As filed with the Securities and Exchange Commission on January 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RAMPART CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Texas 6159 76-0427502
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification
organization) Classification Code Number)
Number)
Rampart Capital Corporation
700 Louisiana, Suite 2550
Houston, Texas 77002
(713) 223-4610
(Address, including zip code and telephone
number, including area code, of registrant's principal
executive offices and principal place of business)
J. H. Carpenter
Rampart Capital Corporation
700 Louisiana, Suite 2550
Houston, Texas 77002
(713) 223-4610
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------
Copies To:
Maurice J. Bates, Esq. Norman R. Miller, Esq.
Maurice J. Bates, L. L. C. Wolin, Ridley & Miller LLP
8214 Westchester, Suite 500 3100 Bank One Center
Dallas, Texas 75225 1717 Main Street
(214) 692-3566 Dallas, Texas 75201-4681
(214) 939-4906
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective. 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.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -
Proposed Proposed
maximum maximum
Amount to be offering aggregate offering Amount of
Title of each class of securities to be registered price price(1) registration fee
registered per share(1)
<S> <C> <C> <C> <C>
Common Stock, $.01 par value (2)......... 1,725,000 $10.00 $17,250,000 $5088.75
- -Representatives' Warrants................ 150,000 $.001 150 $1.00
Common Stock included in Underwriters' 150,000 $12.00 $1,800,000 $ 531.00
Warrants (3)
TOTAL $5,620.75
</TABLE>
(1) Estimated solely for purposes of calculating the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933, as
amended.
(2) Includes 225,000 Shares of Common Stock issuable pursuant to the
Representative's over-allotment option.
(3) Represents shares of common stock issuable upon exercise of the
Representatives' Warrants, together with such additional
indeterminate number of shares of Common Stock as may be issued upon
exercise of such Representatives' Warrants by reason of the anti-dilution
provisions contained therein.
------------
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
1,500,000 Shares
RAMPART CAPITAL CORPORATION
Common Stock
Rampart Capital Corporation
700 Louisiana Street, Suite 2510
Houston, Texas 77002
Rampart Capital Corporation
700 Louisiana Street, Suite 2510
Houston, Texas 77002
We are a specialty financial services company that acquires undervalued
financial assets, primarily commercial debt portfolios and real estate at
substantial discounts. We collect the debt and sell the real estate and other
assets for profit. Additionally, we provide short-term bridge funding for real
estate projects.
This is an initial public offering of 1,500,000 shares (the "Shares") of common
stock (the "Common Stock") of Rampart Capital Corporation. Currently, there is
no public market for our Common Stock.
The Underwriters' have an option to purchase an additional 225,000 Shares to
cover over-allotments We are a specialty financial services company that
acquires undervalued financial assets, primarily commercial debt portfolios and
real estate at substantial discounts. We collect the debt and sell the real
estate and other assets for profit. Additionally, we provide short-term bridge
funding for real estate projects.
This is an initial public offering of 1,500,000 shares (the "Shares") of common
stock (the "Common Stock") of Rampart Capital Corporation. Currently, there is
no public market for our Common Stock.
The Underwriters' have an option to purchase an additional 225,000 Shares to
cover over-allotments
The Offering:
Per Share Total
Public Offering Price $10.00 $15,000,000
Underwriting discounts $ 1.00 $ 1,500,000
Proceeds to Rampart $ 9.00 $13,500,000
Proposed Trading Symbol
American Stock Exchange ""
-----------------------
This investment involves a high degree of risk. See "Risk Factors" beginning on
page 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-----------------
REDSTONE SECURITIES, INC. .
Prospectus dated 1999
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information herein
has been adjusted to reflect a 3,000 to 1 stock split in December 1998, and
assumes the Underwriters' over-allotment option and the Underwriters' Warrants
are not exercised. The Shares offered involve a high degree of risk. Investors
should carefully consider the information set forth under "Risk Factors."
<PAGE>
Profile of Rampart's Business Activities
Rampart Capital Corporation is a specialty financial services company that
acquires undervalued financial assets, primarily in the form of commercial debt
portfolios and real estate, manages and services its asset portfolios, collects
the debt and sells real estate and other assets for profit, and provides short
term bridge funding for real estate projects.
Typically, our discounted debt portfolios contain some or all of the following:
non-performing loans and other debt obligations, primarily secured,
under-performing loans, primarily real estate secured, performing loans,
primarily real estate secured, other forms of unsecured debt obligations, real
estate, and other assets.
Discounted Debt Portfolios
We purchase commercial loans and other commercial obligations at substantial
discounts from their legal balances by competitive bids and negotiated
purchases. We purchase our discounted debt portfolios from: governmental
entities, such as the Federal Deposit Insurance Corporation ("FDIC"), financial
institutions, insurance companies, bankruptcy estates, and liquidating trusts.
Undervalued Real Estate and other Assets
We acquire real estate and other assets in distressed situations at substantial
discounts below market values from: bankruptcy estates, liquidating trusts,
insurance companies, and local taxing authorities.
The majority of the real estate is sold at market value in the market place.
Because our cost basis in most properties is low, we have not realized a loss on
any property sold. In order to optimize profitability, properties with
significant upside market potential are managed for future liquidation.
Short-term Bridge Funding
We also provide short-term bridge funding for selected real estate projects. Our
typical funding scenario requires that:
we own the real estate, developers buy-back the properties with
preferential yields and equity participation to Rampart, our equity
participation percentage increases at specific timetables, and we receive 100%
of the equity of the project at specified default dates.
We anticipate that this activity will be a significant portion of our business
expansion for both revenues and profits.
Potential availability of tax loss carryforwards
In July 1997, we acquired the remaining assets and corporations of the MCorp
Liquidating Trusts. As a result of this acquisition, management believes that
there may be approximately $57 million of net operating loss carryforwards and
built-in-losses (collectively "NOLs") subject to certain possible limitations,
which may be available to offset future taxable income of the acquired
corporations for federal and state income tax purposes. If the Company is able
to utilize the NOLs, it must be utilized against profits occurring in the
acquired corporations as opposed to consolidated profits realized by Rampart. We
cannot assure that sufficient profits, if any, can be generated in the acquired
corporations prior to the expiration of some or all of the potential NOLs.
Because of these risks, we believe investors should consider an investment in
the Company without giving effect to any benefits that may be attributable to
the NOLs.
See "Risk Factors," "The MCorp Acquisition," "Certain Federal Income Tax
Matters" and "Notes to Financial Statements."
Business
Business Strategy
Our business strategy is to continue to broaden and expand our core business
while building on our strengths and expertise. To achieve this objective, we
plan to do the following:
Expand the acquisition of discounted loan portfolios and real estate;
Broaden our sources of revenue and operating earnings by developing or acquiring
additional businesses that leverage our core strengths and management expertise;
Invest in fragmented or underdeveloped markets in which we have the investment
expertise to achieve attractive risk-adjusted rates of return; Pursue new
business opportunities, both domestic and foreign, through joint ventures,
thereby capitalizing on the expertise of partners who complement our skills; and
Maximize growth in earnings, thereby accelerating the utilization of potential
NOLs.
Company Offices
Rampart is a Texas Corporation whose principal executive offices are located at
700 Louisiana, Suite 2510, Houston, Texas 77002; telephone number (713)
223-4610; facsimile: (713) 223-4814. The electronic mail address is
[email protected].
<PAGE>
The Offering
<TABLE>
<S> <C>
Shares offered ............................. 1,500,000 Shares of Common Stock See "Description of Capital
Stock."
Common Stock to be outstanding
after the Offering........................ 3,750,000 Shares (1)
Use of Proceeds............................. Purchase of discounted asset portfolios, working capital and
other general corporate purposes. See "Use of Proceeds."
Risk Factors................................ The Shares offered are speculative and involve a high degree of
risk and should not be purchased by investors who cannot afford
the loss of their entire investment. See "Risk Factors."
Proposed American Stock Exchange Symbols
Common Stock............................. ""
</TABLE>
- -----------------
(1) Does not include:
Up to 225,000 Shares to be issued upon exercise of the Underwriters'
over-allotment option, 150,000 Shares to be issued upon exercise of the
Underwriters' Warrants, and 375,000 Shares reserved for issuance under the 1998
Stock Compensation Plan. See "Management - 1998 Stock Compensation Plan" and
Note 10 of the "Notes to Financial Statements."
<PAGE>
Selected Consolidated Financial Information
The following selected financial data has been derived from our audited balance
sheets and income statements for the fiscal years ended December 31, 1996 and
1997 and unaudited balance sheets and income statements for the ten months ended
October 31, 1997 and 1998. This selected financial data should be read in
conjunction with the financial statements of Rampart and related footnotes
included at the end of this prospectus. See "Financial Statements."
<TABLE>
<CAPTION>
Year Ended December 31, Ten Months Ended October
31,
----------------------------- ---------------------------
1996 1997 1997 1998
---------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Operating Data:
Revenues $3,194,258 $2,935,283 $2,052,052 $6,162,135
Cost of Revenues 1,402,453 1,166,063 859,204 2,276,641
Operating Expenses 1,888,527 1,644,860 1,260,313 1,439,022
--------- --------- --------- ---------
Earnings (loss) before income tax (96,722) 124,360 (67,465) 2,446,472
Income tax benefit (expense) 35,255 309,131 382,981 (694,994)
------ ------- ------- ---------
Net income (loss) (61,467) 433,491 315,516 1,751,478
Basic net income (loss) per common share $ (0.03) $ $ $
0.19 0.14 0.78
Weighted average common shares outstanding 2,250,000 2,250,000 2,250,000 3,750,000
Year Ended December 31, Ten Months Ended
October31,1998
----------------------------- ------------------------------
1996 1997 Actual Adjusted (1)
---------------- ------------ -------------- ---------------
Balance Sheet:
Working capital (2) - - - -
Current assets (2) - - - -
Current liabilities (2) - - - -
Total assets $ 6,180,478 $ 7,000,157 $ 7,482,817 $ 17,422,817
Total liabilities 5,515,354 5,901,542 4,632,724 1,572,724
Shareholders' equity 665,124 1,098,615 2,850,093 15,850,093
Weighted average common shares outstanding 2,250,000 2,250,000 2,250,000 3,750,000
Book value per share $ 0.30 $ 0.49 $ $ 4.23
1.27
- -------
</TABLE>
(1) Adjusted to reflect the sale of 1,500,000 Shares offered by this
prospectus at an offering price of $10.00 per Share and application of
the net proceeds of $13,000,000.
(2) In our industry short-term obligations are met by cashflow generated from
assets of indeterminable term. Consequently, consistent with industry
practice, our balance is presented on an unclassified basis.
<PAGE>
Acquisition of MCorp Subsidiaries and Assets
In March 1989, MCorp Inc., a large bank holding company, filed for protection
under the federal bankruptcy laws and in 1994 the bankruptcy court approved a
plan of reorganization and liquidation of MCorp. The court ordered that the
assets of MCorp be transferred into three grantor trusts for the benefit of the
creditors ("MCorp Liquidating Trusts" or "Trusts"). In July 1997, we acquired,
through competitive bid, certain corporate subsidiaries and assets (the "MCorp
Acquisition") from the MCorp Liquidating Trusts. The following table sets forth
a classification of the assets which were purchased for $881,134 net of cash
acquired.
<TABLE>
<S> <C>
Performing loans (outstanding principal balances) $ 2,432,000
Foreclosed real property (cost basis) 189,000
Non-performing loans (legal balances) 34,060,000
==============
Total Balances and Cost Basis of Assets Acquired $36,681,000
==============
</TABLE>
Because of the unknown potential for collection of the non-performing loans, we
did not allocate any cost basis to those loans. As of October 31, 1998, we had
collected $703,748 or about 80% of the net purchase price by selling some of the
foreclosed real estate and collecting some of the performing and non-performing
loans. Based on our evaluation of future cash recoveries of the remaining assets
as of October 31, 1998, we presently estimate additional recoveries of
approximately $1.5 million (excluding interest) from the sale of the real estate
and collection of outstanding debt over the next three years. If we attain our
projected collections, total recoveries on the MCorp assets would approximate
$2.2 million..
Incidental to the acquisition of the assets described above, the entities
acquired in the MCorp Acquisition had NOLs of approximately $57 million. We
believe that these NOLs, subject to certain possible limitations, may be used to
offset future taxable income of the acquired corporations. If the Company is
able to utilize the NOLs, it must be utilized against profits occurring in the
acquired corporations as opposed to consolidated profits realized by Rampart. We
cannot assure that sufficient profits, if any, can be generated in the acquired
corporations prior to the expiration of some or all of the potential NOLs. Nor
can we assure that the Internal Revenue Service will not deny use of all or a
part of the NOLs. Because of these risks, we believe investors should consider
an investment in the Company without giving effect to any benefits that may be
attributable to the NOLs. See ""Risk Factors", "Certain Federal Income Tax
Matters" and Notes to Financial Statements.
<PAGE>
RISK FACTORS
Investing in our Shares involves a high degree of risk. Prospective investors
should consider the following factors in addition to other information set forth
in the prospectus before purchasing the Shares. You should note that this
Prospectus contains certain "forward-looking statements," including without
limitation, statements containing the words "believes," "anticipates,"
"expects," "intends," "plans," "should," "seeks to," and similar words. You are
cautioned that such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those in the forward-looking statements as a result of various
factors, including but not limited to, the risk factors set forth in this
Prospectus. The accompanying information contained in this Prospectus identifies
important factors that could cause such differences.
General Economic Conditions
Our lines of business can be adversely affected by:
Periods of economic slowdown or recession, rising interest rates, and
declining demand for real estate.
Although these conditions may increase the number of non-performing debt and
undervalued real estate portfolios available for acquisition at discounted
prices, such conditions could:
reduce marketability of our performing loans and real estate, reduce the
value or demand for collateral securing performing loans, increase the cost of
capital invested, and reduce the return on assets by lengthening the time that
capital is invested.
Uncertain Nature of the Asset Acquisition and Resolution Business
This industry developed approximately ten years ago. Initially, very little was
known about the profit potential of this industry, and there were few
competitors. As the industry matured, participants have become increasingly
knowledgeable and more sophisticated in evaluating and pricing assets. As a
result, the competition for asset portfolios has increased, resulting in higher
prices and lower resulting gross yields, the number of portfolios available for
purchase has declined since 1995, the majority of the sellers in today's market
are not governmental entities; therefore, more negotiated transactions and fewer
bid situations are available.
Because of state and federal regulations, commercial banks, thrifts and
insurance companies are required to allocate more regulatory capital to
non-performing assets. Consequently, it is often preferable from a regulatory
capital perspective for these entities to sell assets at substantial discounts
from legal balances. In the aggregate, these entities are among the most active
sellers of assets. If regulations were changed in the future to decrease the
regulatory capital required to be allocated to non-performing assets, these
entities would have less incentive to dispose of assets. To the extent these
entities retain non-performing assets rather than sell them, there would be a
decreased supply of assets available for purchase by Rampart and its
competitors. Any significant decrease in the supply of non-performing assets
available for purchase would likely result in significant decreases in revenues
in the discounted asset acquisition industry. We cannot assure that regulatory
changes will not be adopted.
Potential Availability of Certain Federal Income Tax Benefits
In the MCorp Acquisition, we acquired entities having NOLs in the amount of
approximately $57 million. There is little or no legal authority governing many
of the tax aspects of the MCorp Acquisition since many determinations involving
the use of the NOLs after such acquisitions are questions of fact. Additionally,
we have not obtained a private letter ruling from the Internal Revenue Service
("IRS") or an opinion of counsel regarding the availability of the NOLs.
Therefore, we cannot assure that the IRS will not successfully challenge the
availability of some or all of the NOLs. The utilization of certain of the NOLs
could also potentially be limited or unavailable in the future in the event of
the occurrence of a second ownership change as defined in the Tax Code. (Certain
NOLs of the Company are currently limited due to a previous ownership change
concerning the acquisition of certain of the subsidiaries of the Company.) In
order to insure that a second change of ownership does not occur, the two
existing shareholders of the Company have agreed to certain restrictions on the
transfer of their shares so as to avoid an ownership change and the application
of Section 382 of the Tax Code which defines such changes. See "The MCorp
Acquisition", " Management-Restrictions on Transfer." and "Certain Federal
Income Tax Matters."
If the Company is able to utilize the NOLs, it must be utilized against profits
occurring in the acquired corporations as opposed to consolidated profits
realized by Rampart. We cannot assure that sufficient profits, if any, can be
generated in the acquired corporations prior to the expiration of some or all of
the potential NOLs or that the IRS will not deny use of all or part of the NOLs.
Because of these risks, we believe investors should consider an investment in
the Company without giving effect to any benefits that may be attributable to
the NOLs.
Reliance on Key Personnel
Rampart is dependent on the efforts of certain members of senior management,
particularly Charles W. Janke (Chairman of the Board and Chief Executive
Officer), J. H. Carpenter; (President and Chief Operating Officer), Charles F.
Presley (Vice President, Treasurer and Chief Financial Officer) and Eileen
Fashoro, (Vice President and Assistant Secretary). If one or more of these
individuals becomes unable or unwilling to continue in his/her present role, our
business operations or prospects could be adversely impacted. None of these
individuals have entered into an employment agreement. We cannot assure that any
of the foregoing individuals will continue to serve in his or her current
capacity or for what time period this service might continue. We do not have
employment agreements with any of our executive officers.
Period to Period Variances
Our method of revenue recognition for non-performing assets is based upon actual
cash collections received. Such collections have historically varied and will
likely continue to vary significantly from period to period. Consequently,
period to period reported revenue has historically varied and will likely
continue to vary. This variance may cause significant fluctuations in earnings
reported from period to period and, therefore, significant fluctuations in the
trading price of Rampart's Shares.
Future Acquisitions of Debt Portfolios, Real Estate and Other Assets
We plan to grow through acquisitions of debt portfolios, real estate and other
assets. At present, we are engaged in preliminary discussions for several
potential acquisitions of existing portfolios. However, we cannot assure or
represent that we will be successful in consummating any acquisitions on
beneficial terms.
Capital Requirements and Interest Rates
A substantial portion of the proceeds of this offering will be utilized for
acquisitions of debt portfolios, real estate, and other assets. Therefore, we
may require additional capital to expand our operations. The Company may be
limited in the use of equity financing due to the restrictions on ownership
changes occasioned by Section 382 of the Tax Code, which may require debt
financing. There can be no assurance that any such debt financing will be
available on favorable terms. See "Use of Proceeds" and "Certain Federal Income
Tax Matters."
Execution of our business strategy depends to a significant degree on our
ability to obtain additional financing. Factors which could adversely affect
access to the capital markets, or the costs of such capital, include changes in
interest rates, general economic conditions and the perception in the capital
markets of the business, results of operations, leverage, financial condition
and business prospects.
Most of the indebtedness incurred bears interest at floating rates, which change
when certain short term benchmarks increase. If these benchmark rates increase
beyond what we had originally projected, our profitability will be adversely
affected. Additionally, if interest rates rise significantly, we may be unable
to meet these obligations. Even if we are able to service our asset acquisition
debt, significant increases in interest rates will depress margins on the
resolution of such asset portfolios, thereby decreasing overall earnings, which
may prevent meeting debt obligations we have incurred or may incur in the
future. Although we may be able to negotiate ceilings on interest rates or
otherwise hedge against such risk, we cannot assure that we will be able to do
so, or that we will be able to so hedge against this risk at a reasonable cost.
Immediate Substantial Dilution
Our current shareholders acquired their shares at a cost per share
substantially below the price being offered in this offering. Consummation of
the offering will result in a substantial increase in the value of the current
shareholders' holdings. In addition, the public offering price of the Shares
will be substantially higher than the current book value per Share.
Consequently, investors purchasing Shares being offered will incur an immediate
and substantial dilution of their investment of approximately $5.77 per Share or
approximately 57.7% as it relates to the resulting book value of the Shares
after completion of this offering. See "Dilution."
Influence on Voting by Principal Shareholders
Upon completion of this offering, the directors and principal shareholders will
own approximately 60.0% of the outstanding shares. Consequently, these
shareholders will be able to control the vote on election of directors and to
substantially impact the vote on other matters submitted to shareholders.
Although there are no agreements or arrangements with respect to voting these
Shares among these individuals, if they act together they will be able to
substantially impact any vote of the stockholders and thereby exert considerable
influence over our affairs. See "Principal Shareholders."
Absence of Prior Public Market - American Stock Exchange Listing
Prior to this offering, there was no public market for the Shares. We intend to
apply for listing of the Shares on the American Stock Exchange. We cannot assure
that our listing application will be approved. Such listing, if approved, does
not imply that there will be a meaningful, sustained market for the Shares. We
cannot assure that an active trading market for the Shares will develop or
continue.
Arbitrary Determination of Offering
The public offering price for the Shares was determined by negotiation between
Rampart and the Underwriters and should not be assumed to bear any relationship
to asset value, net worth or other generally accepted criteria of value. Recent
history relating to the market prices of newly public companies indicates that
the market price of the Shares following this offering may be highly volatile.
See "Underwriting."
Payment of Dividends
We have never paid cash dividends on the Common Stock, and do not anticipate
that we will pay cash dividends in the foreseeable future. The payment of
dividends will depend on earnings, financial condition and other factors the
Board of Directors may consider relevant. We currently plan to retain any
earnings to provide for development and growth. See "Dividend Policy."
Shares Eligible for Future Sale
Upon completion of this offering, we will have 3,750,000 shares of Common Stock
outstanding (3,975,000 shares if the Underwriters' over-allotment option is
exercised). The current shareholders will own 2,250,000 shares, which will
represent 60.0% of the then issued and outstanding shares (57.1% if the
over-allotment option is exercised in full). The shares held by the current
shareholders are "restricted securities" as that term is defined in the Rules
and Regulations under the Securities Act. These shares may be sold in the public
market only if registered under the Securities Act or sold pursuant to an
applicable exemption from registration, such as that provided by Rule 144 under
the Securities Act. The shares held by the current shareholders will not be
eligible for sale under Rule 144 for at least one year from the effective date
of this Prospectus. The current shareholders have agreed with the Underwriters
that they will not sell or otherwise dispose of their shares for a period of one
year after the date of this Prospectus without the prior written consent of the
Underwriters. Additionally to preserve the potential NOLs, the current
shareholders have agreed with Rampart not to reduce their ownership to less than
50% of the shares outstanding during the initial three year period after the
date of this Prospectus. Sales of significant amounts of shares by current
shareholders in the public market after this offering could adversely affect the
market price. See "Principal Shareholders" and "Certain Federal Income Tax
Matters."
Shares of Common Stock Reserved under 1998 Stock Option Plan
We have reserved 375,000 shares of Common Stock for issuance to key employees,
officers, directors, and consultants under The 1998 Stock Compensation Plan. To
date no options have been granted under the 1998 Stock Compensation Plan. The
existence of these options may prove to be a hindrance to future equity
financing. See "Management - 1998 Stock Compensation Plan."
Effect of Underwriters' Warrants
The holders of the Underwriters' Warrants have four years starting one year
from the effective date of this Offering to profit from a rise in the market
price of the Shares causing dilution in the interests of the other shareholders.
Further, the terms on which we might obtain additional financing during that
period may be adversely affected by the existence of the Underwriters' Warrants.
The holders of the Underwriters' Warrants may exercise their Warrants at a time
when we might be able to obtain additional capital through a new offering of
shares on terms more favorable than those provided herein. We have agreed that,
under certain circumstances, we will register under federal and state securities
laws the shares to be issued thereunder. Exercise of these registration rights
could involve expense at a time when we could not afford the expenditures and
may adversely affect the terms upon which we may obtain financing. See
"Description of Capital Stock" and "Underwriting."
Underwriters' Influence on the Market
A significant amount of the Shares offered may be sold to customers of the
Underwriters. Subsequently these customers may engage in transactions for the
sale or purchase of such Shares through or with the Underwriters. If they
participate in the market, the Underwriters may exert a dominating influence on
the market, if one develops, for the Shares. The price and the liquidity of the
Shares may be significantly affected by the degree of the Underwriters'
participation in the market. See "Description of Capital Stock" and
"Underwriting."
Competition
Currently, there is substantial competition for acquisitions of discounted
assets, and this competition may increase in the future. In this business, we
compete with investment banks, investment partnerships, private financial
services companies similar to us, and a variety of other competitors, both local
and regional. Some of these competitors have greater financial resources and
lower required financial rates of return on their investments. Consequently,
certain competitors may be better able to acquire new asset portfolios, to
pursue new business opportunities and to survive periods of industry
consolidation.
<PAGE>
USE OF PROCEEDS
We expect to net approximately $13,000,000 from the proceeds of this offering
($15,000,000 if the over-allotment option is exercised in full). This assumes an
initial public offering price of $10.00 per Share after deducting the
Underwriters' discount and $500,000 of expenses relating to the offering. We
intend to use the net proceeds is as follows:
<TABLE>
<S> <C> <C>
Amount %
-------------------- ------------
Acquisitions of undervalued real estate and discounted loans (1) $9,500,000 73.5
Temporarily reduce line of credit debt (2) 3,000,000 23.1
Working capital 500,000 0.4
==================== ============
$13,000,000 100.0
==================== ============
---------------
</TABLE>
(1) We are conducting preliminary negotiations regarding several acquisitions
of multiple asset portfolios and will use the proceeds from this offering
to acquire those portfolios or invest in future business opportunities as a
part of our expansion plans
(2) We plan to pay down our cline of credit until we have use for the funds.
Our credit facility incurs interest at prime rate plus one percent.
Pending application of the net proceeds of this offering, we may invest the
funds in interest-bearing accounts, United States Government obligations and
certificates of deposit.
USE OF PROCEEDS PIE CHART OF INFORMATION IN THE TABLE ABOVE.
DIVIDEND POLICY
We have never paid cash or other dividends on the Common Stock and do not
anticipate that we will pay cash dividends in the foreseeable future. The Board
of Directors plan to retain earnings for the development and expansion of
business. Any future determination as to the payment of dividends will be at the
discretion of the Board of Directors and will depend on a number of factors,
including future earnings, capital requirements, financial condition, and any
other factors that the Board of Directors may deem relevant.
<PAGE>
DILUTION
As of October 31, 1998, our net tangible book value was $2,850,093 or $1.27 per
share based on 2,250,000 shares outstanding. The net tangible book value is the
aggregate amount of our tangible assets less our total liabilities. The net
tangible book value per share represents the total tangible assets, less total
liabilities, divided by the number of shares outstanding. After giving effect to
(i) the sale of 1,500,000 Shares at an assumed offering price of $10.00 per
share, and (ii) the application of the estimated net proceeds, the pro forma net
tangible book value would increase to $15,350,092 or $4.23 per share. This
represents an immediate increase in net tangible book value of $2.96 per share
to current shareholders and an immediate dilution of $5.77 per share to new
investors or 57.7% as illustrated in the following table:
<TABLE>
<S> <C> <C>
Public offering price per Share $10.00
Net tangible book value per Share before this offering $1.27
Increase per share attributable to new investors 2.96
------------
Adjusted net tangible book value per share after this 4.23
offering
--------------
Dilution per share to new investors $ 5.77
--------------
Percentage dilution 57.7%
</TABLE>
The following table sets forth as of October 31,1998, the number of Shares
purchased as a result of the offering, the total consideration paid, and the
average price per share paid by the current shareholders (before deducting
underwriting discounts and other estimated expenses) at an assumed offering
price of $10 per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Current Shareholders 2,250,000 60.0% $ 750 0% $0.00
New investors 1,500,000 (1) 40.0% 15,000,000 100.0% $10.00
------
Total 3,750,000 (2) 100.0% $15,000,750 100.0%
</TABLE>
--------
(1) Upon exercise of the over-allotment option, the number of shares held by new
investors would increase to 1,725,000 or 43.4% of the total number of shares to
be outstanding after the offering and the total consideration paid by new
investors will increase to $17,250,000. See "Principal Shareholders."
(2) Does not include 750,000 shares issuable upon the exercise of (i) the
Underwriters' over-allotment option, (ii) the Underwriters' Warrants, or (iii)
employee stock options. To the extent that these options and warrants are
exercised, there will be further share dilution to new investors.
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization (i) as of October 31, 1998 and
(ii) on a pro forma as adjusted basis to give effect to the sale of 1,500,000
Shares and the application of the estimated net proceeds. See "Use of Proceeds."
<TABLE>
<CAPTION>
October 31, 1998
(Actual) (As Adjusted)
<S> <C> <C>
Liabilities:
Notes payable (1) $3,501,705 $433,831
Shareholders' equity
Preferred Stock, $.01 par value, 10,000,000 shares authorized; 0 0
no shares issued actual or adjusted (2)
Common Stock, $.01 par value $ 22,500 $ 37,500
10,000,000 shares authorized,
2,250,000 shares issued and outstanding,
3,750,000 as adjusted (3) (4)
Additional paid in capital 0 13,000,000
Retained earnings 2,827,593 2,827,593
Total shareholders' equity $2,850,093 15,865,093
Total capitalization $6,351,798 $16,298,724
- -----------
</TABLE>
(1) Consistent with industry practice, the balance sheet is presented on an
unclassified basis. Accordingly, total capitalization as presented here
captures notes payable in its entirety.
(2) The Preferred Stock was authorized by the Board of Directors in
December 1998.
(3) Does not include 375,000 shares reserved for issuance under the 1998 Stock
Compensation Plan. See "Management - 1998 Stock Compensation Plan."
(4) Does not include an aggregate of up to 375,000 Shares issuable upon
exercise of (i) the over-allotment option, or (ii) the Underwriters'
Warrants.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read Rampart's Consolidated Financial Statements, related notes and
other financial information included in this Prospectus in conjunction with this
discussion of our operations.
Results of Operations
Over the period from December 31, 1996 to October 31, 1998, we have increased
net revenues by 93% to $6.2 million from $3.2 million. As a percentage of
revenues, costs decreased 6.9% (43.8% compared to 36.9%) and operating expenses
decreased 35.7% (from 59.1% to 23.4%) for the same period. A comparative summary
of the earnings statement is shown below.
<TABLE>
<CAPTION>
Operating Data: Calendar Year Ended Ten Months Ended
<S> <C> <C> <C> <C>
12/31/96 12/31/97 10/31/97 10/31/98
------------- ------------ ------------- ----------------
Revenues $ 3,194,258 $ 2,935,283 $ 2,052,052 $ 6,162,135
Cost of revenues 1,402,453 1,166,063 859,204 2,276,641
------------- ------------ ------------- ----------------
Gross Profit 1,791,805 1,769,220 1,192,848 3,885,494
General and administrative 1,299,663 1,002,260 743,184 1,026,973
expense
Interest expense 588,864 642,600 517,129 412,049
------------- ------------ ------------- ----------------
Earnings (loss) before income (96,722) 124,360 (67,465) 2,446,472
tax
Income tax benefit (expense) 35,255 309,131 382,981 (694,994)
------------- ------------ ------------- ----------------
Net income (loss) $ (61,467) $ 433,491 $ 315,516 $ 1,751,478
------------- ------------ ------------- ----------------
Basic net income (loss) per $ (0.03) $ 0.19 $0.14 $ 0.78
common share
------------- ------------ ------------- ----------------
------------- ------------ ------------- ----------------
Diluted net income (loss) per $ (0.03) $ 0.19 $0.14 $ 0.78
common share
------------- ------------ ------------- ----------------
Weighted average common shares 2,250,000 2,250,000 2,250,000 2,250,000
outstanding
------------- ------------ ------------- ----------------
</TABLE>
BAR AND LINE GRAPH
RESULTS OF OPERATIONS
REVENUE BY YEAR 12/31/96, 12/31/97, AND 10/31/98
NET INCOME (LOSS) BY YEAR 12/31/96, 12/31/97, AND 10/31/98
<PAGE>
The following table presents certain financial data, as a percentage of net
revenues for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended Ten Months Ended
----------------------------- ---------------------------------
12/31 1996 12/31/1997 10/31/97 10/31/98
----------------------------- ---------------------------------
<S> <C> <C> <C> <C>
------------- ------------ ------------- ----------------
------------- ------------ ------------- ----------------
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 43.9 39.7 41.9 36.9
------------- ------------ ------------- ----------------
------------- ------------ ------------- ----------------
Gross Profit 56.1 60.3 58.1 63.1
General and administrative expense 40.7 34.1 36.2 16.7
Interest expense 18.4 22.0 25.2 6.7
------------- ------------ ------------- ----------------
Earnings (loss) before income tax (3.0) 4.2 (3.3) 39.7
Income tax benefit (expense) 1.1 10.6 18.7 (11.3)
------------- ------------ ------------- ----------------
Net income (loss) (1.9) 14.8 15.4 28.4
------------- ------------ ------------- ----------------
</TABLE>
Comparison of the Ten Months Ended October 31, 1997 and October 31, 1998
Revenues for the ten-month period ended October 31, 1998 increased by 200.3% to
$6,162,135 from $2,052,052 for the same period in the previous year, due
primarily to increased collections of debt obligations and sales of real estate.
Gross profit for the period increased to $3,885,494, a 225.7% increase from the
previous year.
We made no additions to personnel during the period. Although general and
administrative expenses for the period increased compared to the same period
last year, they only represent 16.7% of revenues in 1998 as opposed to 36.2% of
revenues in 1997.
Interest expense decreased by 20.3% to $412,049 during the period from $517,129
in the prior year, reflecting a decrease in notes payable. We reduced the
balance of the outstanding bank debt with a significant portion of the increased
recoveries of debt obligations and sale of foreclosed real estate.
Earnings before income taxes increased to $2,446,472 for the ten months ended
October 31, 1998 as compared to a loss of $67,465 for the same period in the
prior year. As a percentage of revenues, earnings before income taxes increased
to 39.7% as compared to a loss of 3.3% in the prior year.
Comparison of the Years Ended December 31, 1996 and December 31, 1997
During 1997, we changed our corporate strategy regarding the resolution of debt
obligations and the sale of forecloses real estate. Consequently, total revenues
in 1997 decreased 8.1% or $258,975 from the previous calendar year. During
earlier periods we resolved the purchased loan portfolios on an accelerated
basis in order to accelerate cashflow and the paydown of debt, rather than
optimize recoveries. In late 1996 the opportunities to purchase loan portfolios
at advantageous prices declined due to reductions in loan offerings and
increased competition. While this strategy caused a short-term reduction in
revenues, its positive effect was reflected in gross profit for 1997 and
revenues during 1998. We believe the positive effects of this strategic change
will be increasingly evident during future periods.
Gross profit increased from 56.1% in 1996 to 60.3% in 1997 primarily due to the
strategic change mentioned previously.
General and administrative expenses for 1997 decreased by 22.9% from $1,299,663
in 1996 to $1,002,260 in 1997.
Interest expense increased from $588,864 in 1996 to $642,600 in 1997, reflecting
an increase in notes payable of $928,601. The increase in notes payable
reflected a corresponding increase in purchased asset portfolios and foreclosed
real estate of $871,718 or 16.1% over 1996. Accounts receivable, accounts
payable and accrued liabilities were all significantly lower for 1997 as
compared to 1996.
Liquidity and Capital Resources
We have financed working capital requirements through the use of bank debt and
minor borrowings from shareholders and related parties. As of October 31, 1998,
we had no outstanding debt to shareholders or related parties. We have a
$5,000,000 working capital line of credit with Southwest Bank of Texas, NA. The
line of credit is secured by the purchased debt portfolios and foreclosed real
estate. As of October 31, 1998, the line of credit had an outstanding balance of
$3,060,000 and available credit of $1,940,000. We are in compliance with all of
the loan covenants governing the credit facility.
As of October 31, 1998, we had working capital of $1,650,341 and a working
capital ratio of 1.48. Our cash requirements for calendar 1998 and in the future
will depend upon continued profitable operations and the level of future
acquisitions. The net proceeds from this offering and anticipated future
profitable operations will provide working capital requirements over the course
of the next twelve months. We could be required to seek additional financing
prior to the end of twelve months, if:
plans or assumptions change, there are unanticipated changes in business
conditions, or the proceeds of this offering prove to be insufficient to fund
operations.
