As filed with the Securities and Exchange Commission on April 09, 1999
Registration No. 333-71089
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM SB-2/A
AMENDMENT 1
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.
<PAGE>
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
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 of 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 $ 0.975 $ 1,462,500
Proceeds to Rampart $ 9.025 $13,537,500
-----------------------
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>
<TABLE><CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Prospectus Summary......................................................................3
Selected Consolidated Financial Information.............................................6
Risk Factors............................................................................7
Potential Decline in Value of Collateral and Paying Loans..........................7
Uncertain Nature of the Asset Acquisition and Resolution Business..................7
Potential Unavailability of Certain Federal Income Tax Benefits....................8
Reliance on Principal Officers: Charles W. Janke and J. H. Carpenter...............8
Period to Period Variances of Revenues and Collections.............................8
Future Acquisitions of Debt Portfolios, Real Estate and Other Assets...............9
Capital Requirements and Interest Rates............................................9
Dilution to New Shareholders.......................................................9
Influence on Voting by Charles W. Janke and J. H. Carpenter........................9
Absence of Prior Public Market-American Stock Exchange Listing.....................9
Shares of Common Stock Reserved Under 1998 Stock Option Plan.......................10
Effect of Underwriters' Warrants...................................................10
Underwriters' Influence on the Market..............................................10
Environmental Risk on Real Estate Acquired or Foreclosed...........................10
Use of Proceeds.........................................................................11
Dividend Policy.........................................................................12
Dilution................................................................................12
Capitalization..........................................................................13
Management's Discussion and Analysis
of Financial Condition and Results Of Operations ..................................14
Business................................................................................18
Additional Information..................................................................24
Management..............................................................................25
Certain Relationships and Related Transactions..........................................29
Principal shareholders..................................................................31
Certain Federal Income Tax Matters......................................................32
Description of Capital Stock............................................................35
Shares Eligible For Future Sale.........................................................36
Plan of Distribution....................................................................37
Legal Matters...........................................................................39
Experts.................................................................................39
Index to Financial Statements...........................................................40
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
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.
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, paying
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.
<PAGE>
Bridge Funding
Short-term Bridge Funding
We also provide short-term bridge funding for selected real estate projects. Our
typical funding scenario requires that:
we purchase the real estate, we have a minimum preferential yield and an
equity participation , developers may purchase the real estate from us or
arrange for sales to third parties, subject to our approval, 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 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
currently there may be approximately $56.1 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, which are operated as wholly-owned
subsidiaries, 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.
However, most of our income is now generated through these subsidiaries and all
of our acquisitions and asset purchases since July 1997 have been made through
the subsidiaries. Most notable was our acquisition of the Newport Assets in
February 1999 through Rampart Properties Corporation, our subsidiary with the
greatest NOL carryforward. See "Risk Factors," "Business-The MCorp Acquisition
and -Acquisition of Newport Assets," "Certain Federal Income Tax Matters" and
"Notes to Financial Statements."
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 through our acquired subsidiaries, 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
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.
Underwriting................................ This is a firm commitment underwriting. Redstone Securities,
Inc. will act as representative of the underwriters. We have
agreed to pay the underwriters a 9.75% discount on the gross
proceeds from the sale of the shares offered, a 2%
non-accountable expense allowance and to grant warrants to
purchase 150,000 shares at 165% of the offering price.
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.
<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, 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,
---------------------------------
1997 1998
------------------ --------------
<S> <C> <C>
Operating Data:
Revenues $2,935,283 $6,843,785
Cost of Revenues 1,166,063 2,408,487
Operating Expenses 1,644,860 1,675,697
--------- ---------
Earnings before income tax 124,360 2,759,601
Income tax benefit (expense) 309,131 (694,891)
------- ---------
Net income 433,491 2,064,710
Basic net income per common share $ 0.19 $ .92
Weighted average common shares outstanding 2,250,000 2,250,000
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1998 1998
1997 1998 Pro Forma (1) Adjusted (2)
-------------- ------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Balance Sheet:
Working capital (3) - - -
Current assets (3) - - -
Current liabilities (3) - - -
Total assets $ 7,000,157 $ 7,966,549 $ 10,841,549 $ 17,701, 420
Total liabilities 5,901,542 4,803,224 7,678,224 1,500,595
Shareholders' equity 1,098,615 3,163,325 3,163,325 16,200,825
Weighted average common shares outstanding 2,250,000 2,250,000 2,250,000 3,750,000
Book value per share $ 0.49 $ 1.41 $ 1.41 $ 4.32
- -------
</TABLE>
(1) Proforma effect of the acquisition of the Newport Assets. On February 1,
1999, through Rampart Properties Corporation, our wholly-owned subsidiary,
we acquired the real estate, receivables, and other assets of a bankrupt
estate from a trustee in bankruptcy for $2,875,000. See
"Business-Acquisition of Newport Assets".
(2) 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 $13,037,500.
(3) In our industry, short-term obligations are met by cash flow generated from
assets of indeterminable term. Consequently, consistent with industry
practice, our balance is presented on an unclassified basis.
<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.
Potential Decline in Value of Collateral and Paying Loans Our lines of
business are particularly subject to:
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 paying loans and real estate, thereby
increasing the time required to liquidate our assets, reduce the value or
demand for collateral securing paying loans, thereby increasing the risk of
paying loans becoming non-paying, and 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.
<PAGE>
Potential Unavailability of Certain Federal Income Tax Benefits
In the MCorp Acquisition, we acquired entities having NOLs in the amount of
approximately $55.8 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 "Business-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.
However, most of our income is now generated through the acquired corporations
and all of our acquisitions and asset purchases since July 1997 have been made
through these subsidiaries.
Reliance on Principal Officers: Charles W. Janke and J. H. Carpenter
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 become 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 of Revenues and Collections
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. Currently we do not have any negotiations for acquisitions pending.
However, we cannot assure or represent that we will be successful in
consummating any acquisitions on beneficial terms.
<PAGE>
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.
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 $5.68 per share or
approximately 56.8% as it relates to the resulting book value of the shares
after completion of this offering. See "Dilution."
Influence on Voting by Charles W. Janke and J. H. Carpenter
Upon completion of this offering, Charles W. Janke and J. H. Carpenter, officers
and directors, will own approximately 60.0% of the outstanding shares. Although
there are no agreements or arrangements between such persons with respect to
voting their shares, if they act together, they will be able to control the vote
on any election of directors and to substantially impact the vote on other
matters submitted to shareholders and thereby exert considerable influence over
the affairs of the Company. See "Principal Shareholders."
Absence of Prior Public Market - American Stock Exchange Listing
Prior to this offering, there was no public market for our common stock. We have
applied 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.
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 "Plan of Distribution - Underwriters' Warrants."
<PAGE>
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 "Plan of
Distribution Underwriters."
Environmental Risk on Real Estate Acquired or Foreclosed
Some of the real estate acquired through foreclosure or direct purchase and
real estate collateralized loans may have the risk of environmental problems. If
they exist, these problems consist primarily of underground storage tanks and
asbestos. To the extent we are able, prior to foreclosure or purchase, we
undertake to identify any environmental issues and assess their magnitude. The
decision to purchase or foreclose the property is based on an evaluation of the
environmental risk. After we acquire an asset, if a problem is identified, we
notify the appropriate environmental agency and engage certified environmental
consultants to evaluate and remedy the problem. If we were not able to correct
any environmental problems, we could be subject to potential liability under
environmental protection laws. See "Business - Investment in Real Estate and
Other Assets."
<PAGE>
USE OF PROCEEDS
We expect to net approximately $13,037,500 from the proceeds of this offering
($15,068,500 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>
<CAPTION>
Amount %
-------------------- ------------
<S> <C> <C>
Acquisitions of undervalued real estate and discounted loans (1) $6,300,000 48.3
Temporarily reduce debt (2) 6,200,000 47.6
Working capital 537,500 4.1
==================== ============
$13,037,500 100.0
==================== ============
---------------
</TABLE>
(1) We intend to use as much as $6,300,000 for future acquisitions of
undervalued real estate and discounted loan portfolios consistent with our
business strategy. Currently, we do not have any negotiations for
acquisitions pending.
(2) Our total debt increased by $2,875,000 for the purchase of the Newport
Assets. We plan to pay down our revolving credit facility until we have use for
the funds. The credit facility incurs interest at prime rate plus one percent.
Additionally, we will pay off the $1,400,000 debt to the Janke Family
Partnership, Ltd. incurred for the purchase (1) of the Newport Assets. This debt
has a fixed interest rate of 10%. See "Certain Relationships and Related
Transactions." Pending application of the net proceeds of this offering, the
Company may invest such net proceeds in interest-bearing accounts, United States
Government obligations, certificates of deposit or short-term interest-bearing
securities.
[GRAPHIC OMITTED]
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 December 31, 1998, our net tangible book value was $3,163,325 or $1.41 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 $16,200,825 or $4.32 per share. This
represents an immediate increase in net tangible book value of $2.91 per share
to current shareholders and an immediate dilution of $5.68 per share to new
investors or 56.8% 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 $1.41
Increase per share attributable to new investors 2.91
------------
Adjusted net tangible book value per share after this 4.32
offering
--------------
Dilution per share to new investors $ 5.68
--------------
Percentage dilution 56.8%
</TABLE>
The following table sets forth as of December 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% $ 0% $0.00
750
New investors 1,500,000 40.0% 15,000,000 100.0% $10.00
------
(1)
--------------- ---------- ---------------- -----------
=============== ========== ================ ===========
Total 3,750,000 100.0% $15,000,750 100.0%
(2)
=============== ========== ================ ===========
--------
</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 December 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>
December 31, 1998
-----------------------------------------------------------
---------------- --- ----------------- --- ----------------
(Actual) Pro Forma (1) (As Adjusted)
---------------- ----------------- ----------------
---------------- ----------------
<S> <C> <C> <C>
Liabilities:
Notes payable (2) $3,740,488 $6,615,488 $437,859
-----------------
---------------- ----------------
Shareholders' equity
Preferred Stock, $.01 par value, 10,000,000 0 0
shares authorized; no shares issued actual or
adjusted (3)
Common Stock, $.01 par value $ 22,500 $ 22,500 $ 37,500
10,000,000 shares authorized,
2,250,000 shares issued and outstanding,
3,750,000 as adjusted (4)
Additional paid in capital 0 13,022,500
Retained earnings 3,140,825 3,140,825 3,140,825
---------------- ----------------
---------------- ----------------- ----------------
Total shareholders' equity $3,163,325 $3,163,325 $16,200,825
---------------- ----------------
---------------- ----------------- ----------------
Total capitalization $6,903,813 $9,778,813 $16,638,684
---------------- ----------------- ----------------
- -----------
</TABLE>
(1) Proforma effect of the purchase of Newport Assets on February 1, 1999.
See "Business-Acquisition
of Newport Assets"
(2) 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.
(3) The preferred stock was authorized by the board of directors in
December 1998.
(4) 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>
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, 1997 to December 31, 1998, we have increased
net revenues by 134% to $6.8 million from $2.9 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: Year Ended
------------------------------
12/31/97 12/31/98
-------------- ------------
<S> <C> <C>
Revenues $ 2,935,283 $ 6,843,785
Cost of revenues 1,166,063 2,408,487
-------------- ------------
Gross Profit 1,769,220 4,435,298
General and
administrative expense 1,002,260 1,181,555
Interest expense 642,600 494,142
-------------- ------------
Earnings before income tax 124,360 2,759,601
Income tax benefit (expense) 309,131 (694,891)
-------------- ------------
Net income $ 433,491 $ 2,064,710
-------------- ------------
Basic net income per common $ 0.19 $ 0.92
share
-------------- ------------
-------------- ------------
Diluted net income per common $ 0.19 $ 0.92
share
-------------- ------------
Weighted average common shares 2,250,000 2,250,000
outstanding
-------------- ------------
</TABLE>
[GRAFIC OMITTED]
<PAGE>
The following table presents certain financial data, as a percentage of net
revenues, for the periods indicated:
<TABLE>
<CAPTION>
Year Ended
------------------------------
12/31 1997 12/31/1998
------------------------------
------------- ------------
------------- ------------
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of revenues 39.7 35.2
------------- ------------
------------- ------------
Gross Profit 60.3 64.8
General and administrative expense 34.1 17.3
Interest expense 22.0 7.2
------------- ------------
Earnings before income tax 4.2 40.3
Income tax benefit (expense) 10.6 (10.2)
------------- ------------
Net income 14.8 30.1
------------- ------------
</TABLE>
Comparison of the Years Ended December 31, 1997 and December 31, 1998
In late 1996 the opportunities to purchase loan portfolios at advantageous
prices declined due to reductions in loan offerings and increased competition.
Prior to 1997, in order to accelerate collections on our purchased loan
portfolios, we offered substantial discounts for quick cash settlements. The
cash flow from accelerated settlements was used to acquire more asset pools and
pay down debt. During 1997, we changed our corporate strategy of giving
substantial discounts for the resolution of debt obligations and the sale of
foreclosed real estate. We decided to maximize collections, even if the recovery
period was extended. This strategic change was in response to the rising costs
of acquiring new asset pools. We believed that the additional costs to maximize
collections on existing assets would provide a higher yield than the potential
yield to be realized by purchasing higher cost portfolios. We also believed that
the strategy of maximizing collections is necessary to maintaining viable yields
on new assets purchased.
During 1998, we collected $799,926 on notes that we originally assessed as
worthless. Because of our original assessment, none of the acquisition costs
were allocated to these notes. Collections in the future on these notes may be
expected to be as successful because they are secured by collateral which is
subject to foreclosure. A comparative summary of the Company's collections from
inception to date on notes for which no original cost was allocated and notes
for which a cost basis was allocated is set forth in the table in
"Business-Investment in Discounted Debt Portfolios and Services."
The 134% increase in net revenues from 1997 to 1998 is partially due to the
strategy change, to the timing of settlement negotiations, resolution of
litigation and the sale of a large real estate holding ($1,875,000 selling
price). The $2,666,000 increase in gross profit from $1,769,000 in 1997 to
$4,435,000 in 1998 without a corresponding increase in General and
Administrative costs is primarily due to the sale of one large real estate
holding ($1,125,000 gross profit) with the balance due to the change in strategy
discussed above. We believe the positive effects of our change in collection
strategy will be increasingly evident during future periods.
Gross profit increased from 60.3% in 1997 to 64.8% in 1998 primarily due to
a change in the rate of cost recognition used by several of our
subsidiaries during 1998. The critical variable in our modified cost
recovery method of cost recognition is the rate of amortization that is
used in order to recognize costs in consistent proportion with the
collections from the asset pools. Accordingly, our rate of amortization is
based on the cost of asset pools as compared to total projected
collections. Historical collections significantly in excess of projections
create a need to periodically adjust the rate of cost amortization. During
1998, the rate of amortization of several of our subsidiaries was decreased
because of favorable collection experience on assets within these
subsidiaries.
<PAGE>
General and Administrative expenses for 1998 increased by 17.9% to
$1,181,555 from $1,002,260 in 1997. We did not add any additional staff to
generate the additional revenues. The primary reason these expenses
increased was due to performance bonuses to non-shareholder employees and
profit sharing payout to Janke family entities.
Interest expense decreased $148,458 in 1998 to $494,142 from $642,600 in
1997. This decrease is due to cash flow being used to reduce debt.
Liabilities, exclusive of deferred federal income taxes, decreased
$1,746,000 in 1998.
Because of the policy change in 1997 and the timing in the sale of a large
real estate holding, earnings as a percentage of revenues increased from
4.2% in 1997 to 40.3% in 1998. Because of the variability in the timing of
our revenues and the increased costs in acquiring new assets, we may not be
able to sustain such high earnings percentages.
Liquidity and Capital Resources
We have financed capital requirements with bank debt and borrowings from
shareholders and related parties. As of December 31, 1998, we had no outstanding
debt to shareholders or related parties, however, on February 1, 1999, the Janke
Family Partnership,. Ltd. loaned $1.4 million for the acquisition of the Newport
Assets. We have a $5,000,000 revolving 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 December 31, 1998, the line of credit had an
outstanding balance of $3,303,000 and available credit of $1,697,000. As a
result of the acquisition of Newport Assets, the balance on the line of credit,
as of March 31, 1998, was $4,173,161 with available credit of $826,839. We are
in compliance with all of the loan covenants governing the credit facility.
