<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No___________)*
SOUTHMARK CORPORATION
--------------------------------------------------------------------------------
(Name of Issuer)
Redeemable Series A Preferred Stock, par value $0.01 per share
Common Stock; par value $0.01 per share
--------------------------------------------------------------------------------
(Title of Class of Securities)
844544-88-2 - Redeemable Series A Preferred Stock
844544-80-9 - Common Stock
--------------------------------------------------------------------------------
(CUSIP Number)
Steven C. Metzger
Prager, Metzger & Kroemer PLLC
2626 Cole Avenue, Suite 900
Dallas, Texas 75204-1083
(214) 969-7600
(214) 523-3838 (Facsimile)
...........................................................................
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
May 24, 2000
--------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rules 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting persons's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
CUSIP No. 844544-88-2
--------------------------------------------------------------------------------
1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
A&B CAPITAL CORPORATION, FEI No. 75-2856350
--------------------------------------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a)
(b)
--------------------------------------------------------------------------------
3) SEC Use Only
--------------------------------------------------------------------------------
4) Source of Funds (See Instructions) WC
--------------------------------------------------------------------------------
5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e)
--------------------------------------------------------------------------------
6) Citizenship or Place of Organization Nevada
--------------------------------------------------------------------------------
7) Sole Voting Power 965,541
Number of
Shares Bene- ------------------------------------------------------------
ficially 8) Shared Voting Power
Owned by
Each Report- ------------------------------------------------------------
ing Person 9) Sole Dispositive Power 965,541
With
------------------------------------------------------------
10) Shared Dispositive Power -0-
--------------------------------------------------------------------------------
11) Aggregate Amount Beneficially Owned by Each Reporting Person 965,541 shares
--------------------------------------------------------------------------------
12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
--------------------------------------------------------------------------------
13) Percent of Class Represented by Amount in Row (11) 34.1%
--------------------------------------------------------------------------------
14) Type of Reporting Person (See Instructions) CO
--------------------------------------------------------------------------------
<PAGE> 3
CUSIP No. 844544-80-9
--------------------------------------------------------------------------------
1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
(entities only)
A&B CAPITAL CORPORATION, FEI No. 75-2856350
--------------------------------------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a)
(b)
--------------------------------------------------------------------------------
3) SEC Use Only
--------------------------------------------------------------------------------
4) Source of Funds (See Instructions) WC
--------------------------------------------------------------------------------
5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e)
--------------------------------------------------------------------------------
6) Citizenship or Place of Organization Nevada
--------------------------------------------------------------------------------
7) Sole Voting Power 7,345,514
Number of
Shares Bene- ------------------------------------------------------------
ficially 8) Shared Voting Power -0-
Owned by
Each Report- ------------------------------------------------------------
ing Person 9) Sole Dispositive Power 7,345,514
With
------------------------------------------------------------
10) Shared Dispositive Power -0-
--------------------------------------------------------------------------------
11) Aggregate Amount Beneficially Owned by Each Reporting Person 7,345,514
shares
--------------------------------------------------------------------------------
12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
--------------------------------------------------------------------------------
13) Percent of Class Represented by Amount in Row (11) 20.0%
--------------------------------------------------------------------------------
14) Type of Reporting Person (See Instructions) CO
--------------------------------------------------------------------------------
<PAGE> 4
ITEM 1. SECURITY AND ISSUER.
This initial Statement on Schedule 13D (the "Statement") relates to
securities of Southmark Corporation, a Georgia corporation (the "Issuer" or
"Southmark"), which has its principal executive offices located at 2711 LBJ
Freeway, Suite 950, Dallas, Texas 75234. The securities in question are the
Redeemable Series A Preferred Stock, par value $0.01 per share (the "Preferred
Stock") and the Common Stock, par value $0.01 per share (the "Common Stock").
The CUSIP number of the shares of Preferred Stock is 844544-88-2; the CUSIP
number of the shares of Common Stock is 844544-80-9.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) and (f). This Statement is filed by A&B Capital Corporation, a
Nevada corporation, which presently has its principal executive offices located
at 1600 Red Bud Boulevard, Suite 402, McKinney, Texas 75609. The name, business
address, and capacity with A&B Capital Corporation of each of the executive
officers or directors of A&B Capital Corporation are set forth on Schedule 1
attached hereto. Each of the individuals listed on Schedule 1 is a citizen of
the United States of America. A&B Capital Corporation is a wholly-owned
subsidiary of Octagon Equity Corporation, a Nevada corporation, which presently
has its principal executive offices located at 1600 Red Bud Boulevard, Suite
402, McKinney, Texas 75609. The executive officers or directors of Octagon
Equity Corporation are the same as A&B Capital Corporation.