Year 2000 Compliance
We are aware of the issues associated with the year 2000 as it relates to
information systems. A new information system certified by the supplier to be
Year 2000 compliant was installed in 1998. The cost of the new computers and
software was approximately $25,000. Based on the nature of our business, we do
not expect to experience material business interruption due to the impact of
Year 2000 compliance on our customers and vendors. Since our system is Year 2000
compliant and we are not dependent on vendors, there will not be any significant
additional expenditure. Year 2000 issues should not affect our liquidity,
financial positions, or results of operations.
Accounting Standards
The Financial Accounting Standards Board ("FASB") periodically issues
statements of financial accounting standards. In April 1997, FASB issued
Statement of Financial Accounting Standards (SFAS) No. 128. The new standard
replaces primary and fully diluted earnings per share with basic and diluted
earnings per share. We are required to adopt SFAS No. 128 in the year ending
December 31, 1998. We have adopted SFAS No. 128 for the year ended December 31,
1998 and for all periods presented.
In June 1997, the FASB issued SFAS No. 130 and 131. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components.
SFAS No. 131 establishes standards for reporting about operating segments,
products and services, geographic areas, and major customers. The standards
became effective for calendar years beginning after December 15, 1997. We have
adopted these standards for the year ended December 31, 1998. SFAS No. 130 and
131 will not have a material effect on our financial condition or reported
results of operation.
In February 1998, the Financial Accounting Standards Board issued SFAS 132,
Employers' Disclosures about Pensions and Other Post retirement Benefits - An
Amendment of FASB Statements No. 87,88, and 106. This Statement revises
employers' disclosures about pension and other post retirement benefit plans. It
does not change the measurement or recognition of those plans. Rather, it
standardizes the disclosure requirements for pensions and other post retirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures that are no longer
useful. This Statement became effective February 1998. It will not have a
material effect on our financial condition or results of operations.
In August 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. This statement,
which applies to all entities, requires derivative instruments to be measured at
fair value and recognized as either assets or liabilities on the balance sheet.
The statement is effective for fiscal years beginning after June 15, 1999 with
earlier application encouraged but permitted only as of the beginning of any
fiscal quarter beginning after June 1998. Retroactive application is prohibited.
We do not believe this statement will be applicable to our financial condition
or our results of operations.
<PAGE>
BUSINESS
Organization, Operations & Strategy
We are a specialty financial services company that commenced business operations
in 1994. Our office is located at 700 Louisiana, Suite 2510, Houston, Texas
77002. Our primary business activities are:
acquiring undervalued financial assets, primarily in the form of discounted
commercial debt portfolios and real estate; managing and servicing our purchased
asset portfolios; collecting the debt and selling the real estate for profit;
and providing short-term bridge funding for real estate projects.
We plan to increase our business through purchases of:
undervalued real estate and other assets from business bankruptcies; portfolios
of assets being sold by real estate investment trusts; non-performing and
under-performing assets by insurance companies; real properties with delinquent
property taxes from local taxing authorities; debt portfolios from
privately-held entities in the business of acquiring and resolving discounted
assets looking for exit strategies which would generate long-term capital gain
tax treatment; non-performing debt portfolios from financial institutions;
distressed assets in selected foreign markets; and through the increased demand
for short-term bridge financing for selected real estate projects.
Industry & Competition; History of Operations
Our industry, commonly called the distressed asset business, started
approximately ten years ago when the FDIC and the Resolution Trust Corporation
("RTC") began liquidating large portfolios of notes and real estate acquired
from failed banks and savings institutions. Initially, there were few
participants in the business. The two principal officers of Rampart were active
participants at the start-up of the industry and were involved in acquisitions
of assets with face values in excess of $400 million while associated with
another company. As the industry matured, more knowledgeable and sophisticated
investors entered the business. Numerous investment companies and partnerships
were established to buy distressed assets. Additionally, bank and other
financial institutions have been active purchasers of discounted assets in
recent years. Since 1994, according to the FDIC's database, over 300 separate
entities have purchased debt and/or real estate portfolios from the FDIC.
Investment in Discounted Debt Portfolios
Rampart began acquiring distressed debt portfolios and other assets in 1994,
primarily on a competitive bid basis from the FDIC and RTC. In 1995 we began
acquiring assets from healthy financial institutions, banks and insurance
companies, interested in eliminating non-performing assets from their
portfolios. These acquisitions were made on both a competitive bid and
negotiated purchase basis. In 1996 we began to negotiate purchases of assets,
primarily debt and real estate, from bankruptcy estates and liquidating trusts.
In July 1997, we consummated the MCorp Acquisition with a net cash outlay of
$881,134 in which we acquired performing and non-performing loans with principal
balances of approximately $36 million and foreclosed real estate with a cost
basis of approximately$189,000. The subsidiaries acquired in the MCorp
Acquisition have approximately $57 million in NOLs which we believe can be used
to offset future taxable income generated by the acquired corporate entities,
subject to certain possible limitations. See "The MCorp Acquisition" and
"Certain Federal Income Tax Matters."
Investment in Discounted Debt Portfolios & Services
Our primary business is the acquisition of non-performing portfolios of
commercial loans and other commercial obligations. These debt portfolios are
purchased at substantial discounts from their legal balances by competitive bids
and negotiated purchases. Sources of discounted debt portfolios are:
governmental entities, such as the FDIC, financial institutions, insurance
companies, bankruptcy estates, and liquidating trusts.
Typically, our discounted debt portfolios contain some or all of the following:
non-performing loans and other debt obligations, primarily secured,
under-performing loans, primarily real estate secured, performing loans,
primarily real estate secured, other forms of unsecured debt obligations, real
estate, and other assets.
Rampart currently owns performing notes receivable with principal balances
totaling $5,051,048 as of October 31, 1998. These notes have a cost basis of
$1,825,728, or 37 percent of outstanding principal balances. The majority of
these notes is secured by real estate and mature within three to five years.
Additionally, Rampart has non-performing debt, secured and unsecured, with a
cost basis of $2,103,040 as of October 31, 1998. These assets are in various
stages of resolution, including litigation and bankruptcy. While there can be no
assurance that any recoveries will be realized on these assets, we estimate a
minimum recovery of $3.5 million over the next three years.
Most of the debt we acquire is included within large pools of loans offered for
sale. Some of the individual notes within these pools have no value in that
there is either no potential for collecting any of the outstanding legal balance
of the debt or it is not economically feasible to pursue collection. As soon as
non-collectable debt is identified, it is written off. To date, less than two
percent of the notes purchased for value have been deemed uncollectible.
When we purchase debt portfolios, we allocate the purchase price of the
portfolio to each individual note based on management's assessment of potential
collections. During the initial review prior to purchase, we allocate a zero
cost basis to those individual notes which appear to have no potential for
collection. After the purchase is consummated, subsequent in-depth reviews are
performed on each of the note files. Consequently, we have made significant
collections on some notes which we initially assessed to be worthless. We cannot
assure that we will be successful in doing this in the future.
Investment in Real Estate and other Assets
A major portion of our business is managing real estate and other assets
acquired by foreclosure on non-performing debt and real estate purchased below
our assessment of market values. We sell the majority of the real estate and
other assets in an orderly manner in the marketplace. However, some of our real
estate properties, in our opinion, have significant potential for increased
market value. We manage these properties for future liquidation at optimum price
levels. None of these properties have a cost basis greater than ten percent of
our total assets. However, the earnings from these properties are significant
contributors to our current profitability and we believe that the ultimate sale
of the properties will generate significant future earnings. Some of these
properties are summarized below:
Retail Center, San Antonio, Texas 15,000 square foot retail center prime
location, 100% occupied $125,000 annual net cash flow Cost basis of $360,00
after depreciation Market value of $1 million based on broker's opinion of value
Held for market appreciation, earnings and future sale 12 acres on South Padre
Island, Texas Undeveloped commercial waterfront property Allocated cost basis on
this property is zero Market value of $750,000 based on broker's opinion of
value Currently offered for sale
Underground storage facility, Montgomery County, Texas 40,000 square foot
underground storage facility 37 acres of land Cost basis of $75,000 Market value
of $900,000 based on recent cash offer Currently offered for sale
We determine that the properties we foreclose or purchase do not have
significant environmental problems before we acquire title to these properties.
Some of the real estate acquired had remedial environmental problems. These
problems consisted primarily of underground storage tanks and asbestos. When
environmental issues are identified, we notify the appropriate state agency and
engage a certified environmental consultant/contractor to evaluate and remedy
the problem. Once the problems are remedied and the proper certifications are
obtained from the agencies, we sell or manage the properties. We have never
suffered a loss on a property that had environmental issues. As of the date of
this Prospectus, the remedial costs have not been significant and we attempt to
recover all environmental costs in our selling price.
All of the real estate properties are insured for property damage based on
replacement value and all of the properties have liability insurance coverage up
to $10 million.
<PAGE>
Short-term Bridge Funding on Real Estate Projects
A newer business activity includes short-term bridge funding for selected real
estate projects. Our typical funding situation requires that:
we own the real estate, developers buy-back the properties with preferential
yields and equity participation to Rampart, our equity participation percentage
increases at specific timetables, and we receive 100% of the equity of the
project at specified default dates.
In 1998 we funded two projects totaling $1,100,731. A portion of the projects
has been sold for development. We anticipate that activity will be a significant
portion of our business expansion in terms of volume and profits.
Legal Proceedings
We are not parties in any lawsuit, pending or threatened, which management
believes should have a material effect on our financial position.
Employees
We have a permanent staff of seven employees - two executive officers, four
professional staff, which includes two administrative officers, and one clerical
staff. Additionally, we have established a network of contract due diligence
professionals and field support personnel to perform field work and supplement
our permanent staff on our investments , when needed. We believe that we have
solid relationships with our employees. None of our employees are members of any
labor union.
Office Facilities
Our corporate offices are located in the NationsBank building in downtown
Houston, Texas. We have about 2,000 square feet of office space. Of this space,
a major law firm, without cost, provides about 1,200 square feet to Rampart. We
also have use of the law firm's meeting rooms, law library, reception facilities
and other facilities within the firm on an as needed basis. The law firm
performs approximately sixty percent of our legal work and provides the space
and facilities without charge. The balance of our space is leased on a month to
month basis. The Company has additional lease space available in the event
expansion is required.
Additional Information
Rampart has not previously been subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have filed
with the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form SB-2 (including any amendments thereto, the "Registration
Statement") under the Securities Act with respect to the Shares offered. This
Prospectus does not contain all of the information, exhibits, and schedules
contained in the Registration Statement. For further information about Rampart
and the Shares, you should read the Registration Statement. Statements made in
this Prospectus regarding the contents of any contract or document filed as an
exhibit to the Registration Statement are not necessarily complete. Therefore,
you should read the Registration Statement. Each such statement is qualified in
its entirety by such reference. The Registration Statement, the exhibits, and
the schedules filed with the Commission may be inspected, without charge, at the
Commission's public reference facilities. These facilities are located at:
Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549,
Northwestern Atrium Center, 500 West Madison Street, Room 1400, Chicago,
Illinois 60661; and Suite 1300, Seven World Trade Center, New York, New York
10048.
Copies of the materials may also be obtained at prescribed rates by writing to
the Commission, Public Reference Section, 450 Fifth Street, NW, Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission at http://www.sec.gov.
As a result of this offering, Rampart will become subject to the reporting
requirements of the Exchange Act. Therefore, we will file periodic reports,
proxy statements, and other information with the Commission. Following the end
of each calendar year, we will furnish our shareholders with annual reports
containing audited consolidated financial statements certified by independent
public accountants and proxy statements. For the first three quarters of each
calendar year, we will provide quarterly reports containing unaudited
consolidated financial information.
Rampart intends to apply for listing of the Shares on the American Stock
Exchange ("Amex"). We cannot assure that our shares will be accepted for
listing. Our reports, proxy statements, and other information will be available
for inspection at the principal office of the Amex at 86 Trinity Place, New
York, New York 10006.
<PAGE>
MANAGEMENT
Directors and Executive Officers
Our directors and executive officers as of January 1, 1999 are identified
below:
Name Age Position
Charles W. Janke 54 Chairman, Chief Executive Officer, & Director
J. H. (Jim) 57 President, Chief Operating Officer, Secretary &
Carpenter Director
Charles F. Presley 49 Vice-President, Chief Financial Officer,
Treasurer & Controller
James W. Christian 45 Director
James J. Janke 45 Director
Our directors are elected at each annual meeting of shareholders. The officers
are elected annually by the Board of Directors. Officers and directors hold
office until their respective successors are elected and qualified or until
their earlier resignation or removal.
Charles W. Janke was Chairman, President and Chief Executive Officer of Rampart
since its organization in March 1994. He relinquished his position as President
to Mr. Carpenter effective January 1, 1999. Prior to the organization of
Rampart, Mr. Janke `s primary activity was private investments. During 1992 and
1993, Mr. Janke invested in Laidllaw Holdings, Inc., a securities investment
firm. During this period he provided mezzanine and bridge financing for several
firms, all of which became listed on the NASDAQ Exchange. During the period 1989
through 1992, Mr. Janke provided acquisition funding for a company that acquired
in excess of $400 million in residential mortgage portfolios in association with
a major securities firm. After a brief retirement, he funded the start-up of
Rampart and became active in its management. For the period 1975 through 1985,
Mr. Janke was a stockholder and officer in Centurian National Group, Inc., a
cemetery and funeral home holding company which was acquired by Service
Corporation International, a public corporation.
J. H. Carpenter was elected President and Chief Operating Officer in December
1998 to become effective January 1, 1999. He has been Vice President and a
director since the organization of the Company in March 1994. For the period
October 1991 through March 1994, Mr. Carpenter was a shareholder and president
of two closely held corporations that acquired commercial debt from the RTC.
During the period, 1989 to October 1991, Mr. Carpenter was associated with a
company that acquired, in conjunction with a major securities firm, purchased
and sold over $400 million in residential mortgage portfolios. From 1970 through
1981, Mr. Carpenter was Vice President and Treasurer of Camco, Incorporated, a
publicly traded oil tool manufacturing company.
Charles F. Presley was elected Vice President and Chief Financial Officer in
December 1998 to become effective January 1, 1999 and has been the controller
for Rampart since March 1996. He is responsible for accounting, federal and
state tax compliance, internal controls, and also has investigation and
litigation support responsibilities. For the 15 years prior to his tenure with
Rampart, Mr. Presley was the principal practitioner in a Certified Public
Accounting practice in Houston, Texas.
James W. Christian was elected a director of the Company in December 1998
to become effective January 1, 1999. Mr. Christian is a member of the
Houston, Texas law firm, Christian & Smith L. L. P. where he has practiced
since 1990. Mr. Christian specializes in litigation, corporate and real
estate law.
James J. Janke was elected a director of the Company in 1996. Mr. Janke is
Vice President and General Manager of a top 100 Ford dealership where he
has been employed since 1976. He serves on the Board of Directors of the
Houston Auto Dealers Association, the Houston Livestock Show and Rodeo, a
charitable organization, and the Better Business Bureau of Houston. Charles
W. Janke and James J. Janke are brothers.
Outside Directors
We will appoint one director who is not an officer, employee, or 5% shareholder
upon conclusion of the offering as designated by the Representative of the
Underwriters.
Compensation of Directors
Directors who are also employees will not receive any remuneration in their
capacity as directors. Outside directors will receive travel expense
reimbursement and $1,000 per meeting attended.
Executive Compensation
The following table sets forth the compensation awarded to, earned by, or paid
to the Chief Executive Officer and the other officer (the "Named Executive
Officers") of the Company who received compensation of over $100,000 for the
fiscal years ended December 31, 1998, 1997 and 1996.:
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Annual Compensation All Other
---------------------------------
Principal Position Fiscal Year Salary Bonus Compensation
- --------------------------- ------------------------ --------------- -------------- --------------------
<S> <C> <C> <C> <C>
Charles W. Janke 1998 132,886 -- --
Chief Executive 1997 123,562 -- --
Officer
1996 226,824
- --------------------------- ------------------------ --------------- -------------- --------------------
J. H. Carpenter 1998 131,659 -- --
President 1997 122,437 -- --
1996 120,222
- --------------------------- ------------------------ --------------- -------------- --------------------
</TABLE>
In the future, we intend to compensate officers in accordance with the
recommendations of a compensation committee consisting entirely of outside
directors.
Restrictions on Transfer
On January 21, 1999, Charles W. Janke and J.H. Carpenter entered into a Share
Transfer Restriction Agreement with Rampart. Janke and Carpenter agreed, during
the term of the agreement, not to sell, assign, transfer, or otherwise dispose
of any shares of Rampart in a transaction which would cause an ownership change
under Section 382 of the Internal Revenue Code of 1986. Rampart agree not to
issue any new shares of Common Stock or Preferred Stock for a period of three
years and one day from the consumation of this public offering.
Employment Agreements
We do not have employment agreements with any employees.
<PAGE>
Indemnification and Limitation of Liability
As permitted by the Texas Business Corporation Act, we intend to maintain
insurance against any liability incurred by our officers and directors in
defense of any actions to which they may be made parties by reason of their
positions as officers and directors if it can be obtained at a reasonable cost.
The Company has been advised that it is the position of the Securities and
Exchange Commission that insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
1998 Stock Compensation Plan
In December 1998, the Board of Directors adopted the 1998 Stock Compensation
Plan (the "Plan"). The Plan was also approved by the shareholders in December
1998. Under the Plan, up to 375,000 shares of our Common Stock may be granted as
incentive compensation to:
employees, officers, directors, and consultants to Rampart or any parent,
subsidiary or affiliate of Rampart.
The number of shares reserved and the shares granted are subject to
adjustment in the event of any subdivision, combination, or
reclassification of shares. The Plan will terminate in 2008. Either
incentive stock options ("ISO's") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or non-qualified options, or
both may be granted at the discretion of the Board of Directors or a
committee of the Board of Directors (the "Committee"). The exercise price
of any option will not be less than the fair market value of the shares at
the time the option is granted. The options granted are exercisable within
the times or upon the events determined by the Board or Committee set forth
in the grant, but no option is exercisable beyond ten years from the date
of the grant. The Board of Directors or Committee administering the Plan
will determine:
whether each option is to be an ISO or non-qualified stock option, the
number of shares, the exercise price, the period during which the option
may be exercised, and any other terms and conditions of the option.
The holder of an option may pay the option price in: cash, or shares of the
Company with a fair market value equal to the purchase price, or partly in
shares and partly in cash.
The options can only be transferred by will or by the laws of descent and
distribution. Except in the case of death, disability or change in control,
no option shall be exercisable after an employee ceases to be an employee
unless extended for not more than 90 days by the Committee. An optionee who
was a director or advisor to the Company may exercise his options at any
time within three months after his status as a director of advisor is
terminated, unless his termination was caused because of death or
disability. If an optionee's employment as an employee, director or
advisor, is terminated because of permanent disability, the Committee shall
have the right to extend the exercise period for not longer than one year
from the date of termination.
The Plan also permits the award of Stock Appreciation Rights ("SARs") to
optionees. The Committee may award to an otionee, with respect to each
share of Common Stock covered by an option (a "Related Option"), a related
SAR permitting the optionee to be paid the appreciation on the Related
Option. A SAR granted with respect to an ISO must be granted together with
the Related Option. A SAR granted with respect to a Non-qualified Option
may be granted together with or subsequent to the grant of the Related
Option. The exercise of the SAR shall cancel and terminate the right to
purchase an equal number of shares covered by the Related Option.
The Plan can be amended or terminated at any time. The plan is administered
by the Compensation Committee of the Board of Directors, which is composed
entirely of directors who are "disinterested persons" as defined in Rule
16b-3 of the Securities Exchange Act of 1934, as amended. Currently,
options have not been granted to anyone.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the last three years, Charles W. Janke, Chairman and Chief Executive
Officer, and members of his immediate family or trusts loaned funds to Rampart
as shown below as part of the funds required to purchase two loan portfolios.
The lenders were paid interest and given a participation in the net cash profits
of the recovery from the portfolios.
<TABLE>
<CAPTION>
<S> <C> <C>
Date Lending Party Amount
January 1, 1996 Charles W. Janke $100,000
May 22, 1996 CW Janke Trust $112,500
May 22, 1996 HY Janke Trust $112,500
May 22, 1996 Alfred Janke $125,000
</TABLE>
All of these loans, including interest and profit participations of $ 171,588
were paid in 1997 and 1998. There are no balances outstanding as of this date.
Furthermore, the Janke family limited partnership has pledged certificates of
deposits as collateral for our bank financing. We could not have received the
amount of financing without this pledge. In order to compensate the family
limited partnership for the reduced yield on the money invested in the
certificates and pledged as collateral, we have paid an additional 6% interest
per year on the certificates pledged. We paid additional interest of $102,000 in
1997 and $84,000 in 1998, as the amount pledged as collateral has been reduced.
During 1998, InSource Financial Corporation, a company owned and controlled by
J. H. . Carpenter, President and director, sold its interest in a real estate
mortgage and judgment lien to Rampart for $300,000. As of the date of this
Prospectus, Rampart had collected approximately $375,000 on this mortgage and
judgment. InSource purchased the lien in 1995 for approximately $250,000,
including capitalized costs.
In 1998, we sold for $525,000, a property to a consortium of buyers consisting
of Mr. Carpenter, Mr. Janke, trusts for two of Mr. Janke's children, the Janke
family limited partnership, and Southwest Commerce Partners No. 1, Ltd., a
partnership in which Mr. Janke has a 25% interest for an amount equal to the
highest third party offer received on the property. We took 10% interest bearing
notes that mature in three years as payment for the property. We purchased the
property in 1994as part of a debt portfolio purchased from the FDIC and
allocated a cost basis of $100,000 to the property.
In 1994, Southwest Commerce Partners No. 1, Ltd., a limited partnership in which
Mr. Janke has a 25% interest, provided a portion of the funding for the purchase
of two portfolios of non-performing debt from the FDIC. The partnership received
a 6.25% profit interest in the acquired portfolios. As of October 31, 1998, all
of the funds contributed by the partnership have been repaid and the partnership
retains a profit interest in the assets remaining in the acquired portfolios.
We believe that all of the foregoing transactions were on terms no less
favorable than would have been received at the time of the transaction if
transacted with unaffiliated third parties. Any future transactions between
Rampart and its officers and directors, principal shareholders and affiliates,
will be approved by a majority of the Board of Directors, including a majority
of the independent, disinterested outside directors. These future transactions
will be on terms no less favorable to Rampart than could be obtained from
unaffiliated third parties.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table identifies the beneficial ownership of the Common Stock as
of December 31, 1998 by:
each beneficial owner of more than 5% of the outstanding shares of
Common Stock; each director of the Company; the Named Executive Officers,
and all directors and executive officers as a group
Unless noted each beneficial owner has sole investment and voting power for the
shares beneficially owned.
<TABLE>
<CAPTION>
Shares Owned
-------------------------------------------------------------------------
Prior to Offering After Offering
---------------------------------- -- -----------------------------------
Name and Address of Owner Number Percent Number Percent
- --------------------------------------------- --------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Charles W. Janke (1) 1,500,000 66.7% 1,500,000 40.0%
2147 Del Monte, Houston, Texas 77019
J. H. Carpenter (2) 750,000 33.3% 750,000 20.0%
700 Louisiana, Suite 2510, Houston, Texas
77002
Charles F. Presley -- --
4119 Tasselwood Lane, Houston, Texas 77014
James J. Janke -- --
1145 North Shepherd, Houston, Texas 77008
James W. Christian -- --
5 Martin Lane, Houston, Texas 77055
--------------- -------------- ---------------- --------------
--------------- -------------- ---------------- --------------
All Executive Officers and Directors as a 2,250,000 100.0% 2,250,000 60.0%
group (5 persons)
--------------- -------------- ---------------- --------------
- -----------
</TABLE>
(1) Mr. Janke's Shares are owned by a family limited partnership in which
Mr. Janke is the general partner
(2) The majority (600,000) of Mr. Carpenter's Shares is owned by a family
limited partnership. The general partner is a closely held corporation whose
stock is owned by trusts for the benefit of Mr. Carpenter's children and
grandchildren. Mr. Carpenter is sole director and officer of this corporation
and has voting power over its stock. The balance of Mr. Carpenter's Shares
(150,000 shares) is held by a corporation which is solely owned and controlled
by Mr. Carpenter.
<PAGE>
CERTAIN FEDERAL INCOME TAX MATTERS
<PAGE>
The following discussion is a summary of certain of the significant federal
income tax matters with respect to the availability of the NOLs acquired by
Rampart in the MCorp Acquisition. We have not obtained a private letter ruling
from the IRS or an opinion of counsel regarding the availability of the NOLs.
The following discussion also does not address any aspect of state and local
taxation, including, without limitation, the effect of state law limitations on
the use of NOLs.
This summary is based on the Internal Revenue Code (the "Code"), Treasury
Regulations promulgated and proposed thereunder (the "Regulations"), judicial
decisions, and published administrative rules and pronouncements of the IRS as
in effect on the date hereof. Changes in such rules or new interpretations
thereof may have retroactive effect and could therefore significantly affect the
tax consequences described below.
<PAGE>
Basis for availability of NOLs
On July 10, 1997, we acquired five corporate subsidiaries of the MCorp
Liquidating Trusts. The five corporate subsidiaries had existing NOLs on the
acquisition date. Generally, corporations that have experienced an ownership
change under Code section 382 can utilize NOLs only to a limited extent.
However, there is an exception to the general rule when the loss corporations
are under the jurisdiction of a bankruptcy court and the acquiring corporation
is a creditor of the entity in bankruptcy. Our ability to utilize the NOLs is
based for the most part upon this exception. In addition to the NOLs that may be
utilized under the bankruptcy exception, the Company also has NOLs that are
subject to the limitations of Code section 382. In addition to Code section 382,
other limitations arising out of the consolidated federal income tax regulations
can also work to limit the use of the NOLs.
How certain ownership changes effect NOLs How certain ownership changes
effect NOLs In general, whenever there is a more that 50% ownership change
of a corporation during a three-year testing period, the ownership change
rules in Code section 382 limit the corporation's utilization of pre-change
NOLs on an annual basis following the ownership change to the product of
the fair market value of the stock of the corporation immediately before
the ownership change and the (long-term tax exempt rate) then in effect
(which is an interest rate published monthly by the IRS). A more than 50%
ownership change occurs when the percentage of stock of the corporation
owned by one or more five-percent shareholders has increased by more than
50 percentage points (determined by value) over the lowest percentage of
the corporation's stock owned by the same shareholders during the
three-year testing period. In any given year, the annual limitation imposed
by section 382 of the Code may be decreased by built-in losses or increased
by built-in gains realized after, but accruing economically before, the
ownership change.
The effect of the ownership change rules of section 382 of the Code may be
ameliorated by an exception that applies in the case of federal bankruptcy
reorganizations. Under the (bankruptcy exception) to section 382 of the Code, if
the reorganization results in an exchange by qualifying creditors and
stockholders of their claims and interests for at least 50% of the debtor
corporation's stock (determined by vote and value), then the general ownership
change rules will not apply. Instead, the debtor corporation will be subject to
a different tax regime under which NOLs are not limited on an annual basis but
are reduced by certain provisions which are not applicable to the MCorp
acquisition. However, because the bankruptcy exception is based upon factual
determination and upon legal issues with respect to which there is uncertainty,
there can be no assurance that the IRS will not challenge the amount or
availability of the NOLs of the acquired corporations. Moreover, if the
bankruptcy exception applies, the Tax Code provides that any more than 50%
ownership change of the debtor within a two- year period will result in
forfeiture of all of the debtor's NOLs incurred through the date of such second
ownership change.
Certain limitations to use of NOLs
The Regulations provide limits on the use of NOLs when corporations that were
members of a former consolidated group join in the filing of a consolidated
federal income tax return of another group. Since the MCorp corporations were
acquired from a consolidated group, and Rampart will file a consolidated federal
income tax return, the separate return limitation year ("SRLY") rules apply to
these NOLs. Generally, these NOLs are available only to the extent that the
acquired corporation generates taxable income in the Rampart consolidated group.
In addition, the SRLY limitations operate after any annual limitations imposed
by Code section 382.
Company's basis for NOLs availability
Because of the application of the bankruptcy exception, the Company believes
that the general ownership change rules of section 382 do not apply to limit the
utilization of certain of the Company's NOLs. In addition, the Company believes
that it has not experienced a more than 50% ownership change since the prior
ownership change, therefore, the Company's NOLs have not been forfeited under
section 382(1)(5)(D). However, while the bankruptcy exception applies to most of
the NOLs, the remaining NOLs are subject to the operation of section 382 of the
Code. In order to prevent a second change in ownership, the Company's
shareholders have agreed to certain restrictions on the transfers of stock
within the appropriate time limits.
The Company's 1997 Consolidated Federal Income Tax Return identified
approximately $51.2 million of NOLs. In addition, we have identified
approximately $8.4 million of items that had no fair market value as of the
acquisition date. The write off of these items will generate built-in-losses
that will be written off for tax purposes in 1998. The following is a list of
our NOLs and built-in losses:
Pre-acquisition NOLs of Rampart 1,400,000
NOLs subject to 382 limitation and SRLY limitations 2,400,000
NOLs & Built-in losses not subject to 382 limitation but
subject to SRLY limitations 55,800,000
Total NOLs & Built-in-losses $59,600,000
Although we have $59.6 million in total NOLs, our Code section 382
limitation NOLs, for all practical purposes, are not utilizable. Hence, we
expect $57.2 million of the NOLs to be available. However, the $57.2
million of the NOLs will only be available to the extent that the specific
acquired subsidiaries with the NOLs have taxable income in the future to
offset their NOLs under the SRLY rules.
NOLs can be carried forward for 15 years from the date they arise. If the
NOLs are not used within the 15-year period, they expire. The following is
a summary of our NOLs and these expiration dates:
NOLs Expiration Schedule
Year Amount
1999 $1,459,000
2000 2,190,000
2001 0
2002 10,377,000
2003 13,305,000
2004+ 29,869,000
==================
$ 57,200,000
==================
Our NOLs and built-in-losses will not fully expire until 2015. See Notes to
Financial Statements.
Existing Shareholder Restrictions to Protect NOLs
Certain changes in the ownership of Rampart could cause an additional limitation
of the use of the NOLs acquired with the MCorp Corporations. We have taken
precautions to prevent these ownership changes from happening. Prior to this
offering the two shareholders identified in this prospectus are the only two 5%
Shareholders. If they retain ownership of more than 50% of Rampart for at least
three years following this offering, then an ownership change causing a
limitation on the use of the NOLs will not occur. The shareholders have agreed
with Rampart not to reduce their ownership to less than 50% ownership as defined
in the Code and Regulations for three years following the offering.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Common Stock
We are authorized to issue 10,000,000 shares of Common Stock, $0.01 par
value. As of October 31, 1998, there were 2,250,000 shares of Common Stock
issued and held by 3 holders of record. Shareholders are entitled to share
ratably in any dividends paid on the Common Stock when, as and if declared
by the Board of Directors. Each share of Common Stock is entitled to one
vote. Cumulative voting is denied. There are no preemptive or redemption
rights available to shareholders of common stock. Upon liquidation,
dissolution or winding up of Rampart, the holders of Common Stock are
entitled to share ratably in the net assets legally available for
distribution. All outstanding shares of Common Stock and the Shares to be
issued in this offering will be fully paid and non-assessable.
Preferred Stock
The Board of Directors, without further action by the shareholders, is
authorized to issue up to 10,000,000 shares of preferred stock, $.01 par value.
The preferred shares may be issued in one or more series. The terms as to any
series, as relates to any and all of the relative rights and preferences of
shares, including without limitation, preferences, limitations or relative
rights with respect to redemption rights, conversion rights, voting rights,
dividend rights and preferences on liquidation will be determined by the Board
of Directors. The issuance of preferred stock with voting and conversion rights
could have an adverse affect on the voting power of the holders of the Common
Stock. The issuance of preferred stock could also decrease the amount of
earnings and assets available for distribution to holders of the Common Stock.
In addition, the issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control. We have no plans or commitments to
issue any shares of preferred stock.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock will be American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 3,750,000 Shares of Common Stock
issued and outstanding. Of these shares, the 1,500,000 shares sold in this
offering (1,725,000 if the over-allotment option is exercised in full) will be
freely tradable in the public market without restriction under the Securities
Act, except shares purchased by an "affiliate" (as defined in the Securities
Act) of Rampart. The remaining 2,250,000 shares (the "Restricted Shares"), will
be "restricted shares" within the meaning of the Securities Act. Restricted
Shares cannot be publicly sold unless registered under the Securities Act or
sold in accordance with an applicable exemption from registration, such as that
provided by Rule 144 under the Securities Act. In general, under Rule 144, as
currently in effect, a person (or persons whose shares are aggregated) is
entitled to sell Restricted Shares if at least one year has passed since the
later of the date such shares were acquired from Rampart or any affiliate of
Rampart. Rule 144 provides, however that within any three-month period such
person may only sell up to the greater of 1% of the then outstanding shares of
Common Stock (approximately 37,500 shares following the completion of this
offering) or the average weekly trading volume in our shares during the four
calendar weeks immediately preceding the date on which the notice of the sale is
filed with the Commission. Sales pursuant to Rule 144 also are subject to
certain other requirements relating to manner of sale, notice of sale and
availability of current public information. Anyone who not an affiliate for a
period of at least 90 days is entitled to sell Restricted Shares under Rule 144
without regard to the limitations if at least two years have passed since the
date such shares were acquired from us or any affiliate. Any affiliate is
subject to such volume limitations regardless of how long the shares have been
owned or how they were acquired. After this offering, the two executive officers
will own 2,250,000 shares of the Common Stock. Our officers, directors and
shareholder directors will enter into an agreement with the Underwriters
agreeing not to sell or otherwise dispose of any shares for three one year after
the date of this Prospectus without the prior written consent of the
Underwriters'. We cannot predict the effect, if any, that offer or sale of these
shares would have on the market price. Nevertheless, sales of significant
amounts of Restricted Shares in the public markets could adversely affect the
fair market price of the shares, as well as impair our ability to raise capital
through the issuance of additional equity shares.
<PAGE>
44
PLAN OF DISTRIBUTION
Underwriters
Under the terms and conditions of the Underwriting Agreement, the Company has
agreed to sell to the Underwriters named below, and each of the Underwriters,
for whom Redstone Securities, Inc. (the "Representative") is acting as the
Representative, have severally agreed to purchase the number of Shares set forth
opposite its name in the following table.
Underwriters Number of Shares
Redstone Securities, Inc.
===========================
Total 1,500,000
=========================
The Underwriters have advised us that they propose to offer the Shares
to the public at the initial public offering price per share set forth on
the cover page of this Prospectus and to certain dealers at such price less
a concession of not more than $___ per Share. These dealers may re-allow
$____ to other dealers. The Representative will not reduce the public
offering price, concession and re-allowance to dealers until after the
offering is completed. Regardless of any reduction, we will receive the
amount of proceeds set forth on the cover page of this Prospectus.
We have granted to the Underwriters an option, exercisable during the
45-day period after the date of this Prospectus, to purchase up to 225,000
additional Shares to cover over-allotments, if any. The option purchase
price is the same price per share we will receive for the 1,500,000 Shares
that the Underwriters have agreed to purchase. If the Underwriters exercise
such option, each of the Underwriters will purchase its pro-rata portion of
such additional Shares. The Underwriters will sell the additional Shares on
the same terms as those on which the 1,500,000 Shares are being sold.
The Underwriters can only offer the Shares through licensed securities
dealers in the United States who are members of the National Association of
Securities Dealers, Inc. and may allow the dealers any portion of its ten
(10%) percent commission.
The Underwriters will not confirm sales to any discretionary accounts
without the prior written consent of their customers.
Under the terms of the Underwriting Agreement, the holders of the
2,250,000 Restricted Shares have agreed that, for one year after the date
of this Prospectus and subject to certain limited exceptions, without the
prior written consent of the Representative, they will not:
sell, contract to sell, or otherwise dispose of any Shares, any
options to purchase Shares, or any securities convertible into, exercisable
for, or exchangeable for Shares.