Whenever acquisitions have required more funding than available through our
revolving credit facility a major shareholder and/or related parties have
provided temporary funding for acquisitions. However, we cannot assure that this
funding source will be available in the future.
Our cash requirements for calendar 1999 and in the future will depend upon
continued profitable operations and the level of future acquisitions. The net
proceeds from this offering, anticipated future profitable operations, and
temporary loans from a major shareholder are expected to provide for 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.
<PAGE>
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 and for all periods presented. 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.
In December 1998, the Financial Accounting Standards Board issued SFAS 134
"Accounting for Mortgaged-Backed Securities Retained after the
Securitization of Mortgage Loans held for Sale by a Mortgage Banking
Enterprise", which amends SFAS 65. This statement is effective for the
fiscal quarter beginning after December 15, 1998. It will not have a
material effect on our financial condition or 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.
We plan to maximize utilization of NOLs obtained from the MCorp acquisition
by:
optimizing profitability within the acquired subsidiaries which have NOLs
by concentrating future asset purchases within the companies.
Principal Acquisitions
The two acquisitions described below have been our two largest purchases of
undervalued financial assets in the last two years.
<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 $1,303,913.
<TABLE>
<CAPTION>
Allocation of Purchase price
---------------------------------
<S> <C>
Cash $ 427,589
Paying loans (principal balances of $2,432,000) 801,692
Foreclosed real property (approximate tax assessed value of $189,000) 79,442
Legal claims with unknown status 0
---------------------------------
Total Purchase Price $ 1,308,723
Less: Cash acquired 427,589
=================================
Net purchase price $ 881,134
=================================
</TABLE>
Because of the unknown potential for collection of the legal balances on claims
with unknown status, we did not allocate any cost basis to those loans. As of
December 31, 1998, we had collected $875,535 or about 99.4% of the net purchase
price of the entire asset portfolio by selling some of the foreclosed real
estate, collecting some of the paying loans and collecting $174,000 on three of
the claims with unknown status. Based on our evaluation of future cash
recoveries of the remaining assets as of December 31, 1998, we presently
estimate additional recoveries of approximately $1.3 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 be approximate $2.2 million.
Incidental to the acquisition of the assets described above, the entities
acquired in the MCorp Acquisition had NOLs and Built-in-Losses of approximately
$55.8 million of which approximately $360,000 was utilized in 1998. 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. See "Risk Factors", "Certain Federal Income Tax Matters" and
Notes to Financial Statements.
<PAGE>
Acquisition of Newport Assets
On February 1, 1999, we purchased from the Liquidating Trustee in Bankruptcy in
the Federal Bankruptcy Court in the Southern District of Texas for a purchase
price of $2,875,000, all of the real estate, receivables and other assets of the
bankruptcy liquidation estate (the "Bankruptcy Estate") of Newport Partners. The
assets were acquired free and clear of all liens, claims and encumbrances.
Simultaneously with the purchase of the assets from the Liquidating Trustee , we
sold a portion of the real estate, easement rights, property assessment rights,
and property maintenance obligations to the New Property Owners' Association of
Newport for $850,000, payable interest only in the first year and monthly
installments of principal and interest at 10 % per annum for 9 years, beginning
February 1999.
The assets purchased from the Bankruptcy Estate are summarized below:
Description of Real Estate Acreage 18-hole public play golf course
124.53 Clubhouse and conference center (32,040 square feet of
improvements) 23.34 Platted reserve for 9-additional golf holes
for planned expansion 81.18
Undeveloped acreage 382.70
308 fully developed lots 61.60
282 partially developed lots 56.40
Platted and unplatted reserves 77.54
------
Sub-total 807.29
Description of Real Estate Parcels Sold to New Property Owners
Association:
Swimming Pool and 4 tennis courts 7.17
Recreational Restricted Reserves 81.52
Sub-total 88.69
Total Acreage Purchased 895.98
Other assets purchased included receivables for property assessments in the
amount of $3.2 million and furniture, fixtures, inventory and equipment with a
market value of about $75,000.
The purchase was financed by borrowing $1.475 million from our revolving credit
facility with Southwest Bank of Texas, N.A. and $1.4 million from the Janke
Family Partnership, Ltd. The Bank recorded a first lien secured interest on the
assets and the Janke Family Partnership, Ltd. was granted a second lien
position. The purchase was made through Rampart Properties Corporation, our
wholly-owned subsidiary, to utilize the NOLs attributable to that subsidiary.
See "Certain Relationships and Related Transactions".
<PAGE>
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.
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 paying loans with principal balances of $2.4
million, claims with unknown status with legal balances of approximately $34
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 and Built-in-Losses 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."
<PAGE>
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, paying loans, primarily
real estate secured, other forms of unsecured debt obligations, real estate, and
other assets.
Rampart currently owns paying notes receivable with principal balances
totaling $4,987,811 as of December 31, 1998. These notes have a cost basis of
$1,625,673, or 32.6 percent of outstanding principal balances. The majority of
these notes are 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 $2,218,805 as of December 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.
Success in this business segment is dependent on management's ability to
assess value on the asset pools being purchased, predominantly by review of the
seller's records. Because we purchase assets primarily from failed institutions,
bankruptcies, and other distressed situations, the information available for
review prior to purchase is often aged and incomplete. We allocate the purchase
price of the portfolio to each individual note based on management's assessment
of potential collections. Our success in assessing value under these
circumstances is shown in the analysis below:
<TABLE>
<CAPTION>
No. of Original Collections Estimated
Loans Cost Basis to Date Remaining
Allocation Collections
-------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Assets originally assessed as worthless and subsequently 33 $ $ 1,565,857 $ 1,791,000
collected 0
Assets originally assessed as collectible and subsequently 47 406,894 33,817 0
impaired
-------- -------------- -------------- ---------------
Subtotal 80 $ 406,894 $ 1,599,674 $ 1,791,000
Remaining assets acquired 282 14,355,403 19,406,424 13,545,000
-------- -------------- -------------- ---------------
All assets purchased from inception to 12/31/98 362 $14,762,297 $21,006,098 $15,336,000
-------- -------------- -------------- ---------------
</TABLE>
During the initial review, 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. Based on the more current information derived from the in-depth
reviews, we decide whether or not to pursue for collection. As noted in the
schedule above, we have made significant collections ($1,565,857) on 33 notes
that we initially assessed to be worthless. Conversely, we have written off or
written down 47 notes with a cost basis of $406,894 with cumulative collections
of $33,817, thus realizing a loss of $373,077. Overall, we have collected
$1,192,780 in excess of the allocated costs on 80 loans where management's
original assessment of value was based on incomplete information. The estimated
remaining collections of $1,791,000 are predominantly secured by real estate. We
cannot assure that this performance will continue in the future; however, our
conservative valuation procedures should result in valuation exceptions being
generally favorable.
<PAGE>
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:
Classified as Commercial Rental Property:
Retail Center, Dallas, Texas 40,000 square foot retail center, 100%
occupied $250,000 annual net cash flow Substantial upside potential on rents and
market value Cost basis of $390,203 after depreciation Market value of
$1,500,000 based on broker's opinion of value Held for market appreciation,
earnings and future sale.
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
Classified as Purchased asset pools:
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 a broker's opinion of value Currently offered for sale
Classified as Investment real estate:
None of our investment real estate has been owned long enough for
significant appreciation over original costs.
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.
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 acquired land at a cost of $1,100,731 to provide bridge funding
for developers. A portion of the projects have been sold for development,
leaving $875,745 of investment real estate at December 31, 1998. We anticipate
that activity will be a significant portion of our business expansion in terms
of volume and profits.
<PAGE>
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 fieldwork and supplement
our permanent staff, 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 Bank of America building (previously
the NationsBank building), 700 Louisiana, Suite 2510, Houston, Texas, 77002. We
have about 2,000 square feet of office space. Of this space, a major law firm
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 60% of our
legal work and, as an accommodation, provides the space and facilities without
charge. The balance of our space is leased on a month to month basis. Additional
lease space is available in the event expansion is required. Currently, we do
not have a written lease agreement.
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) 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, the exhibits and any schedules attached. 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 and, in
each instance, you are referred to a copy of each contract, document or exhibit
filed with 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 March 31, 1999 are identified below:
<TABLE>
<S> <C> <C>
Name Age Position
Charles W. Janke 54 Chairman, Chief Executive Officer, & Director
J.H. (Jim) Carpenter 57 President, Chief Operating Officer, Secretary &
Director
Charles F. Presley 49 Vice-President, Chief Financial Officer,
Treasurer & Controller
James W. Christian 45 Director
James J. Janke 45 Director
</TABLE>
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, Chief Executive Officer, and
director of Rampart since its organization in March 1994. He relinquished his
position as President to Mr. Carpenter effective January 1, 1999 and continues
as a director. Prior to the organization of Rampart, Mr. Janke `s primary
activity was private investments. During 1992 and 1993, Mr. Janke invested in
Laidlaw 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. Mr. Janke's ownership in Laidlaw Holdings, Inc.
was less than 1% and he has no current ownership. 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.
<PAGE>
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. The director nominee designated by the representative of the
underwriters is Robert A. Shuey, III. Mr. Shuey is a director and Chief
Executive Officer of Euromed, Inc., which owns all of the outstanding stock of
Redstone Securities, Inc., the representative of the underwriters in this
offering. Mr. Shuey has been a director of Euromed since July 1996 and Chief
Executive Officer since December 1998. Prior thereto, he had been Manager of
Investment Banking with Tejas Securities Group, Inc. since September 1997. He
has been in the investment banking business for more than the past five years,
with National Securities Corporation from September 1996 until August 1997; with
La Jolla Securities Corporation from April 1995 until August 1996, with Dillon
Gage Securities Corporation from January 1994 until April 1995 and Dickinson &
Co. from March 1993 to December 1993. Mr. Shuey is a member of the Board of
Directors of AutoBond Corporation, Westower Corporation and Transnational
Financial Corporation. Mr. Shuey is a graduate of Babson with a degree in
Economics and Finance.
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, for a
period of three years and one day from the consummation of this offering, 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 agreed not to issue any new shares of
common stock or preferred stock for the same period.
Employment Agreements
We do not have employment agreements with any employees.
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.
<PAGE>
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. Net cash profits for purposes of profit
participation were defined as gross collections less direct collection costs.
<TABLE>
<CAPTION>
Date Lending Party Amount Stated Profit Effective
Interest Participation % Interest Rate
Rate
<S> <C> <C> <C> <C> <C>
January 1, 1996 Janke Family Partnership, Ltd. $100,000 12% 0% 12%
May 22, 1996 C.W. Janke Trust $112,500 12% 1.4625%, 27.1%
6.5825%
May 22, 1996 H. Y. Janke Trust $112,500 12% 1.4625%, 27.1%
6.5825%
May 22, 1996 Alfred Janke $112,500 12% 3.655% 23.9%
</TABLE>
All of these loans, including interest and profit participation 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 $334,000. 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 1994 as 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, contributed approximately $52,000 for its interest
in 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
December 31, 1998, all of the funds contributed by the partnership have been
repaid and the partnership retains a 6.25% profit interest in the assets
remaining in the acquired portfolios.
On February 1, 1999, we acquired through Rampart Properties Corporation, our
wholly-owned subsidiary, the real estate and other assets from the bankruptcy
estate of Newport Partners, LLC for $2,875,000. The Janke Family Partnership,
Ltd. loaned $1,400,000 to Rampart Properties Corporation to provide a portion of
the funding for the purchase. The balance of the purchase price was advanced by
Southwest Bank of Texas, N.A. against our revolving line of credit. The Janke
Family Partnership, Ltd. was secured by a real estate note secured by a deed of
trust which was secondary to the security interest of Southwest Bank. The real
estate note provides for monthly payments of interest only at a 10% annual
interest rate, commencing March 31, 1999. The maturity date of the note is
December 31, 1999. We intend to retire the Janke Family Partnership, Ltd. note
from the proceeds of this offering. See "Use of Proceeds" and
"Business-Acquisition of Newport Assets".
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 March 31, 1999 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
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.
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.
<PAGE>
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 and Built-in losses not subject to 382 limitation but
subject to SRLY limitations 55,800,000
Total NOLs and Built-in-losses $59,600,000
Less: NOLs subject to 382 limitation and SRLY limitations 2,400,000
Less: NOLs utilized in 1998 (1) 1,122,000
---------
Less: NOLs subject to 382 limitation and SRLY limitations $56,078,000
===========
- -----------
(1) NOLs utilized in 1998 are comprised of $758,000 of pre-acquisition
NOLs of Rampart and $364,000 of acquired NOLs.
Although we have $59.6 million in total NOLs, our Code section 382
limitation NOLs, for all practical purposes, are not utilizable. Further,
we utilized approximately $1,122,000 of NOL in 1998. Hence, we expect $56.1
million of the NOLs to be available. However, the $56.1 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. Since July 1997, all of our acquisitions
and asset purchases have been made through our acquired subsidiaries and
most of our income is generated through these subsidiaries. We plan to
continue to maximize utilization of the NOLs by making acquisitions and
purchases through our acquired subsidiaries.
<PAGE>
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 $1,458,000
2000 1,827,000
2001 0
2002 10,377,000
2003 13,305,000
2004+ 29,111,000
=================
$ 56,078,000
==================
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, Charles W. Janke and J. H. Carpenter were the only two 5%
shareholders. If they retain ownership of more than 50% of Rampart for at least
three years following this offering, an ownership change causing a limitation on
the use of the NOLs will not occur. The shareholders have entered into a Share
Transfer Restriction Agreement with Rampart not to reduce their ownership to
less than 50% ownership as defined in the Code and Regulations for three years
and one day following this 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 December 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 is 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 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>
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 nine
and three-quarters (9.75%) 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 holders 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."
<PAGE>
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 165% 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 granted to the holders
of the underwriters' warrants or underlying shares "piggyback" registration
rights with respect to any registration statement we may file, 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.
<PAGE>
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.
Stabilization; Passive Market Making Transactions
Certain persons participating in this 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 the 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, has audited our financial statements for the fiscal years
ended December 31, 1997 and 1998. 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
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Pannell Kerr Forster of Texas, P.C., Independent Public Accountants..................................F-1
Consolidated Balance Sheets as of December 31, 1998 and 1997...................................................F-2
Consolidated Statements of Operations for the Years Ended December 31, 1998
and 1997.......................................................................................................F-3
Consolidated Statements of Shareholders' Equity for the Years Ended December
31, 1998 and 1997..............................................................................................F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998
and 1997.......................................................................................................F-5
Notes to Financial Statements................................................................................F6-F19
</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, 1998 and 1997,
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, 1998 and 1997, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Houston, Texas
January 29, 1999, except for PANNELL KERR FORSTER OF TEXAS, P.C.