(d). During the last five years, none of A&B Capital Corporation, Octagon
Equity Corporation nor any of their respective executive officers or directors
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
(e). During the last five years, none of A&B Capital Corporation, Octagon
Equity Corporation nor any of their respective executive officers or directors
has been a party to any civil proceeding of a judicial or administrative body of
competent jurisdiction which resulted in a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The consideration paid to purchase the shares of Preferred Stock (and
Common Stock) described in Item 5 below, is from the working capital of A&B
Capital Corporation and no part of the purchase price is represented by funds or
other consideration borrowed or otherwise obtained for the purpose of acquiring,
-1-
<PAGE> 5
holding, trading or voting the securities. A&B Capital Corporation may in the
future utilize its margin accounts with Goldman Sachs and Bear Stearns & Co.,
which accounts may from time to time have debit balances and include certain of
the shares of Preferred Stock and Common Stock. Since other securities are held
in such accounts, it may be impracticable to determine the amounts, if any,
borrowed with respect to the Preferred Stock or the Common Stock and interest
costs vary with applicable costs and account balances.
ITEM 4. PURPOSE OF TRANSACTION.
The purpose of the acquisitions of securities of the Issuer described in
Item 5(c) below, was an investment in the Issuer to assist in the day-to-day
operational control and management of the Issuer by A&B Capital Corporation. A&B
Capital Corporation has no present plans or proposals which would result in A&B
Capital Corporation or any affiliate of it seeking to acquire the entire equity
interest in the Issuer. A&B Capital Corporation intends to continue to regularly
review the position of A&B Capital Corporation with respect to shares of
Preferred Stock and Common Stock of the Issuer and, depending upon the
evaluation of the Issuer's operations and prospects and upon market and economic
conditions and future developments (including without limitation, other business
opportunities, developments with respect to the business and operations of the
Issuer, general economic conditions, as well as regulatory conditions), A&B
Capital Corporation might (i) increase or decrease its holdings of shares of
Preferred Stock or Common Stock (or both) of the Issuer and/or (ii) change its
intentions with respect to its investment. As of the date of this original
Statement on Schedule 13D, A&B Capital Corporation does not have any present
plans or proposals which relate to or would result in
(a) the acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer (except that A&B
Capital Corporation may purchase additional shares of Preferred Stock or
Common Stock of the Issuer or sell some or all of the shares of Preferred
Stock or Common Stock at any time held depending upon A&B Capital
Corporation's then views as to its investment); or
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Issuer or any of its
subsidiaries (except that depending upon available business opportunities,
A&B Capital Corporation may request that the Issuer acquire another entity
having ongoing business operations, but no such other entity has been
identified as of the date of this Statement on Schedule 13D); or
-2-
<PAGE> 6
(c) a sale or transfer of a material amount of assets of the Issuer or
any of its subsidiaries (except that pursuant to the purchase from Charles
B. Brewer described in Item 5(c) below, A&B Capital Corporation agreed to
cause the Issuer to have sufficient funds for the Issuer to make a
distribution of cash or securities of another to certain of the preferred
shareholders of the Issuer); or
(d) any change in the present Board of Directors or Management of the
Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the Board (except that
pursuant to the agreement with Charles B. Brewer concerning the acquisition
of his securities, as described in Item 6 below, two designees of A&B
Capital Corporation, Ronald F. Akin and Ronald F. Bruce have been added to
and became members of the Board of Directors of the Issuer on May 24, 2000
subject to certain conditions); or
(e) any material change in the present capitalization or dividend
policy of the Issuer (except that pursuant to the acquisition of securities
from Charles B. Brewer described in Item 5(c) below, A&B Capital
Corporation agreed to cause the Issuer to make a distribution to certain of
the other Preferred Shareholders of the Issuer); or
(f) any other material change in the Issuer's business or corporate
structure; or
(g) changes in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person; or
(h) causing a class of securities of the Issuer to be de-listed from a
national securities exchange or cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities
association; or
(i) a class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or
(j) any action similar to any of those enumerated above.