Substantially all of such shares would be eligible for immediate
public sale following expiration of the lock-up periods, and subject to the
provisions of Rule 144. However, the hiolders of such 2,250,000 shares have
agreed with Rampart that they will not dispose of their shares to the
extent such disposition would jeopardize the NOLS. In addition, Rampart has
agreed, that until 365 days after the date of this Prospectus and subject
to certain exceptions, without the prior written consent of the
Representatives, Rampart will not:
issue, sell, contract to sell, or otherwise dispose of any Shares, any
options to purchase any Shares, or any securities convertible into,
exercisable for, or exchangeable for Shares in this offering, the issuance
of Common Stock upon the exercise of outstanding options or warrants or the
issuance of options under its employee stock option plan are not included
in the restrictions we agreed to. See "Shares Eligible for Future Sale."
We have agreed to pay the Representative a non-accountable expense
allowance of 2.00% of the gross amount of the Shares sold ($300,000 on the
sale of the Shares offered) at the closing of the offering. The
Representative will pay the Underwriters' expenses in excess of the 2%
allowance. If the expenses of underwriting are less than the 2% allowance,
the excess shall be additional compensation to the Underwriters. If this
offering is terminated before its successful completion, we may be
obligated to pay the Representative a maximum of $50,000 on an accountable
basis for expenses incurred by the Underwriters in connection with this
offering. In addition to the non-accountable expense allowance, we estimate
that we will incur other costs of approximately $200,000 for legal,
accounting, listing, printing and filing fees.
We have agreed that, for a period of five years from the closing of
the sale of the Shares, we will nominate for election as a director a
person designated by the Representative. If the Representative has not
exercised that right, the Representative shall have the right to designate
an observer, who shall be entitled to attend all meetings of the Board and
receive all correspondence and communications sent by us to the members of
the Board. The Representative has not yet identified the person who is to
be nominated for election as a director or designated as an observer.
The Underwriting Agreement provides for indemnification among Rampart
and the Underwriters against certain civil liabilities, including
liabilities under the Securities Act. In addition, the Underwriters'
Warrants provide for indemnification among Rampart and the holders of the
Underwriters' Warrants and underlying shares against certain civil
liabilities, including liabilities under the Securities Act, and the
Exchange Act.
Underwriters' Warrants
Upon the closing of this offering, we have agreed to sell to the Underwriters
for nominal consideration, the Underwriters' Warrants. The Underwriters'
Warrants are exercisable at 120% of the public offering price for a four-year
period starting one year from the effective date of this offering. The
Underwriters' Warrants may not be sold, transferred, assigned or hypothecated
for a period of one year from the date of this offering except to the officers
of the Underwriters and their successors and dealers participating in the
offering and/or their partners or officers. The Underwriters' Warrants will
contain anti-dilution provisions providing for appropriate adjustment of the
number of shares subject to the Warrants under certain circumstances. The
holders of the Underwriters' Warrants have no voting, dividend or other rights
as shareholders of Rampart with respect to shares underlying the Underwriters'
Warrants until the Underwriters' Warrants have been exercised. For four years
from the one year anniversary of this offering, we have agreed to give advance
notice to the holders of the Underwriters' Warrants or underlying shares of our
intention to file a registration statement, other than in connection with
employee stock options, mergers, or acquisitions. The holders of the
Underwriters' Warrants and underlying shares shall have the right to require us
to include their shares in such registration statement at our expense.
For the term of the Underwriters' Warrants, the holders of the warrants will be
given the opportunity to profit from a rise in the market value of our shares,
with a resulting dilution in the interest of other shareholders. The holders of
the Underwriters' Warrants can be expected to exercise the Underwriters'
Warrants at a time when we would, in all likelihood, be able to obtain needed
capital by an offering of our unissued shares on terms more favorable than those
provided by the Underwriters' Warrants. This could adversely affect the terms on
which we could obtain additional financing. Any profit realized by the
Underwriters on the sale of the Underwriters' Warrants or shares issuable upon
exercise of the Underwriters' Warrants will be additional underwriting
compensation.
Determination of Offering Price
The initial public offering price was determined by negotiations between the
Representative and us. The factors considered in determining the public offering
price include:
our revenue growth since organization, the industry in which we
operate, our business potential and earning prospects, and the general
condition of the securities markets at the time of the offering.
The offering price does not bear any relationship to our assets, book
value, net worth or other recognized objective criteria of value.
Prior to this offering, there was no public market for the Shares, and we
cannot assure that an active market will develop.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
OVERALLOTMENT, ENTERING STABILIZATION BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS, AND IMPOSING PENALTY BIDS.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE SHARES ON AMEX IN ACCORDANCE WITH RULE 103 OF
REGULATION M.
American Stock Exchange
Listing
We will apply for listing of the Common Stock on the American Stock Exchange
under the trading symbol "." The listing is contingent, among other things, upon
our obtaining 400 shareholders.
LEGAL MATTERS
Maurice J. Bates L.L.C., Dallas, Texas, will pass on the validity of the
issuance of the Shares. Wolin, Ridley & Miller L.L.P., Dallas, Texas, will
pass on certain legal matters for the Underwriters in connection with the
sale of the Shares.
EXPERTS
Pannell Kerr Forster of Texas P. C., independent certified public
accountants, have audited our financial statements for the fiscal years
ended December 31, 1996 and 1997. Our financial statements are included in
this prospectus and registration statement in reliance upon the report of
said firm and upon their authority as experts in accounting and auditing.
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Financial Statements
December 31, 1997
RAMPART CAPITAL CORPORATION
Index to Financial Statements
<TABLE>
Page
<S> <C>
Report of Pannell Kerr Forster of Texas, P.C., Independent Public Accountants..................................F-1
Consolidated Balance Sheets as of October 31, 1998 and 1997 (unaudited) and
December 31, 1997 and 1996.....................................................................................F-2
Consolidated Statements of Operations for the Ten Months Ended October 31,
1998 and 1997 (unaudited) and for the Years Ended December 31, 1997 and 1996...................................F-3
Consolidated Statement of Shareholders' Equity for the Ten Months Ended
October 31, 1998 (unaudited) and for the Years Ended December 31, 1997 and 1996................................F-4
Consolidated Statements of Cash Flows for the Ten Months Ended October 31,
1998 and 1997 (unaudited) and for the Years Ended December 31, 1997 and 1996...................................F-5
Notes to Financial Statements................................................................................F6-F16
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Rampart Capital Corporation
We have audited the accompanying consolidated balance sheets of Rampart Capital
Corporation and subsidiaries (the "Company") as of December 31, 1997 and 1996,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Rampart Capital
Corporation and Subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Houston, Texas
March 4, 1998
PANNELL KERR FORSTER OF TEXAS, P.C.
See notes to consolidated financial statements
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, October 31,
1996 1997 1997 1998
------------- ------------- ------------ --------
(Unaudited)
Assets
<S> <C> <C> <C> <C>
Cash $ 58,291 $ 21,514 $ 83,335 $ 358,500
Purchased asset pools, net (Notes 1 and 3) 5,412,656 6,284,374 6,455,486 4,582,147
Commercial rental property, net (Note 4) 390,203 380,854 382,413 736,948
Investment real estate 224,986 224,986 224,986 1,100,731
Notes receivable from related parties (Note 5) - - - 525,000
Property and equipment, net (Note 6) 25,025 20,522 21,272 35,686
Other assets 69,317 67,907 84,341 143,805
------------ ------------ ------------ -----------
Total assets $6,180,478 $7,000,157 $7,251,833 $7,482,817
---------- ---------- ---------- ----------
Liabilities and Shareholders' Equity
Notes payable (Note 7) $4,404,563 $5,333,164 $5,537,260 $3,501,705
Notes payable to related parties (Note 7) 431,147 331,147 431,147 -
Accounts payable and accrued expenses 260,644 127,231 266,636 366,236
Deferred tax liability (Notes 1 and 8) 419,000 110,000 36,150 764,783
----------- ----------- ------------ -----------
Total liabilities 5,515,354 5,901,542 6,271,193 4,632,724
---------- ---------- ---------- ----------
Commitments and contingencies (Note 9)
Shareholders' equity
Common stock ($.01 par value;
10,000,000 shares authorized;
2,250,000 shares issued and
outstanding) 22,500 22,500 22,500 22,500
Retained earnings 642,624 1,076,115 958,140 2,827,593
----------- ---------- ----------- ----------
Total shareholders' equity 665,124 1,098,615 980,640 2,850,093
----------- ---------- ----------- ----------
Total liabilities and shareholders' equity $6,180,478 $7,000,157 $7,251,833 $7,482,817
---------- ---------- ---------- ----------
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended Ten Months Ended
December 31, October 31,
1996 1997 1997 1998
------------- ------------- ------------ --------
(Unaudited)
<S> <C> <C> <C> <C>
Collections on asset pools $3,022,322 $2,555,363 $1,769,588 $5,478,589
Net rental and other income 171,936 379,920 282,464 683,546
----------- ----------- ----------- -----------
Total revenue 3,194,258 2,935,283 2,052,052 6,162,135
Asset pool amortization (1,402,453) (1,166,063) (859,204) (2,276,641)
---------- ---------- ----------- ----------
Gross profit 1,791,805 1,769,220 1,192,848 3,885,494
General and administrative expenses (1,299,663) (1,002,260) (743,184) (1,026,973)
Interest expense (588,864) (642,600) (517,129) (412,049)
------------ ----------- -------- -----------
Income (loss) before income tax benefit
(expense) (96,722) 124,360 (67,465) 2,446,472
Income tax benefit (expense) 35,255 309,131 382,981 (694,994)
------------- ----------- ----------- ---------
Net income (loss) $ (61,467) $ 433,491 $ 315,516 $1,751,478
------------ ----------- ----------- ----------
Basic net income (loss) per common share $(.03) $.19 $.14 $.78
----- ---- ---- ----
Diluted net income (loss) per common share $(.03) $.19 $.14 $.78
----- ---- ---- ----
Average common shares outstanding
(Note 11) 2,250,000 2,250,000 2,250,000 2,250,000
--------- --------- --------- ---------
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
<S> <C> <C> <C>
Balance, December 31, 1995 $22,500 $ 704,091 $ 726,591
Net loss - (61,467) (61,467)
------------ ------------ ------------
Balance, December 31, 1996 22,500 642,624 665,124
Net income - 433,491 433,491
------------ ----------- -----------
Balance, December 31, 1997 22,500 1,076,115 1,098,615
Net income (unaudited) - 1,751,478 1,751,478
------------ ---------- ----------
Balance, October 31, 1998 (unaudited) $22,500 $2,827,593 $2,850,093
------- ---------- ----------
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended Ten Months Ended
December 31, October 31,
--------------------------- --------------------
1996 1997 1997 1998
------------- ------------- ------------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (61,467) $ 433,491 $ 315,516 $1,751,478
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities
Depreciation 9,434 13,852 11,543 11,167
Changes in operating assets and
liabilities
Asset pool amortization 1,402,453 1,166,063 859,204 2,276,641
Purchase of asset pools (483,207) (299,961) (270,182) (1,352,782)
Other costs capitalized with asset
pools (365,419) (856,686) (750,716) (402,937)
Decrease (increase) in other assets (14,184) 1,410 (15,026) (75,898)
Decrease (increase) in accounts
payable and accrued expenses (49,997) (133,413) 5,992 239,005
Increase (decrease) in deferred tax
liability (35,387) (309,000) (382,850) 654,783
------------ ----------- ----------- -----------
Net cash provided (used) by
operating activities 402,226 15,756 (226,519) 3,101,457
----------- ------------ ----------- ----------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash
acquired - (881,134) (881,134) -
Purchase of investment real estate - - - (138,151)
Purchase of property and equipment (34,460) - - (22,424)
------------ -------------------------------- ------------
Net cash used by investing
activities (34,460) (881,134) (881,134) (160,575)
------------ ----------- ----------- -----------
Cash flows from financing activities
Proceeds from notes payable to related
parties 450,000 - - -
Payments on notes payable to related
parties (18,853) (100,000) - (331,147)
Proceeds from notes payable - 1,931,601 1,905,697 805,000
Payments on notes payable (218,797) (1,003,000) (773,000) (3,077,749)
Payments on notes payable to officers (126,875) - - -
Payments on note payable - other (535,000) - - -
----------- -------------------------------------------
Net cash provided (used) by
financing activities (449,525) 828,601 1,132,697 (2,603,896)
----------- ------------ ---------- ----------
Net increase (decrease) in cash (81,759) (36,777) 25,044 336,986
Cash at beginning of period 140,050 58,291 58,291 21,514
----------- ------------ ----------- ------------
Cash at end of period $ 58,291 $ 21,514 $ 83,335 $ 358,500
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
F-16
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 1 - Nature of Business and Summary of Significant Accounting Policies
Description of business
Rampart Capital Corporation (the "Company"), established in March
1994, is a specialized financial services company which evaluates,
acquires, manages, services and disposes of portfolios of
non-performing debt and other forms of legal obligations. A
significant amount of loans are secured by real estate and other
financial assets. The Company purchases these loan pools at
substantial discounts from their outstanding legal principal
amounts from financial institutions and regulatory agencies in the
United States. Purchased loan pools are acquired by public sealed
bid sales of portfolios of loans, by sealed bid sales limited to a
small number of invited participants and by negotiated
transactions on behalf of the Company.
Basis of consolidation
The consolidated financial statements include the accounts of
Rampart Capital Corporation and all of its subsidiaries.
Intercompany accounts and transactions have been eliminated.
Purchased asset pools
At the acquisition date, the purchased asset pools consist of
non-performing debts and legal obligations, including commercial
and industrial loans, commercial real estate loans, multifamily
residential loans, judgments and deficiency balances. All of the
debts were purchased at substantial discounts from their
outstanding legal principal amounts. Subsequent to acquisition,
debts are considered performing if debt service payments are made
in accordance with the original or restructured terms of the
notes. At the acquisition date, the aggregate cost of the
purchased loan pools is allocated to individual assets based on
their relative values within the pool.
Subsequent to acquisition, the purchased asset pools are
periodically revalued and carried at the lower of cost or fair
value. The estimated fair value is calculated by projecting cash
flows on an asset by asset basis through management's estimates
that reflect the credit and interest rate risk inherent in the
assets. Any allowance to reduce cost to fair value on purchased
asset pools is recorded as a provision for possible loss on the
purchased asset pools during the period determined. No material
allowances or provisions were required to adjust the carrying
values of the purchased asset pools as of December 31, 1997 or
1996 or October 31, 1998.
Interest and rents collected on loans and other real estate in the
purchased asset pools are recognized as part of the proceeds from
disposition of purchased asset pools. Gross profit from
dispositions and payments received on purchased asset pools are
recognized as income to the extent that proceeds collected on the
asset pool exceed a pro rata portion of allocated cost from the
purchased asset pools.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(Continued)
Foreclosed assets
Foreclosed assets acquired in settlement of notes are recorded at
the lower of allocated cost or fair market value. Costs relating
to the development and improvement of foreclosed assets are
capitalized, whereas those relating to holding foreclosed assets
are charged to expense.
Property and equipment
Property and equipment is stated at cost less accumulated
depreciation. Depreciation for financial reporting purposes is
provided using the straight-line method over the estimated useful
lives of the assets. Estimated useful lives of the assets range
from three to five years. Commercial rental property is
depreciated over 40 years.
Expenditures for major acquisitions and improvements are
capitalized; expenditures for maintenance and repairs are charged
to expense as incurred. When property and equipment are sold or
retired, the cost and related accumulated depreciation are removed
from the accounts and any gain or loss is reflected in income.
Income taxes
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, Accounting for Income
Taxes. This statement requires the use of an asset and liability
approach for financial accounting and reporting purposes and also
requires deferred tax balances to be adjusted to reflect the tax
rates in effect when those amounts are expected to be payable or
refundable.
Deferred income taxes are provided for differences in timing in
reporting certain expenses for financial statement and Federal
income tax purposes. Deferred income taxes result primarily from
the use of a modified cost recovery method for financial statement
reporting and the cost recovery method for tax reporting in
recognizing asset pool amortization.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant estimates include the estimation of future
collections on purchased loan pools used in determining the value
of individual assets within the purchased loan pool and the
periodic revaluation for possible loss. Actual results could
differ materially from those estimates.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(Continued)
Unaudited interim financial data
The interim financial data as of and for the ten months ended
October 31, 1998 and 1997 are unaudited; however, in the opinion
of management, the interim financial data include all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations for these interim
periods. The interim financial data are not necessarily indicative
of the results of operations for a full fiscal year.
Concentration of credit risk
The Company maintains its cash with major U.S. banks and, from
time to time, these amounts exceed the Federally insured limit of
$100,000. The terms of these deposits are on demand to minimize
risk. The Company has not incurred losses related to these
deposits.
The non-performing nature of the purchased asset pools subjects
the Company to substantial credit risk.
Reclassifications
Certain reclassifications have been made to the 1996 financial
statements to conform with the 1997 presentation. These
reclassifications had no effect on the 1996 net loss or
shareholders' equity.
Note 2 - Acquisitions
During 1997, the Company acquired certain corporate subsidiaries
and assets of MCorp Trust, MCorp Financial Trust, and MCorp
Management Trust (collectively the "MCorp Trusts"). The MCorp
Trusts were created pursuant to a confirmed Plan of Reorganization
in the Chapter 11 bankruptcy estates of MCorp, Inc., MCorp
Management, Inc., and MCorp Financial, Inc. The assets of the
MCorp Trusts consisted of:
<TABLE>
<S> <C>
Performing loans $ 2,432,000
Foreclosed real property 189,000
Non-performing loans 34,060,000
------------
36,681,000
Discount required to reflect purchase price at unamortized cost (35,799,866)
------------
Cash paid, net of cash acquired $ 881,134
-------------
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 2 - Acquisitions (Continued)
The acquisition has been accounted for as a purchase. Accordingly,
the results of the operations of the acquired businesses have been
included in the Company's consolidated results of operations from
the date of acquisition. The impact of these acquisitions on the
results of operations for 1997 is not material, except as
described in Note 7.
Additionally, in 1997, the Company acquired 100% of the
outstanding common stock of two other unrelated entities by
executing against a judgment creditor.
Note 3 - Purchased Asset Pools, Net
Purchased asset pools, as summarized by management, are as
follows:
<TABLE>
<CAPTION>
December 31, October 31,
1996 1997 1998
(Unaudited)
<S> <C> <C> <C>
Debtors' obligations on outstanding balances of:
Performing loans $ 4,265,585 $ 5,913,188 $ 5,114,664
Non-performing loans 23,619,992 48,274,794 13,766,593
Foreclosed real property assets
and mineral rights 8,470,649 9,223,253 7,512,314
------------ ------------ -----------
36,356,226 63,411,235 26,393,571
Discount required to reflect purchase
price at unamortized cost (30,943,570) (57,126,861) (21,811,424)
------------ ------------ -----------
Purchased asset pools, net $ 5,412,656 $ 6,284,374 $ 4,582,147
------------ ------------ ------------
</TABLE>
The purchased asset pools are pledged to secure notes payable to
banks and others (see Note 7).
During 1998, based upon further review and evaluation of assets
acquired from MCorp Trusts (see Note 2), most of the
non-performing loans were written off as noncollectible. The
related discount to amortized cost was proportionately reduced.
Non-cash transactions
During the ten months ended October 31, 1998, the Company
reclassified purchased asset pool assets with a cost basis of
$360,001 and $296,304 to commercial rental property and investment
real estate, respectively.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended
October 31, 1998 and 1997 is unaudited)
Note 4 - Commercial Rental Property, Net
Commercial rental property consists of the following:
<TABLE>
<CAPTION>
December 31, October 31,
1996 1997 1998
(Unaudited)
<S> <C> <C> <C>
Commercial rental property, at cost $390,203 $390,203 $750,204
Accumulated depreciation - (9,349) (13,256)
-------------- ---------- ----------
Commercial rental property, net $390,203 $380,854 $736,948
-------- -------- --------
</TABLE>
Gross rental income from the property amounted to approximately $280,000
for both 1997 and 1996, and $370,000 for the ten months ended October 31, 1998.
Note 5 - Notes Receivable From Related Parties
During June 1998, the Company sold a property to a buyer comprised
of a consortium of related parties in exchange for notes
receivable totaling $525,000. Principal plus interest at 10% per
annum is due June 2001.
Note 6 - Property and Equipment, Net
Property and equipment, net, consists of the Company's furniture
and equipment and is recorded at cost. Accumulated depreciation on
the Company's furniture and equipment amounted to $35,751, $31,248
and $43,009 as of December 31, 1997 and 1996, and October 31,
1998, respectively.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 7 - Notes Payable
Notes payable consist of the following:
Notes payable
<TABLE>
<CAPTION>
December 31, October 31,
1996 1997 1998
(Unaudited)
<S> <C> <C> <C>
$5,000,000 bank line of credit, secured by notes receivable and
real estate comprising the purchased asset pools and a
shareholders' certificate of deposit; principal payable based on
proceeds from disposition and payments received on the purchased
asset pools; interest payable monthly at the bank's prime rate
plus 1.5% per annum (10% and 9.75% as of December 31, 1997 and
1996, respectively), with the remaining unpaid
principal and interest due September 30, 1999 $2,454,563 $3,933,164 $3,060,000
$2,000,000 term note payable to bank, secured by the notes
receivable and real estate comprising the purchased asset pools
and a shareholder's certificate of deposit; principal payments of
$100,000 due quarterly beginning December 1996; interest payable
monthly at the bank's prime rate plus 1.5% per annum (10% and
9.75% as of December 31, 1997 and 1996, respectively), with the
remaining unpaid principal and interest paid September
30, 1998 1,950,000 1,400,000 -
$441,705 term note payable to a third party corporation, secured
by real estate; principal and interest payments of $24,827 due
semi-annually beginning December 1998; bearing a stated interest
rate of 9.5% per annum, with the remaining unpaid principal and
interest
due June 2002 - - 441,705
----------------- ----------------- --
$4,404,563 $5,333,164 $3,501,705
---------- ---------- ----------
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 7 - Notes Payable (Continued)
Notes payable to related parties
<TABLE>
<CAPTION>
December 31, October 31,
1996 1997 1998
(Unaudited)
<S> <C> <C> <C>
Unsecured promissory note payable to a Company
officer, accruing interest at 12% per annum,
paid June 30, 1997 $ 100,000 $ - $ -
Unsecured promissory notes payable to various trusts and
individuals affiliated with a Company officer, accruing interest
at 12% per annum, with all outstanding principal and interest due
December 31, 1998, paid February
1998 331,147 331,147 -
------------ ----------- ---------
$ 431,147 $ 331,147 $ -
----------- ----------- --------
Interest paid during 1997 and 1996, and the period ended October
31, 1998 on all of the Company's debt instruments, approximated
$642,000, $589,000, and $412,000, respectively. Of this, $152,000,
$137,000 and $4,000 was paid to related parties during 1997, 1996,
and the period ended October 31, 1998, respectively, inclusive of
$102,000 paid during 1997 and 1996, and $84,000 during the period
ended October 31, 1998 to a shareholder for the pledge of the
shareholder's personal collateral against the Company's notes
payable to bank.
During 1996, a note payable to a former shareholder in the amount
of $535,000 was paid in full.
Non-cash transaction
During the ten months ended October 31, 1998, the Company acquired
real estate in exchange for a $441,705 note payable to the seller.
Note 8 - Income Taxes
The deferred tax liability as of December 31, 1997 and 1996, and
October 31, 1998 arises from the use of a modified cost recovery
method for financial statement purposes and the cost recovery
method of revenue recognition for purchased loan pools for Federal
income tax purposes. The Company's deferred tax asset as of
December 31, 1997 and October 31, 1998 consists of net operating
loss carryforwards ("NOLs") of approximately $2,481,000 and
$51,200,000, which expire from 2008 through 2012.
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 8 - Income Taxes (Continued)
Included in the Company's NOLs at December 31, 1997 are
approximately $846,000 available to the Company by virtue of their
1997 acquisition of the subsidiaries and assets of the MCorp
Trusts (the "Mcorp Acquisition") (see Note 2). At October 31,
1998, based upon further review of the MCorp Acquisition and
completion of the Company's 1997 Federal income tax return,
management believes the Company has a reasonable position to
support full utilization of the NOLs related to the MCorp
Acquisition. Accordingly, management believes the Company has
available NOLs of approximately $51,200,000 at October 31, 1998.
The ultimate realization of the resulting net deferred tax asset
is dependent upon generating sufficient taxable income prior to
expiration of the NOLs. Due to the nature of these NOLs and since
realization is not assured, management has established a valuation
allowance relating to the deferred tax asset. The ability of the
Company to realize the deferred tax asset is periodically reviewed
and the valuation allowance adjusted accordingly.
Deferred income taxes have been established for the effects of
differences in the bases of assets and liabilities for financial
reporting and income tax purposes. The provision for income tax
expense (benefit), consisting entirely of deferred income taxes,
is reconciled with the Federal statutory rate as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------- --------------
Amount Rate Amount Rate Amount Rate
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate $(32,885) 34.0% $ 42,284 34.0% $831,800 34.0%
Acquisition of net operating
loss carryforward - - (325,710) (261.9) (136,806) (5.6)
State and other, net (2,370) 2.4 (25,705) (20.5) - -
---------- ----- ---------- ----- -------------- ----
Income tax (benefit) expense $(35,255) 36.4% $(309,131) (248.4)% $694,994 28.6%
-------- ---- --------- ------ -------- ----
</TABLE>
The components of the Company's deferred tax liability are
summarized as follows:
<TABLE>
<CAPTION>
December 31, October 31,
1996 1997 1998
(Unaudited)
<S> <C> <C> <C>
Book basis of purchased asset pools,
net, in excess of tax basis $(866,889) $(1,065,000) $(1,617,783)
Net operating loss carryforward 447,889 955,000 19,712,000
Valuation allowance - - (18,859,000)
--------------- ----------------- -----------
Deferred tax liability, net $(419,000) $ (110,000) $ (764,783)
--------- ------------- ------------
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 9 - Commitments and Contingencies
Litigation
The Company is involved in various legal proceedings in the
ordinary course of business. In the opinion of management, the
resolution of such matters should not have a material adverse
impact on the financial condition of the Company. Subsequent to
December 31, 1997, the Company evaluated its financial exposure to
litigation and environmental risks associated with loan related
assets and foreclosed real estate and elected to transfer and
realign its assets based upon the element of risk associated with
the different types of asset pools. Management believes that this
restructuring of its assets within existing corporate entities
will provide greater protection of its financial condition.
Income participation
Gross collections on two of the Company's asset pools are subject
to a 6.75% participation by a joint venturer in the pools, in the
amount by which and at such time that gross collections exceed the
Company's cost to acquire and collect the pools. The Company's
cost and gross collections on the pools subject to this
participation are $1,360,000 and $1,467,000, respectively, as of
December 31, 1997 and $1,116,000 and $1,026,000, respectively as
of December 31, 1996. No expense has been recognized in connection
with the agreement. Management currently estimates collection on
these loans to be $3,194,000, and the total participation to be
approximately $125,000.
The note agreements associated with the notes payable to various
trusts and individuals (collectively, the "Lenders") affiliated
with a Company officer call for the Lender's participation in the
net cash receipts, after recovery of the purchase price of the
loans in the combined amount of 6.58% of loan pool 95M003 and
13.165% of FDIC Pool 96LJ01. During 1998, the Company's
obligations under these participation agreements were paid in
full.
Operating leases
The Company leases vehicles under operating leases which expire
November 1999. Future minimum rental payments required by these
leases are estimated as follows:
Year Ending
December 31,
1998 $21,905
1999 20,079
-------
Total $41,984
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 9 - Commitments and Contingencies (Continued)
Total expense incurred under these and other month-to-month rental
agreements totaled $21,905 and $15,575 during 1997 and 1996,
respectively.
Office space
The Company's offices are located in space presently provided at
no direct cost by the firm providing legal counsel to the Company.
Note 10 - Revenue Concentrations
During 1997, collections from a single debtor accounted for
approximately 15% of the total revenue of the Company. During the
ten months ended October 31, 1998, proceeds from a single
transaction amounted to 29% of total revenue of the Company, and
collections arising from settlement with an individual debtors
obligation amounted to 10% of total revenue of the Company.
Note 11 - Subsequent Event
Stock split and preferred stock
In December 1998, the Board of Directors approved (i) an increase
in the authorized number of shares of common stock to 10,000,000,
(ii) a 3,000-for-1 stock split of issued and outstanding common
shares and (iii) authorization of 10,000,000 shares of $.01 par
value preferred stock. All common shares, per share and option
information in the accompanying financial statements has been
restated to reflect the effect of the split and change in
authorized shares.
Proposed public offering
The Company intends to file a Registration Statement with the SEC
for the sale of 1,500,000 shares of common stock.
Stock compensation plan
In December 1998, the 1998 Stock Compensation Plan (the "Plan")
was approved by the Board of Directors ("Board") and by the
shareholders. The provisions of the Plan provide for 375,000
shares of Company common stock to be granted as incentive
compensation to employees, officers, directors and/or consultants
of the Company and its subsidiaries. The number of shares and the
shares granted are subject to adjustment in the event of any
change in the capital structure of the Company. Further, the Plan
provides for issuance, at the discretion of the Board, of (i)
incentive stock options ("ISO's") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended, or (ii)
non-qualified options. The exercise price of any option will not
be less than the fair market value of the shares at the time the
option is granted, and exercise will be required within 10 years
of the grant date. The Plan will terminate in 2008.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
(Information as of and for the ten months ended October 31,
1998 and 1997 is unaudited)
Note 11 - Subsequent Event (Continued)
Stock compensation plan (continued)
The Plan permits the award of Stock Appreciation Rights ("SARs")
to optionees. The Committee may award to an optionee, with respect
to each share of Common Stock covered by an option (a "Related
Option"), related SAR permitting the optionee to be paid the
appreciation on the Related Option. A SAR granted with respect to
an ISO must be granted together with the Related Option. A SAR
granted with respect to a non-qualified option may be granted
together with or subsequent to the grant of the Related Option.
The exercise of the SAR shall cancel and terminate the right to
purchase an equal number of shares covered by the Related Option.
There have been no options granted under the Plan.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Pursuant to Section 2.02-1 of the Texas Business Corporation Act, a
corporation may indemnify an individual made a party to a proceeding because the
individual is or was a director against liability incurred in his official
capacity with the corporation including expenses and attorneys fees.
Article VI of the Restated Articles of Incorporation provides as
follows:
"The Corporation shall indemnify any director or officer, or former
director or officer of the Corporation, or any person who may have served at its
request as a director or officer of another corporation of which this
Corporation owns shares of capital stock or of which it is a creditor to the
fullest extent permitted by the Texas Business Corporation act and as provided
in the By-laws of the Corporation."
Article VII of the by-laws provides as follows:
"Section 1. Indemnification.
The corporation shall indemnify its present or former directors and
officers, employees, agents and other persons to the fullest extent permissible
by, and in accordance with, the procedures contained in Article 2.02 of the
Texas Business Corporation Act. Such indemnification shall not be deemed to be
exclusive of any other rights to which a director, officer, agent or other
person may be entitled, consistent with law, under any provision of the articles
of Incorporation or By-laws of the corporation, any general or specific action
of the board of directors, the terms of any contract, or as may be permitted or
required by law."
"Section 2. Insurance and Other Arrangements
"Pursuant to Section R of Article 2.02-1of the Texas Business
Corporation Act, the corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, officer, employee,
or agent or the corporation or who is or was serving at the request of the
corporation a a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, jpin venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted against him or
her and incurred by him or her in such capacity or arising out of his or her
status as such person, whether or not the corporation would have the power to
indemnify him or her against that liability under article 2.02-1 of the Texas
Business Corporation Act." Item 25. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the public offering by the Company of
the securities offered hereunder are
as follows:
Securities and Exchange Commission Filing Fee $5,621
NASD Filing Fee* 2,432
American Stock Exchange Application and Listing Fee 20,000
Accounting Fees and Expenses* 40,000
Legal Fees and Expenses 80,000
Printing* 40,000
Fees of Transfer Agent and Registrar* 5,000
Underwriters' Non-Accountable Expense Allowance 300,000
Miscellaneous* 6,947
----
Total* $500,000
========
- ----------------
* Estimated.
Item 26. Recent Sales of Unregistered Securities
There were no transactions by the Registrant during the last three
years involving the sale of securities which were not registered under the
Securities Act:.
<PAGE>
Item 27. Exhibits
Exhibit No Item
Exhibit 1.1 Form of Underwriting Agreement.(1)
Exhibit 1.2 Form of Underwriters' Warrant Agreement.(1)
Exhibit 3.1 Restated Articles of Incorporation of the
Registrant. (1)
Exhibit 3.2 Bylaws of the Registrant (1)
Exhibit 5.1 Opinion of Maurice J. Bates L.L.C.(2)
Exhibit 10.1 1998 Stock Compensation Plan (1)
Exhibit 10.2 Share Transfer Restriction Agreement. (1)
Exhibit 21 Subsidiaries of the Registrant. (1)
Exhibit 23.1 Consent of Pannell Kerr Forster of Texas, P. C.,
Certified Public Accountants.(1)
Exhibit 23.2 Consent of Maurice J. Bates, L.L.C. is contained
in his opinion filed as Exhibit 5.1 to
this registration statement.(2)
Exhibit 27 Financial Data Schedule (1)
--------------
(1) Filed herewith
(2) To be filed by amendment
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(3) For the purpose of determining any liability under the
Securities Act, treat each post-effective amendment that
contains a form of prospectus as 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 of those securities.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling 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.
(5) 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
shares of 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.
(6) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was
declared effective.
<PAGE>
SIGNATURES
In accordance with 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 SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas on January 22, 1999.
Rampart Capital Corporation.
By: /s/ Charles W. Janke
Charles W. Janke, Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Charles W. Janke and J. H.
Carpenter, and each for them, his true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, for him and in his name,
place and stead, in any and all capacities (until revoked in writing), to sign
any and all further amendments to this Registration Statement (including
post-effective amendments), and to file same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
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 thereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or
their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Charles W. Janke Chairman of the Board January 22, 1999
- ------------------------
Charles W. Janke (Principal Executive Officer)
/s/ J. H. Carpenter President January 22, 1999
- --------------------
J. H. Carpenter Director
/s/ Charles W. Presley Vice President, Chief Financial January 22, 1999
- ----------------------
Charles W. Presley Officer, Treasurer
(Principal Financial Officer)
/s/ James J. Janke Director January 22, 1999
- ------------------
James J. Janke
/s/ James W. Christian Director January 22, 1999
- ----------------------
James W. Christian
</TABLE>
35541_3 - 75205/00005
Underwriting Agreement
1,500,000 Shares
RAMPART CAPITAL CORPORATION
Common Stock
January __, 1999
UNDERWRITING AGREEMENT
REDSTONE SECURITIES, INC.
As Representative of the Several Underwriters
101 Fairchild Avenue
Plainview, New York 10110
Dear Sirs:
Rampart Capital Corporation, a Texas corporation (the "Company"),
proposes to sell to you and the other underwriters named in Schedule I hereto
(collectively, the "Underwriters"), for whom Redstone Securities, Inc. is acting
as managing underwriter and representative (the "Representative"), in the
respective amounts set forth opposite each Underwriter's name in Schedule I
hereto, an aggregate of 1,500,000 shares of Common Stock, $.01 par value (the
"Common Stock"), of the Company (such shares are hereinafter collectively
referred to as the "Underwritten Securities"). The Company also proposes to
grant to the Underwriters the Underwriters' Option (described in Section 2(b)
hereof) to purchase up to an aggregate of 225,000 shares of Common Stock solely
to cover over-allotments in the sale of the Underwritten Securities (such shares
are collectively referred to herein as the "Option Securities"). Additionally,
the Company proposes to grant to the Representative the Representative's
Warrants (defined in Section 7 hereof) to purchase up to 150,000 shares of
Common Stock (the Representative's Warrants and the underlying shares of Common
Stock, are collectively referred to herein as the "Warrant Securities"). The
Underwritten Securities, the Option Securities and the Warrant Securities are
collectively referred to herein as the "Securities."