Note 14, as to which the date
is February 12, 1999
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1997 1998
<S> <C> <C>
Assets
Cash $ 21,514 $ 583,629
Purchased asset pools, net 6,284,374 4,513,332
Commercial rental property, net 380,854 732,156
Investment real estate 224,986 1,100,731
Notes receivable from related parties - 525,000
Property and equipment, net 20,522 36,249
Other assets 67,907 475,452
------------ -----------
Total assets $7,000,157 $7,966,549
---------- ----------
Liabilities and Shareholders' Equity
Notes payable $5,333,164 $3,740,488
Notes payable to related parties 331,147 -
Accounts payable and accrued expenses 127,231 291,812
Federal income taxes payable - 12,624
Deferred tax liability 110,000 758,300
----------- -----------
Total liabilities 5,901,542 4,803,224
---------- ----------
Commitments and contingencies
Shareholders' equity
Common stock ($.01 par value;
10,000,000 shares authorized;
2,250,000 shares issued and
outstanding) 22,500 22,500
Retained earnings 1,076,115 3,140,825
---------- ----------
Total shareholders' equity 1,098,615 3,163,325
---------- ----------
Total liabilities and shareholders' equity $7,000,157 $7,966,549
---------- ----------
</TABLE>
See notes to consolidated financial statements
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1998
<S> <C> <C>
Collections on asset pools $2,555,363 $6,121,106
Net rental and other income 379,920 722,679
----------- -----------
Total revenue 2,935,283 6,843,785
Asset pool amortization (1,166,063) (2,408,487)
---------- ----------
Gross profit 1,769,220 4,435,298
General and administrative expenses (1,002,260) (1,181,555)
Interest expense (642,600) (494,142)
----------- -----------
Income before income tax benefit (expense) 124,360 2,759,601
Income tax benefit (expense) 309,131 (694,891)
----------- -----------
Net income $ 433,491 $2,064,710
----------- ----------
Basic net income per common share $.19 $.92
---- ----
Diluted net income per common share $.19 $.92
---- ----
Average common shares outstanding 2,250,000 2,250,000
--------- ---------
</TABLE>
See notes to consolidated financial statements
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
<S> <C> <C> <C>
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 - 2,064,710 2,064,710
------------ ---------- ----------
Balance, December 31, 1998 $22,500 $3,140,825 $3,163,325
------- ---------- ----------
</TABLE>
See notes to consolidated financial statements
<PAGE>
RAMPART CAPITAL CORPORATION
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1998
<S> <C> <C>
Cash flows from operating activities
Net income $ 433,491 $2,064,710
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation 13,852 15,394
Asset pool amortization 1,166,063 2,440,213
Purchase of asset pools (299,961) (504,373)
Other costs capitalized with asset pools (856,686) (524,798)
Decrease (increase) in other assets 1,410 (407,545)
Decrease (increase) in accounts payable
and accrued expenses (133,413) 164,581
Increase in federal income taxes payable - 12,624
Increase (decrease) in deferred tax liability (309,000) 648,300
----------- -----------
Net cash provided by operating activities 15,756 3,909,106
------------ ----------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash
acquired (881,134) -
Purchase of investment real estate - (434,040)
Purchase of property and equipment - (22,423)
----------------- -----------
Net cash used by investing activities (881,134) (456,463)
------------ -----------
Cash flows from financing activities
Payments on notes payable to related
parties (100,000) (331,147)
Proceeds from notes payable 1,931,601 1,222,629
Payments on notes payable (1,003,000) (3,257,010)
Financed asset sales to related parties - (525,000)
----------------- -----------
Net cash provided (used) by financing activities 828,601 (2,890,528)
------------ ----------
Net increase (decrease) in cash (36,777) 562,115
Cash at beginning of period 58,291 21,514
------------- ------------
Cash at end of period $ 21,514 $ 583,629
------------- -----------
</TABLE>
See notes to consolidated financial statements
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
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 acquires,
manages, services and disposes of portfolios of undervalued
assets, primarily non-performing commercial debt and other forms
of legal obligations and real estate (asset pools). A significant
portion of the debts are secured by real estate or other assets.
The Company purchases these asset pools at substantial discounts
from their outstanding legal principal amounts from financial
institutions, regulatory agencies and bankruptcy courts. Purchased
asset pools are primarily 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. Additionally, the Company provides short-term
bridge financing for real estate projects.
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. The majority
of the debts were non-performing and purchased at substantial
discounts from their outstanding legal principal amounts. At the
acquisition date, the aggregate cost of the purchased asset pool
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 (i) cost or (ii)
fair value less any estimated costs to sell. 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, 1998 or 1997.
Revenue is recognized in the amount of collections on purchased
asset pools. Collections on asset pools arise from (i) payments by
debtors in full or partial settlement of their loan or judgement
obligation, or (ii) the Company's sale of real estate acquired
pursuant to foreclosure or settlement of a debtor obligation.
Amortization of the purchased asset pools is recognized for
financial statement purposes based on the ratio of the total cost
to total estimated collections on the purchased asset pools.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(Continued)
Purchased asset pools (continued)
Rents collected on real estate, other than commercial rental
property, in the purchased asset pools are recognized as part of
the collections on asset pools.
Commercial rental property
Rents collected on commercial rental property are recognized as
rental income is collected. Sales of commercial rental property
are generally recorded using the full accrual method of accounting
for sales of real estate, assuming the conditions for recognition
are met.
Investment real estate
The Company provides short term bridge funding for selected real
estate projects by acquiring land and contracting to sell the land
to or through developers. Revenues and associated costs are
recognized at the time of sale assuming the criteria for sales
recognition are met.
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 ("SFAS") 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.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(Continued)
Income taxes (continued)
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 asset pools used in determining the value
of individual assets within the purchased asset pool and the
periodic revaluation for possible loss. Actual results could
differ materially from those estimates.
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 majority of the notes receivable included in the asset pools
are concentrated in Texas and substantially all of the real estate
is located in Texas.
Fair value of financial instruments
SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," requires that the Company disclose estimated fair
values of it's financial instruments. Fair value estimates,
methods and assumptions are set forth below.
The carrying amount of cash and accounts payable and accrued
expenses approximates fair value at December 31, 1998 and 1997 due
to the short-term nature of such accounts. The carrying amount of
notes receivable from related parties approximates fair value as
of December 31, 1998.
Purchased asset pools are carried at the lower of cost or
estimated fair value. The estimated fair value is management's
estimate of potential collections calculated on an asset-by-asset
basis. The carrying value of the purchased asset pools is
$6,284,374 and $4,513,332 as of December 31, 1998 and 1997,
respectively. The estimated fair value of the purchased asset
pools is $15,336,000 and $12,379,000 as of December 31, 1998 and
1997, respectively.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(Continued)
Fair value of financial instruments (continued)
Management believes that the stated interest rates of notes
payable approximate market rates for instruments with similar
credit risk. Accordingly, the carrying value of notes payable is
believed to approximate fair value.
Reclassifications
Certain reclassifications have been made to the 1997 financial
statements to conform with the 1998 presentation. These
reclassifications had no effect on the 1997 net income or
shareholders' equity.
New accounting standards
In November 1998, the Financial Accounting Standards Board
("FASB") issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities", which established accounting and
reporting standards for derivative instruments and hedging
activities. It requires that entities recognize all derivatives as
either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The
provisions of this statement are effective for all fiscal quarters
of all fiscal years beginning after June 15, 1999. In December
1998, the FASB issued SFAS 134 "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise", which amended
SFAS 65. This statement is effective for the first fiscal quarter
beginning after December 15, 1998. The Company believes that
neither standard will have a material impact on their financial
statements or disclosures thereto.
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 acquisition (the "MCorp Acquisition") has been accounted for
as a purchase. The purchase price of $881,134, net of cash
acquired of $427,589, was allocated to purchased asset pools. 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.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 3 - Commercial Rental Property, Net
Commercial rental property consists of the following:
<TABLE>
<CAPTION>
December 31,
1997 1998
<S> <C> <C>
Commercial rental property, at cost $390,203 $750,204
Accumulated depreciation (9,349) (18,048)
---------- ---------
Commercial rental property, net $380,854 $732,156
-------- --------
</TABLE>
Gross rental income from the property amounted to
$713,286 and $340,629 for 1998 and 1997, respectively.
Non-cash transactions
During the year ended December 31, 1998, the Company reclassified
asset pool assets with a cost basis of $360,001 and $296,304 to
commercial rental property and investment real estate,
respectively. The cost basis of these assets while held for sale
was lower than the fair value less the estimated costs to sell, so
no allowance had been established by the Company. Accordingly, no
basis adjustment was recognized in connection with the
reclassification.
Note 4 - Notes Receivable From Related Parties
During June 1998, the Company sold a property from its asset pool
to related parties in exchange for five notes receivable totaling
$525,000. Note principal plus interest at 10% per annum is due
June 2001 for each of the notes. The Company recognized $210,000
of asset pool amortization in connection with this sale. The cost
basis originally allocated to this property at the time of sale
approximated $268,000.
Note 5 - Property and Equipment
Property and equipment consists of the Company's furniture and
equipment and is recorded at cost. Accumulated depreciation on the
Company's furniture and equipment amounted to $42,446 and $35,751
as of December 31, 1998 and 1997, respectively.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 6 - Notes Payable
Notes payable consist of the following:
Notes payable
<TABLE>
<CAPTION>
December 31,
1997 1998
<S> <C> <C>
$5,000,000 bank line of credit, secured by notes receivable and
real estate comprising the purchased asset pools and a
shareholder's 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 1.0% per annum (8.8% and 10% as of December 31, 1998 and
1997, respectively), with the remaining unpaid principal and
interest due December 31, 1999 $3,933,164 $3,302,629
$2,000,000 term note payable to bank, secured by 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 1997; interest payable
monthly at the bank's prime rate plus 1.5% per annum. Entire
principal and
interest paid September 30, 1998 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 - 437,859
----------------- -----------
$5,333,164 $3,740,488
---------- ----------
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 6 - Notes Payable (Continued)
Notes payable to related parties
<TABLE>
<CAPTION>
December 31,
1997 1998
<S> <C> <C>
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 $ -
----------- -----------
</TABLE>
Interest paid during 1998 and 1997 on all of the Company's debt
instruments, approximated $449,000 and $642,000, respectively,
including $90,000 and $152,000 paid to related parties during 1998
and 1997, respectively. Of the amounts paid to related parties
during 1998 and 1997, $84,000 and $102,000, respectively, were to
a shareholder for the pledge of the shareholder's personal
collateral against the Company's notes payable to bank.
Non-cash transaction
During the year ended December 31, 1998, the Company acquired
investment real estate for $585,117, comprised of a cash payment
of $143,412 and a $441,705 non-recourse note payable to the
seller.
Note 7 - Income Taxes
The deferred tax liability as of December 31, 1998 and 1997 arises
from the use of different methods of recognition of asset pool
amortization for financial statement purposes and Federal tax
purposes. A modified cost recovery method, whereby the
amortization recognized in conjunction with collections on
individual asset pool components is recognized in the ratio of
total asset pool acquisition costs to total asset pools
collections, is used for financial statement purposes. The cost
recovery is used for Federal income tax purposes. The Company's
deferred tax asset as of December 31, 1998 and 1997 consists of
net operating loss carryforwards ("NOLs") of approximately
$56,100,000 and $2,481,000, which expire from 2008 through 2012.
At December 31, 1998, based upon further review of the MCorp
Acquisition (see Note 2) 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 $56,100,000 at
December 31, 1998.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 7 - Income Taxes (Continued)
The ultimate realization of the resulting net deferred tax asset
is dependent upon generating sufficient taxable income within the
appropriate subsidiaries 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>
1997 1998
Amount Rate Amount Rate
<S> <C> <C> <C> <C>
Tax at statutory rate $ 42,284 34.0% $938,264 34.0%
Utilization of net operating
loss carryforward (325,710) (261.9) (221,619) (8.0)
State and other, net (25,705) (20.5) (21,754) (0.8)
---------- ----- ---------- ----
Income tax (benefit) expense $(309,131) (248.4)% $694,891 25.2%
--------- ------ -------- ----
</TABLE>
Significant components of the Company's deferred tax assets and
liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1997 1998
<S> <C> <C>
Book basis of purchased asset pools,
net, in excess of tax basis $(1,065,000) $(1,468,000)
Net operating loss carryforward 955,000 19,075,000
Valuation allowance - (18,365,300)
----------------- -----------
Deferred tax liability, net $ (110,000) $ (758,300)
------------- ------------
</TABLE>
The Company has recorded a valuation allowance against a majority
of the deferred tax assets because the realization of the deferred
tax assets is contingent on the future profitability of the
Company. The changes in the valuation account applicable to the
deferred tax asset primarily relate to management's position taken
during 1998 with regard to the availability of NOL's related to
the MCorp Acquisition (see Note 2).
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 7 - Income Taxes (Continued)
<TABLE>
<CAPTION>
December 31,
1997 1998
<S> <C> <C>
Valuation allowance at beginning of year $ - $ -
Increase for the year - 18,365,300
------------------- -----------
Valuation allowance at end of year $ - $18,365,300
------------------ -----------
</TABLE>
Income taxes paid during 1998 and 1997 were $14,500 and $0,
respectively.
Note 8 - 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, results of operations or
liquidity of the Company. Subsequent to December 31, 1998, 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.
Operating leases (as lessee)
The Company leases vehicles under operating leases which expire
November 2000. Future minimum rental payments required by these
leases are estimated as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
<S> <C>
1999 $ 10,000
2000 9,000
---------
Total $19,000
</TABLE>
Total expense incurred under these and other month-to-month rental
agreements approximated $33,000 and $22,000 during 1998 and 1997,
respectively.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 8 - Commitments and Contingencies (Continued)
Operating leases (as lessor)
The Company has long-term lease agreements with tenants in their
San Antonio and Dallas commercial rental property locations.
Future minimum payments required under these leases are estimated
as follows:
Year Ending
December 31,
1999 $392,000
2000 314,000
2001 154,000
2002 13,000
----------
Total $873,000
Office space
The Company's offices are located in a major downtown Houston
office building. A portion of its space is leased to the Company
on a month-to-month basis and a portion is provided as an
accommodation by the firm providing legal counsel to the Company.
Note 9 - Segment Reporting
The Company operates in three business segments (i) collections on
discounted debt portfolios, (ii) commercial real estate, and (iii)
bridge funding of investment real estate. The collection of debt
instruments segment services paying loans and non-performing loans
and judgments. The non-performing loans and judgments are acquired
at deeply discounted prices. The commercial real estate segment
holds foreclosed property for the production of rental income. The
bridge funding of investment real estate segment acquires land to
provide bridge funding for developers. The acquisitions generally
occur in conjunction with an agreement for one or more developers
to acquire portions of the real estate on a specific timetable.
Financial information by reportable operating segment is as
follows:
<TABLE>
<CAPTION>
As of and for the year ended December 31, 1998
Collections on
Discounted Commercial Investment
Debt portfolios Real Estate Real Estate Totals
<S> <C> <C> <C> <C>
Revenue $6,034,566 $713,286 $ 95,933 $6,843,785
Segment profit 2,363,953 350,759 44,889 2,759,601
Segment assets 5,378,303 957,142 875,745 7,211,190
Depreciation and amortization - 8,699 - 8,699
Capital expenditures 997,446 - 875,745 1,873,191
Net interest expense 391,955 52,259 49,928 494,142
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 9 - Segment Reporting (Continued)
<TABLE>
<CAPTION>
As of and for the year ended December 31, 1997
Collections on
Discounted Commercial Investment
Debt Portfolios Real Estate Real Estate Totals
<S> <C> <C> <C> <C>
Revenue $2,594,654 $340,629 $ - $2,935,283
Segment profit 16,895 107,465 - 124,360
Segment assets 6,284,374 605,840 - 6,890,214
Depreciation and amortization - 9,349 - 9,349
Capital expenditures 2,282,095 - - 2,282,095
Net interest expense 588,725 53,875 - 642,600
</TABLE>
Reconciliation of reportable segment assets to the Company's
consolidated totals as of December 31 are as follows:
<TABLE>
<CAPTION>
Assets 1997 1998
------ --------------- ---------
<S> <C> <C>
Total assets for reportable segments $6,890,214 $7,211,190
Cash not allocated to segments 21,514 563,629
Other assets not allocated to segments 88,429 191,730
------------ -----------
Consolidated total assets $7,000,157 $7,966,549
---------- ----------
</TABLE>
Note 10 - Stock Split and Preferred Stock Authorization
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.
Note 11 - 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
December 31, 1998
Note 11 - 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"), 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.
There have been no options granted under the Plan.
Note 12 - Related Party Transactions
During 1998, the Company acquired, for $334,000, an interest in a
real estate mortgage and judgment lien from an entity controlled
by a Company officer. Collections are expected to exceed $375,000.
Note 13 - Revenue Concentrations
During 1997, collections from a single debtor accounted for
approximately 15% of the total revenue of the Company. During
1998, proceeds from a single transaction amounted to 26% of total
revenue of the Company.
Note 14 - Subsequent Event
Proposed public offering
In January 1999, the Company filed a Registration Statement with
the SEC for the sale of 1,500,000 shares of common stock.
Asset acquisition (unaudited)
On February 1, 1999, the Company acquired all of the assets of a
bankruptcy liquidation estate, including real estate, receivables,
and other assets for $2,875,000. The assets were acquired from the
Liquidating Trustee in Federal Bankruptcy Court. The acquisition
was financed with $1,475,000 of bank debt and $1,400,000 borrowed
from the Company's majority shareholder. The purchase price will
be allocated to the individual asset components based on
management's estimate of relative market value.