-3-
<PAGE> 7
In each instance enumerated above, A&B Capital Corporation has committed to
certain matters to Charles B. Brewer pursuant to the Stock Purchase Agreement
with him described in Item 6 below, the resulting effect of which may be to
alter one or more of the statements set forth above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) According to the latest information available from the Issuer, as of
April 30, 2000, 2,831,997 shares of Preferred Stock and 36,761,096 shares of
Common Stock were issued and outstanding. Accordingly, the 965,541 shares of
Preferred Stock and 7,346,114 shares of Common Stock deemed beneficially owned
by A&B Capital Corporation constitutes approximately 34% of the shares of
Preferred Stock of Southmark and 20% of the Common Stock of Southmark,
respectively, believed by A&B Capital Corporation to be outstanding.
(b) A&B Capital Corporation has the sole power to vote 965,541 shares of
Preferred Stock and 7,345,514 shares of Common Stock of the Issuer and, subject
to compliance with applicable securities laws, as well as a right of rescission
in favor of Charles B. Brewer under certain circumstances with respect to
certain of such shares, A&B Capital Corporation will have the sole power to
dispose of all of such 965,541 shares of Preferred Stock of the Issuer and
7,345,514 shares of Common Stock of the Issuer.
(c) During the sixty calendar days ended May 24, 2000, except for the
transactions described below, A&B Capital Corporation and its officers and
directors did not engage in any transaction in the shares of Preferred Stock of
the Issuer or Common Stock of the Issuer or any other equity interests
derivative thereof:
(i) On May 24, 2000, A&B Capital Corporation purchased from Grace
Brothers, Ltd., an Illinois limited partnership ("GBL"), 787,271 shares of
Preferred Stock (which constitutes approximately 27.8% of the 2,831,997
shares of Preferred Stock of the Issuer presently outstanding) and
7,343,156 shares of Common Stock (which constitutes approximately 20% of
the 36,761,096 shares of Common Stock of the Issuer presently outstanding)
for a total consideration of $1,574,542 cash (calculated at the rate of
$2.00 per share of Preferred Stock). The shares of Common and Preferred
Stock constituted all securities of Southmark owned by GBL, was the subject
of a simple securities trade on the basis of payment versus delivery and
followed the approval by the Board of Directors or the "Transfer Review
Committee" of the Issuer.
-4-
<PAGE> 8
(ii) On May 24, 2000, A&B Capital Corporation acquired from Charles B.
Brewer 178,270 shares of Preferred Stock (which constitutes approximately
6.3% of the 2,831,997 shares of Preferred Stock of Southmark presently
outstanding) and 2,358 shares of Common Stock (which constitutes less than
0.01% of the 36,761,096 shares of Southmark Common Stock outstanding) at a
price of $267,405 (representing $1.50 per share of Preferred Stock) paid in
cash to Charles B. Brewer pursuant to a Stock Purchase Agreement dated May
23, 2000 (the "Stock Purchase Agreement") between A&B Capital Corporation
and Brewer. The shares of Common and Preferred Stock constituted all
securities of the Issuer owned by Brewer and followed the approval by the
Board of Directors as the Transfer Review Committee of the Issuer. Part of
the requirements of the Stock Purchase Agreement include the requirement of
a distribution through the Issuer to its Other Preferred Shareholders of
certain funds. See Item 6 below.
After giving effect to the two transactions described above, as of May 24, 2000,
A&B Capital Corporation is the owner and holder of a total of 965,541 shares of
Preferred Stock (which constitutes approximately 34.1% of the 2,831,997 shares
of Preferred Stock of Southmark believed to be outstanding), and a total of
7,346,114 shares of Common Stock (which constitutes approximately 20% of the
36,761,096 shares of Common Stock of Southmark presently outstanding). Except as
set forth above, A&B Capital Corporation, Octagon Holdings Corporation and their
respective officers and directors have not engaged in any transaction in the
shares of Preferred Stock or Common Stock of the Issuer during the past sixty
days immediately prior to the date of this Statement on Schedule 13D.
(d) No person other than A&B Capital Corporation or its Board of Directors
is known to have the right to receive or the power to direct receipt of
dividends from, or the proceeds of sale of, the 965,541 shares of Preferred
Stock and 7,346,114 shares of Common Stock of the Issuer held by A&B Capital
Corporation.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Pursuant to the Stock Purchase Agreement, A&B Capital Corporation
covenanted to cause the Issuer no later than July 31, 2000 to have an amount of
funds or other value calculated on the basis of $1.50 per share of Preferred
Stock (other than shares purchased from Brewer or GBL) sufficient to enable the
Issuer to cause a distribution to all "Other Preferred Shareholders" (excluding
Brewer, GBL and A&B Capital Corporation) of a value
-5-
<PAGE> 9
equal to $1.50 per share. Under certain circumstances, Brewer has an opportunity
to rescind, ab initio, during the period from July 31, 2000 until August 31,
2000 (unless Brewer shall have agreed to an extension of time) to rescind the
transaction by giving back the cash consideration paid to him in exchange for
the securities sold by him to A&B Capital Corporation. Under certain
circumstances, any designees appointed to the Board of Directors of the Issuer
will resign upon such rescission arrangement.