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Effective Date" shall mean each date that the
Registration Statement (as defined below) and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean the
date and time that this Agreement is executed and delivered by the parties
hereto. The term "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in Section 1(a) below with respect to the offering of the
Securities, and any preliminary prospectus included in the Registration
Statement on the Effective Date that omits Rule 430A Information (as defined
below). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the most recent Preliminary Prospectus which predates or
coincides with the Execution Time. "Prospectus" shall mean the final prospectus
with respect to the offering of the Securities that contains the Rule 430A
Information. "Registration Statement" shall mean (a) the registration statement
referred to in Section 1(a) below, including Exhibits and Financial Statements,
in the form in which it has or shall become effective, (b) in the event any
post-effective amendment thereto becomes effective prior to the Closing Date (as
defined in Section 3(a) hereof) or any settlement date pursuant to Section 3(b)
hereof, such registration statement as so amended on such date, and (c) in the
event of the filing of any abbreviated registration statement increasing the
size of the offering (a "Rule 462 Registration Statement"), pursuant to Rule
462(b) (as defined below), which registration statement became effective upon
filing the Rule 462 Registration Statement. Such term shall include Rule 430A
Information (as defined below) deemed to be included therein at the Effective
Date as provided by Rule 430A. "Rule 424," "Rule 462(b)" and "Rule 430A" refer
to such rules promulgated under the Securities Act of 1933, as amended (the
"Act"). "Rule 430A Information" means information with respect to the Securities
and the offering thereof permitted to be omitted from the Registration Statement
when it becomes effective pursuant to Rule 430A.
<PAGE>
35541_3 - 75205/00005
Underwriting Agreement
1.ab 1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each Underwriter that:
(a) The Company meets the requirements for the use of Form
SB-2 under the Act and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a
related preliminary prospectus ("Preliminary Prospectus"), on Form SB-2
(Commission File No. 333-_________) (the "Registration Statement") for
the registration under the Act of the Securities. The Company may have
filed one or more amendments thereto, including related Preliminary
Prospectuses, each of which has previously been furnished to you. The
Company will next file with the Commission either prior to
effectiveness of such Registration Statement, a further amendment
thereto (including the form of Prospectus) or, after effectiveness of
such Registration Statement, a Prospectus in accordance with Rules 430A
and 424(b)(1) or (4). As filed, such amendment and form of Prospectus,
or such Prospectus, shall include all Rule 430A Information and, except
to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you in
writing, prior to the Execution Time, will be included or made therein.
(b) The Preliminary Prospectus at the time of filing thereof,
conformed in all material respects with the applicable requirements of
the Act and the rules and regulations thereunder and did not include
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading. If the Effective Date is prior to or
simultaneous with the Execution Time, (i) on the Effective Date, the
Registration Statement conformed in all material respects to the
requirements of the Act and the rules and regulations thereunder and
did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and (ii) at the
Execution Time, the Registration Statement conforms, and at the time of
filing of the Prospectus pursuant to Rule 424(b), the Registration
Statement and the Prospectus will conform, in all material respects to
the requirements of the Act and the rules and regulations thereunder,
and neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state a
material fact required to be stated therein or necessary in order to
make the statements therein (and, in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading.
If the Effective Date is subsequent to the Execution Time, on the
Effective Date, the Registration Statement and the Prospectus will
conform in all material respects to the requirements of the Act and the
rules and regulations thereunder, and neither of such documents will
contain any untrue statement of any material fact or will omit to state
any material fact required to be stated therein or necessary to make
the statements therein (and, in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading.
The two preceding sentences do not apply to statements in or omissions
from the Registration Statement or the Prospectus (or any supplements
thereto) based upon and in conformity with information furnished in
writing to the Company by or on behalf of any Underwriter through the
Representative specifically for use in connection with the preparation
of the Registration Statement or the Prospectus (or any supplements
thereto).
(c) The Company does not own or control, directly or
indirectly, any shares of capital stock or equity interests in any
corporation, partnership, association or other entity, except as set
forth in the Prospectus.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate
power and corporate authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction in which it conducts its business or owns
property and in which the failure, individually or in the aggregate, to
be so qualified would have a material adverse effect on the properties,
assets, operations, business, condition (financial or otherwise) or
prospects of the Company ("Material Adverse Effect"). The Company has
all necessary authorizations, approvals, orders, licenses, certificates
and permits of and from all government regulatory officials and bodies,
to own its properties and conduct its business as described in the
Prospectus except where the absence of any such authorization,
approval, order, license, certificate or permit would not have a
Material Adverse Effect.
(e) The Company does not own any shares of capital stock or
any other securities of any corporation or any equity interest in any
firm, partnership, association or other entity other than as described
in the Registration Statement.
(f) The Company's equity capitalization is as set forth in the
Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; all
outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable, and the
certificates therefor are in valid and sufficient form; there are, and,
on the Effective Date, the Closing Date (and any settlement date
pursuant to Section 3(b) hereof), there will be, no other classes of
stock outstanding except Common Stock; all outstanding options to
purchase shares of Common Stock have been duly and validly authorized
and issued; except as described in the Registration Statement, there
are, and, on the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), there will be, no options, warrant or rights to
acquire, or debt instruments convertible into or exchangeable for, or
other agreements or understandings to which the Company is a party,
outstanding or in existence, entitling any person to purchase or
otherwise acquire shares of capital stock of the Company; the issuance
and sale of the Securities have been duly and validly authorized and,
when issued and delivered and paid for, the Securities will be fully
paid and nonassessable and free from preemptive rights, and will
conform in all respects to the description thereof contained in the
Prospectus; the Representative's Warrants will, when issued, constitute
valid and binding obligations of the Company enforceable in accordance
with their terms and the Company has reserved a sufficient number of
shares of Common Stock for issuance upon exercise thereunder; the
Securities will, when issued, possess the rights, privileges and
characteristics as described in the Prospectus; and the certificates
for the Securities are in valid and sufficient form. Each offer and
sale of securities of the Company referred to in Item 26 of Part II of
the Registration Statement was effected in compliance with the Act and
the rules and regulations thereunder.
(g) The Securities (other than the Representative's Warrants)
have been approved for listing on the American Stock Exchange ("AMEX"),
upon official notice of issuance.
(h) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of the Company, threatened action,
suit or proceeding before any court or governmental agency, authority
or body, domestic or foreign, or any arbitrator involving the Company
of a character required to be disclosed in the Registration Statement
or the Prospectus. There is no contract or other document of a
character required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit that is not described or filed
as required.
(i) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as rights of indemnity and contribution
hereunder may be limited by public policy and except as the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and general principles of equity.
(j) The Company has full corporate power and corporate
authority to enter into and perform its obligations under this
Agreement and to issue, sell and deliver the Securities in the manner
provided in this Agreement. The Company has taken all necessary
corporate action to authorize the execution and delivery of, and the
performance of its obligations under, this Agreement.
(k) Neither the offering, issuance and sale of the Securities,
nor the consummation of any other of the transactions contemplated
herein, nor the fulfillment of the terms hereof, will conflict with or
result in a breach or violation of, or constitute a default under, or
result in the imposition of a lien on any properties of the Company or
an acceleration of indebtedness pursuant to, the Articles of
Incorporation or bylaws of the Company, as currently in effect, or any
of the terms of any indenture or other agreement or instrument to which
the Company is a party or by which the Company or any of its properties
are bound, or any law, order, judgment, decree, rule or regulation
applicable to the Company of any court, regulatory body, administrative
agency, governmental body, stock exchange or arbitrator having
jurisdiction over the Company. The Company is not in violation of its
Articles of Incorporation or bylaws, as currently in effect, or, except
as described in the Prospectus, in breach of or default under any of
the terms of any indenture or other agreement or instrument to which it
is a party or by which it or its properties are bound, which breach or
default would, individually or in the aggregate, have a Material
Adverse Effect.
(l) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it
any shares of capital stock in consequence of the issue and sale of the
Securities, nor does any person have preemptive rights, or rights of
first refusal or other rights to purchase any of the Securities. Except
as referred to in the Prospectus, no person holds a right to require or
participate in a registration under the Act of Common Stock, Preferred
Stock or any other equity securities of the Company.
(m) The Company has not (i) taken and will not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result
in, under the Exchange Act, or otherwise, stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities (other than those actions permitted by
applicable law) or (ii) effected any sales of shares of securities that
are required to be disclosed in response to Item 26 of Part II of the
Registration Statement (other than transactions disclosed in the
Registration Statement or the Prospectus).
(n) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is
required to be obtained or filed by or on behalf of the Company in
connection with the transactions contemplated herein, except such as
may have been obtained or made for registration of the Securities under
the Act, and such as may be required under the Blue Sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters.
(o) The accountants who have certified the Financial
Statements filed or to be filed with the Commission as part of the
Registration Statement are independent accountants as required by the
Act.
(p) No stop order preventing or suspending the use of any
Preliminary Prospectus has been issued, and no proceedings for that
purpose are pending or, to the best knowledge of the Company,
threatened or contemplated by the Commission; no stop order suspending
the sale of the Securities in any jurisdiction has been issued and no
proceedings for that purpose have been instituted or, to the best
knowledge of the Company, threatened or are contemplated; and any
request of the Commission for additional information (to be included in
the Registration Statement or the Prospectus or otherwise) has been
complied with.
(q) The Company has not sustained, since January 1, 1998, any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree,
and, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there have not been any
changes in the capital stock or long-term debt of the Company, or any
material adverse change, or a development known to the Company that
could reasonably be expected to cause or result in a material adverse
change, in the general affairs, management, financial position,
stockholders' equity, results of operations or prospects of the
Company, otherwise than as set forth in the Prospectus. Except as set
forth in the Prospectus, there exists no present condition or state of
facts or circumstances known to the Company involving its customers
which the Company can now reasonably foresee would have a Material
Adverse Effect or which would result in a termination or cancellation
of any agreement with any customer whose purchases, individually or in
the aggregate, are material to the business of the Company, or which
would result in any material decrease in sales to any such customer or
purchases from any supplier, or which would prevent the Company from
conducting its business as described in the Prospectus in essentially
the same manner in which it has heretofore been conducted.
(r) The Financial Statements and the related notes of the
Company, included in the Registration Statement and the Prospectus
present fairly the financial position, results of operations, cash flow
and changes in shareholders' equity of the Company at the dates and for
the periods indicated, subject in the case of the Financial Statements
for interim periods, to normal and recurring year-end adjustments. The
unaudited pro forma combined condensed statements of the Company
present fairly the financial position and the results of operations at
the dates and for the periods indicated. Such Financial Statements and
the unaudited pro forma combined financial information of the Company
were prepared in conformity with the Commission's rules and regulations
and in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved.
(s) The Company owns or possesses, or has the right to use
pursuant to licenses, sublicenses, agreements, permissions or
otherwise, adequate patents, copyrights, trade names, trademarks,
service marks, licenses and other intellectual property rights
necessary to carry on its business as described in the Prospectus, and,
except as set forth in the Prospectus, the Company has not received any
notice of either (i) default under any of the foregoing or (ii)
infringement of or conflict with asserted rights of others with respect
to, or challenge to the validity of, any of the foregoing which, in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a Material Adverse Effect, and the Company knows of
no fact which could reasonably be anticipated to serve as the basis for
any such notice.
(t) Subject to such exceptions as are not likely to result in
a Material Adverse Effect, (A) the Company owns all properties and
assets described in the Registration Statement and the Prospectus as
being owned by it and (B) the Company has good title to all properties
and assets owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except as otherwise disclosed in the
Prospectus and except for (i) liens for taxes not yet due, (ii)
mortgages and liens securing debt reflected on the Financial Statements
included in the Prospectus, (iii) materialmen's, workmen's, vendor's
and other similar liens incurred in the ordinary course of business
that are not delinquent, individually or in the aggregate, and do not
have a Material Adverse Effect on the value of such properties or
assets of the Company, or on the use of such properties or assets by
the Company, in its respective business, and (iv) any other liens that,
individually or in the aggregate, are not likely to result in a
Material Adverse Effect. All leases to which the Company is a party and
which are material to the conduct of the business of the Company are
valid and binding and no material default by the Company has occurred
and is continuing thereunder; and the Company enjoys peaceful and
undisturbed possession under all such material leases to which it is a
party as lessee.
(u) The books, records and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions in and
dispositions of the assets of the Company. The system of internal
accounting controls maintained by the Company is sufficient to provide
reasonable assurances that (i) transactions are executed in accordance
with management's general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(v) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company has not incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, in each case, which are likely to result in a Material
Adverse Effect, and there has not been any payment of or declaration to
pay any dividends or any other distribution with respect to the shares
of the capital stock of the Company.
(w) The Company is in compliance in all material respects with
all applicable laws, rules and regulations, including, without
limitation, employment and employment practices, immigration, terms and
conditions of employment, health and safety of workers, customs and
wages and hours, and is not engaged in any unfair labor practice. No
property of the Company has been seized by any governmental agency or
authority as a result of any violation by the Company or any
independent contractor of the Company of any provisions of law. There
is no pending unfair labor practice complaint or charge filed with any
governmental agency against the Company. There is no labor strike,
material dispute, slow down or work stoppage actually pending or, to
the best knowledge of the Company, threatened against or affecting the
Company; no grievance or arbitration arising out of or under any
collective bargaining agreements is pending against the Company no
collective bargaining agreement which is binding on the Company
restricts the Company from relocating or closing any of its operations
and none of the Company has experienced any work stoppage or other
labor dispute at any time.
(x) The Company has accurately, properly and timely (giving
effect to any valid extensions of time) filed all federal, state, local
and foreign tax returns (including all schedules thereto) that are
required to be filed, and has paid all taxes and assessments shown
thereon. Any and all tax deficiencies asserted or assessed against the
Company by the Internal Revenue Service ("IRS") or any other foreign or
domestic taxing authority have been paid or finally settled with no
remaining amounts owed. Neither the IRS nor any other foreign or
domestic taxing authority has examined any tax returns of the Company
nor has the IRS or any foreign or domestic taxing authority asserted a
position which conflicts with any tax position taken by the Company.
The charges, accruals and reserves shown in the Financial Statements
included in the Prospectus in respect of taxes for all fiscal periods
to date are adequate, and nothing has occurred subsequent to the date
of such Financial Statements that makes such charges, accruals or
reserves inadequate. The Company is not aware of any proposal (whether
oral or written) by any taxing authority to adjust any tax return filed
by the Company.
(y) With such exceptions as are not likely to result in a
Material Adverse Effect, the Company is in compliance with all Federal,
state, foreign and local laws and regulations relating to pollution or
protection of human health or the environment ("Environmental Laws"),
there are no circumstances that may prevent or interfere with such
compliance other than as set forth in the Prospectus, and the Company
has not received any notice or other communication alleging a currently
pending violation of any Environmental Laws. With such exceptions as
are not likely to result in a Material Adverse Effect, other than as
set forth in the Prospectus, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge or disposal of any
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products, that may result in the imposition of
liability on the Company or any claim against the Company or, to the
Company's best knowledge, against any person or entity whose liability
for any claim the Company has or may have assumed either contractually
or by operation of law, and the Company has not received any notice or
other communication concerning any such claim against the Company or
such person or entity.
(z) Except as set forth in the Prospectus, there are no
outstanding loans, advances or guaranties of indebtedness by the
Company to or for the benefit of its affiliates, or any of its officers
or directors, or any of the members of the families of any of them,
which are required to be disclosed in the Registration Statement or the
Prospectus.
(aa) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(bb) Except as set forth in the Prospectus, the Company has
insurance of the types and in the amounts that it reasonably believes
is adequate for its business, including, but not limited to, casualty
and general liability insurance covering all real and personal property
owned or leased by the Company, as applicable, against theft, damage,
destruction, acts of vandalism and all other risks customarily insured
against.
(cc) The Company has not at any time (i) made any
contributions to any candidate for political office, or failed to
disclose fully any such contribution, in violation of law; (ii) made
any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public
duties, other than payments required or allowed by all applicable laws;
or (iii) violated, nor is it in violation of, any provision of the
Foreign Corrupt Practices Act of 1977.
(dd) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company, and the Registration Statement has been duly
executed pursuant to such authorization by and on behalf of the
Company.
(ee) All documents delivered or to be delivered by the Company
or any of its directors or officers to the Underwriters, the Commission
or any state securities law administrator in connection with the
issuance and sale of the Securities were, on the dates on which they
were delivered, and will be, on the dates on which they are to be
delivered, true, complete and correct in all material respects.
(ff) Except as described in the Prospectus, the Company does
not maintain, nor does any other person maintain on behalf of the
Company, any retirement, pension (whether deferred or non-deferred,
defined contribution or defined benefit) or money purchase plan or
trust. There are no unfunded liabilities of the Company with respect to
any such plans or trusts that are not accrued or otherwise reserved for
on the Financial Statements.
(gg) Any certificates signed by an officer of the Company and
delivered to the Representative or the Underwriters or to counsel for
the Underwriters shall also be deemed a representation and warranty of
the Company to the Underwriters as to the matters covered thereby. Any
certificate delivered by the Company to its counsel for purposes of
enabling such counsel to render the opinions referred to in Section
6(b) will also be furnished to the Representative and counsel for the
Underwriters and shall be deemed to be additional representations and
warranties by the Company to the Underwriters as to the matters covered
thereby.
(hh) The Company has obtained and delivered to the
Representative the written agreements, substantially in the form
attached hereto as Exhibit B, of the principal shareholders of the
Company restricting dispositions of equity securities of the Company.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to issue and
sell to the Underwriters an aggregate of 1,500,000 shares of Common Stock. Each
of the Underwriters agrees, severally and not jointly, to purchase from the
Company the number of Underwritten Securities set forth opposite its name in
Schedule I hereto. The purchase price per Underwritten Securities to be paid by
the several Underwriters to the Company shall be $_________ per share.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option (the "Underwriters' Option") to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of 225,000 shares of Common Stock,
at the same purchase price per share for use solely in covering any
over-allotments made by the Representative for the account of the Underwriters
in the sale and distribution of the Underwritten Securities. Said Underwriters'
Option may be exercised in whole or in part at any time on or before the 45th
day after the Effective Date upon written or telegraphic notice by the
Representative to the Company setting forth the number of Option Securities
which the several Underwriters are electing to purchase pursuant to the
Underwriters' Option and the settlement date. Delivery of certificates for such
Option Securities by the Company and payment therefor to the Company shall be
made as provided in Section 3 hereof. The number of Option Securities purchased
by each Underwriter pursuant to the Underwriters' Option shall be determined by
multiplying the number of Option Securities to be sold by the Company pursuant
to the Underwriters' Option, as exercised, by a fraction, the numerator of which
is the number of Underwritten Securities to be purchased by such Underwriter as
set forth opposite its name in Schedule I and the denominator of which is the
total number of Underwritten Securities to be purchased by all of the
Underwriters as set forth on Schedule I (subject to such adjustments to
eliminate any fractional share purchases as the Representative in its discretion
may make).
3. Delivery and Payment.
(a) If the Underwriters' Option described in Section 2(b) hereof is
exercised on or before the third business day prior to the Closing Date (as
defined below), delivery of the certificates for the Underwritten Securities
described in Sections 2(a) and 2(b) hereof shall be made by the Company through
the facilities of the Depository Trust Company ("DTC"), and payment therefor
shall be made at 10:00 a.m., Dallas, Texas time, on ___________________, 1999 or
such later date (not later than ____________, 1999) the Representative shall
designate, which date and time may be postponed by agreement among the
Representative and the Company or as provided in Section 9 hereof (such date,
time of delivery and payment for such Securities being herein called the
"Closing Date"). Delivery of the certificates for such Securities to be
purchased on the Closing Date shall be made as provided in the preceding
sentence for the respective accounts of the several Underwriters against payment
by the several Underwriters through Redstone Securities, Inc. of the aggregate
purchase price of such Underwritten Securities by wire transfer in same day
funds. Certificates for such Underwritten Securities shall be registered in such
names and in such denominations as the Representative may request not less than
one full business day in advance of the Closing Date. The Company agrees to have
the certificates for the Underwritten Securities to be purchased on the Closing
Date available at the office of the DTC, not later than 10:00 a.m., Dallas,
Texas time, at least one business day prior to the Closing Date.
(b) If the Underwriters' Option is exercised after the third business
day prior to the Closing Date, (i) delivery of the certificates for the
Underwritten Securities described in Section 2(a) hereof and payment therefor
will be governed by the provisions of Section 3(a) hereof, and (ii) the Company
will deliver (at the expense of the Company) on the date specified by the
Representative (which shall not be less than one nor more than five business
days after exercise of the Underwriters' Option), certificates for the Option
Securities in such names and denominations as the Representative shall have
requested against payment at the office of Redstone Securities, Inc. of the
purchase price by wire transfer in same day funds. If settlement for such
Securities occurs after the Closing Date, the Company will deliver to the
Representative on the settlement date for such Securities, and the obligation of
the Underwriters to purchase such Securities shall be conditioned upon receipt
of, supplemental opinions, certificates and letters confirming as of such date
the opinions, certificates and letters delivered on the Closing Date pursuant to
Section 6 hereof.
The Company agrees to have the certificates for the Option Securities
to be purchased after the Closing Date available at the office of the DTC not
later than 10:00 a.m., Dallas, Texas time, at least one business day prior to
the settlement date.
4. Offering by Underwriters. It is understood that the several Underwriters
propose to offer the Securities for sale to the public as set forth in the
Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution Time, to
become effective as promptly as possible. If the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representative of such timely
filing. The Company will promptly advise the Representative (i) when the
Registration Statement shall have become effective, (ii) when any post-effective
amendment thereto shall have become effective, (iii) of any request by the
Commission for any amendment or supplement of the Registration Statement or the
Prospectus or for any additional information with respect thereto, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the receipt by the Company of any notification with
respect to the institution or threatening of any proceeding for that purpose and
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The Company
will use its best efforts to prevent the issuance of any such stop order or
suspension and, if issued, to obtain as soon as possible the withdrawal thereof.
The Company will not file any amendment to the Registration Statement or
supplement to the Prospectus without the prior consent of the Representative.
The Company will prepare and file with the Commission, promptly upon your
request, any amendment to the Registration Statement or supplement to the
Prospectus that you reasonably determine to be necessary or advisable in
connection with the distribution of the Securities by you, and will use its best
efforts to cause the same to become effective as promptly as possible.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it otherwise shall be necessary to supplement the
Prospectus to comply with the Act or the rules or regulations thereunder, the
Company will promptly prepare and file with the Commission, subject to Section
5(a) hereof, a supplement that will correct such statement or omission or a
supplement that will effect such compliance.
(c) As soon as practicable (but not later than eighteen months after
the effective date of the Registration Statement), the Company will make
generally available to its security holders and to the Representative an
earnings statement or statements (which need not be audited) of the Company
covering a period of at least twelve months after the Effective Date (but in no
event commencing later than 90 days after such date), which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder.
(d) The Company will furnish to each of you and counsel for the
Underwriters, without charge, one signed copy of the Registration Statement and
any amendments thereto (including exhibits thereto) and to each other
Underwriter a conformed copy of the Registration Statement and any amendments
thereto (without exhibits thereto) and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act, as many copies of the
Prospectus and each Preliminary Prospectus and any supplements thereto as the
Representative may reasonably request.
(e) The Company will take all actions necessary for the registration or
qualification of the Securities for sale under the laws of such jurisdictions
within the United States and its territories as the Representative may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities and will pay the fee of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with its
review of the offering, provided that the Company shall not be required to
qualify as a foreign corporation or to consent to service of process under the
laws of any such jurisdiction (except service of process with respect to the
offering and sale of the Securities).
(f) The Company will apply the net proceeds from the offering received
by it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(g) The Company will (i) cause the Securities (other than the
Representatives' Warrants) listed on AMEX and (ii) comply with all registration,
filing and reporting requirements of the Exchange Act, and AMEX which may from
time to time be applicable to the Company.
(h) During the five-year period commencing on the date hereof, the
Company will furnish to its shareholders, as soon as practicable after the end
of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of earnings and will furnish to you and, upon request, to the other
Underwriters hereunder (i) concurrent with furnishing such quarterly reports to
its shareholders, statements of income and other information of the Company for
such quarter in the form furnished to the Company's shareholders; (ii)
concurrent with furnishing such annual reports to its shareholders, a balance
sheet of the Company as at the end of such fiscal year, together with statements
of income and surplus and of cash flow of the Company for such fiscal year, all
in reasonable detail and accompanied by a copy of the certificate or report
thereon of its independent certified public accountants; (iii) as soon as they
are available, copies of all reports and financial statements furnished to or
filed with the Commission, the NASD, AMEX or any other securities exchange on
which any of the Company's securities may be listed; (iv) every press release
and every material news item or article in respect of the Company or its affairs
which was released or prepared by the Company; and (v) any additional
information of a public nature concerning the Company or its business that you
may reasonably request. During such five-year period, if the Company shall have
active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and its
subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary that is not so consolidated.
(i) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for the Securities.
(j) The Company will not, for a period of 365 days following the
Effective Date, without the prior written consent of the Representative, offer,
sell, contract to sell (including, without limitation, any short sale),
transfer, assign, pledge, encumber, hypothecate or grant any option to purchase
or otherwise dispose of, any capital stock, or any options, rights or warrants
to purchase any capital stock of the Company, or any securities or indebtedness
convertible into or exchangeable for shares of capital stock of the Company,
except for (i) sales of Securities as contemplated by this Agreement and (ii)
sales of Common Stock upon the exercise of Warrants or outstanding options
described in the Prospectus.
(k) The Company has reserved and shall continue to reserve a sufficient
number of shares of Common Stock for issuance upon exercise of the
Representatives' Warrants.
(l) If the Company elects to rely on Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 p.m., Washington D.C. time, on the date of this Agreement,
and the Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
(m) For as long as the Representative's Warrants are outstanding, the
Company will nominate for election as a director a person designated by the
Representative, and during such time as the Representative shall not have
exercised such right, the Representative shall have the right to designate a
director or advisory director, who shall be entitled to attend all meetings of
the Board of Directors and receive all correspondence and communications sent by
the Company to the members of the Board of Directors.
(n) For a period of one year from the date of this Prospectus, the
Company shall not, without the prior written consent of the Representative,
issue, sell, contract to sell, or otherwise dispose of any shares of Common
Stock any options to purchase any shares of Common Stock, or any securities
convertible into, exercisable for, or exchangeable for shares of Common Stock,
except upon the exercise of outstanding options or warrants or the issuance of
options under the Company's employee stock option plan.
6. Conditions to the Obligations of the Underwriters. The obligations of the
Underwriters to purchase the Securities described in Sections 2(a) and 2(b)
hereof shall be subject to (i) the accuracy of the representations and
warranties on the part of the Company contained herein as of the Execution Time,
the Closing Date and (in the case of any Securities delivered after the Closing
Date, any settlement date pursuant to Section 3(b) hereof), (ii) the accuracy of
the statements of the Company made in any certificates delivered pursuant to the
provisions hereof, (iii) the performance by the Company of its obligations
hereunder, and (iv) the following additional conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under the
Act, such post-effective amendment shall become effective) not later than 5:00
p.m. Eastern Standard Time, on the execution date hereof or at such later date
and time as the Representative may approve in writing and, at the Closing Date
(and any settlement date pursuant to Section 3(b) hereof), no stop order
suspending the effectiveness of the Registration Statement or any qualification
in any jurisdiction shall have been issued and no proceedings for that purpose
shall have been initiated or, to the best knowledge of the Company, threatened
by the Commission.
(b) The Company shall have furnished to the Representative the opinion
of Maurice J. Bates, L.L.C., counsel for the Company, addressed to the
Underwriters and dated the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), or other evidence satisfactory to the Representative to
the effect that:
(i) The Registration Statement has become effective under the Act; any
required filing of the Prospectus or any supplements thereto pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b); to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any qualification in any
jurisdiction has been issued and no proceedings for that purpose have been
instituted or threatened; any request from the Commission for additional
information has been complied with; the Registration Statement and the
Prospectus (and any supplements thereto) comply as to form in all material
respects with the applicable requirements of the Act and the rules and
regulations thereunder (except that such counsel need express no opinion with
respect to the Financial Statements and schedules included in the Registration
Statement and Prospectus).
(ii) The Company does not own or control, directly or indirectly, any
shares of capital stock or equity interests in any corporation, partnership,
association or other entity, except as set forth in the Prospectus.
(iii) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and corporate authority to own
its properties and conduct its business as described in the Prospectus, and is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction in which it conducts its business or owns
property and in which the failure, individually or in the aggregate, to be so
qualified would have a Material Adverse Effect. The Company has all necessary
and material authorizations, approvals, orders, licenses, certificates and
permits of and from all government regulatory officials and bodies, to own its
properties and conduct its business as described in the Prospectus, except where
failure to obtain such authorizations, approvals, orders, licenses, certificates
or permits would not have a Material Adverse Effect.
(iv) The Company has an authorized share capitalization as set forth in the
Prospectus; the capital stock of the Company conforms in all material respects
to the description thereof contained in the Prospectus; all outstanding shares
of Common Stock have been duly and validly authorized and issued and are fully
paid and nonassessable and the certificates therefor are in valid and sufficient
form in accordance with applicable state law; there are no other classes of
stock outstanding except Common Stock; all outstanding options to purchase
shares of Common Stock have been duly and validly authorized and issued; except
as described in the Prospectus, there are no options, warrants or rights to
acquire, or debt instruments convertible into or exchangeable for, or other
agreements or understandings to which the Company is a party, outstanding or in
existence, entitling any person to purchase or otherwise acquire any shares of
capital stock of the Company; the issuance and sale of the Securities have been
duly and validly authorized and, when issued and delivered and paid for, the
Securities will be fully paid and nonassessable and free from preemptive rights,
and will conform in all respects to the description thereof contained in the
Prospectus; the Representative's Warrants constitute valid and binding
obligations of the Company enforceable in accordance with their terms and the
Company has reserved a sufficient number of shares of Common Stock for issuance
upon exercise thereof; the Representative's Warrants possess the rights,
privileges and characteristics as represented in the forms filed as exhibits to
the Registration Statement and as described in the Prospectus; the Securities
(other than the Representative's Warrants) have been approved for listing on
AMEX upon notice of issuance thereof; the certificates for the Securities are in
valid and sufficient form. Each offer and sale of securities of the Company
described in Item 26 of Part II of the Registration Statement was effected in
compliance with the Act and the rules and regulations thereunder.
(v) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of such counsel after reasonable
investigation, threatened action, suit or proceeding before any court
or governmental agency, authority or body, domestic or foreign, or any
arbitrator involving the Company of a character required to be
disclosed in the Registration Statement or the Prospectus that is not
adequately disclosed in the Prospectus, and, to the best knowledge of
such counsel, there is no contract or other document of a character
required to be described in the Registration Statement or the
Prospectus, or to be filed as an exhibit, which is not described or
filed as required.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
agreement and obligation of the Company enforceable against it in
accordance with its terms (subject to standard bankruptcy and equitable
remedy exceptions, and limitations under the Act as to the
enforceability of indemnification provisions).
(vii) The Company has full corporate power and corporate
authority to enter into and perform its obligations under this
Agreement and to issue, sell and deliver the Securities in the manner
provided in this Agreement; and the Company has taken all necessary
corporate action to authorize the execution and delivery of, and the
performance of its obligations under, this Agreement.
(viii) Neither the offering, issue and sale of the Securities
nor the consummation of any other of the transactions contemplated
herein, nor the fulfillment of the terms hereof, will conflict with or
result in a breach or violation of, or constitute a default under, or
result in the imposition of a lien on any properties of the Company, or
an acceleration of indebtedness pursuant to, the Articles of
Incorporation (or other charter document) or bylaws of the Company, or
any of the terms of any indenture or other agreement or instrument to
which the Company is a party or by which its properties are bound, or
any law, order, judgment, decree, rule or regulation applicable to the
Company of any court, regulatory body, administrative agency,
governmental body, stock exchange or arbitrator having jurisdiction
over the Company. The Company is not in violation of its Articles of
Incorporation or bylaws or, to the best knowledge of such counsel after
reasonable investigation, in breach of or default under any of the
terms of any indenture or other agreement or instrument to which it is
a party or by which it or its properties are bound, which breach or
default would, individually or in the aggregate, have a Material
Adverse Effect.
(ix) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it
any shares of capital stock in consequence of the issue and sale of the
Securities to be sold by the Company hereunder nor does any person have
preemptive rights, or rights of first refusal or other rights to
purchase any of the Securities. Except as referred to in the
Prospectus, no person holds a right to require or participate in a
registration under the Act of Common Stock or any other equity
securities of the Company.
(x) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is
required to be obtained or filed by or on behalf of the Company in
connection with the transactions contemplated herein, except such as
may have been obtained or made and registration of the Securities under
the Act, and such as may be required under the Blue Sky laws of any
jurisdiction.
(xi) To the best knowledge of such counsel after reasonable
investigation, the Company is not in violation of or default under any
judgment, ruling, decree or order or any statute, rule or regulation of
any court or other United States governmental agency or body, including
any applicable laws respecting employment, immigration and wages and
hours, in each case, where such violation or default could have a
Material Adverse Effect. The Company is not involved in any labor
dispute, nor, to the best knowledge of such counsel, is any labor
dispute threatened.
(xii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(xiii) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company, and the Registration Statement has been duly
executed pursuant to such authorization by and on behalf of the
Company.
(xiv) Except as disclosed in the Prospectus, the Company owns
or possesses, or has the right to use pursuant to licenses,
sublicenses, agreements, permissions or otherwise, adequate patents,
copyrights, trade names, trademarks, service marks, licenses and other
intellectual property rights necessary to carry on its business as
described in the Prospectus, and, except as set forth in the
Prospectus, neither such counsel nor, to the knowledge of such counsel,
the Company has received any notice of either (i) default under any of
the foregoing or (ii) infringement of or conflict with asserted rights
of others with respect to, or challenge to the validity of, any of the
foregoing which, in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could have a Material Adverse Effect, and
counsel knows of no facts which could reasonably be anticipated to
serve as the basis for any such notice.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants of the Company
and representatives of the Underwriters at which the contents of the
Registration Statement and Prospectus were discussed and, although such counsel
is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated in subparagraphs (i)
and (v) above), on the basis of the foregoing and on such counsel's
participation in the preparation of the Registration Statement and the
Prospectus, nothing has come to the attention of such counsel that causes such
counsel to believe that the Registration Statement, at the Effective Date and at
the Closing Date (and any settlement date pursuant to Section 3(b) hereof),
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus, at the date
of such Prospectus or at the Closing Date (or any settlement date pursuant to
Section 3(b) hereof), contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no comment with respect to the Financial Statements and
schedules and other financial or statistical data derived therefrom included in
the Registration Statement or Prospectus). References to the Prospectus in this
Section 6(b) shall include any supplements thereto.
(c) The Representative shall have received from Wolin, Ridley & Miller
LLP, counsel for the Underwriters, an opinion dated the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), with respect to the issuance
and sale of the Securities, and with respect to the Registration Statement, the
Prospectus and other related matters as the Representative may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(d) The Company shall have furnished to the Representative a
certificate of the Company, signed by its Chief Executive Officer and its Chief
Financial Officer, dated the Closing Date (and any settlement date pursuant to
Section 3(b) hereof), to the effect that each has carefully examined the
Registration Statement, the Prospectus (and any supplements thereto) and this
Agreement, and, after due inquiry, that:
(i) As of the Closing Date (and any settlement date pursuant
to Section 3(b) hereof), the statements made in the Registration
Statement and the Prospectus are true and correct and the Registration
Statement and the Prospectus do not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under
the securities or Blue Sky laws of any jurisdiction is in effect and no
proceeding for such purpose is pending before or, to the knowledge of
such officers, threatened or contemplated by the Commission or the
authorities of any such jurisdiction; and any request for additional
information with respect to the Registration Statement or the
Prospectus on the part of the staff of the Commission or any such
authorities brought to the attention of such officers has been complied
with to the satisfaction of the staff of the Commission or such
authorities.