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 14 - Subsequent Event (Continued)
Asset acquisition (unaudited) (continued)
Condensed pro forma financial information to give effect as if the
transaction occurred as of December 31, 1998 is as follows:
<TABLE>
<CAPTION>
December 31, Proforma December 31,
1998 Adjustments 1998 (Pro forma)
<S> <C> <C> <C>
Total Assets $7,966,549 $2,875,000 $10,841,549
Total Liabilities 4,803,224 2,875,000 7,678,224
Shareholders' Equity 3,163,325 - 3,163,325
</TABLE>
The pro forma consolidated income and earnings per share would not
have been materially different from the reported amounts during
1997 or 1998 and, accordingly, are not presented.
<TABLE>
<CAPTION>
The assets acquired include:
Acres
<S> <C>
Real estate
18-hole golf course 124.53
Country Club and driving range 23.34
Expansion site - 9 holes for golf course 81.18
Undeveloped acreage 382.70
311 fully developed lots 61.60
286 undeveloped platted lots 56.40
Platted and unplatted reserves 77.54
Pool and 4 tennis courts 7.17
Restricted reserves 81.52
-------
Total acreage 895.98
Delinquent Homeowner's Association
receivables, involving over 1,000 lots $3.2 million
Other assets $ 75,000
</TABLE>
<PAGE>
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 14 - Subsequent Event (Continued)
Asset acquisition (unaudited) (continued)
On February 12, 1999, the Company sold the following assets and
the developer's property maintenance assessment rights and
obligations for an $850,000 note secured by a deed of trust on the
assets sold:
Acres
Pool and 4 tennis courts 7.17
Restricted reserves 81.52
Total acreage 88.69
Note 15 - Year 2000 Issues
The Company developed and implemented a plan to modify its
information technology to be ready for the Year 2000 and has
converted its critical data processing systems. The costs of the
conversion were not significant. Management feels the nature of
the Company's business does not give rise to significant exposure
from noncompliance by vendors or suppliers. While additional
testing will be conducted on its systems through the Year 2000,
the Company does not expect the year 2000 issues to have a
significant effect on operating activities.
<PAGE>
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or any Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or an
offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstance, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to the date hereof.
OFFERING PRICE
$
PER UNIT
Rampart
Capital
Corporation
Prospectus
, 1999
Redstone Securities, Inc.
(214) 692-3544
Until ____ , 1999 (25 days from the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
<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 $5,088.75
NASD Filing Fee* 2,432.00
American Stock Exchange Application and Listing Fee 20,000.00
Accounting Fees and Expenses* 40,000.00
Legal Fees and Expenses 80,000.00
Printing* 40,000.00
Fees of Transfer Agent and Registrar* 5,000.00
Underwriters' Non-Accountable Expense Allowance 300,000.00
Miscellaneous* 27,479.25
---------
Total* $500,000.00
===========
- ----------------
* 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
<TABLE>
<S> <C>
Exhibit No Item
Exhibit 1.1 Form of Underwriting Agreement.(3)
Exhibit 1.2 Form of Underwriters' Warrant Agreement.(3)
Exhibit 3.1 Restated Articles of Incorporation of the Registrant. (3)
Exhibit 3.2 Bylaws of the Registrant (3)
Exhibit 5.1 Opinion of Maurice J. Bates L.L.C.(1)
Exhibit 10.1 1998 Stock Compensation Plan (3)
Exhibit 10.2 Share Transfer Restriction Agreement. (3)
Exhibit 10.3 Opinion of REOC Corp. as to value of Jefferson Street Property. (1)
Exhibit 10.4 Opinion of REOC Corp as to value of San Antonio Property. (1)
Exhibit 10.5 Opinion of John Thobe, M.S. as to value of South Padre Island Property. (1)
Exhibit 10.6 Opinion of Top Guns Land Company, Inc. as to value of Montgomery County, Texas Property.
(1)
Exhibit 10.7 Sixth (current) Amendment to Loan Agreement with Southwest Bank of Texas N. A.(1)
Exhibit 10.8 Purchase and Sale Agreement for Newport Assets. (1)
Exhibit 10.9 Copy of Janke Family Partnership, Ltd. Note for Newport Assets purchase. (1)
Exhibit 21 Subsidiaries of the Registrant. (3)
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.(1)
Exhibit 23.3 Consent of Robert A. Shuey, III as director-designee. (1)
Exhibit 27 Financial Data Schedule (1)
--------------
</TABLE>
(1) Filed herewith (2) To be filed by amendment (3) Previously filed.
<PAGE>
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 April 8 ,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.
Signature Title Date
/s/ Charles W. Janke Chairman of the Board April 8,1999
Charles W. Janke Principal Executive Officer)
/s/ J. H. Carpenter President April 8,1999
J. H. Carpenter Director
/s/ Charles W. Presley Vice President, Chief Financial April 8,1999
Charles W. Presley Officer, Treasurer
(Principal Financial Officer)
/s/ James J. Janke Director April 8,1999
James J. Janke
/s/ James W. Christian Director April 8,1999
James W. Christian
MAURICE J. BATES, L.L.C.
ATTORNEY AT LAW
8214 WESTCHESTER SUITE, 500
DALLAS , TEXAS 75225
Telephone (214) 692-3566
Fax (214) 987-2091
April 8 1999
Rampart Capital Corporation
700 Louisiana, Suite 2550
Houston, Texas 77002
Re: Registration Statement on Form SB-2
Offering of 1,500,000 Shares
Gentlemen:
I have acted as counsel to Rampart Capital Corporation, a Texas
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, (the "Securities Act"), of 1,500,000 shares
of common stock, $.01 par value, (the "Common Stock") to be offered to the
public by the Company in a firm commitment underwriting by Redstone Securities,
Inc. The Registration Statement (defined below) also includes 225,000 additional
shares to cover over-allotments, if any.
A registration statement on Form SB-2 (SEC File No. 333-71089) was
filed with the Securities and Exchange Commission on January 25, 1999 (the
"Registration Statement") and Amendment No. 1 thereto is being filed herewith.
In connection with rendering this opinion, I have examined executed copies of
the Registration Statement and all exhibits thereto and Amendment No. 1 and all
exhibits thereto. I have also examined and relied upon the original, or copies
certified to my satisfaction, of (i) the Articles of Incorporation and By-laws
of the Company, (ii) minutes and records of the corporate proceedings of the
Company with respect to the issuance of the Common Stock to be offered and
related matters, and (iii) such other agreements and instruments relating to the
Company as I deemed necessary or appropriate for purposes of the opinion
expressed herein. In rendering such opinion, I have made such further
investigation and inquiries relevant to the transaction contemplated by the
Registration Statement as I have deemed necessary for the opinion expressed
herein, and I have relied, to the extent I deemed reasonable, on certificates
and certain other information provided to me by officers of the Company and
public officials as to matters of fact of which the maker of such certificate or
the person providing such other information had knowledge.
Furthermore, in rendering my opinion, I have assumed that the signatures on all
documents examined by me are genuine, that all documents and corporate record
books submitted to me as originals are accurate and complete, and that all
documents submitted to me are true, correct and complete copies of the originals
thereof.
Based upon the foregoing, I am of the opinion that the Common Stock to
be issued and sold by the Company as described in the Registration Statement has
been duly authorized for issuance and sale and when issued by the Company
against payment of the consideration therefor pursuant to the terms of the
Underwriting Agreement, will be legally issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Maurice J. Bates, L.L.C.
By /s/ Maurice J. Bates_
Maurice J. Bates
PROPERTY VALUATION ANALYSIS
This valuation has been prepared for the benefit of Rampart Capital Corporation,
Owner of Jefferson Tower Retail Center by REOC Corp, for the purpose of
determining market position and value.
The material in this presentation is based in part upon information furnished by
the Owner of Jefferson Tower Retail Center and in part upon information obtained
by REOC Corp, from sources deemed to be reliable. This information is believed
to be accurate in all material respects, but no representation or warranty,
expressed or implied, as to its accuracy or completeness is made by any party.
Nothing contained herein should be relied upon as a promise or representation as
to the future. Recipients should conduct their own investigation and analysis of
the transaction described herein.
REOC Corp
January, 1998
<PAGE>
JEFFERSON TOWER RETAIL CENTER
Preliminary Opinion of Value
Our Preliminary Opinion of Value and estimate of sales prices for Jefferson
Tower Retail Center located in Dallas, Texas consisted of estimating the value
of the property using two (2) predominate methods of valuing commercial
property: the income Approach and the Comparable Sales Approach.
INCOME APPROACH
Using projected 1998 net operating income of $155,425 before capital costs, we
have valued the property on an "as is" all cash basis at 10 times the cashflow
or $1,554,250 or $38.15/SF.
COMPARABLE SALES APPROACH
The most recent comparable sales can be found in the attached Recent Area
Shopping Center Sales schedule. The four sales closest to size and location to
Jefferson Retail have prices that range from $37.48 per square foot for 734
Jefferson Boulevard to $54.49 per square foot for DeSoto Clock Tower. All are
recent sales with close proximity to Jefferson Tower Retail Center. The average
price for these comparable sales is $42.23 per square foot, with an average
occupancy of 99%, it is feasible that if the market is upgraded and rental rates
increase that Jefferson Tower Retail Center may be valued somewhere between
$38.15/SF and $50/SF in 18 months to two years when the Tower renovation is
completed and if the market conditions improve.
THIS IS AN OPINION OF VALUE OR A COMPARATIVE MARKET ANALYSIS AND SHOULD NOT BE
CONSIDERED AN APPRAISAL. In making any decision that relies upon our work, you
should know that we have not followed the guidelines for development of an
appraisal or analysis contained in the Uniform Standards of Professional
Appraisal Foundation.
<PAGE>
JEFFERSON TOWER RETAIL CENTER
Property Brief
<TABLE>
<S> <C>
Location: 300 block of West Jefferson
Dallas, Texas
Improvements: One-story retail building with solid wall concrete and
common brick veneer finish.
Significant Tenants as Measured by SF Occupied: The Yes Group (12,259 SF) and
24 Hour Pawn (14,460 SF)
Site Size: Approximately 2.33 acres of land, more or less.
Zoning: CA1 - Commercial Area District
Occupancy: 100% (Jan. 1998)
Date of Completion: 1929
</TABLE>
The information above has been obtained from sources believed reliable. While we
do not doubt the accuracy, we have not valued it and maker no guarantee,
warranty or representation about it. It is your responsibility to independently
confirm its accuracy and completeness. You and your advisors should conduct a
careful, independent investigation of the property to determine to your
satisfaction the suitability of the property for your needs.
R E O C
December 30, 1998
1998
Mr. Jim Carpenter Via Facsimile Transmission
Rampart Capital Corporation 713-223-4814
700 Louisiana, Suite 2550 Hard Copy By Overnight Mail
Houston Texas 77002
Re: Broker's Opinion of Value
Mursch Center
6128-36 Bandera Road
San Antonio, Texas
Dear Jim:
The Mursch Center is a two story 15,000 SF mixed-use facility currently
containing two separate medical offices ant a Vacant 9,600 square foot retail
space The building has a rock front, concrete tilt up exterior walls with a
gravel built-up roof over the medical offices and restaurant and a metal
standing seam, gabled roof over the second story of the sporting goods store.
The facility sits on .978 acres or 42,601 square feet of land and has a parking
lot with 68 parking spaces.
The tract has 181.28 feet of frontage along the southwest side of Bandera Road
and 235.0 feet of frontage along the southeast side of Hurley Drive.
The property is zoned B-3 Business District by the City of Leon Valley, which
allows for most types of commercial and office uses.
There are three methods to use in order to arrive at a realistic value:
MARKET APPROACH - An estimate of value based on the actual sales
prices of comparable properties
COST APPROACH - An estimate of value based on current construction
costs, less depreciation, plus land value.
INCOME APPROACH - An estimate of value based on the monetary returns
that a property can be expected to generate capitalization.
<PAGE>
MARKET DATA APPROACH - In the application of the Market Data Approach it is
important to locate sales of properties similar to he subject property. I was
not given sufficient time to find sales of similar properties; therefore, the
Market Data Approach method has not been used in this Opinion of Value.
COST APPROACH - In the application of the Cost Approach the first step is to
estimate the value of the land, as if vacant. Next the reproduction cost
estimated for the subject improvements.
LAND VALUE - In August 1990, Joseph Woller appraised the land at
$325,000 or $7.63 per sq. ft. I consulted with another appraiser,
Marty Bryant, who based on his knowledge of current comparable sales
estimated the land value at $7.00 per sq.ft.
IMPROVEMENTS -Again, in the interest of time, I consulted with
two building contractors who have current experience constructing
similar buildings. Based on my construction experience and the
information I received from these contractors, I have estimated the
replacement value of the building and site improvements to be $45.00
to $50.00 per square foot. Accrued depreciation should be figured at
$6.75 to $7.20 per square foot. Therefore, based on the above
estimates:
LOW High
Improvements $45.00 $50.00
Less Accrued Depreciation - 6.75 - 7.20
38.25 42.80
Land Value (Under Bldg) +19.88 +19.88
Range of Value $58. 13 $62.68
Cost Approach $871,950.00 to $940,200.00
Note - All numbers relate to "under building"/15,000 SF
INCOME APPROACH -This approach is based on the theory that the net operating
income (NOI) produced by the property has a direct relationship to the overall
value of the property. For the purpose of this Opinion of Value I have estimated
the value at the current NOI and at the projected NOI if the building were
leased up at 100% occupancy to credit worthy tenants market rates.
<PAGE>
Income
Franklin Chiropractic 1800 SF = $ 1,710/mo.
H &H Music 9600 SF = 5,256
Texas Pain Clinic 3600 SF = 3.600
$10,556 /mo.
Estimate Expenses $ 3,542
7,014
Estimated monthly expense recapture + 3,309
Monthly Income $10,053
X 12
Annual NOI 120,636
Capitalization Rate 12% / 12
Current Value at 100% occupancy $1,000,000
My decision to use a capitalization rate of 12.0% is based on my knowledge of
current sales of income producing properties in the San Antonio area. New triple
net single tenant AAA properties such as Walgreens Drug Stores are selling at
CAP rates ranging from 8.5% to 9.0% Older A- to B- income producing properties
are selling at CAP rates ranging from 10% to 12.5%.
OPINION OF VALUE:
Market Data Approach No Estimate Figured
Cost Approach $871,950 to $940,200
Income Approach $1,000,000
Jim, please let me know if you need additional information.
Best regards,
Michael S. Hampton, CPM, CCIM
President
MSH/jh
DECEMBER 13, 1998
BROKERS OPINION OF VALUE
12 ACRES OF SCOTT TRACT SOUTH PADRES ISLAND, TEXAS
QUALIFYING CONDITIONS: There are several critical factors in determining the
value of coastal area property that dramatically affect its marketability; 1.)
Submerged land claims of the State of Texas, 2.) The area subject to the
jurisdiction of the U.S. ARMY CORPS OF ENGINEERS, 3.) The amount and types of
wetlands that will require a 404(b)(1) fill permit, 4.) The ability to design
around some of the wetlands, 5.) The owners willingness and ability to hire
qualified consultants and to provide mitigation, and 6.) The owners commitment
to private property rights under federal and Texas law and their willingness to
engage qualified legal assistance if necessary.
SITE SPECIFIC ANALYSIS OF QUALIFYING CONDITIONS: Based on my 15 years of working
on the development of "environmentally encumbered" property (see resume) I
submit the following opinions and observations regarding the subject tract; 1.)
There is no dispute over boundaries with the GLO. The 1982 Bay Harbor district
court decision that set the current boundaries and precluded any further claims
by the State of Texas against this property has resolved this issue. I have
recently learned of a similar "settlement" on a 4,300 acre, also in 1982,
neither of which was appealed by the Attorney General. 2.) Approximately
one-half of the property (6 acres) is subject to Corps jurisdiction based on
being inundated by Spring and Fall high tides. 3.) Approximately one-third is
considered wetlands ( 4 acres) subject to 404 guidelines. 4.) At least one-half
of the wetlands (2 acres) can be designed into the project based upon the
"pilings" exemption and as minimization. 5.) The remaining 2 acres of wetlands
will be avoided in order to meet the "avoidance and minimization" requirements.