Under the Stock Purchase Agreement, Messrs. Bruce and Akin executed an
Instrument of Acceptance and Ratification dated May 24, 2000, ratifying the
resolution adopted by the sole member of the Board of Directors prior to their
election and irrevocably agreed to take no action to revoke or rescind such
resolution. The Instrument of Acceptance and Ratification also is an
acknowledgment and agreement by Messrs. Bruce and Akin that in the event the
covenant set forth in paragraph 6(d) of the Stock Purchase Agreement is not
deemed satisfied by Brewer and certain other matters occur, that Messrs. Bruce
and Akin will submit any necessary resignation at such time as is desired by
Brewer.
Pursuant to the Stock Purchase Agreement, A&B Capital Corporation also
executed a Springing Proxy which only becomes effective if A&B Capital
Corporation fails to cause the Issuer to have the amount of funds available to
make the distribution described above within the time stated and Brewer gives
notice and thirty days' opportunity to cure have passed, and Brewer elects to
rescind the transaction as described above. Once effective, Brewer may utilize
the Springing Proxy to vote for matters involving the election of directors but
may not use such Springing Proxy to vote in favor of a number of other actions
unless the event causing effectiveness remains outstanding for one calendar
year. The Springing Proxy, if effective, terminates upon the satisfaction of the
event in question or one day following the date of distribution of $1.50 per
share to the Other Preferred Shareholders.
Other than as described herein and in Items 3 and 5 above, there are no
contracts, arrangements, understandings or relationships (legal or otherwise)
among the persons named in Item 2 and between such persons and any other person
with respect to any securities of the Issuer, including but not limited to,
transfer or voting of any of the securities, finder's fees, joint ventures, loan
or option arrangements, put or calls, guarantees of profits, division of profits
or loss, or the giving or withholding of proxies.
-6-
<PAGE> 10
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following are filed herewith as exhibits or are incorporated by
referenced indicated below:
EXHIBIT
DESIGNATION EXHIBIT DESCRIPTION
99.1* Stock Purchase Agreement dated and effective May 23, 2000
among A&B Capital Corporation and Charles B. Brewer.
99.2* Approval letter dated May 23, 2000 from the Board of
Directors of Southmark Corporation addressed to Charles B.
Brewer and A&B Capital Corporation.
99.3* Approval letter dated May 23, 2000 from the Board of
Directors of Southmark Corporation addressed to Grace
Brothers, Ltd. and A&B Capital Corporation.
99.4* Springing Proxy dated May 24, 2000 issued by A&B Capital
Corporation in favor of Charles B. Brewer.
----------
*Filed herewith.
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement on
Schedule 13D is true, complete and correct.
Dated: June 5, 2000 A&B CAPITAL CORPORATION
By: Ronald E. Kimbrough
-----------------------------------------
Ronald E. Kimbrough,
Vice President, Secretary
and Treasurer
-7-
<PAGE> 11
SCHEDULE 1
EXECUTIVE OFFERS AND DIRECTORS OF
A&B CAPITAL CORPORATION
<TABLE>
<CAPTION>
NAME AND CAPACITY WITH
A&B CAPITAL CORPORATION BUSINESS ADDRESS
<S> <C>
Ronald F. Akin, Director and President 1600 Red Bud Blvd., Suite 402
McKinney, Texas 75609
Ronald F. Bruce, Director 1600 Red Bud Blvd., Suite 402
McKinney, Texas 75609
Ronald E. Kimbrough, Vice President, 1600 Red Bud Blvd., Suite 402
Secretary and Treasurer McKinney, Texas 75609
</TABLE>
-8-
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
<S> <C>
99.1* Stock Purchase Agreement dated and effective May 23, 2000
among A&B Capital Corporation and Charles B. Brewer.
99.2* Approval letter dated May 23, 2000 from the Board of
Directors of Southmark Corporation addressed to Charles B.
Brewer and A&B Capital Corporation.
99.3* Approval letter dated May 23, 2000 from the Board of
Directors of Southmark Corporation addressed to Grace
Brothers, Ltd. and A&B Capital Corporation.
99.4* Springing Proxy dated May 24, 2000 issued by A&B Capital
Corporation in favor of Charles B. Brewer.
</TABLE>
----------
*Filed herewith.