(iii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock or long-term debt of the Company,
except as set forth in or contemplated by the Registration Statement
and the Prospectus, (y) there has not been any material adverse change
in the general affairs, business, prospects, properties, management,
results of operations or condition (financial or otherwise) of the
Company, whether or not arising from transactions in the ordinary
course of business, in each case, other than as set forth in or
contemplated by the Registration Statement and the Prospectus, and (z)
the Company has not sustained any material interference with its
business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement and the
Prospectus.
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has been
no material litigation instituted against the Company, any of its
respective officers or directors, or, to the best knowledge of such
officers, any affiliate or promoter of the Company, and since such
dates there has been no proceeding instituted or, to the best knowledge
of such officers, threatened against the Company, any of its officers
or directors, or, to the best knowledge of such officers, any affiliate
or promoter of the Company, before any federal, state or county court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, which could have a Material
Adverse Effect.
(v) Each of the representations and warranties of the Company in this
Agreement is true and correct in all material respects on and as of the
Execution Time and the Closing Date (and any settlement date pursuant
to Section 3(b) hereof) with the same effect as if made on and as of
the Closing Date (and any settlement date pursuant to Section 3(b)
hereof).
(vi) Each of the covenants required in this Agreement to be
performed by the Company on or prior to the Closing Date (and any
settlement date pursuant to Section 3(b) hereof) has been duly, timely
and fully performed, and each condition required herein to be complied
with by the Company on or prior to the Closing Date (and any settlement
date pursuant to Section 3(b) hereof) has been duly, timely and fully
complied with.
(e) At the Execution Time and on the Closing Date (and any settlement
date pursuant to Section 3(b) hereof), Pannell Kerr Forester of Texas, P.C.,
shall have furnished to the Representative letters, dated as of such dates, in
form and substance satisfactory to the Representative, confirming that they are
independent accountants within the meaning of the Act and the applicable rules
and regulations thereunder and stating in effect that:
(i) In their opinion, the audited Financial Statements of the
Company for the fiscal years ended December 31, 1996 and 1997, and the
notes to the Financial Statements and Financial Statement schedules for
those periods included in the Registration Statement and the
Prospectus, comply in all material respects with generally accepted
accounting principles and the applicable accounting requirements of the
Act and the applicable rules and regulations thereunder.
(ii) On the basis of a reading of the latest unaudited Financial Statements
made available by the Company, carrying out certain specified procedures (but
not an examination in accordance with generally accepted auditing standards), a
reading of the minutes of the meetings of the shareholders, directors and
committees of the Company, and inquiries of certain officials of the Company who
have responsibility for financial and accounting matters of the Company, nothing
came to their attention that caused them to believe that: (i) the unaudited
Financial Statements of the Company for the ten (10) months ended October 31,
1998, and the notes to the Financial Statements and the Financial Statement
Schedules for the period then ended included in the Registration Statement and
Prospectus do not comply in all material respects with generally accepted
accounting principles or the applicable accounting requirements of the Act and
the applicable rules and regulations thereunder; and (ii) with respect to the
period subsequent to October 31, 1998, at a specified date not more than five
business days prior to the date of the letter, (y) there were any changes in the
long-term debt or capital stock of the Company or its subsidiaries, or decreases
in net current assets, net assets or stockholders' equity of the Company as
compared with the amounts shown on the October 31, 1998 balance sheets included
in the Registration Statement and the Prospectus or (z) there were any decreases
in reserves, sales, net income or income from operations, of the Company, as
compared with the corresponding period in the preceding year, except for changes
or decreases which the Registration Statement discloses have occurred or may
occur and except for changes or decreases, set forth in such letter, in which
case (A) the letter shall be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is not deemed necessary by the
Representative and (B) such changes or decreases and the explanation thereof
shall be acceptable to the Representative, in its sole discretion.
(iii) They have performed certain other specified procedures as a result of
which they determined that all information of an accounting, financial or
statistical nature (which is limited to accounting, financial or statistical
information derived from the general accounting records of the Company) set
forth in the Registration Statement and the Prospectus and specified by you
prior to the Execution Time, agrees with the accounting records of the Company.
The Representative shall also have also received from Pannell
Kerr Forester of Texas, P.C., a letter stating that the Company's system of
internal accounting controls taken as a whole are sufficient to meet the broad
objectives of internal accounting control insofar as those objectives pertain to
the prevention or detection of errors or irregularities in amounts that would be
material to the Financial Statements of the Company.
References to the Prospectus in this Section 6(e) shall
include any supplements thereto.
(f) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall not have been (i)
any changes or decreases from that specified in the letters referred to in
Section 6(e) hereof or (ii) any change, or any development involving a
prospective change, in or affecting the properties, assets, results of
operations, business, capitalization, net worth, prospects, general affairs or
condition (financial or otherwise) of the Company, the effect of which is, in
the sole judgment of the Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Securities as contemplated by the Registration Statement and the Prospectus.
(g) On or prior to the Effective Date, the Securities (other than the
Representative's Warrants) shall have been approved for listing on AMEX.
(h) The Company shall not have sustained any uninsured substantial loss
as a result of fire, flood, accident or other calamity.
(i) The Company shall have furnished to the Representative a
certificate of the Secretary of the Company certifying as to certain information
and other matters as the Representative may reasonably request.
(j) The Company shall have furnished to the Representative such further
information, certificates and documents as the Representative may reasonably
request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in any respect when and as provided in this Agreement, or if any
of the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all respects reasonably satisfactory in form and substance to
the Representative and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date (or any settlement date, pursuant to Section 3(b) hereof), by the
Representative. Notice of such cancellation shall be given to the Company in
writing or by telephone, facsimile or telegraph confirmed in writing.
(k) The Company shall have entered into agreements with Charles W.
Janke and J.H. (Jim) Carpenter providing that for a period of one year after the
date of this Prospectus without the prior written consent of the Representative
they will not sell, contract to sell, or otherwise dispose of any shares of
Common Stock, any options to purchase Common Stock, or any securities
convertible into, excerciseable for or exchangeable for shares of Common Stock.
7. Fees and Expenses and Underwriters' Warrant. The Company agrees to pay or
cause to be paid and issue the following:
(a) the fees, disbursements and expenses of its own counsel and counsel
for the Company and accountants in connection with the registration of the
Securities under the Act and all other expenses in connection with the
preparation, printing and filing of the Registration Statement, any Preliminary
Prospectus, any Prospectus, and any drafts thereof, and amendments and
supplements thereto, and the mailing and delivery of copies thereof to the
Underwriters and dealers;
(b) all expenses in connection with the qualification of the Securities
for offering under state securities laws, including the fees and disbursements
of counsel for the Underwriters in connection with such qualification and in
connection with any Blue Sky memorandum;
(c) all filing and other fees in connection with filing with the NASD,
and complying with applicable review requirements thereof;
(d) the cost of preparing and printing certificates for the Securities;
(e) all expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties sellers' and buyers' stamp taxes
or duties on the purchase and sale of the Securities and stock exchange
brokerage and transaction levies with respect to the purchase and, if
applicable, the sale of the Securities (the latter to the extent paid and not
reimbursed) (i) incident to the sale and delivery by the Company of the
Securities to the Underwriters and (ii) incident to the sale and delivery of the
Securities by the Underwriters to the initial purchasers thereof;
(f) the costs and charges of any transfer agent and registrar;
(g) the fees and expenses in connection with qualification of the
Securities (other than the Underwriters' Warrant) for listing on the AMEX;
(h) a nonaccountable expense allowance of 2.0% of the proceeds derived
from the offering (including the Option Securities described in Section 2(b)
hereof) payable to the Representative; and
(i) all other costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically provided
for in this Section 7.
Additionally, the Representative shall be entitled to receive on the
Closing Date, as partial compensation for its services, warrants (the
"Representative's Warrants") for the purchase of an aggregate of 150,000 shares
of Common Stock of the Company. The Representative's Warrants shall be issued
pursuant to a Warrant Agreement in the form of Exhibit A attached hereto and
shall be exercisable, in whole or in part, for a period of four years commencing
one year from the date of the Prospectus, at 120% of the initial public offering
price for the Common Stock offered pursuant to the Prospectus.
Without limiting in any respect the foregoing obligations of the
Company, which obligations shall survive any termination of this Agreement, if
the sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 6 hereof
is not satisfied, because of any termination pursuant to Section 10 hereof, or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof to be performed
or complied with by the Company other than by reason of a default by any of the
Underwriters, the Company agrees to reimburse the Underwriters, upon demand, for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities to the extent the amounts paid pursuant to
Section 7(h) hereof are insufficient therefor.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person who controls any Underwriter within the meaning of the Act or
the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in (i)
Section 1 of this Agreement, the Registration Statement, any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement thereto,
or (ii) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Securities under the securities or Blue Sky laws thereof or filed with the
Commission or any securities association or securities exchange, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Representative specifically for use in the
Registration Statement or Prospectus; provided further, that with respect to any
untrue statement or omission, or any alleged untrue statement or omission, made
in any Preliminary Prospectus, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling any such Underwriter) from whom the person
asserting any such losses, claims, damages, liabilities or expenses purchased
the Securities concerned to the extent that such untrue statement or omission,
or alleged untrue statement or omission, has been corrected in the Prospectus
and the failure to deliver the Prospectus was not a result of the Company's
failure to comply with its obligations under Section 5(d) hereof. The indemnity
agreement will be in addition to any liability which the Company may otherwise
have. The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding), unless the settlement or compromise or consent includes an
unconditional release of such Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding,
satisfactory in form and substance to the Representative.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of the Company's officers who signs the
Registration Statement, and each person who controls the Company, within the
meaning of the Act or the Exchange Act to the same extent as the foregoing
indemnity from the Company to each Underwriter, but only with reference to
written information relating to such Underwriter furnished to the Company by or
on behalf of such Underwriter through the Representative specifically for use in
the Registration Statement or Prospectus. The Company acknowledges that the
corporate names of the Underwriters, the stabilization legend on page 2 and the
information under the heading "Underwriting" in the Prospectus and in any
Preliminary Prospectus constitute the only information furnished in writing by
or on behalf of the several Underwriters. The obligations of each Underwriter
under this subsection (b) shall be in addition to any liability which the
Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, suit or proceeding, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all expenses; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party, unless such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. All such
expenses shall be paid by the indemnifying party as incurred by an indemnified
party. Any such indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has agreed to pay such fees and expenses
or (ii) the indemnifying party shall have failed promptly after notice by such
indemnified party to assume the defense of such action or proceeding and employ
counsel reasonably satisfactory to the indemnified party in any such action,
suit or proceeding or (iii) the named parties in any such action or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to such
indemnified party which are different from or additional to those available to
the indemnifying party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action or proceeding on behalf of the
indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for all such indemnified parties, which firm shall be designated in writing
to the indemnifying party). Any such fees and expenses payable by the
indemnifying party shall be paid to or on behalf of the indemnified party
entitled thereto as incurred. An indemnifying party shall not be liable for any
settlement of any action or claim effected without its consent, which consent
shall not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Sections 8(a) or 8(b)
is applicable in accordance with its terms but is for any reason held by a court
to be unavailable from the indemnifying party on grounds of policy or otherwise,
the Company and the Underwriters shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) to which the
Company and one or more of the Underwriters may be subject in such proportion so
that the Underwriters are responsible in the aggregate for that portion
represented by the total underwriting compensation in respect of the Securities
bears to the public offering price appearing thereon and the Company is
responsible for the balance; provided, however, that (i) in no case shall any
Underwriter (except as may be provided in the Agreement Among Underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the total underwriting compensation applicable to the Securities to be
purchased by such Underwriter hereunder and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls an
Underwriter within the meaning of the Act shall have the same rights to
contribution as such Underwriter, and each person who controls the Company
within the meaning of the Act, each officer of the Company who shall have signed
the Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clause (ii) of
this Section 8(d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 8(d), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise.
9. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the Securities agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the number of Underwritten
Securities set forth opposite their names in Schedule I hereto bears to the
aggregate number of Underwritten Securities set forth opposite the names of all
the remaining Underwriters) the Underwritten Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase; provided, however,
that if the aggregate number of Underwritten Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of
the aggregate number of Underwritten Securities set forth in Schedule I hereto,
the remaining Underwriters shall have the right to purchase all, but shall not
be under any obligation to purchase any, of such Underwritten Securities, and if
such nondefaulting Underwriters do not purchase all of such Underwritten
Securities, this Agreement will terminate without liability to any
non-defaulting Underwriter or the Company except as otherwise provided in
Section 7. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representative shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company or any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company prior to
delivery of and payment for the Securities, if prior to such time (a) a
suspension or material limitation in trading in securities generally on the New
York or American Stock Exchange or the Nasdaq National Market System shall have
occurred, (b) a banking moratorium shall have been declared by federal or New
York state authorities, (c) the United States shall have engaged in hostilities
which shall have resulted in the declaration, on or after the date hereof, of a
national emergency or war, or (d) a change in national or international
political, financial or economic conditions or national or international equity
markets or currency exchange rates shall have occurred, if the effect of any
such event specified above is, in the sole judgment of the Representative, so
material and adverse as to make it impractical or inadvisable to proceed with
the public offering or delivery of the Securities as contemplated by the
Registration Statement and the Prospectus.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers and the Underwriters set forth in, referred to in, or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities until all appliable
statutes of limitation have expired. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and effective only
on receipt, and will be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed:
to the Representative at:
Redstone Securities, Inc.
101 Fairchild Avenue
Plainview, New York 10110
Attention: Robert A. Shuey, III
Facsimile No. (516) 576-3840
to the Company at:
Rampart Capital Corporation
700 Louisiana, Suite 2510
Houston, Texas 77002
Attention: Charles W. Janke, Chairman and CEO
Facsimile No. (713) 223-4610
with copy to:
James W. Christian, Esq.
Christian & Smith
2302 Fannin Street
5th Floor
Houston, Texas 77002
Facsimile No. (713) 659-7641
13. Successors. This Agreement will inure to the benefit of and be binding upon
the parties hereto and their respective successors and the officers, directors
and controlling persons referred to in Section 8 hereof, and no other person
will have any right or obligation hereunder.
14. Counterparts. This Agreement may be signed in two or more counterparts, each
of which shall be an original, with the same effect as if the signatures thereon
and hereon were on the same instrument.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Texas. Venue will lie in the federal or
state courts of Harris County, Texas.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
35541_3 - 75205/00005
Underwriting Agreement
Very truly yours,
RAMPART CAPITAL CORPORATION
By:
Charles W. Janke, Chairman and Chief Executive Officer
<PAGE>
35541_3 - 75205/00005
Underwriting Agreement
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
Redstone Securities, Inc.
By:
Robert A. Shuey, III
For itself and the other several Underwriters in Schedule I to the foregoing
Agreement.
<PAGE>
35541_3 - 75205/00005
SCHEDULE I
Underwriters Number of
Underwritten Securities
to be Purchased
Redstone Securities, Inc.
---------
Total 1,500,000
<PAGE>
EXHIBIT A
FORM OF WARRANT AGREEMENT
<PAGE>
EXHIBIT B
FORM OF LOCK-UP AGREEMENT
Redstone Securities, Inc.,
As Representative of the Several Underwriters
101 Fairchild Avenue
Plainview, New York 10110
Ladies and Gentlemen:
The undersigned understands that you, as the Representative of the
several underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with Rampart Capital Corporation, a
Texas corporation (the "Company"), providing for the initial public offering
(the "Offering") by the Underwriters, of 1,500,000 shares of Common Stock of the
Company (the "Common Stock") pursuant to the Company's Registration Statement on
Form SB-2 (the "Registration Statement") filed with the Securities and Exchange
Commission.
In consideration of the Underwriters' agreement to purchase the Common
Stock, and for other good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned hereby agrees that during the period beginning on
the date of this letter and ending one (1) year (the "Lock-Up Period") after the
date of the final prospectus relating to the offer and sale of the Common Stock,
the undersigned will not, directly or indirectly, offer, sell, contract to sell,
grant any option for the sale of, pledge, or otherwise dispose of (individually,
a "Disposition") any Common Stock, or securities exercisable, convertible, or
exchangeable for or into Common Stock (collectively, the "Securities"), that the
undersigned now owns or will own in the future (beneficially or of record),
except (i) as a bona fide gift or gifts, provided the donee or donees thereof
agree in writing to be bound by this Lock-Up Agreement, or (ii) with the prior
written consent of the Representative. The foregoing restriction is expressly
agreed to preclude the holder of Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-Up Period, even if such
Securities would be disposed of by someone other than the undersigned. Such
prohibited hedging or other transactions would include, without limitation, any
short sale or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities.
Sincerely,
Date:_______________, 1999
Signature
Print
Name
_______________, 1999
REDSTONE SECURITIES , INC.
As Representative of the Several Underwriters
101 Fairchild Avenue
Plainview, New York 10110
Gentlemen:
Rampart Capital Corporation, a Texas corporation (the "Company"),
hereby agrees to sell to you, and you hereby agree to purchase from the Company
at an aggregate purchase price of $100, stock purchase warrants (the
"Representative's Warrants") covering 150,000 shares (the "Shares") of the
Company's Common Stock, $.01 par value (the "Common Stock"). The
Representative's Warrants will be exercisable by you as to all or any lesser
number of Shares covered thereby, at the Purchase Price per Share as defined
below, at any time and from time to time on and after the first anniversary of
the date hereof and ending at 5:00 p.m. on the fifth anniversary of the date
hereof.
1. Definitions.
As used herein, the following terms, unless the context otherwise
requires, shall have for all purposes hereof the following meanings:
The term "Act" refers to the Securities Act of 1933, as amended.
The term "Affiliate" of any Person refers to any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with, such other Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
The term "Commission" refers to the Securities and Exchange Commission.
The term "Common Stock" refers to all stock of any class or classes
(however designated) of the Company, now or hereafter authorized, the holders of
which shall have the right without limitation as to amount, either to all or to
a part of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any Shares entitled to preference, and
the holders of which shall ordinarily, in the absence of contingency, be
entitled to vote for the election of a majority of the directors of the Company
(even though the right so to vote has been suspended by the occurrence of such a
contingency).
The term "Current Market Price" on any date refers to the average of
the daily Market Price per Share for the 30 consecutive Trading Days commencing
45 Trading Days before the date in question.
The term "Exchange Act" refers to the Securities Exchange Act of 1934,
as amended.
The term "Market Price" refers to the closing sale price on the
American Stock Exchange ("AMEX") or, if no closing sale price is reported, the
closing bid price of the Common Stock, as quoted on the Nasdaq National Market,
or, if the Common Stock is not quoted on the Nasdaq National Market, as reported
by the National Quotation Bureau Incorporated. If Market Price cannot be
established as described above, Market Price shall be the fair market value of
the Common Stock as determined in good faith by the Board of Directors whose
determination shall be conclusive.
<PAGE>
35544_3 - 75205/00005
Warrant Agreement
The term "Other Securities" refers to any securities of the Company
(other than Common Stock) or any other person (corporate or otherwise) which the
holders of the Representative's Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Representative's
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 6 below or otherwise.
The term "Person" refers to an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization and a
government or any department or agency thereof.
The term "Prospectus" shall mean the final prospectus of the Company,
dated the date hereof, relating to the offer and sale of Common Stock.
The term "Purchase Price" refers to the purchase price per Share of the
Common Stock subject to this Agreement. The Purchase Price shall equal to 120%
of the initial offering price to public of the Common Stock as set forth in the
Prospectus, subject to adjustment as provided in Section 6 below.
The term "Registration Statement" refers to a Registration Statement
filed with the Commission pursuant to the Rules and Regulations of the
Commission promulgated under the Act.
The term "Trading Day" shall mean a day on which the Nasdaq National
Market System or the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of business.
The term "Underlying Stock" refers to the Shares (or Other Securities)
issuable under this Warrant Agreement pursuant to the exercise, in whole or in
part, of the Representative's Warrants.
The purchase and sale of the Representative's Warrants shall take
place, and the purchase price therefor shall be paid by delivery of your check,
simultaneously with the purchase of and payment for any Shares as provided in
the Underwriting Agreement between the Company and you, dated the date hereof.
2. Representations and Warranties.
The Company represents and warrants to you as follows:
(a) Corporate Action. The Company has all requisite corporate power and
authority, and has taken all necessary corporate action, to execute and deliver
this Agreement, to issue and deliver the Representative's Warrants and
certificates evidencing same, and to authorize and reserve for issuance, and
upon payment from time to time of the Purchase Price to issue and deliver, the
Shares.
(b) No Violation. Neither the execution nor delivery of this Agreement,
the consummation of the actions herein contemplated nor compliance with the
terms and provisions hereof will conflict with, or result in a breach of, or
constitute a default or an event permitting acceleration under, any of the
terms, provisions or conditions of the Articles of Incorporation or Bylaws of
the Company or any indenture, mortgage, deed of trust, note, bank loan, credit
agreement, franchise, license, lease, permit, judgment, decree, order, statute,
rule or regulation or any other agreement, understanding or instrument to which
the Company is a party or by which it is bound.
3. Compliance with the Act.
(a) Transferability of Representative's Warrants. You agree that the
Representative's Warrants may not be transferred, sold, assigned or hypothecated
for a period of one (1) year from the date hereof, except to (i) persons who are
officers of you; (ii) a successor to you in a merger or consolidation; (iii) a
purchaser of all or substantially all of your assets; (iv) your shareholders in
the event you are liquidated or dissolved; and (v) persons who are officers or
partners of participating broker-dealers.
(b) Registration of Underlying Stock. The Underlying Stock issuable
upon the exercise of the Representative's Warrants have not been registered
under the Act. You agree not to make any sale or other disposition of the
Underlying Stock except pursuant to a Registration Statement which has become
effective under the Act, setting forth the terms of such offering, the
underwriting discount and the commissions and any other pertinent data with
respect thereto, unless you have provided the Company with an opinion of counsel
reasonably acceptable to the Company that such registration is not required.
(c) Inclusion in Registration of Other Securities. If at any time
commencing one year after the date hereof but prior to the fifth anniversary of
the date hereof, the Company shall propose the registration on an appropriate
form under the Act of any Shares or Other Securities, the Company shall at least
30 days prior to the filing of such Registration Statement give you written
notice, or telegraphic or telephonic notice followed as soon as practicable by
written confirmation thereof, of such proposed registration and, upon written
notice, or telegraphic or telephonic notice followed as soon as practicable by
written confirmation thereof, given to the Company within five business days
after the giving of such notice by the Company, shall include or cause to be
included in any such Registration Statement all or such portion of the
Underlying Stock as you may request, provided, however, that the Company may at
any time withdraw or cease proceeding with any such registration if it shall at
the same time withdraw or cease proceeding with the registration of such Common
Stock or such Other Securities originally proposed to be registered.
Notwithstanding any provision of this Agreement to the
contrary, if any holder of Representative's Warrants exercises such
Representative's Warrants but shall not have included all the Underlying Stock
in a Registration Statement which complies with Section 10(a)(3) of the Act,
which has been effective for at least 30 calendar days following the exercise of
the Representative's Warrants, the registration rights set forth in this Section
3(c) shall be extended until such time as (i) such a Registration Statement
including such Underlying Stock has been effective for at least 30 calendar days
or (ii) in the opinion of counsel satisfactory to you and the Company,
registration is not required under the Act or under applicable state laws for
resale of the Underlying Stock in the manner proposed.
(d) Company's Obligations in Registration. In connection with any
offering of Underlying Securities pursuant to Section 3(c) above, the Company
shall:
(i) Notify you as to the filing thereof and of all amendments or
supplements thereto filed prior to the effective date thereof;
(ii) Comply with all applicable rules and regulations of the Commission;
(iii) Notify you immediately, and confirm the notice in writing, (1) when the
Registration Statement becomes effective, (2) of the issuance by the Commission
of any stop order or of the initiation, or the threatening, of any proceedings
for that purpose, (3) of the receipt by the Company of any notification with
respect to the suspension of qualification of the Underlying Securities for sale
in any jurisdiction or of the initiation, or the threatening, of any proceedings
for that purpose and (4) of the receipt of any comments, or requests for
additional information, from the Commission or any state regulatory authority.
If the Commission or any state regulatory authority shall enter such a stop
order or order suspending qualification at any time, the Company will make every
reasonable effort to obtain the lifting of such order as promptly as
practicable.
(iv) During the time when a Prospectus is required to be delivered under
the Act during the period required for the distribution of the Underlying
Securities, comply so far as it is able with all requirements imposed upon it by
the Act, as hereafter amended, and by the Rules and Regulations promulgated
thereunder, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Underlying Securities. If at any time
when a Prospectus relating to the Underlying Securities is required to be
delivered under the Act any event shall have occurred as a result of which, in
the opinion of counsel for the Company or your counsel, the Prospectus relating
to the Underlying Securities as then amended or supplemented includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend such Prospectus to comply with the Act, the Company will
promptly prepare and file with the Commission an appropriate amendment or
supplement (in form satisfactory to you).
(v) Endeavor in good faith, in cooperation with you, at or prior to the
time the Registration Statement becomes effective, to qualify the Underlying
Securities for offering and sale under the securities laws relating to the
offering or sale of the Underlying Securities of such jurisdictions as you may
reasonably designate and to continue the qualifications in effect so long as
required for purposes of the sale of the Underlying Securities; provided that no
such qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process, or to
taxation as a foreign corporation doing business in such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction. For the purposes of this
paragraph, "good faith" is defined as the same standard of care and degree of
effort as the Company will use to qualify its securities other than the
Underlying Securities.
(vi) Make generally available to its security holders as soon as
practicable, but not later than the first day of the eighteenth full calendar
month following the effective date of the Registration Statement, an earnings
statement (which need not be certified by independent public or independent
certified public accountants unless required by the Act or the rules and
regulations promulgated thereunder, but which shall satisfy the provisions of
Section 11(a) of the Act) covering a period of at least twelve months beginning
after the effective date of the Registration Statement.
(vii) After the effective date of such Registration Statement, prepare, and
promptly notify you of the proposed filing of, and promptly file with the
Commission, each and every amendment or supplement thereto or to any Prospectus
forming a part thereof as may be necessary to make any statements therein not
misleading; provided that no such amendment or supplement shall be filed if you
shall object thereto in writing promptly after being furnished a copy thereof.
(viii) Furnish to you, as soon as available, copies of any such
Registration Statement and each preliminary or final Prospectus, or supplement
or amendment prepared pursuant thereto, all in such quantities as you may from
time to time reasonably request;
(ix) Make such representations and warranties to any underwriter of the
Underlying Securities, and use your best efforts to cause Company counsel to
render such opinions to such underwriter, as such underwriter may reasonably
request; and
(x) Pay all costs and expenses incident to the performance of the Company's
obligations under Sections 3(c) and 3(d), including, without limitation, the
fees and disbursements of the Company's auditors and legal counsel, fees and
disbursements of legal counsel for you, registration, listing and filing fees,
printing expenses and expenses in connection with the transfer and delivery of
the Underlying Stock; provided, however, that the Company shall not be
responsible for compensation and reimbursement of expenses to underwriters or
selling agents for the included Underlying Securities.
(e) Agreements by Warrant Holder. In connection with the filing of a
Registration Statement pursuant to Section 3(c) above, if you participate in the
offering by including the Underlying Securities owned by you, you agree:
(i) To furnish the Company all material information requested by the
Company concerning yourself and your holdings of securities of the Company and
the proposed method of sale or other disposition of the Underlying Securities
and such other information and undertakings as shall be reasonably required in
connection with the preparation and filing of any such Registration Statement
covering all or a part of the Underlying Securities and in order to ensure full
compliance with the Act; and
(ii) To cooperate in good faith with the Company and its underwriters, if
any, in connection with such registration, including placing the Underlying
Securities to be included in such Registration Statement in escrow or custody to
facilitate the sale and distribution thereof.
(f) Indemnification. The Company shall indemnify and hold harmless you
and any underwriter (as defined in the Act) for you, and each person, if any,
who respectively controls you or such underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all
expense whatsoever reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever), joint
or several, to which any of you or such underwriter or such controlling person
becomes subject, under the Act or otherwise, insofar as such loss, liability,
claim, damage and expense (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in (i) a Registration Statement covering the Underlying Securities, in
the prospectus contained therein, or in an amendment or supplement thereto or
(ii) in any application or other document or communication (in this Section
collectively called "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Underlying Securities under the
securities laws thereof or filed with the Commission, or arise out of or based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company shall not be obligated to indemnify in any
such case to the extent that any such loss, claim, damage, expense or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon, and in conformity with,
written information respectively furnished by you or such underwriter or such
controlling person for use in the Registration Statement, or any amendment or
supplement thereto, or any application, as the case may be.
If any action is brought against a person in respect of which
indemnity may be sought against, the Company pursuant to the foregoing
paragraph, such person shall promptly notify the Company in writing of the
institution of such action and the Company shall assume the defense of the
action, including the employment of counsel (satisfactory to the indemnified
person in its reasonable judgment) and payment of expenses. The indemnified
person shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
indemnified person or unless the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of the
action or the Company shall not have employed counsel to have charge of the
defense of the action or the indemnified person shall have reasonably concluded
that there may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to direct the defense of the action on behalf of the
indemnified person), in any of which events these fees and expenses shall be
borne by the Company. Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of any claim
or action effected without its written consent. The Company's indemnity
agreements contained in this Section shall remain in full force and effect
regardless of any investigation made by or on behalf of any indemnified person,
and shall survive any termination of this Agreement. The Company agrees promptly
to notify you of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the Registration
Statement pursuant to Section 3(c) above.
If you choose to include any Underlying Securities in a public
offering pursuant to Section 3(c) or above, then you agree to indemnify and hold
harmless the Company and each of its directors and officers who have signed any
such Registration Statement, and any underwriter for the Company (as defined in
the Act), and each person, if any, who controls the Company or such underwriter
within the meaning of the Act, to the same extent as the indemnity by the
Company in this Section 3(f) but only with respect to statements or omissions,
if any, made in such Registration Statement, or any amendment or supplement
thereto, or in any application in reliance upon, and in conformity with, written
information furnished by you to the Company for use in the Registration
Statement, or any amendment or supplement thereto, or any application, as the
case may be. In case any action shall be brought in respect of which indemnity
may be sought against you, you shall have the rights and duties given to the
Company, and the persons so indemnified shall have the rights and duties given
to you by the provisions of the first paragraph of this Section.
The Company further agrees that, if the indemnity provisions
of the foregoing paragraphs are held to be unenforceable, any holder of a
Representative's Warrant or controlling person of such a holder may recover
contribution from the Company in an amount which, when added to contributions
such holder or controlling person has theretofore received or concurrently
receives from officers and directors of the Company or controlling persons of
the Company, will reimburse such holder or controlling person for all losses,
claims, damages or liabilities and legal or other expenses; provided, however,
that if the full amount of the contribution specified in this Section 3(f) is
not permitted by law, then such holder or controlling person shall be entitled
to contribution from the Company and its officers, directors and controlling
persons to the full extent permitted by law.
4. Exercise of Representative's Warrants.
(a) Cash Exercise. Each Representative's Warrant may be exercised in
full or in part (but not as to a fractional Share) by the holder thereof by
surrender of the Warrant Certificate, with the form of subscription at the end
thereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or bank cashier's check payable
to the order of the Company, in the respective amount obtained by multiplying
the number of Shares to be purchased by the Purchase Price per Share.
(b) Net Exercise. Notwithstanding anything to the contrary contained in
Section 4(a), any holder of a Representative's Warrant may elect to exercise the
Representative's Warrant in full or in part and receive Shares on a "net
exercise" basis in an amount equal to the value of the Representative's Warrant
by delivery of the form of subscription attached to the Warrant Certificate and
surrender of the Representative's Warrant at the principal office of the
Company, in which event the Company shall issue to the holder a number of Shares
computed using the following formula:
X= (P)(Y)(A-B)
A
Where: X= the number of Shares to be issued to holder.
P= the portion of the Representative's Warrant
being exercised (expressed as a fraction).
Y= the total number of Shares issuable upon
exercise of the Representative's Warrant.
A= the Current Market Price of one Share.
B= Purchase Price.
(c) Partial Exercise. Prior to the expiration of the Representative's
Warrants, upon any partial exercise, the Company at its expense will forthwith
issue and deliver to or upon the order of the purchasing holder, a new Warrant
Certificate or Certificates of like tenor, in the name of the holder thereof or
as such holder (upon payment by such holder of any applicable transfer taxes)
may request calling in the aggregate for the purchase of the number of Shares of
the Underlying Stock equal to the number of such Shares called for on the face
of the Warrant Certificate (after giving effect to any adjustment therein as
provided in Section 6 below) minus the number of such Shares (after giving
effect to such adjustment) designated by the holder in the aforementioned form
of subscription.
(d) Company to Reaffirm Obligations. The Company will, at the time of
any exercise of any Representative's Warrant, upon the request of the holder
thereof, acknowledge in writing its continuing obligation to afford to such
holder any rights (including without limitation any right to registration of the
Shares issued upon such exercise) to which such holder shall continue to be
entitled after such exercise in accordance with the provisions of this
Agreement; provided, however, that if the holder of a Representative's Warrant
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such holder any such rights.
5. Delivery of Certificates on Exercise.
As soon as practicable after the exercise of any Representative's
Warrant in full or in part, and in any event within twenty days thereafter, the
Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the purchasing
holder thereof, a certificate or certificates for the number of fully paid and
nonassessable shares of the Underlying Stock to which such holder shall be
entitled upon such exercise, plus in lieu of any fractional share to which such
holder would otherwise be entitled, cash in an amount determined pursuant to
Section 7(g), together with any other stock or other securities and property
(including cash, where applicable) to which such holder is entitled upon such
exercise pursuant to Section 6 below or otherwise.
6. Anti-Dilution Provisions.
The Representative's Warrants are subject to the following terms and
conditions during the term thereof:
(a) Stock Distributions and Splits. In case (i) the outstanding Shares
(or Other Securities) shall be subdivided into a greater number of shares or
(ii) a dividend in Common Stock (or Other Securities) shall be paid in respect
of Common Stock (or Other Securities), the Purchase Price per Share in effect
immediately prior to such subdivision or at the record date of such dividend or
distribution shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend or distribution be
proportionately reduced; and if outstanding Shares (or Other Securities) shall
be combined into a smaller number of shares thereof, the Purchase Price per
Share in effect immediately prior to such combination shall simultaneously with
the effectiveness of such combination be proportionately increased. Any dividend
paid or distributed on the Common Stock (or Other Securities) in stock or any
other securities convertible into Shares (or Other Securities) shall be treated
as a dividend paid in Common Stock (or Other Securities) to the extent that
Shares (or Other Securities) are issuable upon the conversion thereof.
(b) Adjustments. Whenever the Purchase Price per Share is adjusted as
provided in Section 6(a) above, the number of Shares purchasable upon exercise
of the Representative's Warrants immediately prior to such Purchase Price
adjustment shall be adjusted, effective simultaneously with such Purchase Price
adjustment, to equal the product obtained (calculated to the nearest full Share)
by multiplying such number of Shares by a fraction, the numerator of which is
the Purchase Price per Share in effect immediately prior to such Purchase Price
adjustment and the denominator of which is the Purchase Price per Share in
effect upon such Purchase Price adjustment, which adjusted number of Shares
shall thereupon be the number of Shares purchasable upon exercise of the
Representative's Warrants until further adjusted as provided herein.