6.) Recent federal court rulings regarding the "takings" issue and certain Corps
"guidelines" that are either unconstitutional or are outside of the laws that
Congress passed have put a real damper on the agencies willingness to step
beyond their legal bounds. The "Texas Real Private Property Rights Preservation
Act" passed in 1997 has finally been acknowledged by the Texas Natural Resources
Conservation Commission as being applicable thc their Clean Water Act 401
Certification process. I have recently resurrected a 3.45 acre tract that had
previously been denied a permit and will now receive "certification". Your 12
acres has very similar characteristics to the 3.45 acres that I have eluded to.
It was actually appraised four years ago, prior to the permitting process at
$600,000 or 54.00/square foot for a conventional bank loan. CONCLUSION REGARDING
PROPFRTY VALUE: Based upon my experience, consultations with other "pedigreed"
environmental consultants, and the improved legal climate I can conclude that a
minimum of 8 acres up to 10 acres can be developed. The fact that you also
control 1,000 acres of valuable "mitigation" land that la similar to and in the
same area as land being purchased by another of my clients for his mitigation is
also a contributing factor in my valuation,
<PAGE>
OPINION OF VALUE: 8 ACRES (348,480 sq.ft.)
@ $2.25/sq.ft. = $785,000
10 ACRES (435,600 sq.ft.)
@ $2.00/ sq.ft. = $870,000
VALUE AFTER PERMIT: $2,450,000 TO $2,750,000
I hope that this rather detailed OPINION OF VALUE meets your needs.
Best Regards,
/s/ John Thobe, M.S., M.B.A
John Thobe, M.S., M.B.A.
Commercial Broker & Consultant
"THIS IS AN OPINION OF VALUE OR COMPARATIVE MARKET ANALYSIS AND SHOULD NOT BE
CONSIDERED AN APPRAISAL. In making any decision that relies upon my work, you
should know that I have not followed the guidelines for development of an
appraisal or analysis contained in the Uniform Standards of Professional
Appraisal Practice of the Appraisal
Foundation."
TOP GUNS
Land Company Inc.
12828 Hwy. 105 West
Conroe, Texas 77304
"We Aim to Please"
Conroe Fax Metro Houston
(409)588-4006 (409)588-4007 (409)447-4006 (281)440-6633
December 15, 1998
Mr. Chuck Janke
Re: Broker's Opinion of Value
Dear Mr. Janke :
At your request, I have prepared this letter for your use as a " Broker's
Opinion of Value " of the former Westland Oil Bomb Shelter.
It is my opinion that the value of the certain approximate 36.825 acres and the
40,000 square foot bomb shelter in the John Corner Survey, A-8, has a value of
$950,000.This is based on the replacement cost of approximately $7,000,000 for
the building and the value of the land. The value of the associated land is
$9,000-$10,000 per acre, for say, a total value of approximately $330,000,
leaving a value of $620,000 on the building or $15.50 per square foot. This is
relatively inexpensive for any climate controlled storage (medical records,
x-rays, electromagnetic sensitive material, etc.) or laboratory, since it has
two generators, each capable of carrying the electrical load of the air
conditioner and lights. Climate controlled storage in the area rents for $0.80
to $1.09 per square foot. Because the building is so unique there is nothing
comparable in the area.
"THIS IS AN OPINION OF VALUE AND SHOULD NOT BE CONSIDERED AN APPRA1SAL. In
making any decision that relies upon my work, you should know that I have not
followed the guidelines for development of an appraisal or analysis contained in
the Uniform Standards of Professional Appraisal Foundation."
Please contact me if any further information is required.
Sincerely,
/s/ William C. Bloh
William C. Bloh
Real Estate Broker
September 30, 1998
Rampart Capital Corporation, et al.
700 Louisiana, Suite 2540
Houston, Texas 77002
Re: SIXTH AMENDMENT TO LOAN AGREEMENT (Sixth Amendment) dated as of September
30, 1998 by and between Southwest Bank of Texas N.A. and Rampart Capital
Corporation, et. al
Gentlemen:
This Sixth Amendment is made and entered into as of the date above between
SOUTHWEST BANK OF TEXAS N.A. ("Bank") and Borrower(hereinafter defined) to
evidence the parties' agreement to modify and amend the existing Loan Agreement,
as last amended by Fifth Amendment to Loan Agreement dated on May 1, 1998
effective as of January 1, 1998 (all capitalized terms which are defined in the
Loan Agreement shall have the same meaning herein, unless expressly modified
hereby).
Borrower has requested that the Loan Agreement be modified and the Bank has
agreed to such modifications upon the terms set forth herein. For sufficient
consideration, the parties hereby agree that the Loan Agreement is modified to
the extent required to accomplish the intent of the specific modifications of
this Sixth Amendment.
The term "Borrower" is hereby defined to include the following entities, jointly
and severally, Rampart Capital Corporation, a Texas corporation ("RCC"); Rampart
Facilities Corporation, a Texas corporation; Rampart Ventures Corporation,
L.L.C., a Texas limited liability company; Rampart Acquisition Corporation, L.
L. C., a Texas limited liability company; Rampart Properties Corporation, a
Nevada corporation; IGBAF, inc., a Texas corporation; IGBF, inc., a Texas
corporation; Ag Capital Corporation, an Oklahoma corporation; Leissner's, Inc.,
a Texas corporation; and BCL Enterprises, inc. a Texas corporation; provided,
however, (i) as to filings with the Bank and compliance issues under the Loan
Agreement, RCC shall remain the entity primarily responsible for all such
matters unless otherwise agreed to in writing by the Bank, and (ii) without
further approval by the Bank, IGBP, inc. and Ag Capital Corporation may be
consolidated into IGBAF, inc. Other subsidiaries of RCC maybe converted into
limited liability companies without further approval from the Bank, as along as
the transaction does not affect the Bank's lien position on the collateral.
<PAGE>
This Sixth Amendment modifies the Loan Agreement to accomplish the following:
1. Borrower hereby agrees that the Bank may designate an independent
party to perform a collateral field audit of Borrower's assets to be done
at the expense of Borrower butnot to exceed $2,000. The audit shall be
completed by April 30, 1999 and annually thereafter. The Bank shall define
the scope of such audit which will include, at a minimum, a review of the
status of property taxes, the existence of tax liens and the adequacy of
insurance coverage for all Eligible Class A Note Receivable, Eligible Class
B Notes Receivable, Eligible Class C Notes Receivable, Status F Foreclosed
Real Estate and Status G Foreclosed Real Estate.
2. The term "Note" shall be that certain promissory note of even date
herewith from Borrower to the Bank in the face amount of $5,000,000 due and
payable on or before December 31, 1999.
3. The term "Guaranty" or "Guaranties" shall refer individually to the
respective Guaranty Agreements of Charles W. Janke, James H. Carpenter,
Janke Family Partnership, Ltd., J. H. Carpenter Family Partnership Ltd. and
In source Financial Corporation, a Texas corporation or severally to more
than one such Guaranty.
4. The term "Eligible Class F & I Assets" shall mean Eligible REO
classified by Borrower as "Status F-Foreclosed R/E - Major Assets" and
"Status I-Investment and Commercial Real Estate" as defined by Borrower.
5. The Borrower will not permit its tangible net worth (on a
consolidated basis) to be less than $2,800,000 at any time after December
31, 1998. As used herein, "tangible net worth" shall mean the sum of
preferred stock (if any), par value of common stock, capital in excess of
par value of common stock, and retained earnings less treasury stock (if
any), less good will, cost in excess of net assets acquired, deferred
development costs and all other assets as are properly classified as
intangible assets.
6. The Borrower shall maintain on a consolidated basis a ratio of
Total Liabilities to Tangible Net Worth not exceeding 2.00:1.00. As used
"total Liabilities "means the sum of current liabilities plus long term
liabilities, excluding any deferred income taxes.
7. Borrower has requested and the Bank has agreed to release the
principal amount of $1,200,000 of that certain $1,700,000 Certificate of
Deposit No. 25850 in the name of Janke Family Partnership, Ltd. so that
only the remaining $500,000 of the certificate of deposit shall secure the
Loan.
8. Borrower shall pay to the Bank a facilities availability fee of
THIRTY-THREE THOUSAND SEVEN HUNDRED FIFTY DOLLARS ($33,750.00).
9. Borrower shall provide the Bank with instruments reasonably
required by the Bank to evidence the extension of all liens and security
interests in favor of the Bank securing the Loan.
To the extent that the terms and provisions of the Loan Agreement require
modification to accomplish the specific terms set forth above, the parties agree
that they shall cooperate to permit advances upon the terms set forth above. To
the extent that the Bank, in its reasonable opinion, does not have adequate
information to make an Advance based upon this Sixth Amendment, the Bank shall
not be required to make an advance as to that item or items until such
information is provided to the Bank in form required by the Bank. To further
update and consolidate the reporting and covenants of Borrower set forth in
paragraphs 13 and 14 of the Loan Agreement, such paragraphs, as amended, are
attached hereto as Schedule 1 and made a part hereof for all purposes.
<PAGE>
The representations and warranties of Borrower contained in the Loan Agreement
and the other Security instruments and otherwise made in writing by or on behalf
of the Borrower pursuant to the Loan Agreement and the other Security
instruments were true and correct when made, and are true and correct in all
material respects at and as of the time of delivery of this Sixth Amendment,
except for such changes in the facts represented and warranted which are not in
violation of the Loan Agreement, this Sixth Amendment or the other Security
instruments and those matters which were not in compliance and the Bank was
notified of same and as to those exceptions (but not to any future exceptions)
which the Bank approved as exceptions to the Loan Agreement requirements.
Previous items of non-compliance were approved and accepted by the Bank.
Borrower has performed and complied with all Loan Agreements and conditions
contained in the Loan Agreement and the Security instruments required to be
performed or complied with by Borrower prior to or at the time of delivery of
this Sixth Amendment.
There exists, and after giving effect to this Sixth Amendment will exist, no
default or Event of Default, or any condition, or act which constitutes, or with
notice or lapse of time (or both) would constitute an Event of Default under any
loan agreement, note agreement, or trust indenture to which the Borrower is a
party, including without limitation, the Loan Agreement, the Notes and the
Security instruments, to the knowledge of the parties hereto.
Nothing in this Sixth Amendment is intended to amend any of the representations
or warranties contained in the Loan Agreement.
Borrower represents that this is a commercial, business and/or investment
transaction and that the proceeds of the Notes have not and will not be used for
personal, family, household or residential purposes; that all disclosures, if
any, required by law have been received by Borrower prior to the execution
hereof; and requests that Bank rely upon this representation, and the Bank has
relied upon the representations and warranties contained in this Sixth Amendment
in agreeing to the amendments and supplements to the Loan Agreement set forth
herein.
Except as otherwise expressly provided herein, the Loan Agreement, the Security
Instruments, the Notes and the other instruments and agreements referred to
therein are not amended, modified or affected by this Sixth Amendment. Except as
expressly set forth herein, all of the terms, conditions, covenants,
representations, warranties and all other provisions of the Loan Agreement are
herein ratified and confirmed and shall remain in full force and effect.
On and after the date on which this Sixth Amendment becomes effective, the
terms, "this Loan Agreement," "hereof," "herein," "hereunder" and terms of like
import, when used herein or in the Loan Agreement shall, except where the
context otherwise requires, refer to the Loan Agreement, as amended by this
Sixth Amendment.
<PAGE>
This Sixth Amendment may be executed in two or more counterparts, and it shall
not be necessary that the signatures of all parties hereto be contained on any
one counterpart hereof; each counterpart shall be deemed an original, but all of
which together shall constitute one and the same instrument.
It is understood between the parties hereto that Borrower shall provide Bank, at
Borrower's expense, all other reports, further agreements and instruments, title
policies, surveys, and other documentation as reasonably requested during the
term of the Notes, so as to preserve, protect and perfect, or maintain the
perfection, of all liens created by the instruments securing payment of the
Notes or other required documentation so that Bank shall have all documentation
necessary to comply with Bank's internal lending policies and that documentation
required by any applicable regulatory agency/authority.
All notices to Borrower shall be sent to the address set forth above. All
notices to Guarantors or any other liable parties shall be given to them at the
Borrower's address and also to the last home address in the files of the Bank.
Borrower and Bank agree that without the written consent of Charles W. Janke and
James H. Carpenter, the Borrower may not increase the maximum amount of the
Loan.
The Bank acknowledges and conditionally consents (such consent is subject to
review of actual documents submitted to the Bank at which time the Bank's final
consent will not be unreasonably withheld or delayed) to the fact that Borrower
and one or more Guarantors are entering into (a) indemnity Agreements with
respect to the Loan and Guaranties, (b) Stock Pledge Agreements with respect to
collateral for the indemnity Agreements, (c) Security Agreements with respect to
collateral for the Indemnity Agreements, (d) By Law Modifications, and (e)
Shareholder Buy/Sell Agreements; all of which will potentially result in (i) a
change in ownership percentages of Borrower, (ii) one or more Guarantors
purchasing (after an event of default which is not timely cured) the Loan and
all collateral related thereto upon the terms provided in the Loan Documents,
and (3) related undertakings. Bank agrees that the existence and substance of
the above documents (now or those documents consented to in the future by the
Bank) and arrangement do not create a default under any document pertaining to
the Loan.
<PAGE>
The Bank hereby confirms that the Bank has returned the Guaranty Agreement of
Kyra Janke given in connection with the original transaction involving this Loan
and that Kyra Janke is no longer a Guarantor of this Loan.
NOTICE TO OBLIGERS: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THIS LOAN
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES TO THIS LOAN. THE TERM "PARTIES" INCLUDES THE
UNDERSIGNED PERSONS AND ENTITIES. THE TERM "LOAN" INCLUDES THIS AGREEMENT AND
THE DOCUMENTS REFERENCED HEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to be
executed on the date first set forth above but in all respects effective as of
September 30, 1998.
BORROWER:
RAMPART CAPITAL CORPORATION
BY: /S/ Charles W. Janke
Charles W. Janke
President
RAMPART FACILITIES CORPORATION
BY: /S/ Charles W. Janke
Charles W. Janke, President
RAMPART VENTURES CORPORATION, L.L.C.,
BY /S/ Charles W. Janke
Charles W. Janke, Managing Member
RAMPART ACQUISITION CORPORATION, L.L.C.
BY: /S/ Charles W. Janke
Charles W. Janke, Managing Member
RAMPART PROPERTIES CORPORATION
BY: /S/ Charles W. Janke
Charles W. Janke, President
IGBAF, INC.
BY: /S/ Charles W. Janke
Charles W. Janke, President
IGBF, INC.
BY: /S/ Charles W. Janke
Charles W. Janke, President
AG CAPITAL CORPORATION
BY: /S/ Charles W. Janke
Charles W. Janke, President
LEISSNER'S INC.
BY: /S/Charles W. Janke
Charles W. Janke, President
BCL ENTERPRISES. INC.
BY: /S/Charles W. Janke
Charles W. Janke, President
BANK:
SOUTHWEST BANK OF TEXAS N.A.