(c) Reorganizations. In case the Company shall be recapitalized by
reclassifying its outstanding Common Stock (or Other Securities) into a stock
with a different par value or by changing its outstanding Common Stock (or Other
Securities) with par value to stock without par value, then, as a condition of
such reorganization, lawful and adequate provision shall be made whereby each
holder of a Representative's Warrant shall thereafter have the right to
purchase, upon the terms and conditions specified herein, in lieu of the Shares
(or Other Securities) theretofore purchasable upon the exercise of the
Representative's Warrants, the kind and amount of shares of stock and other
securities receivable upon such recapitalization by a holder of the number of
Shares (or Other Securities) which the holder of a Representative's Warrant
might have purchased immediately prior to such recapitalization. If any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation, shall be effected
in such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant Agreement and in lieu of the Shares immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding Shares equal to the number
of Shares of such stock immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby had such consolidation, merger or
sale not taken place, and in any such case, appropriate provision shall be made
with respect to the rights and interests of the holders of Representative's
Warrants to the end that the provisions hereof (including without limitation
provisions for adjustments of the Purchase Price and of the number of Shares
purchasable and receivable upon the exercise of the Representative's Warrants)
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise hereof
(including an immediate adjustment, by reason of such consolidation or merger,
of the Purchase Price to the value for the Common Stock reflected by the terms
of such consolidation or merger if the value so reflected is less than the
Purchase Price in effect immediately prior to such consolidation or merger). In
the event of a merger or consolidation of the Company with or into another
corporation as a result of which a number of Shares of the surviving corporation
greater or lesser than the number of Shares outstanding immediately prior to
such merger or consolidation are issuable to holders of Common Stock of the
Company, then the Purchase Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were a
subdivision or combination of the outstanding Shares. The Company will not
effect any such consolidation, merger or sale, unless prior to the consummation
thereof the successor corporation (if other than the Company) resulting from
such consolidation or merger or the corporation purchasing such assets shall
assume by written instrument executed and mailed or delivered to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase. If a purchase, tender or exchange offer is
made to and accepted by the holders of more than of the outstanding Shares, the
Company shall not effect any consolidation, merger or sale with the Person
having made such offer or with any Affiliate of such Person, unless prior to the
consummation of such consolidation, merger or sale the holders of
Representative's Warrants shall have been given a reasonable opportunity to then
elect to receive upon the exercise of Representative's Warrants either the
stock, securities or assets then issuable with respect to the Common Stock of
the Company or the stock, securities or assets, or the equivalent issued to
previous holders of the Common Stock in accordance with such offer.
(d) Effect of Dissolution or Liquidation. In case the Company shall
dissolve or liquidate all or substantially all of its assets, all rights under
this Agreement shall terminate as of the date upon which a certificate of
dissolution or liquidation shall be filed with the Secretary of the State of
Texas (or, if the Company theretofore shall have been merged or consolidated
with a corporation incorporated under the laws of another state, the date upon
which action of equivalent effect shall have been taken); provided, however,
that (i) no dissolution or liquidation shall affect the rights under Section
6(c) of any holder of a Representative's Warrant and (ii) if the Company's Board
of Directors shall propose to dissolve or liquidate the Company, each holder of
a Representative's Warrant shall be given written notice of such proposal at the
earlier of (x) the time when the Company's shareholders are first given notice
of the proposal or (y) the time when notice to the Company's shareholders is
first required.
(e) Notice of Change of Purchase Price. Whenever the Purchase Price per
Share or the kind or amount of securities purchasable under the Representative's
Warrants shall be adjusted pursuant to any of the provisions of this Agreement,
the Company shall forthwith thereafter cause to be sent to each holder of a
Representative's Warrant, a certificate setting forth the adjustments in the
Purchase Price per Share and/or in such number of Shares, and also setting forth
in detail the facts requiring, such adjustments, including without limitation a
statement of the consideration received or deemed to have been received by the
Company for any additional shares of stock issued by it requiring such
adjustment. In addition, the Company at its expense shall within 90 days
following the end of each of its fiscal years during the term of this Agreement,
and promptly upon the reasonable request of any holder of a Representative's
Warrant in connection with the exercise from time to time of all or any portion
of any Representative's Warrant, cause independent certified public accountants
of recognized standing selected by the Company to compute any such adjustment in
accordance with the terms of the Representative's Warrants and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based.
(f) Notice of a Record Date. In the event of (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend payable out of earned surplus of the Company) or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, (ii) any capital reorganization of the Company, or any
reclassification or recapitalization of the capital stock of the Company, or any
transfer of all or substantially all of the assets of the Company to, or
consolidation or merger of the Company with or into, any other person or (iii)
any voluntary or involuntary dissolution or liquidation of the Company, then and
in each such event the Company will mail or cause to be mailed to each holder of
a Representative's Warrant a notice specifying not only the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and stating the amount and character of such dividend, distribution or
right, but also the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
Shares (or other Securities) for securities or other property deliverable upon
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up. Such notice shall
be mailed at least twenty (20) days prior to the proposed record date therein
specified. 7. Further Covenants of the Company.
(a) Reservation of Stock. The Company shall at all times reserve and
keep available, solely for issuance and delivery upon the exercise of the
Representative's Warrants, all Shares from time to time issuable upon the
exercise of the Representative's Warrants and shall take all necessary actions
to ensure that the par value per Share, if any, of the Underlying Stock is, at
all times equal to or less than the then effective Purchase Price per Share.
(b) Title to Shares. All shares of the Underlying Stock delivered upon
the exercise of the Representative's Warrants shall be validly issued, fully
paid and nonassessable; each holder of a Representative's Warrant shall receive
good and marketable title to the Underlying Stock, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities and adverse claims
whatsoever; and the Company shall have paid all taxes, if any, in respect of the
issuance thereof.
(c) Listing on Securities Exchanges; Registration. If the Company at
any time shall list any Common Stock on any national securities exchange, the
Company will, at its expense, simultaneously list on such exchange, upon
official notice of issuance upon the exercise of the Representative's Warrants,
and maintain such listing of, all shares of the Underlying Stock from time to
time issuable upon the exercise of the Representative's Warrants; and the
Company will so list on any national securities exchange, will so register and
will maintain such listing of, any Other Securities if and at the time that any
securities of like class or similar type shall be listed on such national
securities exchange by the Company.
(d) Exchange of Representative's Warrants. Subject to Section 3(a)
hereof, upon surrender for exchange of any Warrant Certificate to the Company,
the Company at its expense will promptly issue and deliver to or upon the order
of the holder thereof a new Warrant Certificate or certificates of like tenor,
in the name of such holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate for the purchase
of the number of Shares called for on the face or faces of the Warrant
Certificate or Certificates so surrendered.
(e) Replacement of Representative's Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant Certificate and, in the case of any such loss, theft
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant Certificate, the Company, at the
expense of the warrant holder will execute and deliver, in lieu thereof, a new
Warrant Certificate of like tenor.
(f) Reporting by the Company. The Company agrees that, if it files a
Registration Statement during the term of the Representative's Warrants, it will
use its best efforts to keep current in the filing of all forms and other
materials which it may be required to file with the appropriate regulatory
authority pursuant to the Exchange Act, and all other forms and reports required
to be filed with any regulatory authority having jurisdiction over the Company.
(g) Fractional Shares. No fractional Shares are to be issued upon the
exercise of any Representative's Warrant, but the Company shall pay a cash
adjustment in respect of any fraction of a Share which would otherwise be
issuable in an amount equal to the same fraction of the highest market price per
Share on the day of exercise, as determined by the Company.
8. Other Holders.
The Representative's Warrants are issued upon the following terms, to
all of which each holder or owner thereof by the taking thereof consents and
agrees as follows: (a) any person who shall become a transferee, within the
limitations on transfer imposed by Section 3(a) hereof, of a Representative's
Warrant properly endorsed shall take such Representative's Warrant subject to
the provisions of Section 3(a) hereof and thereupon shall be authorized to
represent himself as absolute owner thereof and, subject to the restrictions
contained in this Agreement, shall be empowered to transfer absolute title by
endorsement and delivery thereof to a permitted bona fide purchaser for value;
(b) each prior taker or owner waives and renounces all of his equities or rights
in such Representative's Warrant in favor of each such permitted bona fide
purchaser, and each such permitted bona fide purchaser shall acquire absolute
title thereto and to all rights presented thereby; (c) until such time as the
respective Representative's Warrant is transferred on the books of the Company,
the Company may treat the registered holder thereof as the absolute owner
thereof for all purposes, notwithstanding any notice to the contrary and (d) all
references to the word "you" in this Warrant Agreement shall be deemed to apply
with equal effect to any person to whom a Warrant Certificate or Certificates
have been transferred in accordance with the terms hereof, and where
appropriate, to any person holding shares of the Underlying Stock.
9. Miscellaneous.
All notices, certificates and other communications from or at the
request of the Company to the holder of any Representative's Warrant shall be
mailed by first class, registered or certified mail, postage prepaid, to such
address as may have been furnished to the Company in writing by such holder, or,
until an address is so furnished, to the address of the last holder of such
Representative's Warrant who has so furnished an address to the Company, except
as otherwise provided herein. This Agreement and any of the terms hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas. The headings in
this Agreement are for reference only and shall not limit or otherwise affect
any of the terms hereof. This Agreement, together with the forms of instruments
annexed hereto as Schedule I, constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, this Warrant Agreement has been duly executed on
the date hereof.
<PAGE>
35544_3 - 75205/00005
Warrant Agreement
Rampart Capital Corporation
By:________________________________________
Charles W. Janke
Chairman and Chief Executive Officer
<PAGE>
35544_3 - 75205/00005
Warrant Agreement
<PAGE>
35544_3 - 75205/00005
Warrant Agreement
Redstone Securities, Inc.
By:_________________________________________
Robert A. Shuey, III
<PAGE>
35544_3 - 75205/00005
Warrant Agreement
<PAGE>
35544_3 - 75205/00005
SCHEDULE I
RAMPART CAPITAL CORPORATION
Warrant Certificate
Evidencing Right to Purchase 150,000 Shares of
Common Stock
This is to certify that Redstone Securities, Inc. (" RSI") or assigns,
is entitled to purchase at any time or from time to time after 10:00 a.m.,
Dallas, Texas time, on ______________, 1999 and until 5:00 p.m., Dallas, Texas
time, on _______________, 2004 up to the above referenced number of shares (the
"Shares") of Common Stock, $.01 par value (the "Common Stock"), of Rampart
Capital Corporation, a Texas corporation (the "Company"), for the consideration
specified in Section 4 of the Warrant Agreement dated the date hereof between
the Company and RSI (the "Warrant Agreement"), pursuant to which this Warrant is
issued. All rights of the holder of this Warrant Certificate are subject to the
terms and provisions of the Warrant Agreement, copies of which are available for
inspection at the office of the Company. Capitalized terms used but not defined
herein shall have the respective meanings set forth in the Warrant Agreement.
The Shares issuable upon the exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "Act"), and no
distribution of such Shares may be made until the effectiveness of a
Registration Statement under the Act covering such Shares. Transfer of this
Warrant Certificate is restricted as provided in Section 3(a) of the Warrant
Agreement.
This Warrant has been issued to the registered owner in reliance upon
written representations necessary to ensure that this Warrant was issued in
accordance with an appropriate exemption from registration under any applicable
state and federal securities laws, rules and regulations. This Warrant may not
be sold, transferred, or assigned unless, in the opinion of the Company and its
legal counsel, such sale, transfer or assignment will not be in violation of the
Act, applicable rules and regulations of the Securities and Exchange Commission,
and any applicable state securities laws.
Subject to the provisions of the Act and of such Warrant Agreement,
this Warrant Certificate and all rights hereunder are transferable, in whole or
in part, at the offices of the Company, by the holder hereof in person or by
duly authorized attorney, upon surrender of this Warrant Certificate, together
with the Assignment hereof duly endorsed. Until transfer of this Warrant
Certificate on the books of the Company, the Company may treat the registered
holder hereof as the owner hereof for all purposes.
Any Shares (or other securities) which are acquired pursuant to the
exercise of this Warrant shall be acquired in accordance with the Warrant
Agreement and certificates representing all securities so acquired shall bear a
restrictive legend reading substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AN OPINION
OF COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
REQUIRED.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed by its duly authorized officer.
Date:__________________, 1998
<PAGE>
35544_3 - 75205/00005
Rampart Capital Corporation
By:
<PAGE>
35544_3 - 75205/00005
<PAGE>
SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: Rampart Capital Corporation
The undersigned, the holder of the enclosed Warrant Certificate, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
Certificate for, and to purchase thereunder, _________________ shares of Common
Stock, $.01 par value, of Rampart Capital Corporation and either tenders
herewith payment of the purchase price in full in the form of cash or a
certified or cashier's check in the amount of $______________ therefor or, if
the undersigned elects pursuant to Section 4(b) of the Warrant Agreement
referred to in the Warrant Certificate to convert the enclosed Warrant
Certificate into Common Stock by net issuance, the undersigned exercises the
Warrant by exchange under the terms of said Section 4(b), and requests that the
certificate or certificates for such Shares be issued in the name of and
delivered to the undersigned.
Date: ______________________________
----------------------------------------
(Signature must conform
in all respects to name
of holder as specified on
the face of the Warrant
Certificate)
---------------------------------------
---------------------------------------
(Address)
Please indicate in the space below the number of Shares called for on
the face of the Warrant Certificate (or, in the case of a partial exercise, the
portion thereof as to which the Warrant is being exercised), in either case
without making any adjustment for additional Shares or other securities or
property or cash which, pursuant to the adjustment provisions of the Warrant,
may be deliverable upon exercise and whether the exercise is a cash exercise
pursuant to Section 4(a) of the Warrant Agreement or a net issuance exercise
pursuant to Section 4(b) of the Warrant Agreement.
Number of Shares:__________
Cash:____________________
Net issuance:______________
<PAGE>
ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers unto
____________________________________ the right represented by the enclosed
Warrant Certificate to purchase ____________________ shares of Common Stock,
$.01 par value, of Rampart Capital Corporation with full power of substitution
in the premises.
The undersigned represents and warrants that the transfer, in whole in
or in part, of such right to purchase represented by the enclosed Warrant
Certificate is permitted by the terms of the Warrant Agreement referred to in
the Warrant Certificate, and the transferee hereof, by his acceptance of this
Assignment, represents and warrants that he or she is familiar with the terms of
such Warrant Agreement and agrees to be bound by the terms thereof with the same
force and effect as if a signatory thereto.
Date:___________________
(Signature must conform
in all respects to name of
holder as specified on
the face of the Warrant
Certificate)
(Address)
Signed in the presence of:
RAMPART CAPITAL CORPORATION
RESTATED ARTICLES OF INCORPORATION
(with amendments)
ARTICLE ONE
Rampart Capital Corporation, pursuant to Article 4.07 of the Texas Business
Corporation Act, hereby adopts Restated Articles of Incorporation which
accurately copy the Articles of Incorporation and all amendments thereto that
are in effect to date and as further amended by such Restated Articles of
Incorporation as hereinafter set forth and which contain no other change in any
provisions thereof.
ARTICLE TWO
The Articles of Incorporation of the Corporation are amended by the Restated
Articles of Incorporation as follows:
ARTICLE THREE relating to the purposes of the Corporation is amended to read as
follows:
"ARTICLE III
PURPOSES
The purpose or purposes for which the corporation is organized are:
To transact any and all lawful businesses for which a corporation may
be incorporated under the Texas Business Corporation Act, as currently in effect
or hereafter amended, to have and exercise all of the powers conferred by the
laws of the State of Texas upon corporations formed under the Texas Business
Corporation Act, and to do any or all of the things herein set forth to the same
extent as natural persons might or could do; provided, however, that nothing
stated herein shall authorize this Corporation to be organized for or to
transact any business in the State of Texas that is prohibited by any laws of
the State of Texas, as now existing or hereafter amended, enacted, or by these
Articles."
ARTICLE FOUR relating to the capitalization of the Corporation is hereby amended
to read as follows:
"ARTICLE IV
CAPITAL STOCK
Section 1. The Corporation shall have authority to issue two classes of
capital stock, designated "Common Stock" and "Preferred Stock," respectively.
The aggregate number of shares of Common Stock authorized to be issued is ten
million (10,000,000) shares with a par value of one cent ($0.01) per share. The
aggregate number of shares of Preferred Stock authorized to be issued is ten
million (10,000,000) shares with a par value of one cent ($0.01) per share.
Section 2. Each share of Common Stock shall have one vote on each
matter submitted to a vote of shareholders. Cumulative voting is expressly
prohibited and denied in all elections of directors of the Corporation. Each
holder of shares of capital stock of the Corporation entitled to vote at the
election of directors shall have the right to vote, in person or by proxy, all
or any portion of such shares for or against each individual director to be
elected and shall not be entitled to vote for or against any one director more
that the aggregated number of shares held by such holder which are entitled to
vote on the election of directors. With respect to any action to be taken by the
shareholders of the Corporation as to any matter, the affirmative vote of the
holders of a majority of the shares of the capital stock of the Corporation
entitled to vote thereon and represented in person or by proxy at a meeting of
the shareholders at which a quorum is present shall be sufficient to authorize,
affirm, ratify or consent to such action.
Section 3. The Preferred Stock may be issued in one or more series,
from time to time, at the discretion of the Board of Directors without the
necessity of shareholder approval, with each such series to consist of such
number of shares and to have such voting powers (whether full, limited, or no
voting powers or more than one vote per share) and such designations, powers,
preferences, and relative participating optional, redemption, conversion,
exchange or other special rights, and such qualifications, limitations or
restrictions thereof, as shall be stated in the resolution or resolutions
providing for the issuance of such series adopted by the Board of Directors. The
Board of Directors, in such resolution or resolutions, may increase or decrease
the number of shares within each such series; provided however, the Board of
Directors may not decrease the number of shares within a series to less than the
number of shares within such series that are then issued.
Section 4. The Board of Directors shall have the power and authority at
any time and from time to time without the necessity of shareholder approval to
issue, sell, or otherwise dispose of any authorized and unissued shares of any
class of stock of the Corporation to such persons or parties, including the
holders of any class of stock, for such consideration (not less than the par
value thereof) and upon such terms and conditions as the Board of Directors in
its discretion shall deem to be in the best interests of the Corporation.
Section 5. No shareholder of the Corporation or any other person shall
be entitled to any preemptive or preferential right whatsoever to acquire,
purchase or subscribe for (i) any additional or unissued shares or treasury
shares of the Corporation, (ii) any securities of the Corporation convertible
into or carrying a right to subscribe to or acquire shares of the Corporation,
or (iii) any other securities of the Corporation, provided, however, that
nothing in this section shall restrict or prohibit the Corporation from
creating, issuing, offering, distributing, or otherwise granting any warrants,
options, rights of first refusal, conversion rights, subscription rights or
other rights entitling shareholders or other persons to acquire any shares or
other securities of the Corporation; provided, further, that such issuance may
not be inconsistent with any provision of law or with any provision of these
Articles."
ARTICLE FIVE is hereby amended to read as follows:
"ARTICLE V
COMMENCEMENT OF BUSINESS
The Corporation shall not commence business until it has received for
the issuance of its shares consideration of the value of at least one thousand
and no/100 dollars ($1,000), consisting of money, labor done or property
actually received; provided, however, that failure to comply with the
requirements of this Article V shall not affect the validity of any action taken
by the Corporation."
A new ARTICLE VI relating to indemnification of officers and directors is added
as follows:
"ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify any director or officer, or former
director or officer of the Corporation, or any person who may have served at its
request as a director of officer of another corporation of which this
corporation owns shares of capital stock or of which it is a creditor to the
fullest extent permitted by the Texas Business Corporation act and as provided
in the By-laws of the Corporation."
A new ARTICLE VII relating to adoption and amendment of the By-laws is added as
follows:
"ARTICLE VII
BY-LAWS
The Board of Directors shall adopt the initial By-laws of the
Corporation. Except to the extent such power may be modified or divested by
action of shareholders representing a simple majority or the issued and
outstanding shares of the capital stock of the Corporation taken at a regular or
special meeting of the shareholders, the power to adopt, alter, amend or repeal
the By-laws of the Corporation shall be vested in the Board of Directors,
subject to repeal or change by action of the Corporation's shareholders."
A new ARTICLE VIII relating to interested directors, officers and shareholders
is added as follows:
"ARTICLE VIII
INTERESTED DIRECTORS, OFFICERS AND SHAREHOLDERS
Section 1. No contract or transaction between the Corporation and one
or more of its directors or officers, or between any corporation, partnership,
association or other organization in which one or more of the directors or
officers of the Corporation are directors, officers or partners or have a
financial interest, shall be void or voidable solely by reason of such
relationship, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors of the Corporation or
committee thereof that authorizes the contract or transaction, or solely because
its or their votes are counted for such purposes, if any one of the following
conditions are met:
(i) The material facts concerning the relationship or interest of the
director or officer and the material facts concerning the contract or
transaction are disclosed or known to the Board of Directors of the Corporation
or the committee thereof in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors may be less than a quorum; or
(ii) The material facts concerning the relationship or interest of the
director or officer and the material facts concerning the contract or
transaction are disclosed or are known to the shareholders of the Corporation
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by the shareholders of the Corporation at any annual or
special meeting of shareholders called for that purpose; or
(iii) The contract or transaction is fair to the Corporation at the
time it is authorized, approved or ratified by the Board of Directors of the
Corporation, a committee thereof, or the shareholders of the Corporation.
Section 2. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors of the
Corporation or of a Committee thereof that authorizes such contract or
transaction."
ARTICLE SIX of the Articles of Incorporation relating to the Registered Office
and Registered Agent of the Corporation is hereby amended to become ARTICLE IX
and to change the registered office and agent of the Corporation as follows:
"ARTICLE IX
REGISTERED OFFICE AND REGISTERED AGENT
Section 1. The address of the registered office of the Corporation is
811 Dallas Avenue, Houston, Texas 77002.
Section 2. The name of the registered agent of the Corporation at that
address is C T Corporation System." ARTICLE SEVEN of the Articles of
Incorporation relating to directors is hereby amended to become ARTICLE X and to
read as follows:
"ARTICLE X
DIRECTORS
The number of directors of the Corporation shall be
fixed in the manner provided in the By-laws of the
Corporation."
ARTICLE THREE
Each such amendment made by these Restated Articles of Incorporation
has been effected in conformity with the provisions of the Texas Business
Corporation Act and such Restated articles of Incorporation were duly adopted by
the shareholders of the Corporation on the 23rd day of December, 1998.
ARTICLE FOUR
The number of shares outstanding was 750; the number of shares entitled to vote
on the Restated Articles of Incorporation as so amended was 750; the number of
shares voted for such Restated articles of Incorporation as so amended was 750;
and the number of shares voted against such Restated articles of Incorporation
was 0.
ARTICLE FIVE
The amendments to the articles of Incorporation shall not effect a change in the
stated capital of the Corporation. No exchange of outstanding shares of the
Corporation shall be effected.
ARTICLE SIX
The Articles of Incorporation and all amendments and supplements thereto are
superseded by the following Restated Articles of Incorporation which accurately
copy the entire text thereof and as amended as above set forth:
RESTATED ARTICLES OF INCORPORATION
(with Amendments)
OF
RAMPART CAPITAL CORPORATION
ARTICLE I
NAME
The name of the corporation is RAMPART CAPITAL
CORPORATION
ARTICLE II
DURATION
The period of its duration is perpetual.
ARTICLE III
PURPOSES
The purpose or purposes for which the corporation is organized are:
To transact any and all lawful businesses for which a corporation may
be incorporated under the Texas Business Corporation Act, as currently in effect
or hereafter amended, to have and exercise all of the powers conferred by the
laws of the State of Texas upon corporations formed under the Texas Business
Corporation Act, and to do any or all of the things herein set forth to the same
extent as natural persons might or could do; provided, however, that nothing
stated herein shall authorize this Corporation to be organized for or to
transact any business in the State of Texas that is prohibited by any laws of
the State of Texas, as now existing or hereafter amended, enacted, or by these
Articles.
ARTICLE IV
CAPITAL STOCK
Section 1. The Corporation shall have authority to issue two classes of
capital stock, designated "Common Stock" and "Preferred Stock", respectively.
The aggregate number of shares of Common Stock authorized to be issued is ten
million (10,000,000) shares with a par value of one cent ($0.01) per share. The
aggregate number of shares of Preferred Stock authorized to be issued is ten
million (10,000,000) shares with a par value of one cent ($0.01) per share.
Section 2. Each share of Common Stock shall have one vote on each
matter submitted to a vote of shareholders. Cumulative voting is expressly
prohibited and denied in all elections of directors of the Corporation. Each
holder of shares of capital stock of the Corporation entitled to vote at the
election of directors shall have the right to vote, in person or by proxy, all
or any portion os such shares for or against each individual director to be
elected and shall not be entitled to vote for or against any one director more
that the aggregated number of shares held by such holder which are entitled to
vote on the election of directors. With respect to any action to be taken by the
shareholders of the Corporation as to any matter, the affirmative vote of the
holders of a majority of the shares of the capital stock of the Corporation
entitled to vote thereon and represented in person or by proxy at a meeting of
the shareholders at which a quorum is present shall be sufficient to authorize,
affirm, ratify or consent to such action.
Section 3. The Preferred Stock may be issued in one or more series,
from time to time, at the discretion of the Board of Directors without the
necessity of shareholder approval, with each such series to consist of such
number of shares and to have such voting powers (whether full, limited, or no
voting powers or more than one vote per share) and such designations, powers,
preferences, and relative participating optional, redemption, conversion,
exchange or other special rights, and such qualifications, limitations or
restrictions thereof, as shall be stated in the resolution or resolutions
providing for the issuance of such series adopted by the Board of Directors. The
Board of Directors, in such resolution, or resolutions, may increase or decrease
the number of shares within each such series; provided however, the Board of
Directors may not decrease the number of shares within a series to less than the
number of shares within such series that are then issued.
Section 4. The Board of Directors shall have the power and authority at
any time and from time to time without the necessity of shareholder approval to
issue, sell, or otherwise dispose of any authorized and unissued shares of any
class of stock of the Corporation to such persons or parties, including the
holders of any class of stock, for such consideration (not less than the par
value thereof) and upon such terms and conditions as the Board of Directors in
its discretion shall deem to be in the best interests of the Corporation.
Section 5. No shareholder of the Corporation or any other person shall
be entitled to any preemptive or preferential right whatsoever to acquire,
purchase or subscribe for (i) any additional or unissued shares or treasury
shares of the Corporation, (ii) any securities of the Corporation convertible
into pr carrying a right to subscribe to or acquire shares of the Corporation,
or (iii) any other securities of the Corporation; provided, however, that
nothing in this section shall restrict or prohibit the Corporation from
creating, issuing, offering, distributing, or otherwise granting any warrants,
options, rights of first refusal, conversion rights, subscription rights or
other rights entitling shareholders or other persons to acquire any shares or
other securities of the Corporation; provided, further, that such issuance may
not be inconsistent with any provision of law or with any provision of these
Articles.
ARTICLE V
COMMENCEMENT OF BUSINESS
The Corporation shall not commence business until it has received for
the issuance of its shares consideration of the value of at least one thousand
and no/100 dollars ($1,000), consisting of money, labor done or property
actually received; provided, however, that failure to comply with the
requirements of this Article V shall not affect the validity of any action taken
by the Corporation."
ARTICLE VI
INDEMNIFICATION
The Corporation shall indemnify any director or officer, or former
director or officer of the Corporation, or any person who may have served at its
request as a director of officer of another corporation of which this
corporation owns shares of capital stock or of which it is a creditor to the
fullest extent permitted by the Texas Business Corporation act and as provided
in the By-laws of the Corporation.
ARTICLE VII
BY-LAWS
The Board of Directors shall adopt the initial By-laws of the
Corporation. Except to the extent such power may be modified or divested by
action of shareholders representing a simple majority or the issued and
outstanding shares of the capital stock of the Corporation taken at a regular or
special meeting of the shareholders, the power to adopt, alter, amend or repeal
the By-laws of the Corporation shall be vested in the Board of Directors,
subject to repeal or change by action of the Corporation's shareholders.
ARTICLE VIII
INTERESTED DIRECTORS, OFFICERS AND SHAREHOLDERS
Section 1. No contract or transaction between the Corporation and one
or more of its directors or officers, or between any corporation, partnership,
association or other organization in which one or more of the directors or
officers of the Corporation are directors, officers or partners or have a
financial interest, shall be void or voidable solely by reason of such
relationship, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors of the Corporation or
committee thereof that authorizes the contract or transaction, or solely because
its or their votes are counted for such purposes, if any one of the following
conditions are met:
(i) The material facts concerning the relationship or interest of the
director or officer and the material facts concerning the contract or
transaction are disclosed or known to the Board of Directors of the Corporation
or the committee thereof in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors may be less than a quorum; or
(ii) The material facts concerning the relationship or interest of the
director or officer and the material facts concerning the contract or
transaction are disclosed or are known to the shareholders of the Corporation
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by the shareholders of the Corporation at any annual or
special meeting of shareholders called for that purpose; or
(iii) The contract or transaction is fair to the Corporation at the
time it is authorized, approved or ratified by the Board of Directors of the
Corporation, a committee thereof, or the shareholders of the Corporation.
Section 2. Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors of the
Corporation or of a Committee thereof that authorizes such contract or
transaction.
ARTICLE IX
REGISTERED OFFICE AND REGISTERED AGENT
Section 1. The address of the registered office of the Corporation is
811 Dallas Avenue, Houston, Texas 77002.
Section 2. The name of the registered agent of the Corporation a that
address is C T Corporation System.
ARTICLE X
DIRECTORS
The number of directors of the Corporation shall be
fixed in the manner provided in the By-laws of the
Corporation. See attached list of directors
Dated as of December 23, 1998 to be effective January 1, 1999.
RAMPART CAPITAL CORPORATION
Original signed by Charles W. Janke Charles W. Janke, President
Original signed by J. H. Carpenter J. H. Carpenter, Secretary
<PAGE>
DIRECTORS OF RAMPART CAPITAL CORPORATION
C. W. JANKE
700 Louisiana, Suite 2510
Houston, Texas 77002
J. H. CARPENTER
700 Louisiana, Suite 2510
Houston, Texas 77002
JAMES J. JANKE
700 Louisiana, Suite 2510
Houston, Texas 77002
8
Rampart Capital Corporation
(A Texas Corporation)
RESTATED BY-LAWS
ARTICLE I
OFFICES
Section 1. Registered Office and Agent.
The registered office shall be located at % C T Corporation, 811 Dallas
Avenue, Houston, Texas 77002. The name of the registered agent at such address
is C T Corporation System. The Board of Directors may change the Corporation's
registered office or registered agent, or both, in the manner set forth in
Article 2.10 of the Texas Business Corporation Act (the "Act").
Section 2. Other Offices.
The Corporation may also have offices at such other places, both within
and without the State of Texas, as the Board of Directors may from time to time
determine or the business of the Corporation requires.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. Time and Place of Meetings.
Annual meetings of shareholders shall be held at such time and place,
within or without the State of Texas, as shall be determined by the Board of
Directors. At the meeting, shareholders shall elect, by a plurality vote, a
Board of Directors and transact such other business as may properly be brought
before the meeting.
Section 2. Notice of Annual Meetings.
Written or printed notice of the annual meeting (but not special as
hereinafter defined) stating the place, day and hour of the meeting shall be
delivered not less then ten (10) nor more than fifty (50) days before the date
of the meeting, either personally, by facsimile or by mail, by or at the
direction of the President, the Secretary or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed t o be delivered three (3) days after
deposited in the United States mail, postage prepaid, addressed to the
shareholder at his address as it appears on the share transfer records of the
Corporation.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Time and Place of Meetings.
Special meetings of shareholders, for any purpose, may be held at such
time and place, within or without the State of Texas, as shall be stated in the
notice of the meeting.
Section 2. Call of Special Meetings.
Special meetings of shareholders, for any purpose or purposes, unless
otherwise prescribed by statute or by the Articles of Incorporation, may be
called by the President, the Board of Directors or by the Secretary at the
request in writing of the holders of not less then one-tenth (1/10) of all the
shares entitled to vote at the meeting. Such request shall state the purpose or
purposes of the proposed meeting. Business transacted at special meetings shall
be confined to the purposes stated in the notice of the meeting.
Section 3. Notice Of Special Meetings.
Written or printed notice of a special meeting stating the place, day
and hour of the meeting and purpose or purposes for which the meeting is called
shall be delivered not less than two (2) nor more than fifty (50) days before
the date of the meeting, either personally, by facsimile or by mail, by or at
the direction of the President, the Secretary or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the shareholder at his address as it
appears on the share transfer records of the Corporation.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. Quorum.
The holders of a majority of the shares of stock issued and outstanding
and entitled to vote, represented in person or by proxy, shall constitute a
quorum at all annual and special meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
Articles of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting, at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 2. Voting.
If a quorum is present, the affirmative vote of a majority of the
shares of stock represented at the meeting shall be the act of the shareholders
unless the vote of a greater or lesser number of shares of stock is required by
law or the Articles of Incorporation. Once a quorum is present at a meting of
shareholders, the shareholders represented in person or by proxy at the meeting
may conduct such business as may properly be brought before the meeting until it
is adjourned, and the subsequent withdrawal from the meeting of any shareholder
or the refusal of any shareholder represented in person or by proxy to vote
shall not affect the presence of a quorum at the meeting. Unless otherwise
provided in the Articles of Incorporation or these By-laws in accordance with
the Act, Directors of the Corporation shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
Directors at a meeting of shareholders at which a quorum is present in person or
by proxy.
Section 3. Votes, Proxies.
Each outstanding share of stock having voting power shall be entitled
to one vote on each matter submitted to a vote at a meeting of shareholders
except to the extent that the voting rights of the shares of any class or
classes are limited or denied by the Articles of Incorporation as permitted by
the Texas Business Corporation Act. A shareholder may vote either in person or
by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact.
Section 4. Action by Written Consent.
Any action required by statute to be taken at a meeting of the
shareholders, or any action which may be taken at a meeting of the shareholders,
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all the shareholders entitled to vote with respect
to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. General Powers
The business and affairs of the Corporation shall be managed by its
Board of Directors which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these By-laws directed or required to be exercised or done
by the shareholders.
Section 2. Number of Directors.
The number of Directors shall be at least one, but not more than seven
(7) and shall be the number to be determined by the Board prior to the next
annual meeting of the shareholders. Directors need not be residents of the State
of Texas nor shareholders of the Corporation. The Directors, other than the
first Board of Directors, shall be elected at the annual meeting of the
shareholders and each director elected shall serve until the next succeeding
annual meeting and until his successor shall have been elected and qualified.
The first Board of Directors shall hold office until the first annual meeting of
shareholders.
Section 3. Vacancies.
Any vacancy occurring in the Board of Directors by death, disability,
resignation, removal or otherwise may be filled by the affirmative vote of the
majority of the remaining Directors though less than a quorum of the Board of
Directors. A director elected to fill a vacancy shall be elected for the
unexpired portion of the term of his predecessor in office. Any Directorship to
be filled by reason of an increase in the number of Directors shall be filled by
election at an annual meeting or at a special meeting of shareholders called for
that purpose. A director elected to fill a newly created Directorship shall
serve until the next succeeding annual meeting of shareholders and until his
successor shall have been elected and qualified.
Section 4. Books of Corporation.
The Directors may keep the books of the Corporation, except such as are
required by law to be kept within the state, outside of the State of Texas at
such place or places as they may from time to time determine.
Section 5. Compensation of Directors.
Directors, as members of the Board of Directors or any committee
thereof, shall be entitled to receive compensation for their services on such
terms and conditions as may be determined from time to time by the Board of
Directors. Nothing herein contained, however, shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Initial compensation for the Directors, until the next
Annual Meeting shall be no more than $1,000 per Director per board meeting. In
addition, the Corporation shall reimburse each Director for all travel, food and
related expenses as its deems necessary with respect to any meeting of the Board
of Directors.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Time and Place of Meetings.
Meetings of the Board of Directors, regular or special, may be held
either within or without the State of Texas, at such time and place as set in
the Notice of Meting.
Section 2. First Meeting of New Board.
The first meeting of each newly elected Board of Directors shall be
held immediately following the annual meeting of shareholders and at the same
place, and no notice of such meeting shall be necessary to the newly elected
Directors in order legally to constitute the meeting, provided a quorum shall be
present, or it may convene at such place and time as shall be fixed by the
consent in writing of all the Directors.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors may be held upon such
notice, or without notice, and at such time and at such place as shall from time
to time be determined by the Board.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by the
President on three days' notice to each director, either personally, by mail, by
facsimile, or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
Directors.
Section 5. Waiver of Notice.
Attendance of a director at any meeting shall constitute a waiver of
notice of such meeting, except where a director attends for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Such position must be set forth in writing by such
Director and be delivered upon arrival at such meeting. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. Quorum.
A majority of the Directors shall constitute a quorum for the
transaction of business unless a greater number is required by law or by the
Articles of Incorporation. The act of a majority of the Directors present at any
meeting at which a quorum is present shall be the act of the Board of Directors,
unless the act of a greater number is required by statute or by the Articles of
Incorporation. If a quorum shall not be present at any meeting of Directors, the
Directors present thereat may adjourn the meeting form time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Directors may not vote by proxy at any meeting of the Board of Directors.
Directors with an interest in a business transaction of the Corporation and
Directors who are Directors or officers or have a financial interest in any
other corporation, partnership, association or other organization with which the
Corporation is transacting business may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee of the
Board of Directors to authorize such business transaction.
Section 7.Action by Unanimous Consent.
Unless otherwise provided by the Articles of Incorporation or By-laws,
any action required or permitted to be taken at a meeting of the Board of
Directors may be taken without a meeting if a consent in writing, or
counterparts thereof, setting forth the action so taken, is signed by all the
members of the Board of Directors. Such consent shall have the same force and
effect as a unanimous vote at a meeting. The signed consent, or a signed copy,
shall be placed in the minute book.
Section 8.Meetings by Communications Equipment.
Unless otherwise provided by the Articles of Incorporation or By-laws,
any action required or permitted to be taken at a meeting of the Board of
Directors may be taken by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE VII
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1.Executive Committee.
The Board of Directors, by resolution adopted by a majority of the
number of Directors fixed by the By-laws or otherwise, may designate three (3)
or more Directors (but only in odd numbers) to constitute an Executive
Committee, which committee, to the extent provided in such resolution or in the
Articles of Incorporation or By-laws, shall have and exercise all of the
authority of the Board of Directors in the management of the Corporation, except
as otherwise required by law. Vacancies in the membership of the Executive
Committee shall be filled by the Board of Directors at a regular or special
meeting of the Board of Directors. The Executive Committee shall keep regular
minutes of its proceedings and report the same to the Board of Directors when
required.
Section 2. Other Committees.
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate from among its members one or more
committees in addition to the Executive Committee, each of which shall be
composed of one or more or its members, and may designate one or more of its
members as alternate members of any committee, who may, subject to any
limitations imposed by the Board of Directors, replace absent or disqualified
members at any meeting of that committee. Any such committee, to the extent
provided in the resolution of the Board of Directors designating the committee
or in the Articles of Incorporation or these By-laws, shall have and may
exercise all of the authority of the Board of Directors, except where action of
the Board of Directors is required by the Act or by the Articles of
Incorporation. Any member of a committee of the Board of Directors may be
removed, for or without cause, by the affirmative vote of a majority of the
whole Board of Directors. If any vacancy or vacancies occur in a committee of
the Board of Directors caused by death, resignation, retirement,
disqualification, removal from office or otherwise, the vacancy shall be filled
by the affirmative vote of a majority of the whole Board of Directors. Such
committee or committees shall have such name or names as may be designated by
the Board of Directors and shall keep regular minutes of their proceedings and
report the same to the Board of Directors when required.
<PAGE>
Section 3. Action by Unanimous Consent.
Any action required or permitted to be taken at a meeting of the
Executive Committee or other committee may be taken without a meeting if a
consent, in writing, setting forth the action so taken, is signed by all the
members of the respective committee. Such consent shall have the same force and
effect as a unanimous vote at a meeting. The signed consent, or a signed copy,
shall be placed in the minute book.
Section 4. Meetings by Communications Equipment.
Unless otherwise provided by the Articles of incorporation or By-laws,
any action required or permitted to be taken at a meeting of the Executive
Committee or other committee may be taken by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE VIII
NOTICES
Section 1. Form of Notice.
Whenever under the provisions of the Act or of the Articles of
Incorporation or of these By-laws notice is required to be given to any director
or shareholder, it shall not be construed to mean personal notice, but such
notice may be given in writing, by facsimile or by mail, addressed to such
director or shareholder at his address as it appears on the records of the
Corporation with postage thereon prepaid and such notice shall be deemed to be
given three (3) days after the time when the same shall be deposited in the
United States mail. Notice to Directors may also be given by telegram and
facsimile or other means of immediate communication. Any notice required or
permitted to be given by telegram, facsimile or other means of immediate
communication shall be deemed to be given at the time of actual delivery.
Section 2. Waiver of Notice.
Whenever any notice whatsoever is required to be given under the
provisions of the statutes or under the provisions of the Articles of
Incorporation or these By-laws, a waiver thereof, in writing, signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS AND AGENTS
Section 1. General.
The officers of the Corporation shall include a President and a
Secretary, each of whom shall be elected by the Board of Directors. Such other
officers, including a Chairman of the Board, Chief Executive Officer, Vice
Presidents, a Treasurer and assistant officers, as may be deemed necessary, may
be elected or appointed by the Board of Directors. Any two or more offices may
be held by the same person. No officer, assistant officer or agent need be a
shareholder, a director or a resident of Texas. The Board of Directors may
appoint such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
Section 2. Election.
The officers of the Corporation to be elected by the Board of Directors
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting or such meeting shall not
have been held, such election shall be held as soon thereafter as conveniently
may be. Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided.
Section 4. Removal.
Any officer or agent elected or appointed by the Board of Directors may
be removed by the Board of Directors whenever, in its judgment, the best
interests of the Corporation will be served thereby. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights. Any vacancy occurring in any office of the Corporation may be
filled by the Board of Directors.
Section 5. Authority, Duties of Officers and Agents.
Officers and agents shall have such authority and perform such duties
in the management of the Corporation as are provided in these By-laws or as may
be determined by resolution of the Board of Directors not inconsistent with
these By-laws.
Section 6. Compensation of Officers and Agents.
The salaries and compensation of officers and agents of the Corporation
shall be fixed from time to time by the Board of Directors.
Section 7. Chairman of the Board.
If there be a Chairman of the Board of Directors, he shall be chosen
from among the Directors. He shall have the power to call special meetings of
the shareholders and of the Directors for any purpose or purposes, and he shall
preside at all meetings of the shareholders and of the Board of Directors,
unless he shall be absent or unless he shall, at his option, designate the Chief
Executive Officer, if there be one, or the President to preside in his stead at
some particular meeting. He shall advise and counsel the Chief Executive Officer
or the President and other officers of the Corporation, and shall exercise such
duties as may be assigned to or required of him from time to time by the Board
of Directors.
Section 8. Chief Executive Officer.
The Chief Executive Officer, if one be elected by the Board of
Directors, shall be the chief executive officer of the Corporation and, subject
to the provisions of these By-laws, shall have oversite control of all its
business. In the absence of the Chairman of the Board, the Chief Executive
Officer shall preside, when present, at all meetings of shareholders and at all
meetings of the Board of Directors and shall see that all orders and resolutions
of the Board of Directors and the shareholders are carried into effect. The
Chief Executive Officer shall have general authority to execute bonds, deeds,
and contracts in the name of the Corporation; to sign stock certificates; to
cause the employment or appointment of such employees and agents of the
Corporation as the proper conduct of operations may require, and to fix their
compensation, subject to the provisions of these By-laws; to remove or suspend
any employee or agent who shall have been employed or appointed under his
authority or under authority of an officer subordinate to him; to suspend for
cause, pending final action by the authority which shall have elected or
appointed him, any officer subordinate to the chief executive office; and, in
general, to exercise all the powers and authority usually pertaining to the
Chief Executive Officer of a corporation, except as otherwise provided by these
By-laws.
Section 9. President.
If there be a Chairman of the Board of Directors and/or a Chief
Executive Officer, the powers and duties of the President shall be subject to
the powers and duties of the Chairman of the Board of Directors and/or the Chief
Executive Officer. If there be no Chairman and/or Chief Executive Officer, the
President shall have all the powers and duties provided for in Section 8.
Section 10. Chief Operating Officer.
The Chief Operating Officer, if one be elected by the Board of
Directors, shall be the chief executive officer of the Corporation and, subject
to the provisions of these By-laws, shall have direct management
responsibilities for all activities of the Corporation. The Chief Operating
Officer shall have general authority to execute bonds, deeds, and contracts in
the name of the Corporation; to sign stock certificates; to cause the employment
or appointment of such employees and agents of the Corporation as the proper
conduct of operations may require, and to fix their compensation, subject to the
provisions of these By-laws; to remove or suspend any employee or agent who
shall have been employed or appointed under his authority or under authority of
an officer subordinate to him; to suspend for cause, pending final action by the
authority which shall have elected or appointed him, any officer subordinate to
the chief operating office; and, in general, to exercise all the powers and
authority usually pertaining to the Chief Operating Officer of a corporation,
except as otherwise provided by these By-laws.
Section 11. Vice Presidents.
The Vice-President or, if there shall be more than one, the
Vice-Presidents, in the order determined by the Board of Directors, shall, in
the absence or disability of the President, perform the duties and exercise the
powers of the President and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe. In the event
such absence or disability occurs, only one Vice President shall be appointed to
make decisions for the President unless specific authority is established in
writing by a majority of the Board of Directors.
Section 12. Assistant Vice President.
In the absence of a Vice President or in the event of his inability or
refusal to act, the Assistant Vice President, if any, (or if there be more than
one, the Assistant Vice Presidents in the order designated or, in the absence of
any designation, then in the order of their election), shall perform the duties
and exercise the powers of that Vice President, and shall perform such other
duties and have such other powers as the Board of Directors, the Chief Executive
Officer, the President, or the Vice President under whose supervision he is
appointed may from time to time prescribe.
Section 13. Secretary.
The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the Executive Committee
or other committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the Board of
Directors and shall perform such other duties as may be prescribed by the Board
of Directors or President under whose supervision he shall be. The Secretary may
delegate to taking minutes of any meeting to any other person.
Section 14. Assistant Secretary.
The Assistant Secretary or, if there be more than one, the
Assistant Secretaries, in the order determined by the Board of Directors, shall,
in the absence or disability of the Secretary perform the duties and exercise
the powers of the Secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 15. Treasurer.
The Treasurer (or the Vice President in charge of finance, if
one be elected), shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the Chief Executive Officer, the
President and the Board of Directors, at its regular meeting or when the Board
of Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the Corporation.
Section 16. Assistant Treasurer.
The Assistant Treasurer or, if there shall be more than one, the
Assistant Treasurers, in the order determined by the Board of Directors, shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE X
GENERAL COUNSEL
The Board of Directors may appoint a general counsel for the
Corporation at compensation to be set by the Board. The general counsel, as
such, shall not be an officer of the Corporation unless the Board of Directors
shall so designate him in the resolution of appointment, but the person
designated as general counsel may hold any other office to which he is elected.
The Board may appoint an individual lawyer or a law firm as the general counsel
of the Corporation, as it may elect. If a law firm should be selected, then one
member thereof shall be designated as the particular lawyer in such firm whose
personal services are contemplated. The General Counsel shall, when called upon,
counsel and advise with the officers of this Corporation on any legal matters
which may arise in the conduct of the Corporation's business, shall handle all
claims and litigation involving the Corporation, and shall perform such further
legal services as may be contemplated in the contract of employment.
ARTICLE XI
POWER TO INDEMNIFY AND TO PURCHASE
INDEMNITY INSURANCE; DUTY TO INDEMNIFY
Section 1. In this Article XI:
(a) "Corporation," includes any domestic or foreign predecessor entity
of the Corporation in a merger, consolidation, or other transaction in which the
liabilities of the predecessor are transferred to the Corporation by operation
of law and in any other transaction in which the Corporation assumes the
liabilities of the predecessor but does not specifically exclude liabilities
that are the subject matter of this Article.
(b) "Director" means any person who is or was a director of the
Corporation, any person who, while a director of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, attorney, accountant, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other enterprise.
(c) "Expenses" include court costs and attorneys' fees.
(d) "Official capacity", means:
(1) when used with respect to a director, the office of director in the
Corporation; and
(2) when used with respect to a person other than a director,
the elective or appointive office in the Corporation held by the
officer or the employment or agency relationship undertaken by the
employee or agent in behalf of the Corporation, but
(3) in both Paragraph (1) and (2) does not include service for
any other foreign or domestic corporation or any partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other
enterprise.
(e) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, any appeal in such an action, suit, or proceeding, and any
inquiry or investigation that could lead to such an action, suit, or proceeding.
Section 2. The Corporation shall indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding because
the person is or was a director of the Corporation only if it is determined in
accordance with Section 6 of this Article XI that the person:
(a) conducted himself in good faith;
(b) reasonably believed:
(1) in the case of conduct in his official capacity as a director of the
Corporation, that his conduct was in the Corporation's best interests; and
(2) in all other cases, that his conduct was at least not opposed
to the Corporation's best interests; and
(c) in the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful.
Section 3. Except to the extent permitted by Section 5 of this Article,
a director may not be indemnified under Section 2 of this Article in respect of
a proceeding:
(a) in which the person is found to be liable on the basis that
personal benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity; or
(b) in which the person is found liable to the Corporation.
Section 4. The termination of a proceeding by judgment, order,
settlement, or conviction, or on a plea of nolo contenders or its equivalent is
not of itself determinative that the person did not meet the requirements set
forth in Section 2 of this Article. A person shall be deemed to have been found
liable in respect of any claim, issue or matter only after the person shall have
been so adjudged by a court of competent jurisdiction after exhaustion of all
appeals therefrom.
Section 5. A person may be indemnified under Section 2 of this Article
against judgments, penalties (including excise and similar taxes), fines,
settlement, and reasonable expenses actually incurred by the person in
connection with the proceeding; but if the person is found liable to the
Corporation or is found liable on the basis that personal benefit was improperly
received by the person, the indemnification:
(a) is limited to reasonable expenses actually incurred by the person in
connection with the proceeding; and
(b) shall not be made in respect of any proceeding in which the person
shall have been found liable for willful or intentional misconduct in the
performance of his duty to the Corporation.
Section 6. A determination of indemnification under Section 2 of this
Article XI must be made:
(a) by a majority vote of a quorum consisting of Directors who at the time
of the vote are not named defendants or respondents in the proceeding;
(b) if such a quorum cannot be obtained, by a majority vote of a
committee of the Board of Directors designated to act in the matter by a
majority vote of all Directors, consisting solely of two or more Directors who
at the time of the vote are not named defendants or respondents in the
proceeding;
(c) by special legal counsel selected by the Board of Directors or a
committee of the Board by vote as set forth in Subsection (a) or (b) of this
Section, or, if such a quorum cannot be obtained and such a committee cannot be
established, by a majority vote of all Directors; or
(d) by the shareholders in a vote that excludes the shares held by
Directors who are named defendants or respondents in the proceeding.
Section 7. Authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as the determination
that indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel (who can be the
general counsel,, authorization of indemnification and determination as to
reasonableness of expenses must be made in the manner specified by Subsection
(c) of Section 6 of this Article XI for the selection of special legal counsel
(who can be the general counsel). A provision contained in the Articles of
Incorporation, the By-laws, a resolution of shareholders or Directors, or an
agreement that makes mandatory the indemnification permitted under Section 2 of
this Article XI shall be deemed to constitute authorization of indemnification
in the manner required by this Section 7 even though such provision may not have
been adopted or authorized in the same manner as the determination that
indemnification is permissible.
Section 8. The Corporation shall indemnify a director against
reasonable expenses incurred by him in connection with a proceeding in which he
is a named defendant or respondent because he is or was a director if he has
been wholly successful, on the merits or otherwise, in the defense of the
proceeding.
Section 9. If, in a suit for the indemnification required by Section 8
of this Article XI, a court of competent jurisdiction determines, that the
director is entitled to indemnification under that Section, the court shall
order indemnification and shall award to the director the expenses incurred in
securing the indemnification.
Section 10. If, upon application of a director, a court of competent
jurisdiction determines, after giving any notice the court considers necessary,
that the director is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he has met the requirements
set forth in Section 2 of this Article XI or has been adjudged liable in the
circumstances described by Section 3 of this Article XI, the court may order the
indemnification that the court determines is proper and equitable. The court
shall limit indemnification to reasonable expenses if the proceeding is brought
by or in behalf of the Corporation or if the director is found liable on the
basis that personal benefit was improperly received by him, whether or not the
benefit resulted from an action taken in the person's official capacity.
Section 11. Reasonable expenses incurred by a director who was, is, or
is threatened to be made a named defendant or respondent in a proceeding may be
paid or reimbursed by the Corporation, in advance of the final disposition of
the proceeding and without any of the determination specified in Section 6 and 7
of this Article XI, after the Corporation receives a written affirmation by the
director of his good faith belief that he has met the standard of conduct
necessary for indemnification under this Article XI and a written undertaking by
or on behalf of the director to repay the amount paid or reimbursed if it is
ultimately determined that he has not met those requirements.
Section 12. The written undertaking required by Section 11 of this
Article XI must be an unlimited general obligation of the director but need not
be secured. It may be accepted without reference to financial ability to make
repayment.
Section 13. A provision for the Corporation to indemnify or to advance
expenses to a director who was, is, or is threatened to be made a named
defendant or respondent in a proceeding, whether contained in the Articles of
Incorporation, the By-laws, a resolution of shareholders or Directors, an
agreement or otherwise, except in accordance with Section 18 of this Article XI,
is valid only to the extent it is consistent with this Article XI as limited by
the Articles of Incorporation, if such a limitation exists.
Section 14. Notwithstanding any other provision of this Article XI, the
Corporation may pay or reimburse expenses incurred by a director in connection
with his appearance as a witness or other participation in a proceeding at a
time when he is not a named defendant or respondent in the proceeding.
Section 15. An officer of the Corporation shall be indemnified as, and
to the same extent, provided by Sections 8, 9, and 10 of this Article XI for a
director and is entitled to seek indemnification under those sections to the
same extent as a director. The Corporation may indemnify and advance expenses to
an officer, employee, or agent of the Corporation to the same extent that it may
indemnify and advance expenses to Directors under this Article XI.
Section 16. The Corporation may indemnify and advance expenses to
persons who are not or were not officers, employees, or agents of the
Corporation who are or were serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, partnership,
joint venturer sole proprietorship, trust, employee benefit plan or other
enterprise, to the same extent that it may indemnify and advance expenses to
Directors under this Article XI.
Section 17. The Corporation may indemnify and advance expenses to an
officer, employee or agent, or person who is identified in Section 16 of this
Article XI and who is not a director to such further extent, consistent with
law, as may be provided by the Articles of Incorporation, By-laws, general or
specific action of the Board of Directors, or contract or as permitted or
required by common law.
Section 18. The Corporation may purchase and maintain insurance or
another arrangement on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation or who is or was serving at the request of
the Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as such a
person, whether or not the Corporation would have the power to indemnify him
against that liability under this Article XI. If the insurance or other
arrangement is with a person or entity that is not regularly engaged in the
business of providing insurance coverage, the insurance or arrangement may
provide for payment of a liability with respect to which the Corporation would
not have the power to indemnify the person only if including coverage for the
additional liability has been approved by the shareholders of the Corporation.
Without limiting the power of the Corporation to procure or maintain any kind of
insurance or other arrangement, the Corporation may, for the benefit of persons
indemnified by the Corporation:
(a) create a trust fund;
(b) establish any form of self-insurance;
(c) secure its indemnity obligation by grant of a security
interest or other lien on the assets of the Corporation; or
(d) establish a letter of credit, guaranty, or surety arrangement.
The insurance or other arrangement may be procured, maintained, or
established within the Corporation or with any insurer or other person deemed
appropriate by the Board of Directors regardless of whether all or part of the
stock or other securities of the insurer `or other person are owned in whole or
part by the Corporation. In the absence of fraud, the judgment of the Board of
Directors as to the terms and conditions of the insurance or other arrangement
and the identity of the insurer or other person participating in an arrangement
shall be conclusive and the insurance or arrangement shall not be voidable and
shall not subject the Directors approving the insurance or arrangement to
liability, on any ground, regardless of whether Directors participating in the
approval are beneficiaries of the insurance or arrangement. The Corporation
shall reimburse said persons (in addition to above insurance) any applicable
paid by said persons.
Section 19. Any indemnification of or advance of expenses to a director
in accordance with this Article XI shall be reported in writing to the
shareholders with or before the notice or waiver of notice of the next
shareholders' meeting or with or before the next submission to the shareholders
of a consent to action without a meeting pursuant to Section A, Article 9.10 of
the Texas Business Corporation Act and, in any case, within the 12-month period
immediately following the date of the indemnification or advance.
Section 20. For purposes of this Article XI, the Corporation is deemed
to have requested a director to serve an employee benefit plan whenever the
performance by him of his duties to the Corporation also imposes duties on or
otherwise involves services by him to the plan or participants or beneficiaries
of the plan. Excise taxes assessed on a director with respect to an employee
benefit plan pursuant to applicable law are deemed fines. Action taken or
omitted by him with respect to an employee benefit plan in the performance of
his duties for a purpose reasonably believed by him to be in the interest of the
participants and beneficiaries of the plan is deemed to be for a purpose which
is not opposed to the best interests of the Corporation.
ARTICLE XII
CERTIFICATES FOR SHARES
Section 1. Form of Certificate.
The shares of capital stock of the Corporation shall be represented by
certificates signed by the Chief Executive Officer, the President or a Vice
President and the Secretary or an Assistant Secretary of the Corporation.
When the Corporation is authorized to issue shares of more than one
class, every certificate shall set forth upon the face or back of such
certificate, or shall state that the Corporation will furnish to any shareholder
upon request and without charge a full statement of the designations,
preferences, limitations and relative rights of the shares of each class
authorized to be issued and, if the Corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined and the authority of the Board of Directors to fix and
determine the relative rights and preferences of subsequent series.
Section 2. Facsimile Signatures.
The signatures of the officers of the Corporation upon a certificate
may be facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the Corporation itself or an employee of
the Corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate was issued, it may be issued by the Corporation with the
same effect as if he were such officer at the date of its issue.
Section 3. Lost Certificates.
The Board of Directors may direct a new certificate to be issued in
place of any certificate theretofore issued by the Corporation alleged to have
been lost or destroyed. When authorizing such issue of a new certificate, the
Board of Directors, in its discretion and as a condition precedent to the
issuance thereof, may prescribe such terms and conditions as it deems expedient,
and may require such indemnities as it deems adequate, to protect the
Corporation from any claim that may be made against it with respect to any such
certificate alleged to have been lost or destroyed.
Section 4. Transfer of Shares.
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and the old
certificate canceled and the transaction recorded upon the books of the
Corporation.
Section 5. Registered Shareholders.
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive distributions
or dividends, to vote as such owner and to hold liable for calls and assessments
a person registered on its books as the owner of shares, and shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Texas.
Section 6. List of Shareholders.
The officer or agent having charge of the transfer books for shares
shall make, at least ten (10) days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of ten (10) days prior to such meeting, shall be
kept on file at the registered office of the Corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original share ledger or transfer book, or a duplicate thereof,
shall be prima facie evidence as to who are the shareholders entitled to examine
such list or share ledger or transfer book or to vote at any meeting of the
shareholders.
ARTICLE XIII
GENERAL PROVISIONS
Section 1. Distributions and Dividends
Subject to the Articles of Incorporation, distributions or share
dividends may be declared by the Board of Directors at any regular or special
meeting. Distributions and dividends may be paid in cash, in property or in
shares of the capital stock, subject to any provisions of the Act and the
Articles of Incorporation. The declaration and payment of distributions and
dividends shall be at the discretion of the Board of Directors.
Before payment of any distribution or dividend, there may be set aside
out of any funds of the Corporation available for distributions or dividends
such sum or sums as the Directors from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies or for
equalizing distributions or dividends or for repairing or maintaining any
property of the Corporation or for such other purpose as the Directors shall
think conducive to the interest of the Corporation, and the Directors may modify
or abolish any such reserve in the manner in which it was created.
Section 3. Checks.
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be fixed resolution of the
Board of Directors.
Section 5. Seal.
The Corporation shall not have a corporate seal.
ARTICLE XIV
AMENDMENTS
These By-laws may be altered, amended or repealed or new By laws may be
adopted at any regular or special meeting of the Board of Directors at which a
quorum is present or represented by the affirmative vote of a majority of the
Directors present, provided notice of the proposed alteration, amendment or
repeal be contained in the notice of such meeting subject to repeal or change by
action of the shareholders.
No By-law shall be adopted by the Directors which shall require more
than a majority of the voting shares for a quorum at a meeting of shareholders,
nor more than a majority of the votes cast to constitute action by the
shareholders, except where higher percentages are required by law or by the
Articles of Incorporation.
ARTICLE X
ADOPTION OF RESTATED BYLAWS
The foregoing restated bylaws were adopted by the Board of Directors on
December 23, 1998 to be effective January 1, 1999.
Original signed by Charles W. Janke
Charles W. Janke, Director
Original signed by James J. Janke
James J. Janke, Director
Original signed by J. H. Carpenter
J. H. Carpenter, Director
Attested to, and certified by:
Original signed by J. H. Carpenter
J. H. Carpenter, Secretary
1998 STOCK COMPENSATION PLAN
of
RAMPART CAPITAL CORPORATION
(a Texas corporation)
<PAGE>
TABLE OF CONTENTS
1998 STOCK COMPENSATION PLAN
of
RAMPART CAPITAL CORPORATION
<TABLE>
<S> <C> <C>
SECTION SUBJECT PAGE
1. Purpose of Plan ...........................................................................1
2. Stock Subject to the Plan....................................................................1
3. Administration of the Plan...................................................................1
(a) General ...........................................................................1
(b) Changes in Law Applicable...........................................................2
4. Types of Awards Under the Plan...............................................................2
5. Persons to Whom Options Shall Be Granted.....................................................2
(a) Nonqualified Options................................................................2
(b) Incentive Options...................................................................2
6. Factors to Be Considered in Granting Options.................................................3
7. Time of Granting Option......................................................................3
8. Terms and Conditions of Options..............................................................3
(a) Number of Shares....................................................................3
(b) Type of Option......................................................................3
(c) Option Period.......................................................................3
(1) General....................................................................3
(2) Termination of Employment..................................................3
(3) Cessation of Service as Director
or Advisor.................................................................4
(4) Disability.................................................................4
(5) Death......................................................................4
(6) Acceleration and Exercise Upon Change
of Control.................................................................4
(d) Option Prices.......................................................................5
(1) Nonqualified Options.......................................................5
(2) Incentive Options..........................................................5
(3) Determination of Fair Market Value.........................................5
(e) Exercise of Options.................................................................6
(f) Non-transferability of Options......................................................6
(g) Limitations on 10% Shareholders.....................................................6
(h) Limits on Vesting of Incentive Options..............................................6
(i) Compliance with Securities Laws.....................................................6
(j) Additional Provisions...............................................................7
9. Medium and Time of Payment...................................................................7
10. Alternate Stock Appreciation Rights..........................................................8
(a) Award of Alternate Stock Rights.....................................................8
(b) Alternate Stock Rights Agreement....................................................8
(c) Exercise ...........................................................................8
(d) Amount of Payment...................................................................8
(e) Form of Payment.....................................................................8
(f) Termination of SAR .................................................................8
(g) Effect of Exercise of SAR...........................................................9
(h) Effect of Exercise of Related Option................................................9
(i) Non-transferability of SAR..........................................................9
11. Rights as a Shareholder......................................................................9
12. Optionee's Agreement to Serve................................................................10
13. Adjustments on Changes in Capitalization.....................................................10
(a) Changes in Capitalization...........................................................10
(b) Reorganization, Dissolution or Liquidation..........................................10
(c) Change in Par Value.................................................................10
(d) Notice of Adjustments...............................................................10
(e) Effect Upon Holder of Option........................................................11
(f) Right of Company to Make Adjustments................................................11
14. Investment Purpose...........................................................................11
15. No Obligation to Exercise Option or SAR......................................................12
16. Modification, Extension, and Renewal of Options..............................................12
17. Effective Date of the Plan...................................................................12
18. Termination of the Plan......................................................................12
19. Amendment of the Plan........................................................................12
20. Withholding ...........................................................................12
21. Indemnification of Committee.................................................................12
22. Application of Funds.........................................................................13
23. Governing Law ...........................................................................13
</TABLE>
<PAGE>
1998 STOCK COMPENSATION PLAN - Page 12
1998 STOCK COMPENSATION PLAN
OF
RAMPART CAPITAL CORPORATION
1. Purpose of Plan. This 1998 Stock Compensation Plan ("Plan") is
intended to encourage ownership of the common stock of RAMPART CAPITAL
CORPORATION ("Company") by certain officers, directors, employees and advisors
of the Company or any Subsidiary or Subsidiaries of the Company (as hereinafter
defined) in order to provide additional incentive for such persons to promote
the success and the business of the Company or its Subsidiaries and to encourage
them to remain in the employ of the Company or its Subsidiaries by providing
such persons an opportunity to benefit from any appreciation of the common stock
of the Company through the issuance of stock options and related stock
appreciation rights to such persons in accordance with the terms of the Plan. It
is further intended that options granted pursuant to this Plan shall constitute
either incentive stock options ("Incentive Options") within the meaning of
Section 422 (formerly Section 422A) of the Internal Revenue Code of 1986, as
amended ("Code"), or options which do not constitute Incentive Options
("Nonqualified Options") as determined by the Committee (as hereinafter defined)
at the time of issuance of such options. Incentive Options, Nonqualified Options
and Reload Options (as defined in Section 11 hereof) are herein sometimes
referred to collectively as "Options". As used herein, the term Subsidiary or
Subsidiaries shall mean any corporation (other than the employer corporation) in
an unbroken chain of corporations beginning with the employer corporation if, at
the time of granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
2. Stock Subject to the Plan. Subject to adjustment as provided in
Section 14 hereof, there will be reserved for the use upon the exercise of
Options to be granted from time to time under the Plan, an aggregate of Two
hundred forty thousand (240,000) shares of the common stock, $.01 par value, of
the Company ("Common Stock"), which shares in whole or in part shall be
authorized, but unissued, shares of the Common Stock or issued shares of Common
Stock which shall have been reacquired by the Company as determined from time to
time by the Board of Directors of the Company ("Board of Directors"). To
determine the number of shares of Common Stock available at any time for the
granting of Options under the Plan, there shall be deducted from the total
number of reserved shares of Common Stock, the number of shares of Common Stock
in respect of which Options have been granted pursuant to the Plan which remain
outstanding or which have been exercised. If and to the extent that any Option
to purchase reserved shares shall not be exercised by the optionee for any
reason or if such Option to purchase shall terminate as provided herein, such
shares which have not been so purchased hereunder shall again become available
for the purposes of the Plan unless the Plan shall have been terminated, but
such unpurchased shares shall not be deemed to increase the aggregate number of
shares specified above to be reserved for purposes of the Plan (subject to
adjustment as provided in Section 14 hereof).
3. Administration of the Plan.
(a) General. The Plan shall be administered by a Compensation
Committee ("Committee") appointed by the Board of Directors, which
Committee shall consist of not less than two (2) members of the Board
of Directors who are not eligible to participate in the Plan, and have
not, for a period of at least one (1) year prior thereto been eligible
to participate in the Plan, except that if at any time there shall be
less than two (2) directors who are qualified to serve on the
Committee, then the Plan shall be administered by the full Board of
Directors. All references in this Plan to the Committee shall be deemed
to refer instead to the full Board of Directors at any time there is
not a committee of two (2) members qualified to act hereunder. The
Board of Directors may from time to time appoint members of the
Committee in substitution for or in addition to members previously
appointed and may fill vacancies, however caused, in the Committee. If
the Board of Directors does not designate a Chairman of the Committee,
the Committee shall select one of its members as its Chairman. The
Committee shall hold its meetings at such times and places as it shall
deem advisable. A majority of its members shall constitute a quorum.
Any action of the Committee shall be taken by a majority vote of its
members at a meeting at which a quorum is present. Notwithstanding the
preceding, any action of the Committee may be taken without a meeting
by a written consent signed by all of the members, and any action so
taken shall be deemed fully as effective as if it had been taken by a
vote of the members present in person at the meeting duly called and
held. The Committee may appoint a Secretary, shall keep minutes of its
meetings, and shall make such rules and regulations for the conduct of
its business as it shall deem advisable.
The Committee shall have the sole authority and power, subject
to the express provisions and limitations of the Plan, to construe the
Plan and option agreements granted hereunder, and to adopt, prescribe,
amend, and rescind rules and regulations relating to the Plan, and to
make all determinations necessary or advisable for administering the
Plan, including, but not limited to, (i) who shall be granted Options
under the Plan, (ii) the term of each Option, (iii) the number of
shares covered by such Option, (iv) whether the Option shall constitute
an Incentive Option or a Nonqualified Option or a Reload Option, (v)
the exercise price for the purchase of the shares of the Common Stock
covered by the Option, (vi) the period during which the Option may be
exercised, (vii) whether the right to purchase the number of shares
covered by the Option shall be fully vested on issuance of the Option
so that such shares may be purchased in full at one time or whether the
right to purchase such shares shall become vested over a period of time
so that such shares may only be purchased in installments, and (viii)
the time or times at which Options shall be granted. The Committee's
determinations under the Plan, including the above enumerated
determinations, need not be uniform and may be made by it selectively
among the persons who receive, or are eligible to receive, Options
under the Plan, whether or not such persons are similarly situated.
The interpretation by the Committee of any provision of the
Plan or of any option agreement entered into hereunder with respect to
any Incentive Option shall be in accordance with Section 422 of the
Code and the regulations issued thereunder, as such section or
regulations may be amended from time to time, in order that the rights
granted hereunder and under said option agreements shall constitute
"Incentive Stock Options" within the meaning of such section. The
interpretation and construction by the Committee of any provision of
the Plan or of any Option granted hereunder shall be final and
conclusive, unless otherwise determined by the Board of Directors. No
member of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan
or any Option granted under it. Upon issuing an Option under the Plan,
the Committee shall report to the Board of Directors the name of the
person granted the Option, whether the Option is an Incentive Option or
a Nonqualified Option, the number of shares of Common Stock covered by
the Option, and the terms and conditions of such Option.
(b) Changes in Law Applicable. If the laws relating to
Incentive Options or Nonqualified Options are changed, altered or
amended during the term of the Plan, the Board of Directors shall have
full authority and power to alter or amend the Plan with respect to
Incentive Options or Nonqualified Options, respectively, to conform to
such changes in the law without the necessity of obtaining further
shareholder approval, unless the changes require such approval.
4. Types of Awards Under the Plan. Awards under the Plan may be in the
form of either Options, alternate stock appreciation rights (as described in
Section 10 hereof), or a combination thereof.
5. Persons to Whom Options Shall be Granted.
(a) Nonqualified Options. Nonqualified Options shall be
granted only to officers, directors (other than "Outside Directors" of the
Company or a Subsidiary [as hereinafter defined]), employees and advisors of the
Company or a Subsidiary who, in the judgment of the Committee, are responsible
for or contribute to the management or success of the Company or a Subsidiary
and who, at the time of the granting of the Nonqualified Options, are either
officers, directors (other than Outside Directors), employees or advisors of the
Company or a Subsidiary. As used herein, the term "Outside Director" shall mean
any director of the Company or a Subsidiary who is not an employee of the
Company or a Subsidiary.