BY: /S/Charles W. Janke
Michael R. Adams, Vice President
ATTACHMENT: SCHEDULE I - Paragraphs 13 and 14 of the Loan Agreement
<PAGE>
SCHEDULE I
to Sixth Amendment to Loan Agreement
Restatement of Paragraphs 13 and 14 (after Sixth Amendment):
13. Without request by Bank, Borrower agrees to furnish, or cause to be
furnished, Bank with true, correct and complete copies of the following as
indicated, until the Notes are paid in full and the Bank's commitment to lend
under the Line of Credit Note is terminated:
a. promptly after becoming available and in any event within thirty (30) days
after the end of each month, Borrower's financial statements in comparable
form as previously furnished to Bank, consisting of at least (i) the
balance sheet of Borrower as of the end of such year prepared on a cost
basis, (ii) the statement of profit and loss of Borrower for such year
prepared on a cash basis, and (iii) the statement of reconciliation of
capital accounts of Borrower for such year; certified by the principal
financial officer of Borrower to be true and correct and fairly reflect
Borrower's financial condition and operations;
b within thirty (30) days after the filing of same, copies of the federal
income tax return of Borrower;
c. as soon as available and in any event within thirty (30) days after the end
of each calendar month, a Borrowing Base Certificate, substantially in the
form as previously approved by the Bank, calculating the amount of the
Borrowing Base;
d. as soon as available and in any event within thirty (30) days after the end
of each calendar month, a full and complete list of all Eligible Notes
Receivable and all liens securing same which are owned by Borrower and
pledged to Bank under any of the Collateral Assignments; such list shall be
in the form and containing information of a type and scope as currently
delivered to Bank in connection with the Prior Collateral Assignment unless
and until Bank requests additional information;
e. such other information regarding the business and affairs and financial
condition of Borrower, and the Guarantors, as Bank may reasonably request;
f. a monthly officer's certificate of Borrower that Borrower has paid and
discharged all taxes, assessments and governmental charges or levies
imposed on Borrower or on its income or profits or on any of its property
prior to the date on which penalties or liens attach thereto; provided,
however, Borrower shall not be required to pay any. such tax, assessment,
charge, levy or claim the payment of which is being contested in good faith
and by proper proceedings; provided further, however, the parties
acknowledge and agree that it is Borrower's customary practice not to pay
real property taxes on its real estate interests unless the failure to do
so would have an immediate and material adverse effect on Borrower's
ability to continue its operations;
<PAGE>
g. Prompt notice of all litigation and all proceedings before any governmental
or regulatory agencies against Borrower, except litigation or proceedings
not materially adversely affecting the financial condition of Borrower;
h. Prompt notice of all litigation and all proceedings before any governmental
or regulatory agencies against any Guarantor, except litigation or
proceedings not materially adversely affecting the financial condition of
such Guarantor; and
i. as soon as available and in any event within one hundred twenty (120) days
after December 31, 1996, and all calendar years thereafter, the financial
statements listed in Paragraph 1 3(a) as of the end of such calendar year
audited by a Certified Public Accountant or Firm approved by the Bank.
14. Borrower will not permit any material change to be made in the character of
its business as carried on at the date hereof;
a. Borrower shall furnish executed Deeds of Trust on any property covered by
the Collateral Assignments to which Borrower obtains title promptly after
taking such action, such that upon recording of such Deed of Trust, Bank
will have a first priority lien; provided, however, this provision shall
apply only to foreclosure (or deed in lieu thereof) against properties
which secure any Eligible Note Receivable to which Borrower has an
allocated cost of over $100,000.00;
b. Borrower agrees that 100% of the Net Purchase Price received by Borrower
from the sale, compromise or settlement of any Eligible Note Receivable and
Eligible REO shall be applied to the payment of the Notes;
c. Borrower shall maintain, or cause to be maintained, accurate books and
records pertaining to the Eligible Notes Receivable in accordance with
generally accepted practices and procedures Borrower will, upon Bank's
request, mark Borrower's ledger cards, books of account and other records
relating to the Eligible Notes Receivable with appropriate notations
satisfactory to Bank, disclosing that Borrower has granted to Bank a
security interest in the Eligible Notes Receivable or containing such other
designations as Bank may require. All such records shall be kept at
Borrower's address as it appears in this Loan Agreement;
d. Borrower will, promptly upon learning thereof, report to Bank all matters
materially affecting the value, enforceability or collectability of any of
the Eligible Notes Receivable such as claims or disputes asserted by any
maker as to the amount of principal or interest owing on such promissory
notes and/or the enforceability of the liens securing the payment thereof;
e. Borrower will promptly provide Bank with notice of any event which will
have an immediate and material adverse effect on the Borrower's ability to
conduct its business as presently conducted;
<PAGE>
f. Borrower shall continue to be a corporation duly incorporated and existing
in good standing under the laws of the State of Texas or the State of
Oklahoma or the State of Nevada, as applicable, and continue to be duly
licensed or qualified as a foreign corporation in all jurisdictions wherein
the character of the property owned or leased by it or the nature of the
business transacted by it makes licensing or qualification necessary as a
foreign corporation;
g. Subsequent to Bank taking legal title to the Eligible Notes Receivable by
commercially reasonable means in accordance with applicable law, Bank shall
have the right to receive, endorse, assign and/or deliver in the name of
Bank or Borrower any and all checks, drafts and other instruments for the
payment of money relating to the Eligible Notes Receivable, and Borrower
hereby waives notice or presentment, protest and of non-payment of any
instrument so endorsed. Borrower further authorizes Bank to sign Borrower's
name on any verifications of Eligible Notes Receivable, to send
verifications of Eligible Notes Receivable to any party and to do all other
acts and things necessary to carry out the provisions of this Loan
Agreement. Bank and its officers, directors, agents and designees shall not
be liable for any acts of omission or commission, or for any error of
judgment or mistake of act or law by Bank after taking such legal title,
unless done maliciously or with gross negligence;
h. To the limited extent required by any regulatory authority having
jurisdiction over Bank, Borrower will furnish to Bank appraisals of the
real property held as collateral prepared in accordance with Bank's
instructions and in form and substance satisfactory to Bank, within ninety
(90) days of each request, the cost of which is to be borne solely by
Borrower;
i. Borrower will permit any officer, employee or agent of Bank to visit and
inspect its principal place of business, both interior and exterior,
examine so books ofrecord and accounts, take copies and extracts therefrom,
and discuss the affairs, finances and accounts of Borrower with Borrower's
accountants and auditors, all at such reasonable times and as often as Bank
may desire;
j. Bank shall hold the originals of all Eligible Notes Receivable in its
possession and Borrower shall take such other and further action as may be
necessary to maintain Bank's perfected security interest in the Eligible
Notes Receivable;
k. Borrower will permit any officer, agent or employee of the Bank's real
estate department to review the Eligible Class A Notes Receivable and
Eligible Class F & I Assets to assess a valuation of such collateral to
determine the Borrowing Base and to determine whether any such property
should be reclassified as Eligible Remaining Assets:
l. Borrower will not permit its tangible net worth (on a consolidated basis)
to be less than $2,800,000 at any time after December 31, 1998. As used
herein, "tangible net worth" shall mean the sum of preferred stock (if
any), par value of common stock, capital in excess of par value of common
stock, and retained earnings less treasury stock (if any), less good will,
cost in excess of net assets acquired, deferred development costs and all
other assets as are properly classified as intangible assets; and
m. Borrower shall maintain on a consolidated basis a ratio of Total
Liabilities to Tangible Net Worth not exceeding 2.00: 1.00. As used "Total
Liabilities" means the sum of current liabilities plus long term
liabilities, excluding any deferred income taxes.
PURCHASE AND SALE AGREEMENT
COUNTY OF HARRIS
KNOW ALL PERSONS BY THESE PRESENTS:
STATE OF TEXAS
This Purchase and Sale Agreement (the "Agreement") is made and entered into by
and between CHRIS WILLIAMS, TRUSTEE IN BANKRUPTCY FOR NEWPORT PARTNERS, Case No.
97-48083-H1-11 (hereinafter called "Seller") and RAMPART PROPERTIES CORPORATION
(hereinafter called "Purchaser").
WITNESSETH:
1. Property. For good and valuable consideration, the receipt of which is hereby
acknowledged, and subject to the terms and conditions hereinafter set forth,
Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase
from Seller, the real property, together with all rights, and appurtenances
thereto along with improvements situated thereon, if any, which is described on
Exhibit "A," which is attached hereto and made a part hereof for all purposes
(the "Real Property"), and all personal property owned by Seller (except for
cash) and used and/or situated on the Property, and all rights and benefits of
Seller under leases, service contracts and existing claims of Seller under
lawsuits, and any other rights of any type or assets of any type owned or
claimed to be owned by Seller, collectively hereinafter referred to as the
"Property." It is intended, by this Contract, that all assets of the bankrupt
estate for Newport Partners (except for the cash to be retained by Seller as
provided for herein) shall be conveyed and transferred to Purchaser at Closing
and upon payment of the Purchase Price.
2. Purchase Price.
A. The purchase price for the Property shall be the sum of TWO MILLION EIGHT
HUNDRED SEVENTY FIVE THOUSAND AND NO/100 DOLLARS ($2,875,000.00) and such
purchase price shall be paid in cash at the Closing (hereafter defined).
B. Upon execution of this Agreement, Purchaser shall make an Earnest Money
deposit, the amount of which shall be equal to five percent (5%) of the Purchase
Price. The earnest money is payable by wire transfer or certified cashier's
check drawn on a United States Bank, made payable to Seller. In the event
Purchaser fails to purchase the Property in accordance with the provisions of
this Agreement, Seller may, as its sole remedy, terminate this Agreement and
retain the Earnest Money as liquidated damages. Otherwise, the Earnest Money
shall be credited to the purchase price of the Property at Closing. Time is of
the essence under this Agreement. If Purchaser fails to timely
eposit the Earnest Money, Purchaser's offer shall be deemed rejected and this
Agreement shall be null, void and of no force and effect.
<PAGE>
3. Title.
A. Title Commitment. Seller has caused the First American Title Company ("the
Title Company") to issue to Purchaser a commitment for an owner's title
insurance policy (the "Title Commitment"), setting forth the state of title to
the Property. Purchaser acknowledges receipt and review of the Title Commitment
and further acknowledges that title to the Property (and the encumbrances listed
on the Title Commitment) are not acceptable to Purchaser in that, the legal
descriptions, survey descriptions, etc. do not coincide. Seller and Purchaser
each agree to use reasonable and good faith efforts prior to Closing to cause
all legal descriptions of the Property, Exhibit "A" to the Title Commitment, and
Exhibit "A" to the Special Warranty Deed to coincide and be the same. If, by the
scheduled Closing Date, all of such legal descriptions do not coincide and are
not determined to be the same by the Title Company, either Seller or Purchaser
shall have the right, by written notice to the other party, to terminate this
Contract, in which event the parties shall be relieved from all obligations
hereunder, each to the other, and the Earnest Money shall be returned to
Purchaser. All items set out in the Title Commitment (save and except for the
legal descriptions, liens listed in Schedule C of the Title Commitment and
parties in possession) shall be considered "Permitted Exceptions."
B. Title Policy. At the Closing of the sale of the Property as provided for
herein, if requested by Purchaser and if Purchaser pays the title premium
charged therefor, Seller shall cause an owner's title policy to be furnished to
Purchaser by the Title Company covering the Property. Such title policy shall be
issued by the Title Company and shall insure Purchaser's ownership of fee
simple, indefeasible title to the Property. The title policy shall contain the
Permitted Exceptions, but shall contain no additional exceptions to title other
than standard printed exceptions (which standard printed exceptions may be
deleted as hereafter provided), and shall be issued on the form of owner's
policy of title insurance then currently promulgated by the State Board of
insurance of the State of Texas. All "Schedule C" items (including, but not
limited to, liens) shall be released or satisfied at or before closing, through
order of the Bankruptcy Court, or otherwise.
C. Deed. The Property will be conveyed by Seller to Purchaser upon the Closing
by Special Warranty Deed conveying good and indefeasible fee simple title free
and clear of all claims of any individual entities, municipalities or other
governmental or quasi-governmental organizations, including, but not limited to
( I ) the New Property Owners Association in Newport, (2) claims offset, failure
of consideration or the like that any property owner in Newport may have against
Seller (including claims to offset paying past maintenance dues, and (3) any
other claims, subject only to: (i) the matters set forth in Schedule "B" of the
Title Commitment (except parties in possession which shall be deleted) at
Purchaser's cost; (ii) all easements and other matters shown on the plat of any
subdivision; and (iii) other matters specifically provided for herein
(collectively, the "Permitted Exceptions").
4. Closing.
A. The purchase of the Property pursuant hereto shall occur at the offices of
the Title Company on the Closing Date. The Closing Date shall occur on the later
of the following dates: (i) ten (10) business days following the "Effective
Date" hereof(as hereafter defined), or(ii) ten (10) days after the "Plan in
Bankruptcy" is confirmed, whichever is later, or on such other date as mutually
agreed upon between Seller and Purchaser, in writing.
B. At the Closing, Seller shall deliver to Purchaser the following:
(1) A Special Warranty Deed, duly executed and acknowledged, conveying the
Property to Purchaser, as provided in Paragraph 3. C above; and
(2) if requested and paid for by Purchaser, Seller shall cause the Title Company
to deliver to Purchaser the owner's policy of title insurance as set out in
Paragraph 3.B above. If Purchaser requests deletion of(and such deletions are
acceptable to the Title Company) the standard exceptions relating to parties in
possession, and the boundary exception, the same shall be deleted at Purchaser's
cost from the owner title policy delivered to Purchaser.
(3) A Bill of Sale and Assignment in form acceptable to Seller and Purchaser,
conveying all Property.
C. At the Closing, Purchaser shall pay to Seller the purchase price for the
Property, in cash, by cashier's check or by wired funds (as instructed by Seller
or the Title Company).
D. At the Closing, Seller shall pay one-half of any escrow fee, the cost of
preparing all mortgage lien releases (of any existing mortgage liens placed
against the Property by Seller, if any), the cost of tax certificates, the cost
of preparation of the Deed by Seller's attorney, and the fees for recording the
Deed. Purchaser shall pay one-half of any escrow fee, and the premiums for an
owner's title insurance policy, together with all deletions therefrom requested
by Purchaser. Real estate taxes and homeowners association assessments, if any,
relating to the Property shall be prorated between Seller and Purchaser, and
shall be fully paid for the year 1998, at Closing. Notwithstanding anything
herein to the contrary, Seller will retain all cash including, but not limited
to, all homeowners fees, dues and assessments paid (and received by Seller) at
or prior to Closing. All homeowners fees, dues and assessments paid after
Closing shall be paid to Purchaser. If Closing shall occur before the tax rate
is fixed for the year in which Closing occurs, the proration of taxes shall be
upon the basis of the tax rate for the previous year applied to the most recent
assessed valuation. Thereafter, there will be no adjustment of such prorations.
E. Except as otherwise provided herein, all closing costs shall be charged to
the respective parties as is customary in the purchase and sale of real property
in Harris County, Texas, on the date of the Closing Possession of the Property
shall be delivered to Purchaser at the Closing thereof
5. Default and Remedies.
A. Seller's Defaults; Purchaser's Remedies.
(1) Seller's Defaults. Seller shall be in default hereunder in the event Seller
shall fail to meet, comply with, or perform any covenant, agreement or
obligation on its part required within the time limits and in the manner
required in this Agreement.
(2) Purchaser's Remedies. In the event Seller shall be in default hereunder,
Purchaser may, at Purchaser's sole option, and as Purchaser's sole remedy, do
any one of the following
(i) Terminate this Agreement by written notice delivered to Seller, and in such
event, this Agreement shall be null, void and of no force and effect, and the
parties hereto shall have no further obligations hereunder, each to the other,
and the Earnest Money shall then be refunded to Purchaser and breakup fee paid;
or
<PAGE>
(ii) Waive defects or objections and enforce specific performance of the sale
and purchase of the Property without adjustment of the purchase price
B. Purchaser's Defaults; Seller's Remedies.
(1) Purchaser's Default. Purchaser shall be in default hereunder if Purchaser
shall for any reason other than a default by Seller hereunder, or termination of
this A6reement pursuant to the express provisions hereof, fail to meet, comply
with, or perform any material covenant, agreement or obligation on its part to
be performed within the time limits and in the manner set forth herein
(2) Seller's Remedies. In the event Purchaser shall be in default hereunder,
Seller may, as its sole and exclusive remedy, terminate this Agreement by
written notice to Purchaser and retain the Earnest Money, it being agreed
between Purchaser and Seller that such sum shall be liquidated damages for a
default by Purchaser hereunder because of the difficulty, inconvenience, and
uncertainty of ascertaining actual damages for such default.
C. In the event either party institutes legal proceedings to exercise its rights
or to enforce this Agreement, the prevailing party in any such proceeding shall
be entitled to recover reimbursement of all reasonable legal fees and costs of
court incurred by such prevailing party from the other party.
6. Utility Districts. Purchaser acknowledges its awareness that the Property is
located within the boundaries of The Newport Municipal Utility District and the
same is the resulting consolidated district of Mud #20 and Mud #73.