(b) Incentive Options. Incentive Options shall be granted only
to employees of the Company or a Subsidiary who, in the judgment of the
Committee, are responsible for or contribute to the management or success of the
Company or a Subsidiary and who, at the time of the granting of the Incentive
Option are either an employee of the Company or a Subsidiary. Subject to the
provisions of Section 8(g) hereof, no individual shall be granted an Incentive
Option who, immediately before such Incentive Option was granted, would own more
than ten percent (10%) of the total combined voting power or value of all
classes of stock of the Company ("10% Shareholder").
6. Factors to Be Considered in Granting Options. In making any
determination as to persons to whom Options shall be granted and as to the
number of shares to be covered by such Options, the Committee shall take into
account the duties and responsibilities of the respective officers, directors,
employees, or advisors, their current and potential contributions to the success
of the Company or a Subsidiary, and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
7. Time of Granting Options. Neither anything contained in the Plan or
in any resolution adopted or to be adopted by the Board of Directors or the
Shareholders of the Company or a Subsidiary nor any action taken by the
Committee shall constitute the granting of any Option. The granting of an Option
shall be effected only when a written Option Agreement acceptable in form and
substance to the Committee, subject to the terms and conditions hereof including
those set forth in Section 8 hereof, shall have been duly executed and delivered
by or on behalf of the Company and the person to whom such Option shall be
granted. No person shall have any rights under the Plan until such time, if any,
as a written Option Agreement shall have been duly executed and delivered as set
forth in this Section 7.
8. Terms and Conditions of Options. All Options granted pursuant to
this Plan must be granted within ten (10) years from the date the Plan is
adopted by the Board of Directors of the Company. Each Option Agreement
governing an Option granted hereunder shall be subject to at least the following
terms and conditions, and shall contain such other terms and conditions, not
inconsistent therewith, that the Committee shall deem appropriate:
(a) Number of Shares. Each Option shall state the number of
shares of Common Stock which it represents.
(b) Type of Option. Each Option shall state whether it is
intended to be an Incentive Option or a Nonqualified Option.
(c) Option Period.
(1) General. Each Option shall state the date upon which it is granted.
Each Option shall be exercisable in whole or in part during such period as is
provided under the terms of the Option subject to any vesting period set forth
in the Option, but in no event shall an Option be exercisable either in whole or
in part after the expiration of ten (10) years from the date of grant; provided,
however, if an Incentive Option is granted to a 10% Shareholder, such Incentive
Option shall not be exercisable more than five (5) years from the date of grant
thereof.
(2) Termination of Employment. Except as otherwise provided in case of
Disability (as hereinafter defined), death or Change of Control (as hereinafter
defined), no Option shall be exercisable after an optionee who is an employee of
the Company or a Subsidiary ceases to be employed by the Company or a Subsidiary
as an employee; provided, however, that the Committee shall have the right in
its sole discretion, but not the obligation, to extend the exercise period for
not more than three (3) months following the date of termination of such
optionee's employment; provided further, however, that no Option shall be
exercisable after the expiration of ten (10) years from the date it is granted
and provided further, no Incentive Option granted to a 10% Shareholder shall be
exercisable after the expiration of five (5) years from the date it is granted.
(3) Cessation of Service as Director or Advisor. In the event an optionee
who was a director or advisor of the Company or a Subsidiary ceases to be a
director or advisor of the Company or a Subsidiary for any reason, other than
Disability or death, prior to the full exercise of the Option, such optionee may
exercise his Option at any time within ninety (90) days after such optionee's
status as a director or advisor of the Company or a Subsidiary is so terminated
to the extent he was entitled to exercise such Option at the date such
optionee's status as a director or advisor of the Company or a Subsidiary
terminated; provided, however, that no Option shall be exercisable after the
expiration of ten (10) years from the date it is granted.
(4) Disability. If an optionee's employment is terminated by reason of the
permanent and total Disability of such optionee or if an optionee who is a
director or advisor of the Company or a Subsidiary ceases to serve as a director
or advisor by reason of the permanent and total Disability of such optionee, the
Committee shall have the right in its sole discretion, but not the obligation,
to extend the exercise period for not more than one (1) year following the date
of termination of the optionee's employment or the date such optionee ceases to
be a director or advisor of the Company or a Subsidiary, as the case may be,
subject to the condition that no Option shall be exercisable after the
expiration of ten (10) years from the date it is granted and subject to the
further condition that no Incentive Option granted to a 10% Shareholder shall be
exercisable after the expiration of five (5) years from the date it is granted.
For purposes of this Plan, the term "Disability" shall mean the inability of the
optionee to fulfill such optionee's obligations to the Company or a Subsidiary
by reason of any physical or mental impairment which can be expected to result
in death or which has lasted or can be expected to last for a continuous period
of not less than twelve (12) months as determined by a physician acceptable to
the Committee in its sole discretion.
(5) Death. If an optionee dies while in the employ of the Company or a
Subsidiary, or while serving as a director or advisor of the Company or a
Subsidiary, and shall not have fully exercised Options granted pursuant to the
Plan, such Options may be exercised in whole or in part at any time within one
(1) year after the optionee's death, by the executors or administrators of the
optionee's estate or by any person or persons who shall have acquired the
Options directly from the optionee by bequest or inheritance, but only to the
extent that the optionee was entitled to exercise such Option at the date of
such optionee's death, subject to the condition that no Option shall be
exercisable after the expiration of ten (10) years from the date it is granted
and subject to the further condition that no Incentive Option granted to a 10%
Shareholder shall be exercisable after the expiration of five (5) years from the
date it is granted.
(6) Acceleration and Exercise Upon Change of Control. Notwithstanding the
preceding provisions of this Section 8(c), if any Option granted under the Plan
provides for either (a) an incremental vesting period whereby such Option may
only be exercised in installments as such incremental vesting period is
satisfied or (b) a delayed vesting period whereby such Option may only be
exercised after the lapse of a specified period of time, such as after the
expiration of one (1) year, such vesting period shall be accelerated upon the
occurrence of a Change of Control (as hereinafter defined) of the Company, or a
threatened Change of Control of the Company as determined by the Committee, so
that such Option shall thereupon become exercisable immediately in part or its
entirety by the holder thereof, as such holder shall elect. For the purposes of
this Plan, a "Change of Control" shall be deemed to have occurred if:
(i) Any "person", including a "group" as determined in accordance with
Section 13(d)(3) of the Securities Exchange Act of 1934 ("Exchange Act") and the
Rules and Regulations promulgated thereunder, is or becomes, through one or a
series of related transactions or through one or more intermediaries, the
beneficial owner, directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities, other than a person who is such a beneficial owner on
the effective date of the Plan and any affiliate of such person;
(ii) As a result of, or in connection with,
any tender offer or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the foregoing
transactions ("Transaction"), the persons who were Directors of the Company
before the Transaction shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company;
(iii) Following the effective date of the Plan, the Company is merged or
consolidated with another corporation and as a result of such merger or
consolidation less than 40% of the outstanding voting securities of the
surviving or resulting corporation shall then be owned in the aggregate by the
former stockholders of the Company, other than (x) any party to such merger or
consolidation, or (y) any affiliates of any such party;
(iv) A tender offer or exchange offer is made and consummated for the
ownership of securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding voting securities; or
(v) The Company transfers more than 50% of its assets, or the last of a
series of transfers result in the transfer of more than 50% of the assets of the
Company, to another corporation that is not a wholly-owned corporation of the
Company. For purposes of this subsection 8(c)(6)(v), the determination of what
constitutes more than 50% of the assets of the Company shall be determined based
on the sum of the values attributed to (i) the Company's real property as
determined by an independent appraisal thereof, and (ii) the net book value of
all other assets of the Company, each taken as of the date of the Transaction
involved.
In addition, upon a Change of Control, any Options previously granted under
the Plan to the extent not already exercised may be exercised in whole or in
part either immediately or at any time during the term of the Option as such
holder shall elect.
(d) Option Prices.
(1) Nonqualified Options. The purchase price or prices of the shares of the
Common Stock which shall be offered to any person under the Plan and covered by
a Nonqualified Option shall be the price determined by the Committee at the time
of granting of the Nonqualified Option, which price may be less than, equal to
or higher than one hundred percent (100%) of the fair market value of the Common
Stock at the time of granting the Nonqualified Option.
(2) Incentive Options. The purchase price or prices of the shares of the
Common Stock which shall be offered to any person under the Plan and covered by
an Incentive Option shall be one hundred percent (100%) of the fair market value
of the Common Stock at the time of granting the Incentive Option or such higher
purchase price as may be determined by the Committee at the time of granting the
Incentive Option; provided, however, if an Incentive Option is granted to a 10%
Shareholder, the purchase price of the shares of the Common Stock of the Company
covered by such Incentive Option may not be less than one hundred ten percent
(110%) of the fair market value of such shares on the day the Incentive Option
is
granted.
(3) Determination of Fair Market Value. During such time as the Common
Stock of the Company is not listed upon an established stock exchange, the fair
market value per share shall be deemed to be the closing sales price of the
Common Stock on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") on the day the Option is granted, as reported by
NASDAQ, if the Common Stock is so quoted, and if not so quoted, the mean between
dealer "bid" and "ask," prices of the Common Stock in the New York
over-the-counter market on the day the Option is granted, as reported by the
National Association of Securities Dealers, Inc. If the Common Stock is listed
upon an established stock exchange or exchanges, such fair market value shall be
deemed to be the highest closing price of the Common Stock on such stock
exchange or exchanges on the day the Option is granted or, if no sale of the
Common Stock of the Company shall have been made on established stock exchange
on such day, on the next preceding day on which there was a sale of such stock.
If there is no market price for the Common Stock, then the Board of Directors
and the Committee may, after taking all relevant facts into consideration,
determine the fair market value of the Common Stock.
(e) Exercise of Options. To the extent that a holder of an Option has a
current right to exercise, the Option may be exercised from time to time by
written notice to the Company at its principal place of business. Such notice
shall state the election to exercise the Option, the number of whole shares in
respect of which it is being exercised, shall be signed by the person or persons
so exercising the Option, and shall contain any investment representation
required by Section 8(i) hereof. Such notice shall be accompanied by payment of
the full purchase price of such shares and by the Option Agreement evidencing
the Option. In addition, if the Option shall be exercised, pursuant to Section
8(c)(4) or Section 8(c)(5) hereof, by any person or persons other than the
optionee, such notice shall also be accompanied by appropriate proof of the
right of such person or persons to exercise the Option. The Company shall
deliver a certificate or certificates representing such shares as soon as
practicable after the aforesaid notice and payment of such shares shall be
received. The certificate or certificates for the shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option. In the event the Option shall not be exercised
in full, the Secretary of the Company shall endorse or cause to be endorsed on
the Option the number of shares which has been exercised thereunder and the
number of shares that remain exercisable under the Option and return such Option
Agreement to the holder thereof.
(f) Non-transferability of Options. An Option granted pursuant to the Plan
shall be exercisable only by the optionee or the optionee's court appointed
guardian as set forth in Section 8(c)(4) hereof during the optionee's lifetime
and shall not be assignable or transferable by the optionee otherwise than by
Will or the laws of descent and distribution. An Option granted pursuant to the
Plan shall not be assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise other than by Will or the laws of descent and
distribution) and shall not be subject to execution, attachment, or similar
process. Any attempted transfer, assignment, pledge, hypothecation, or other
disposition of any Option or of any rights granted thereunder contrary to the
foregoing provisions of this Section 8(f), or the levy of any attachment or
similar process upon an Option or such rights, shall be null and void.
(g) Limitations on 10% Shareholders. No Incentive Option may be granted
under the Plan to any 10% Shareholder unless (i) such Incentive Option is
granted at an option price not less than one hundred ten percent (110%) of the
fair market value of the shares on the day the Incentive Option is granted and
(ii) such Incentive Option expires on a date not later than five (5) years from
the date the Incentive Option
is granted.
(h) Limits on Vesting of Incentive Options. An individual may be granted
one or more Incentive Options, provided that the aggregate fair market value (as
determined at the time such Incentive Option is granted) of the stock with
respect to which Incentive Options are exercisable for the first time by such
individual during any calendar year shall not exceed $100,000. To the extent the
$100,000 limitation in the preceding sentence is exceeded, such option shall be
treated as an option which is not an Incentive Option.
(i) Compliance with Securities Laws. The Plan and the grant and exercise of
the rights to purchase shares hereunder, and the Company's obligations to sell
and deliver shares upon the exercise of rights to purchase shares, shall be
subject to all applicable federal and state laws, rules and regulations, and to
such approvals by any regulatory or governmental agency as may, in the opinion
of counsel for the Company, be required, and shall also be subject to all
applicable rules and regulations of any stock exchange upon which the Common
Stock of the Company may then be listed. At the time of exercise of any Option,
the Company may require the optionee to execute any documents or take any action
which may be then necessary to comply with the Securities Act of 1933, as
amended ("Securities Act"), and the rules and regulations promulgated
thereunder, or any other applicable federal or state laws regulating the sale
and issuance of securities, and the Company may, if it deems necessary, include
provisions in the stock option agreements to assure such compliance. The Company
may, from time to time, change its requirements with respect to enforcing
compliance with federal and state securities laws, including the request for and
enforcement of letters of investment intent, such requirements to be determined
by the Company in its judgment as necessary to assure compliance with said laws.
Such changes may be made with respect to any particular Option or stock issued
upon exercise thereof. Without limiting the generality of the foregoing, if the
Common Stock issuable upon exercise of an Option granted under the Plan is not
registered under the Securities Act, the Company at the time of exercise will
require that the registered owner execute and deliver an investment
representation agreement to the Company in form acceptable to the Company and
its counsel, and the Company will place a legend on the certificate evidencing
such Common Stock restricting the transfer thereof, which legend shall be
substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR THE PRIVATE INVESTMENT OF THE HOLDER
HEREOF AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNTIL EITHER (i) A
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND
ITS COUNSEL THAT REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR
TRANSFER.
(j) Additional Provisions. The Option Agreements authorized under the Plan
shall contain such other provisions as the Committee shall deem advisable,
including, without limitation, restrictions upon the exercise of the Option. Any
such Option Agreement with respect to an Incentive Option shall contain such
limitations and restrictions upon the exercise of the Incentive Option as shall
be necessary in order that the option will be an "Incentive Stock Option" as
defined in Section 422 of the Code.
9. Medium and Time of Payment. The purchase price of the shares of the
Common Stock as to which the Option shall be exercised shall be paid in full
either (i) in cash at the time of exercise of the Option, (ii) by tendering to
the Company shares of the Company's Common Stock having a fair market value (as
of the date of receipt of such shares by the Company) equal to the purchase
price for the number of shares of Common Stock purchased, or (iii) partly in
cash and partly in shares of the Company's Common Stock valued at fair market
value as of the date of receipt of such shares by the Company. Cash payment for
the shares of the Common Stock purchased upon exercise of the Option shall be in
the form of either a cashier's check, certified check or money order. Personal
checks may be submitted, but will not be considered as payment for the shares of
the Common Stock purchased and no certificate for such shares will be issued
until the personal check clears in normal banking channels. If a personal check
is not paid upon presentment by the Company, then the attempted exercise of the
Option will be null and void. In the event the optionee tenders shares of the
Company's Common Stock in full or partial payment for the shares being purchased
pursuant to the Option, the shares of Common Stock so tendered shall be
accompanied by fully executed stock powers endorsed in favor of the Company with
the signature on such stock power being guaranteed. If an optionee tenders
shares, such optionee assumes sole and full responsibility for the tax
consequences, if any, to such optionee arising therefrom, including the possible
application of Code Section 424(c), or its successor Code section, which negates
any nonrecognition of income rule with respect to such transferred shares, if
such transferred shares have not been held for the minimum statutory holding
period to receive preferential tax treatment.
10. Alternate Stock Appreciation Rights.
(a) Award of Alternate Stock Rights. Concurrently with or
subsequent to the award of any Option to purchase one or more shares of
Common Stock, the Committee may in its sole discretion, subject to the
provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the optionee with respect to each
share of Common Stock covered by an Option ("Related Option"), a
related alternate stock appreciation right ("SAR"), permitting the
optionee to be paid the appreciation on the Related Option in lieu of
exercising the Related Option. A SAR granted with respect to an
Incentive Option must be granted together with the Related Option. A
SAR granted with respect to a Nonqualified Option may be granted
together with or subsequent to the grant of such Related Option.
(b) Alternate Stock Rights Agreement. Each SAR shall be on
such terms and conditions not inconsistent with this Plan as the
Committee may determine and shall be evidenced by a written agreement
executed by the Company and the optionee receiving the Related Option.
(c) Exercise. An SAR may be exercised only if and to the
extent that its Related Option is eligible to be exercised on the date
of exercise of the SAR. To the extent that a holder of a SAR has a
current right to exercise, the SAR may be exercised from time to time
by written notice to the Company at its principal place of business.
Such notice shall state the election to exercise the SAR, the number of
shares in respect of which it is being exercised, shall be signed by
the person so exercising the SAR and shall be accompanied by the
agreement evidencing the SAR and the Related Option. In the event the
SAR shall not be exercised in full, the Secretary of the Company shall
endorse or cause to be endorsed on the SAR and the Related Option the
number of shares which have been exercised thereunder and the number of
shares that remain exercisable under the SAR and the Related Option and
return such SAR and Related Option to the holder thereof.
(d) Amount of Payment. The amount of payment to which an
optionee shall be entitled upon the exercise of each SAR shall be equal
to 100% of the amount, if any, by which the fair market value of a
share of Common Stock on the exercise date exceeds the fair market
value of a share of Common Stock on the date the Option related to said
SAR was granted or became effective, as the case may be; provided,
however, the Company may, in its sole discretion, withhold from such
cash payment any amount necessary to satisfy the Company's obligation
for withholding taxes with respect to such payment. For this purpose,
the fair market value of a share of Common Stock shall be determined as
set forth in Section 8(d) hereof.
(e) Form of Payment. The amount payable by the Company to an
optionee upon exercise of a SAR may be paid in shares of Common Stock,
cash or a combination thereof. The number of shares of Common Stock to
be paid to an optionee upon such optionee's exercise of SAR shall be
determined by dividing the amount of payment determined pursuant to
Section 10(d) hereof by the fair market value of a share of Common
Stock on the exercise date of such SAR. For purposes of this Plan, the
exercise date of a SAR shall be the date the Company receives written
notification from the optionee of the exercise of the SAR in accordance
with the provisions of Section 10(c) hereof. As soon as practicable
after exercise, the Company shall either deliver to the optionee the
amount of cash due such optionee or a certificate or certificates for
such shares of Common Stock. All such shares shall be issued with the
rights and restrictions specified herein.
(f) Termination of SAR. Except as otherwise provided in case
of Disability (as defined in Section 8(c)(4) hereof) or death, no SAR
shall be exercisable after an optionee ceases to be an employee,
director or advisor of the Company or Subsidiary; provided, however,
that the Committee shall have the right in its sole discretion, but not
the obligation, to extend the exercise period for not more than three
(3) months following the date such optionee ceases to be an employee,
director or advisor of the Company or a Subsidiary; provided further,
that the Committee may not extend the period during which an optionee
may exercise a SAR for a period greater than the period during which an
optionee may exercise the Related Option. If an optionee's position as
an employee, director or advisor of the Company is terminated due to
the Disability or death of such optionee, the Committee shall have the
right, in its sole discretion, but not the obligation, to extend the
exercise period applicable to the SAR for a period not to exceed the
period in which the optionee may exercise the Option related to said
SAR as set forth in Sections 8(c)(4) and 8(c)(5) hereof, respectively.
(g) Effect of Exercise of SAR. The exercise of any SAR shall
cancel and terminate the right to purchase an equal number of shares
covered by the Related Option.
(h) Effect of Exercise of Related Option. Upon the exercise or
termination of any Related Option, the SAR with respect to such Related
Option shall terminate to the extent of the number of shares of Common
Stock as to which the Related Option was exercised or terminated.
(i) Non-transferability of SAR. A SAR granted pursuant to this
Plan shall be exercisable only by the optionee or the optionee's court
appointed guardian as set forth in Section 8(c)(4) hereof during the
optionee's lifetime and, subject to the provisions of Section 10(f)
hereof, shall not be assignable or transferable by the optionee. A SAR
granted pursuant to the Plan shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and
shall not be subject to execution, attachment, or similar process. Any
attempted transfer, assignment, pledge, hypothecation, or other
disposition of any SAR or of any rights granted thereunder contrary to
the foregoing provisions of this Section 10(i), or the levy of any
attachment or similar process upon a SAR or such rights, shall be null
and void.
11. Rights as a Shareholder. The holder of an Option or a SAR shall
have no rights as a shareholder with respect to the shares covered by the Option
or SAR until the due exercise of the Option, Related Option, or SAR and the date
of issuance of one or more stock certificates to such holder for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 14 hereof.
12. Optionee's Agreement to Serve. Each employee receiving an Option
shall, as one of the terms of the Option Agreement agree that such employee will
remain in the employ of the Company or Subsidiary for a period of at least one
(1) year from the date on which the Option shall be granted to such employee;
and that such employee will, during such employment, devote such employee's
entire time, energy, and skill to the service of the Company or a Subsidiary as
may be required by the management thereof, subject to vacations, sick leaves,
and military absences. Such employment, subject to the provisions of any written
contract between the Company or a Subsidiary and such employee, shall be at the
pleasure of the Board of Directors of the Company or a Subsidiary, and at such
compensation as the Company or a Subsidiary shall reasonably determine. Any
termination of such employee's employment during the period which the employee
has agreed pursuant to the foregoing provisions of this Section 13 to remain in
employment that is either for cause or voluntary on the part of the employee
shall be deemed a violation by the employee of such employee's agreement. In the
event of such violation, any Option or Options held by such employee, to the
extent not theretofore exercised, shall forthwith terminate, unless otherwise
determined by the Committee. Notwithstanding the preceding, neither the action
of the Company in establishing the Plan nor any action taken by the Company, a
Subsidiary or the Committee under the provisions hereof shall be construed as
granting the optionee the right to be retained in the employ of the Company or a
Subsidiary, or to limit or restrict the right of the Company or a Subsidiary, as
applicable, to terminate the employment of any employee of the Company or a
Subsidiary, with or without cause.
13. Adjustments on Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action
by the Shareholders of the Company, the number of shares of Common
Stock covered by the Plan, the number of shares of Common Stock covered
by each outstanding Option, and the exercise price per share thereof
specified in each such Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
of the Company resulting from a subdivision or consolidation of shares
or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such shares effected
without receipt of consideration by the Company after the date the
Option is granted, so that upon exercise of the Option, the optionee
shall receive the same number of shares the optionee would have
received had the optionee been the holder of all shares subject to such
optionee's outstanding Option immediately before the effective date of
such change in the number of issued shares of the Common Stock of the
Company.
(b) Reorganization, Dissolution or Liquidation. Subject to any
required action by the Shareholders of the Company, if the Company
shall be the surviving corporation in any merger or consolidation, each
outstanding Option shall pertain to and apply to the securities to
which a holder of the number of shares of Common Stock subject to the
Option would have been entitled. A dissolution or liquidation of the
Company or a merger or consolidation in which the Company is not the
surviving corporation, shall cause each outstanding Option to terminate
as of a date to be fixed by the Committee (which date shall be as of or
prior to the effective date of any such dissolution or liquidation or
merger or consolidation); provided, that not less than thirty (30) days
written notice of the date so fixed as such termination date shall be
given to each optionee, and each optionee shall, in such event, have
the right, during the said period of thirty (30) days preceding such
termination date, to exercise such optionee's Option in whole or in
part in the manner herein set forth.
(c) Change in Par Value. In the event of a change in the
Common Stock of the Company as presently constituted, which change is
limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par
value, the shares resulting from any change shall be deemed to be the
Common Stock within the meaning of the Plan.
(d) Notice of Adjustments. To the extent that the adjustments
set forth in the foregoing paragraphs of this Section 14 relate to
stock or securities of the Company, such adjustments, if any, shall be
made by the Committee, whose determination in that respect shall be
final, binding and conclusive, provided that each Incentive Option
granted pursuant to this Plan shall not be adjusted in a manner that
causes the Incentive Option to fail to continue to qualify as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
The Company shall give timely notice of any adjustments made to each
holder of an Option under this Plan and such adjustments shall be
effective and binding on the optionee.
(e) Effect Upon Holder of Option. Except as hereinbefore
expressly provided in this Section 14, the holder of an Option shall
have no rights by reason of any subdivision or consolidation of shares
of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class by
reason of any dissolution, liquidation, merger, reorganization, or
consolidation, or spin-off of assets or stock of another corporation,
and any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to the
Option. Without limiting the generality of the foregoing, no adjustment
shall be made with respect to the number or price of shares subject to
any Option granted hereunder upon the occurrence of any of the
following events:
(1) The grant or exercise of any other options which
may be granted or exercised under any qualified or
nonqualified stock option plan or under any other employee
benefit plan of the Company whether or not such options were
outstanding on the date of grant of the Option or thereafter
granted;
(2) The sale of any shares of Common Stock in the
Company's initial or any subsequent public offering,
including, without limitation, shares sold upon the exercise
of any overallotment option granted to the underwriter in
connection with such offering;
(3) The issuance, sale or exercise of any warrants to
purchase shares of Common Stock whether or not such warrants
were outstanding on the date of grant of the Option or
thereafter issued;
(4) The issuance or sale of rights, promissory notes
or other securities convertible into shares of Common Stock in
accordance with the terms of such securities ("Convertible
Securities") whether or not such Convertible Securities were
outstanding on the date of grant of the Option or were
thereafter issued or sold;
(5) The issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether
or not any adjustment in the purchase price was made or
required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible
Securities were outstanding on the date of grant of the Option
or were thereafter issued or sold; or
(6) Upon any amendment to or change in the terms of
any rights or warrants to subscribe for or purchase, or
options for the purchase of, Common Stock or Convertible
Securities or in the terms of any Convertible Securities,
including, but not limited to, any extension of any expiration
date of any such right, warrant or option, any change in any
exercise or purchase price provided for in any such right,
warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable
for Common Stock or any change in the rate at which any
Convertible Securities are convertible into or exchangeable
for Common Stock.
(f) Right of Company to Make Adjustments. The grant of an
Option pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassification,
reorganizations, or changes of its capital or business structure or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
14. Investment Purpose. Each Option under the Plan shall be granted on
the condition that the purchase of the shares of stock thereunder shall be for
investment purposes, and not with a view to resale or distribution; provided,
however, that in the event the shares of stock subject to such Option are
registered under the Securities Act or in the event a resale of such shares of
stock without such registration would otherwise be permissible, such condition
shall be inoperative if in the opinion of counsel for the Company such condition
is not required under the Securities Act or any other applicable law,
regulation, or rule of any governmental agency.
15. No Obligation to Exercise Option or SAR. The granting of an Option
or SAR shall impose no obligation upon the optionee to exercise such Option or
SAR.
16. Modification, Extension, and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Committee and
the Board of Directors may modify, extend or renew outstanding Options granted
under the Plan, or accept the surrender of outstanding Options (to the extent
not theretofore exercised). Neither the Committee nor the Board of Directors
shall, however, modify any outstanding Options so as to specify a lower price or
accept the surrender of outstanding Options and authorize the granting of new
Options in substitution therefor specifying a lower price. Notwithstanding the
foregoing, however, no modification of an Option shall, without the consent of
the optionee, alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
17. Effective Date of the Plan. The Plan shall become effective on the
date of execution hereof, which date is the date the Board of Directors approved
and adopted the Plan ("Effective Date"); provided, however, if the Shareholders
of the Company shall not have approved the Plan by the requisite vote of the
Shareholders, within twelve (12) months after the Effective Date, then the Plan
shall terminate and all Options theretofore granted under the Plan shall
terminate and be null and void.
18. Termination of the Plan. This Plan shall terminate as of the
expiration of ten (10) years from the Effective Date. Options may be granted
under this Plan at any time and from time to time prior to its termination. Any
Option outstanding under the Plan at the time of its termination shall remain in
effect until the Option shall have been exercised or shall have expired.
19. Amendment of the Plan. The Plan may be terminated at any time by
the Board of Directors of the Company. The Board of Directors may at any time
and from time to time without obtaining the approval of the Shareholders of the
Company or a Subsidiary, modify or amend the Plan (including such form of Option
Agreement as hereinabove mentioned) in such respects as it shall deem advisable
in order that the Incentive Options granted under the Plan shall be "Incentive
Stock Options" as defined in Section 422 of the Code or to conform to any change
in the law, or in any other respect which shall not change: (a) the maximum
number of shares for which Options may be granted under the Plan, except as
provided in Section 14 hereof; or (b) the option prices other than to change the
manner of determining the fair market value of the Common Stock for the purpose
of Section 8(d) hereof to conform with any then applicable provisions of the
Code or regulations thereunder; or (c) the periods during which Options may be
granted or exercised; or (d) the provisions relating to the determination of
persons to whom Options shall be granted and the number of shares to be covered
by such Options; or (e) the provisions relating to adjustments to be made upon
changes in capitalization. The termination or any modification or amendment of
the Plan shall not, without the consent of the person to whom any Option shall
theretofore have been granted, affect that person's rights under an Option
theretofore granted to such person. With the consent of the person to whom such
Option was granted, an outstanding Option may be modified or amended by the
Committee in such manner as it may deem appropriate and consistent with the
requirements of this Plan applicable to the grant of a new Option on the date of
modification or amendment.
20. Withholding. Whenever an optionee shall recognize compensation
income as a result of the exercise of any Option or SAR granted under the Plan,
the optionee shall remit in cash to the Company or Subsidiary the minimum amount
of federal income and employment tax withholding which the Company or Subsidiary
is required to remit to the Internal Revenue Service in accordance with the then
current provisions of the Code. The full amount of such withholding shall be
paid by the optionee simultaneously with the award or exercise of an Option or
SAR, as applicable.
21. Indemnification of Committee. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceedings, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his duties; provided that within sixty (60) days after institution of any such
action, suit or proceeding a Committee member shall in writing offer the Company
the opportunity, at its own expense, to pursue and defend the same.
22. Application of Funds. The proceeds received by the Company from the
sale of Common Stock pursuant to Options granted hereunder will be used for
general corporate purposes.
23. Governing Law. This Plan shall be governed and construed in
accordance with the laws of the state of incorporation of the Company.
EXECUTED this ___th day of December, 1998.
RAMPART CAPITAL CORPORATION
By: Original signed by Charles W. Janke
Charles W. Janke, Chairman
ATTEST:
Original signed by J. H. Carpenter
J. H. Carpenter, Secretary
Share Transfer
Restriction Agreement
This Agreement is made this 21st day of January, 1999 by and between
Charles W. Janke, individually and as general partner of Janke Family Limited
Partnership, Ltd., ("Janke"), J. H. Carpenter, individually and as President of
J. H. Carpenter Corporation, general partner of Carpenter Family Limited
Partnership, Ltd. and as President and sole shareholder of InSource Financial
Corporation ("Carpenter") and Rampart Capital Corporation, ("Rampart").
RECITALS:
1. Janke owns 1,500,000 shares of the outstanding common stock, $.01 par vale
(the "Common Stock") of Rampart, representing 66.7% of the currently outstanding
shares. 2. Carpenter owns 750,000 shares of the Common Stock, representing 33.3%
of the outstanding shares. 3. In July 1997, Rampart acquired from the Trustee in
bankruptcy, certain assets and corporate subsidiaries of the MCorp Liquidating
Trusts (the "MCorp Corporations") which included, among other things, net
operating losses and built in losses (collectively "NOLs") attributable to the
MCorp Corporations. 4. The Internal Revenue Code of 1986 (the "Code") provides,
in pertinent part, that if there is a more than 50% ownership change of a
corporation during a three-year testing period, the ownership change rules of
Section 382 of the Code limit the corporation's utilization of pre-change NOLs
on an annual basis following the ownership change. 5. Rampart proposes to engage
in a public offering of its Common Stock through a firm commitment underwriting
and the parties hereto wish to limit any sale or transfer of shares of Rampart's
Common Stock to conform to the limitations of Section 382 of the Code and to
protect utilization by Rampart of the NOLs.
NOW THEREFORE, in consideration of the mutual promises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
1. Janke and Carpenter each hereby, individually and on behalf of the
limited partnerships and corporations which they control as set forth above,
agree that during the term hereof, they will not sell, assign transfer or
otherwise dispose of any shares of the Company's Common Stock in a transaction
which would cause a more than 50% ownership change of Rampart under Section 382
of the Code.
2. Rampart agrees with Janke and Carpenter that, during the term
hereof, it will not sell or otherwise dispose of its Common Stock or preferred
stock or consummate any transaction which would effect a change in ownership
contrary to Section 382 of the Code
3. The term of this Agreement shall commence upon the date of execution
and shall continue for a period of three years and one day from the consummation
of the public offering. This Agreement may be amended at any time to conform to
any amendment, modification or revision of Section 382 of the Code or any
ownership change rules of the Code or any corresponding provisions of succeeding
law or if, subsequent to the date hereof, there is no business or legal reason
to restrict the disposition of the shares of Common Stock held by Janke and
Carpenter or to restrict the issuance of new shares by Rampart.
4. This Agreement shall be binding upon the heirs, executors,
successors, administrators and assigns of Janke and Carpenter and upon the
successors and assigns of Rampart.
5. This Agreement shall be governed by the laws of the State of Texas.
In Witness Whereof, the parties have executed this Agreement this 21st
day of January 1999.
Rampart Capital Corporation
By:______________________
- ----------------------
- ------------------------
Charles W. Janke, individually
J. H. Carpenter, individually
Janke Family Limited Partnership, Ltd.
Carpenter Family Limited Partnership, Ltd.
By: J.H. Carpenter Corporation,
General Partner
By:___________________________ By:
- ---------------------
Charles W. Janke, General Partner J.H. Carpenter, President
InSource Corporation
By:
- --------------------
J.H. Carpenter, President
Subsidiaries of the Registrant
Rampart Capital Corporation
<TABLE>
<CAPTION>
Company State or Other Jurisdictions
Company Name Code Jurisdiction of in which qualified Amount Owned
--------- ---- --- ------------------ ----------
Incorporation
<S> <C> <C> <C> <C>
Rampart Capital Corporation RCC Texas 100% RCC
Leissner's Inc LI Texas 100% RCC
BCL Enterprises, Inc BCL Texas 100%RCC
Rampart Facilities RFC Texas 100% RCC
Corporation
Rampart Properties RPC Nevada Texas 52.1% RFC & 48.9% RCC
Corporation
IGBF, Inc. IGBF Texas 100% RPC
Ag-Capital Corporation ACC Oklahoma Texas 100% RPC
IGBAF, Inc. IGBAF Texas 100% IGBAF
Rampart Acquisition RAC Texas 100% IGBAF
Corporation, L.L.C.
Rampart Ventures RVC Texas 100% IGBAF
Corporation, L.L.C.
</TABLE>
Consent of Independent Public Accountants
We consent to the inclusion in this registration statement of Rampart
Capital Corporation on Form SB2 of our report dated March 4, 1998, on our
examinations of the financial statements of Rampart Capital Corporation. We also
consent to the reference to our firm under the caption "Experts".
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
January 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001074681
<NAME> RAMPART
<MULTIPLIER> 1
<CURRENCY> $US
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1998
<PERIOD-END> OCT-31-1998
<EXCHANGE-RATE> 1
<CASH> 358,500
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,582,147
<CURRENT-ASSETS> 358,500
<PP&E> 815,643
<DEPRECIATION> 43,009
<TOTAL-ASSETS> 7,482,817
<CURRENT-LIABILITIES> 3,501,705
<BONDS> 3,501,705
0
0
<COMMON> 22,500
<OTHER-SE> 2,827,593
<TOTAL-LIABILITY-AND-EQUITY> 7,482,817
<SALES> 5,478,589
<TOTAL-REVENUES> 6,162,135
<CGS> 2,276,641
<TOTAL-COSTS> 2,276,641
<OTHER-EXPENSES> 1,026,973
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 412,049
<INCOME-PRETAX> 2,446,472
<INCOME-TAX> 694,994
<INCOME-CONTINUING> 1,751,478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,751,478
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
</TABLE>