7. Special Conditions. The parties recognize and agree that this is a "backup"
contract, subject to the rights of Seller and the Buyer under that contract
dated the 7th day of December, 1998, between Seller and RGW GOLF DEVELOPMENT,
which contract is attached hereto as Exhibit "B" (the "Prime Contract"). it is
intended that this Contract shall become effective only in the event of
termination of the Prime Contract. If the Prime Contract is terminated (by the
buyer thereunder or by the Seller herein) then this Contract shall become
effective, and the "Effective Date" of this Contract shall be that date on which
Seller notifies the Purchaser herein that the Prime Contract has been
terminated. If the Seller herein does not give Purchaser notice that the Prime
Contract has been terminated on or before January 30 , 1999, then this Contract
shall automatically terminate and be of no further force and effect [and any
Earnest Money deposited by the Purchaser herein, together with the "breakup fee"
(hereafter defined) shall be paid over to the Purchaser] and the parties shall
have no further liabilities or obligations each to the other. If the Prime
Contract closes, then the Earnest Money will be returned to Purchaser and Seller
herein will pay to Purchaser [within two (2) business days after the closing
under the Prime Contract] a "breakup fee" equal to three percent (3%) of the net
amount received by Seller at the closing of the Prime Contract. If Purchaser
closes hereunder, it shall still receive the breakup fee set out in the
preceding sentence. Obligations covering the breakup fees shall survive the
Closing of this Contract.
8. General Provisions.
A. Commissions. Seller has agreed to pay a commission to CB Richard Ellis
("Broker") in accordance with a separate agreement. Neither the Seller nor the
Broker shall pay any brokerage commission, finder's or other fee to any broker,
agent or other person other than Seller's obligations under the above-referenced
listing agreement between it and the Broker. Purchaser acknowledges that any
cooperating broker claiming to represent the Purchaser or the Seller shall not
receive any commission payments from Seller or the Broker unless ordered by the
court. Except as set forth in the preceding sentences of this Section, Seller
shall defend, indemnify, and hold harmless Purchaser, and Purchaser shall
defend, indemnify, and hold harmless Seller and Broker, from and against all
claims by any broker, agent or other person for brokerage, commission, finder's
or other fees relative to this Agreement or the sale of the Property, and all
court costs, attorney's fees, and other costs or expenses, arising therefrom,
and alleged to be due by authorization of the indemnifying party. This paragraph
shall survive the termination of this Agreement and the Closing.
The Seller's duty to indemnify and hold the Broker and/or Purchaser harmless is
limited to the assets of the Newport Partners bankruptcy estate, and the Seller
shall in no way be personally liable for any such indemnification. The Seller's
duty to indemnify and hold harmless created hereby shall survive until the
closing of the bankruptcy estate.
<PAGE>
B. Survival of Provisions. It is mutually agreed by the parties hereto that
except as expressly provided herein, the terms and provisions contained in this
Agreement shall be considered merged into the instruments evidencing such
conveyance, and shall not survive such conveyance.
C. Notices. All of the requirements and provisions for notice under this
Agreement shall have been met when such notice has been placed in writing and
sent certified mail, United States mail, postage prepaid, return receipt
requested, to the respective parties hereto at the following addresses or a
change of address is given by either party to the other in writing:
TO PURCHASER: RAMPART PROPERTIES CORPORATION
700 Louisiana, Suite 2510
Houston, Texas 77002
WITH COPY TO: CHRISTIAN & SMITH, LLP
ATTENTION: WES CHRISTIAN
2302 FANNIN
SUITE 500
HOUSTON, TEXAS 77002
TO SELLER: CHRIS WILLIAMS, TRUSTEE
5858 WESTHEIMER
SUITE 707
HOUSTON, TEXAS 77057
WITH COPY TO: WEYCER, KAPI.AN, PULASKI &
ZUBER, P.
ATTENTION: EDWARD J. ROTHBERG
11 GREENWAY PLAZA
SUITE 1400
HOUSTON, TEXAS 77046
D. Time of Essence. It is mutually agreed that time is of the essence of this
Agreement and each of its terms. Waiver of any obligation or performance by
either Purchaser or Seller shall not constitute a waiver of a subsequent
obligation or performance. If the final day of any period of time set out in any
provision of this Agreement falls upon a Saturday or Sunday or a legal holiday
under the laws of the State of Texas, then and in such event, the time of such
period shall be extended to the next business day which is not a Saturday,
Sunday or legal holiday.
E. Entire Agreement. This Agreement contains the entire agreements, oral or
written of the parties hereto, and there are no other representations,
conditions and/or understandings made which are not expressly contained in this
Agreement. This Agreement shall be binding upon and shall inure to the benefit
of the respective permitted successors and assigns of the parties hereto and
shall be governed and construed by the laws of the State of Texas. This
Agreement and the rights of Purchaser herein may not be assigned without the
prior written consent of Seller.
F. Court Approval. At the Closing, Seller shall furnish Purchaser with an order
from the bankruptcy court approving the sale and conveyance as contemplated by
the terms of this Agreement, or an order confirming Chapter 11 Plan ("Plan in
Bankruptcy") authorizing the Trustee ("Seller") to sell and convey the Property
to Purchaser free and clear of all liens, claims and encumbrances.
<PAGE>
G. PURCHASER ACKNOWLEDGES, UNDERSTANDS AND AGREES THAT PURCHASER HAS HAD
SUFFICIENT OPPORTUNITY TO MAKE FULL AND COMPLETE INSPECTIONS OF THE PROPERTY TO
PURCHASER'S SATISFACTION. PURCHASER HAS ALSO RECEIVED A SURVEY OF THE PROPERTY
AND HAD AN OPPORTUNITY TO REVIEW THE TITLE TO THE PROPERTY TO PURCHASER'S
SATISFACTION. PURCHASER IS RELYING SOLELY ON PURCHASER'S OWN INVESTIGATIONS OF
THE PROPERTY AND NOT ON ANY INFORMATION PROVIDED BY SELLER, BROKER OR ANY PARTY
ACTINC ON BEHALF OF SELLER. IT IS THE UNDERSTANDING AND INTENTION OF THE PARTIES
HERETO THAT THE SALE OF THE PROPERTY FROM SELLER TO PURCHASER IS MADE ON AN "AS
IS, WHERE IS" BASIS AND WITH ALL FAULTS. IT IS EXPRESSLY PROVIDED, AND PURCHASER
ACKNOWLEDGES, TIIAT SELLER HAS NOT MADE, DOES NOT MAKE, AND SPECIFICALLY NEGATES
AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, AGREEMENTS OR
GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, EXPRESS OR IMPLIED, ORAL OR
WRITTEN, RELATING TO, CONCERNING OR WITH RESPECT TO (1) THE VALUE, NATURE,
QUALITY OR CONDITION OF THE PROPERTY, (11) THE COMPLIANCE OF OR BY THE PROPERTY
WITH ANY LAWS, RULES, REGULATIONS, STATUTES OR ORDINANCES OF ANY APPLICABLE
GOVERNMENTAL AUTHORITY OR BODY, (111) THE LIABILITY, MERCHANTABILITY,
MARKETABILITY OR PROFITABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR USE OR
PURPOSE OF THE PROPERTY, OR (IV) ANY OTHER MATTER WITH RESPECT TO TIIE PROPERTY.
SPECIFICALLY, PURCHASER ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE EXPRESSLY SET OUT
IN THIS AGREEMENT, SELLER AND BROKER HAVE NOT MADE, DO NOT MAKE AND SPECIFICALLY
NEGATE AND DISCLAIM ANY REPRESENTATIONSOR WARRANTIES REGARD ING CO MPLIANCE OF
THE PROPERTY WITH ANY ENVIRONMENTAL PROTECTION OR LAND USE LAWS, RULES OR
REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, THOSE
PERTAINING TO SOLID WASTE, AS DEFINED BY U. S. ENVIRONMENTAL PROTECTION AGENCY
REGULATIONS AT 40 C.F.R., PART261, OR TIIE DISPOSAL OR EXISTENCE IN OR ON THE
PROPERTY, OF ANY HAZARDOUS SUBSTANCES AS DEFINED BY THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, AND
THE REGULATIONS PROMULGATED THEREUNDER. THE STATEMENTS AND DISCLAIMERS MADE
UNDER THIS PARAGRAPH SHALL BE INCLUDED IN THE DEED FROM SELLER TO PURCHASER AND
SHALL EXPRESSLY SURVIVE THE CLOSINC OF THIS AGREEMENT.
H. Assignment. Except as provided in this subparagraph H below, neither party
shall have the right to assign this Agreement or any of its rights and
privileges hereunder to any other person, firm or corporation without the prior
written consent of the other party. Notwithstanding the preceding sentence, it
is agreed and understood that the Purchaser shall have the right to assign this
Contract to an affiliate of Purchaser, or to assign certain portions of the
property being purchased by the Purchaser to other affiliated entities of the
Purchaser. An "affiliate" or "affiliated entities" shall mean
entities(corporations, partnerships or otherwise) controlled by or under the
control of the Purchaser named above.
I. Water. If the Property, which is the subject of this Contract, includes the
golf course, Purchaser understands and agrees that in accordance with the
requirements of the Harris Galveston Coastal Subsidence District ("HGCSD"),
Purchaser agrees to apply for a new water permit within ninety (90) days of the
date of closing. Further, and with respect to the requirements of the HGCSD,
Purchaser agrees as follows: within six (6) months from the date of closing,
Purchaser shall convert to surface water by completing the construction of the
pipe line from Municipal Utility District No. 19 to the irrigation lake in
exchange for (a) an agreement of, or (b) creation of, an agreement from all
necessary parties allowing Purchaser to use such water at a rate satisfactory to
Purchaser.. If permitted pursuant to the terms of a confirmed Chapter 11 Plan,
Seller will escrow $150,000.00 from the sales proceeds for the purpose of
insuring the construction of the water line. In connection therewith, Seller and
Purchaser shall enter into an Escrow Agreement, in form acceptable to Seller,
with the Title Company, whereby the title company will hold such escrow funds
pending completion of the water line, at which time (and upon presentation to
the Trustee and the escrow agent of evidence indicating the amount required for
construction of such water line) such amount (up to but not in excess of the sum
of $150,000.00) shall be paid to Purchaser against paid receipts for the hard
costs of construction of such water line, and the balance in the escrow, if any,
shall be paid over to the Seller.
<PAGE>
J. Inspection Indemnification. Purchaser shall indemnify and defend Seller and
Broker and hold Seller and Broker harmless from and against any and all claims,
liabilities, costs, expenses, causes of action or damages to the Property or
against Seller or Broker caused by Purchaser's and/or Purchaser's authorized
agents', representatives or employees as a result of any inspection of the
Property by such parties.
K. Execution. Each party hereto expressly represents the execution and delivery
of this Agreement is duly authorized by all necessary parties, proceedings and
actions, and is fully binding on the respective party hereto, their successors
and assigns.
L. Until this Contract becomes effective (as provided for in Paragraph 7 above)
the Purchaser shall make no communications with RGW Golf Development regarding
the Property, the Prime Contract, this Contract, or any other matter related to
the foregoing.
M. Seller agrees that Seller will not consent to an alteration or change in the
terms of the Prime Contract without Purchaser's express prior written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.
EXECUTED by Purchaser on this the 15th day of December, 1998.
PURCHASER:
RAMPART PROPERTIES CORPORATION
BY: /S/ J.H. Carpenter
PRINTED NAME: J.H. Carpenter
TITLE: Vice President
EXECUTED by Seller on this the 15th day of December, 1998.
BY: /S/ CHRIS WILLIAMS
CHRIS WILLIAMS, TRUSTEE
IN BANKRUPTCY FOR
NEWPORT PARTNERS
<PAGE>
PURCHASE AND SALE AGREEMENT
COUNTY OF HARRIS
KNOW ALL PERSONS BY THESE PRESENTS:
STATE OF TEXAS
This Purchase and Sale Agreement (the "Agreement") is made and entered into by
and between CHRIS WILLIAMS, TRUSTEE IN BANKRUPTCY FOR NEWPORT PARTNERS
(hereinafter called "Seller") and RGW GOLF DEVELOPMENT, a Texas Corp.
(hereinafter called "Purchaser").
WITNESSETH:
1. Property. For good and valuable consideration, the receipt of which is hereby
acknowledged, and subject to the terms and conditions hereinafter set forth,
Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase
from Seller, the real property, together with all rights, and appurtenances
thereto along with improvements situated thereon, if any, which is described on
Exhibit "A," which is attached hereto and made a part hereof for all purposes
(the "Property").
2. Purchase Price.
A.The purchase price for the Property shall be the sum of NO/100 DOLLARS and
such purchase price shall be paid in cash at thc Closing (hereafter defined).
B. Upon execution of this Agreement, Purchaser shall make an "Earnest Money"
deposit to SELLER. PURCHASER shall deposit an additional $240,000. In the event
Purchaser fails to purchase the Property in accordance with the provisions of
this Agreement, Seller may, as its sole remedy, terminate this Agreement and
retain the Earnest Money as liquidated damages. Otherwise, the Earnest Money
shall be credited to the purchase price of the Property at Closing. Time is of
the essence under this Agreement if Purchaser fails to timely deposit the
Earnest Money, Purchaser's offer shall be deemed rejected and this Agreement
shall be null, void and of no force and effect. The Earnest Money shall be held
by Seller in an interest-bearing account. When reference is made herein to the
Earnest Money, the same shall include any interest earned thereon.
3. Title.
A. Title Commitment. Seller has caused the First American Title Company ("the
Title Company") to issue to Purchaser a commitment for an owner's title
insurance policy (the "Title Commitment"), setting forth the state of title to
thc Property. Purchaser acknowledges receipt and review of the Title Commitment
and further acknowledges that title to the Property (and the encumbrances listed
on the Title Commitment) is acceptable to Purchaser. All items set out in
Schedule B of the Title Commitment shall be considered "Permitted Exceptions."
<PAGE>
B. Title Policy. At the Closing of the sale of the Property as provided
herein, if requested by Purchaser and if Purchaser pays the title premium
charged therefor, Seller shall cause an owner's title policy to be furnished to
Purchaser by the Title Company covering the Property. Such title policy shall be
issued by the Title Company and shall insure Purchaser's ownership of fee
simple, indefeasible title to the Property. The title policy shall contain the
Permitted Exceptions, but shall contain no additional exceptions to title other
than standard printed exceptions, and shall be issued on the standard form of
owner's policy of title insurance then currently promulgated by the State Board
of insurance of the State of Texas.
C. Deed. The Property will be conveyed by Seller to Purchaser upon the Closing
by Special Warranty Deed conveying good and indefeasible fee simple title,
subject only to: (i) the matters set forth in Schedule "B" of the Title
Commitment; (ii) all easements and other matters shown on the plat of any
subdivision; and (iii) other matters specifically provided for herein (and the
same shall also constitute "Permitted Exceptions").
D. Review Period. It is agreed that Purchaser shall have a "Review Period" (that
will begin on the effective date of this Contract and terminate at 5:00 p.m.,
Central Standard Time, January 15, 1999), in which to come upon the Property and
to make soil tests and other inspections of the Property, to make surveys and to
examine the physical condition of the Property and the condition of title to the
Property to determine if the Property is acceptable for Purchaser's use. In the
event the Property is unacceptable to Purchaser, Purchaser shall have until the
end of the Review Period (5 00 p.m., Central Standard Time, January 15, 1999) in
which to notify Seller, in writing, of Purchaser's election to terminate this
Contract, in which the Earnest Money, together with any interest earned thereon,
shall be immediately returned to the parties hereto shall be released from all
obligations hereunder, each to the other. In the event Purchaser does not elect
to so terminate this Contract (on or before 5:00 p.m., Central Standard Time,
January 15, 1999), it shall be deemed, for all purposes, that Purchaser is
satisfied with the condition of the Property, title to the Property and all
other aspects of the Property, and the Earnest Money shall then be nonrefundable
to Purchaser.
4. Closing.
A. The purchase of the Property pursuant hereto shall occur at the offices of
the Title Company on the Closing Date. The Closing Date shall occur on February
15, 1999.
B. At the Closing, Seller shall deliver to Purchaser the following:
(1) A Special Warranty Deed, duly executed and acknowledged. conveying the
Property to Purchaser, as provided in Paragraph 3 above, in the form of Deed
being set out in Exhibit "B," which is attached hereto and made a pan hereof for
all purposes; and
(2) if requested and paid for by Purchaser, Seller shall cause the Title Company
to deliver to Purchaser the owner's policy of title insurance as set out in
Paragraph 3.B above.
C. At the Closing, Purchaser shall pay to Seller the purchase price for the
Property, in cash, by cashier's check or by wired funds (as instructed by Seller
or the Title Company).
D. At the Closing, Seller shall pay one-half of any escrow fee, the cost of
preparing all mortgage lien releases (of existing mortgage liens placed against
the Property by Seller, if any), the cost of tax certificates, the cost of
preparation of the Deed by Seller's attorney, and the fees for recording the
Deed. Purchaser shall pay one-half of any escrow fee, and the premiums for an
owner's title insurance policy. Real estate taxes and homeowners association
assessments, if any, relating to the Property for the year of Closing shall be
prorated between Seller and Purchaser. If Closing shall occur before the tax
rate is fixed for the year in which Closing occurs, the proration of taxes shall
be upon the basis of the tax rate for the previous year applied to thc most
recent assessed valuation. Thereafter, there will be no adjustment of such
prorations.
<PAGE>
E. Except as otherwise provided herein, all closing costs shall be charged to
the respective parties as is customary in the purchase and sale of real property
in Harris County, Texas, on the date of the Closing. Possession of the Property
shall be delivered to Purchaser at the Closing and upon funding of the Purchase
Price to Seller.
5. Default and Remedies.
A. Seller's Defaults; Purchaser's Remedies.
(1) Seller's Defaults. Seller shall be in default hereunder in the event Seller
shall fail to meet, comply with, or perform any covenant agreement or obligation
on its part required within the time limits and in the manner required in this
Agreement.
(2) Purchaser's Remedies. In the event Seller shall be in default hereunder,
Purchaser may, at Purchaser's sole Option, and as Purchaser's sole remedy, do
any one of the following:
(i) Terminate this Agreement by written notice delivered to Seller, and in such
event this Agreement shall be null, void and of no force and effect, and the
parties hereto shall have no further obligations hereunder, each to the other,
and the Earnest Money shall then be refunded to Purchaser; or
(ii) Waive defects or objections and proceed to purchase the Property without
adjustment of the, purchase price.
(iii) Proceed with a Specific Performance Lawsuit against Seller.
B. Purchaser's Defaults; Seller's Remedies.
(1 ) Purchaser's Default Purchaser shall be in default hereunder if Purchaser
shall for any reason other than a default by Seller hereunder, or termination of
this Agreement pursuant to the express provisions hereof, fail to meet, comply
with, or perform any covenant, agreement or obligation on its part to be
performed within the time limits and in the manner set forth herein.
(2) Seller's Remedies. In the event Purchaser shall be in default hereunder,
Seller may, as its sole and exclusive remedy, terminate this Agreement by
written notice to Purchases and retain the Earnest Money, it being agreed
between Purchaser and Seller that such sum shall be liquidated damages for a
default by Purchaser hereunder because of the difficulty, inconvenience. and
uncertainty of ascertaining actual damages for such default.
C. The remedies provided hr above shall be deemed the exclusive remedies of the
parties hereto. In the event either party institutes legal proceedings to
exercise its rights or to enforce this Agreement, the prevailing party in any
such proceeding shall be entitled to recover reimbursement of all reasonable
legal fees and costs of court incurred by such prevailing party from the other
party.
6. Utility Districts. Purchaser acknowledges its awareness that the Property is
located within the boundaries of The Newport Municipal Utility District
<PAGE>
7. General Provisions.
A. Commissions. Seller has agreed to pay a commission to CB Richard Ellis
("Broker") in accordance with a separate agreement. Neither the Seller nor the
Buyer shall pay any brokerage commission, finder's or other fee to my broker,
agent or other person other than Seller's obligations under the above referenced
listing agreement between it and the Broker. Purchaser acknowledges that any
cooperating broker claiming to represent the Purchaser or the Seller shell not
receive any commission payments from Seller or the Broker. Except as set forth
in the preceding sentences of this Section, Seller shall defend, indemnify, and
hold harmless Purchaser, and Purchaser shall defend, indemnify, and hold
harmless Seller and Broker, from and against all claims by any broker, agent or
other person for brokerage, commission, finder's or other fees relative to this
Agreement or the sale of the Property, and all court costs, attorney's fees, and
other costs or expenses, arising therefrom, and alleged to be due by
authorization of the indemnifying party. This paragraph shall survive the
termination of this Agreement and the Closing. The Seller's duty to indemnify
and hold the Broker and/or Purchaser harmless is limited to the assets of the
Newport Partners bankruptcy estate, and the Seller shall in no way be personally
liable for any such indemnification. The Seller s duty to indemnify and hold
harmless created hereby shall survive until the closing of the bankruptcy
estate.
B. Survival of Provisions. It is mutually agreed by the parties hereto that
except as expressly provided herein, the terms and provisions contained in this
Agreement shall be considered merged into the instruments evidencing such
conveyance, and shall not survive such conveyance.
C. Notices, All of the requirements and provisions for notice under this
Agreement shall have been met when such notice bas been placed in writing and
sent certified mail, United States mail, postage prepaid, return receipt
requested, to the respective parties hereto at the following addresses or a
change of address is given by either party to the other in writing:
TO PURCHASER: RGW GOLF DEVELOPMENT, INC.
4112 N. JOSEY LANE
SUITE 120-224
CARROLLTON, TEXAS 75007-1509
TO SELLER: CHRIS WILLLIMS, TRUSTEE
5858 WESTHEIMER
SUITE 707
HOUSTON, TEXAS 71057
D. Time of Essence. It is mutually agreed that time is of the essence of this
Agreement and each of its terms. Waiver of any obligation or performance by
either Purchaser or Seller shall not constitute a waiver of a subsequent
obligation or performance. If the final day of any period of time set out in any
provision of this Agreement falls upon a Saturday or Sunday or a legal holiday
under the laws of the State of Texas, then and in such event, thc time of such
period shall be extended to the next business day which is not a Saturday,
Sunday or legal holiday.
E. Entire Agreement. This Agreement contains the entire agreements, oral or
written of the parties hereto, and there are no other representations,
conditions and/or understandings made which are not expressly contained in this
Agreement. This Agreement shall be binding upon and shall inure to the benefit
of the respective permitted successors and assigns of the parties hereto and
shall oe government and construed by the laws of the State of Texas. This
Agreement and the rights of Purchaser herein may not be assigned without the
prior written consent of Seller.
F. Court Approval. On or before January 14, 1998 the Seller shall furnish
Purchaser with an order from the bankruptcy court approving the sale and
conveyance as contemplated by the terms of this Agreement or an order confirming
Chapter 11 Plan authorizing the Trustee ("Seller") to sell and convey the
Property to Purchaser free and clear of all liens, claims and encumbrances.
<PAGE>
G. PURCHASER HAS ALSO RECEIVED A SURVEY OF THE PROPERTY. PURCHASER IS RELYING
SOLELY ON PURCHASER'S OWN INVESTIGATIONS OF THE PROPERTY AND NOT ON ANY
INFORMATION PROVIDED BY SELLER, BROKER OR ANY PARTY ACTING ON BEHALF OF SELLER.
IT IS THE UNDERSTANDING AND INTENTION OF THE PARTIES HERETO THAT THE SALE OF THE
PROPERTY FROM SELLER TO PURCHASER IS MADE ON AN "AS IS, WHERE IS" BASIS AND WITH
ALL FAULTS. IT IS EXPRESSLY PROVIDED, AND PURCHASER ACKNOWLEDGES, THAT SELLER
HAS NOT MADE, DOES NOT MAKE, AND SPECIFICALLY NECATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, AGREEMENTS OR GUARANTIES OF ANY KIND OR
CHARACTER WHATSOEVER, EXPRESS OR IMPLIED, ORAL OR WRITTEN, RELATING TO,
CONCERNINC OR WITH RESPECT TO (1) THE VALUE, NATURE, QUALITY OR CONDITION OF THE
PROPERTY, (II) THE COMPLIANCE OF OR BY THE PROPERTY WITH ANY LAWS, RULES,
REGULATIONS, STATUTES OR ORDINANCES OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR
BODY, (III) THE LIABILITY, MERCIIANTABILITY, M`LRKETABILITY OR PROFITABILITY,
SUITABILITY OR EITNESS FOR A PARTICULAR USE OR PURPOSE OF THE PROPERTY, OR (IV)
ANY OTHER MATTER WITH RESPECT TO THE PROPERTY. SPECIFICALLY, PURCHASER
ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE EXPRESSLY SET OUT IN THIS AGREEMENT,
SELLER AND BROKER HAVE NOT MADE, DO NOT MAKE AND SPECIFICALLY NEGATE AND
DISCLAIM ANY REPRESENTATIONS OR WARRANTIES REGARDING COMPLIANCE OF THE PROPERTY
WITH ANY ENVIRONMENTAL PROTECTION OR LAND USE LAWS, RULES OR REGULATIONS, ORDERS
OR REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, THOSE PERTAINING TO SOLID WASTE,
AS DEFINED BY U. S. ENVIRONMENTAL PROTECTION AGENCY REGULATIONS AT 40 C.F.R.,
PART 261, OR THE DISPOSAL OR EXISTENCE IN OR ON THE PROPERTY, OF ANY HAZARDOUS
SUBSTANCES AS DEFINED BY THE COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION
AND LIABILITY ACT OF 1980, AS AMENDED, AND THE REGULATIONS PROMULGATED
THEREUNDER. THE STATEMENTS AND DISCLAIMERS MADE UNDER THIS PARAGRAPH SHALL BE
INCLUDED IN THE DEED FROM SELLER TO PURCHASER AND SHALL EXPRESSLY SURVIVE THE
CLOSING OF THIS ACREEMENT.
H. Assignment. Neither party shall have the right to assign this Agreement or
any of its rights and privileges hereunder to any other person, firm or
corporation without the prior written Consent of the other party. Not
withstanding the above, Purchaser, shall have the right to assign this
Agreement.
I. Water. If the Property, which is the subject of this Contract, includes the
golf course, Purchaser understands and agrees that in accordance with the
requirements of the Harris Galveston Coastal Subsidence District ("HGCSD"),
Purchaser agrees to apply for 8 new water permits within ninety (90) days of the
date of closing. Further, and with respect to the requirements of the HGCSD,
Purchaser agrees as follows: within six (6) months from the date of closing,
Purchaser shall convert to surface water by completing the construction of the
pipe line from Municipal Utility District No. 19 to the irrigation lake. If
permitted pursuant to the terms of a confirmed Chapter 11 Plan, Seller will
escrow from the sales proceeds for the purpose of insuring the construction of
the water line. In connection therewith, Seller and Purchaser shall enter into
an Escrow Agreement, in form acceptable to Seller, with the Title Company,
whereby the title company will hold such escrow funds pending completion of the
water line, at which time (and upon presentation to the Trustee and the escrow
agent of evidence indicating the amount required for construction of such
waterline) such amount (up to but not in excess of the sum of $___ shall be paid
to Purchaser from the escrow fund against paid receipts for the hard costs of
construction of such water line, and the balance in the escrow, if any, shall be
paid over to the Seller.
J. Inspection Indemnification. Purchaser shall indemnity and defend Seller and
Broker and hold Seller and Broker harmless from and against any and all claims,
liabilities, costs, expenses, causes of action or damages to the Property or
against Seller or Broker caused by Purchaser's and/or Purchaser's authorized
agents', representatives or employees as a result of any inspection of the
Property by such parties.
K Execution. Each party hereto expressly represents the execution and delivery
of this Agreement is duly authorized by all necessary parties, proceedings and
actions, and is fully binding on the respective party hereto, their successors
and assigns.
<PAGE>
L . "Back-up Contracts." It is understood and agreed that Seller shall have the
right to receive "backup" contracts to purchase the Property, for any price and
upon any terms acceptable to Seller. Back-up contracts will become effective
only in the event Purchaser terminates this Contract as provided for it,
Paragraph 3.D above, or fails to close the purchase of the Property thereafter
(without so terminating the Contract).
EXECUTED by Purchaser on this the 7th day of December, 1998.
PURCHASER:
RGW GOLF DEVLOPMENT INC.
BY: /S/ Ray G. Wicken
PRINTED NAME: Ray G. Wicken
TITLE: President
EXECUTED by Seller on this the 8th day of December, 1998 (the "effective date").
SELLER:
BY: /S/ CHRIS WILLIAMS
CHRIS WILLIAMS, TRUSTEE
IN BANKRUPTCY FOR
NEWPORT PARTNERS
PROMISSORY NOTE
Date: January 29, 1999
Maker: RAMPART PROPERTIES CORPORATION
Maker's Mailing Address (including County):
700 Louisiana, Suite. 2510
Houston, (Harris County) Texas 77002
Payee: Janke Family PARTNERSHIP, LTD.
Place for Payment (including county):
Principal Amount: $1,400,000.00
Annual Interest Rate on Unpaid Principal from Date:Ten per cent (10%) per annum
Annual Interest Rate on Matured, Unpaid Amounts:
The maximum rate allowed by law, and in the absence of such rate
eighteen percent (18.00%) per annum.
Terms of Payment (principal and interest): Principal shall be paid as follows:
Beginning Much 1, 1999 and continuing on the first day of each and every month
thereafter interest only shall be paid until December 31, 1999 when the entire
unpaid principal balance together with all accrued and unpaid interest shall be
due and payable.
Maker shall have the right co prepay all or any portion of the principal balance
of the Note with no notice, penalty or premium.
Security for Payment:
A deed of trust lien of even date herewith covering the property known as
portion of Newport Subdivision, Harris County, Texas, and being more
particularly described in a Deed of Trust of even due herewith executed by the
Maker and Paul H. Coleman for the benefit of Payee.
Maker promises to pay to the order of Payee at the place e for payment and
according to the terms of payment the principal amount plus interest at the
rates stated above. All unpaid amounts shall be due by the final scheduled
payment date.
If Maker defaults in the payment of this note or in the performance of any
obligation in any instrument securing or collateral to it, then Payee may
declare the unpaid principal balance and earned interest on this note
immediately due, without demands or notice or notice of intent to accelerate
whatsoever. Maker and each surety, endorser, and guarantor hereby waive all
demands for payment, presentations for payment, notices of intention to
accelerate maturity, notices of acceleration of maturity, protests, and notices
of protest, to the extent permitted by law.
<PAGE>
If this note or any instrument securing or collateral to It is given to an
attorney for collection or enforcement, or if suit is brought for collection or
enforcement, or if it is collected or enforced through probate, bankruptcy, or
other judicial proceeding, then Maker shall pay Payee all costs of collection
and enforcement, including reasonable attorney's fees and court costs, in
addition to other amounts due. Reasonable attorney's fees shall be 10 % of all
amounts due unless either party pleads otherwise.
Interest on thee debt evidenced by this note shall not exceed the maximum
amount of nonusurious interest that may be contracted for, taken, reserved,
charged, or received under law; any interest in excess of that maximum amount
shall be credited to the principal of the debt or, if that has been paid,
refunded. On any acceleration or required prepayment any such excess shall be
canceled automatically as of the acceleration or prepayment or, if already paid,
credited on the principal of the debt or, if the principal of the debt has been
paid, refunded. This provision overrides other provisions in this and all other
instruments concerning the debt.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
RAMPART PROPERTIES CORPORATION
By: /s/ J.H. Carpenter
J.H. Carpenter
President
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 January 29, 1999, except for Note 14
as to which the date is February 12, 1999, 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
April 8, 1999
Robert A. Shuey, III
8214 Westchester, Suite 500
Dallas, Texas 75225
I have read Amendment No. 1 to the Registration Statement of Rampart Capital
Corporation. dated April 9, 1999 and hereby consent to the use of my name as a
director nominee in the prospectus which is a part thereof.
/s/ Robert A. Shuey, III
Robert A. Shuey, III
April 9, 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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 583,629
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,513,332
<CURRENT-ASSETS> 0
<PP&E> 810,851
<DEPRECIATION> 42,446
<TOTAL-ASSETS> 7,966,549
<CURRENT-LIABILITIES> 0
<BONDS> 3,740,488
0
0
<COMMON> 22,500
<OTHER-SE> 3,140,825
<TOTAL-LIABILITY-AND-EQUITY> 7,966,549
<SALES> 3,121,108
<TOTAL-REVENUES> 6,843,785
<CGS> 2,408,487
<TOTAL-COSTS> 2,408,487
<OTHER-EXPENSES> 1,181,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 494,142
<INCOME-PRETAX> 2,759,601
<INCOME-TAX> 694,891
<INCOME-CONTINUING> 2,064,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,064,710
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
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