As filed with the Securities and Exchange Commission on
September 21, 1998 Registration No. 333 -60171
----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SOURCE CAPITAL CORPORATION
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 91-085390
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1825 N. Hutchinson Road
Spokane, Washington 99212
(509) 928-0908
----------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
Lester L. Clark, Secretary
Source Capital Corporation
1825 N. Hutchinson Road
Spokane, Washington 99214-1146
(509) 928-0908
----------------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
Robert L. Magnuson, Esq.
Witherspoon, Kelley, Davenport & Toole, P.S.
422 West Riverside Avenue
Spokane, Washington 99201
(509) 624-5265
Approximate date of commencement of proposed sale to the public: From
time to time as the several selling shareholders may decide.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) 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 this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each Proposed Proposed Amount of
class of securities Amount to be maximum offering maximum aggregate registration
to be registered registered (1) price per unit offering price (2) fee (2)
------------------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C>
Common Stock, no
stated par value 749,064 shares N/A $6,367,044 $1,879
</TABLE>
(1) Shares issuable upon conversion of the Company's 7-1/2%
Convertible Subordinated Debentures due March 1, 2008 (and
interest accrued thereon) in the principal amount of $6,000,000
due March 1, 2008 issued by the Registrant to certain accredited
investors in a private placement transaction. See "Selling
Shareholders" for a description of certain assumptions made by
the Registrant to determine the number of shares of common Stock
to be registered hereunder. Pursuant to Rule 416 under the
Securities Act of 1933, any additional shares of Common Stock
issued either as a result of the provisions of the subordinated
debentures pursuant to which the Common Stock will be issued or
by reason of a reduction in the conversion price of the
subordinated debentures in accordance with the terms thereof are
deemed to be registered herewith.
(2) Estimated solely for the purpose of calculating the registration
fee pursuant to rule 457. Based on the last reported sale for
the Company's Common Stock on July 27, 1998.
<PAGE>
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
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
749,064 Shares of Common Stock
(No stated par value)
SOURCE CAPITAL CORPORATION
_____________________
This Prospectus relates to the offering by certain investors (the
"Selling Shareholders") of 749,064 shares (the "Conversion Shares") of
common stock, no stated par value (the "Common Stock") issuable upon
conversion of the 7-1/2% Convertible Subordinated Debentures in the
principal amount of $6,000,000 due March 1, 2008 (the "Debentures")
issued by Source Capital Corporation (the "Company" or "Source"). The
Conversion Shares are sometimes referred to herein as the
"Securities."
The Securities may be sold from time to time through brokers, to
dealers acting as principals, directly to purchasers in negotiated
transactions, or any combination of these methods of sale. In
addition, shares may be transferred in connection with the settlement
of call options, short sales or similar transactions that may be
effected by the Selling Shareholders. Sales may be made at prevailing
market prices at the time of such sales, at prices related to such
prevailing prices, at fixed prices that may be changed or at
negotiated prices. See "Selling Shareholders" and "Plan of
Distribution."
None of the proceeds from the sale of the Securities by the Selling
Shareholders will be received by the Company. The Company has agreed
to bear all expenses (other than selling commissions) in connection
with the registration and sale of the Securities being offered by the
Selling Shareholders. The Company has agreed to indemnify the Selling
Shareholders against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act").
In connection with any sales, the Selling Shareholders and any brokers
participating in such sales may be deemed to be "underwriters" within
the meaning of the Securities Act. See "Selling Shareholders."
On September 18, 1998, the last sale price of the Company's Common
Stock on the Nasdaq SmallCap Market was $6.75 per share (symbol
"SOCC").
THE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS,"
COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is September __, 1998.
<PAGE>
AVAILABLE INFORMATION
As used in this Prospectus, unless the context otherwise requires, the
terms "Source" and the "Company" mean Source Capital Corporation and
its subsidiaries. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and
other information may be inspected and copied at the Public Reference
Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the
Public Reference Room by calling 1-800-SEC-0330. In addition, the
Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding
registrants that filed electronically with the Commission. The
address of the site is http://www.sec.gov. The Company's Common Stock
is traded on the Nasdaq SmallCap Market. Reports and other
information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
This Prospectus constitutes part of a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits thereto,
referred to as the "Registration Statement") filed by the Company with
the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration
Statement, copies of which may be obtained from the Commission's
principal office in Washington, D.C. as set forth above and at the
Commission's World Wide Web site. Statements contained in this
Prospectus as to the contents of any contract or any other document
filed, or incorporated by reference, as an exhibit to the Registration
Statement, are qualified in all respects by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents, previously filed by the Company with the
Commission pursuant to the Exchange Act, are incorporated herein by
reference:
(i) Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997, as amended by Amendment No. 1 to the
Company's Annual Report for the year ended December 31, 1997,
dated July 29, 1998.
(ii) Report on Form 10-KSB/A dated July 29, 1998 which contains
Amendment No. 1 to the Annual Report on Form 10-KSB for the
year ended December 31, 1997.
<PAGE>
(iii) Quarterly Report on Form 10-QSB for the quarterly period ended
March 31, 1998;
(iv) Current Report on Form 8-K dated February 11, 1998; and
(v) Current Report on Form 8-K dated May 14, 1998.
(vi) Current Report on Form 8-K dated July 6, 1998.
(vii) Current Report on Form 8-K dated July 29, 1998.
(viii) Current Report on Form 8-K/A dated August 6, 1998 which
contains Amendment No. 1 to the current Report on Form 8-K
dated July 6, 1998.
(ix) Quarterly Report on Form 10-QSB for the quarterly period ended
June 30, 1998.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to
the termination of this offering shall be deemed to be incorporated by
reference into this Prospectus. Any statement contained in any
document incorporated or deemed to be incorporated by reference in
this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this Prospectus modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of
any such person, a copy of any document described above (other
than exhibits). Requests for such copies should be directed to
Source Capital Corporation at its principal offices located at
1825 N. Hutchinson Road, Spokane, Washington 99214-1146, telephone
(509) 928-0908, attention: Chief Financial Officer.
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN INVESTMENT IN
THE COMMON STOCK OFFERED BY THIS PROSPECTUS. CERTAIN STATEMENTS IN
THIS PROSPECTUS AND DOCUMENTS INCORPORATED HEREIN BY REFERENCE ARE
FORWARD-LOOKING AND ARE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS
OR PHRASES SUCH AS "INTENDED," "WILL BE POSITIONED," "EXPECTS," OR ARE
"EXPECTED," "ANTICIPATES," "ANTICIPATED" "WILL CONTINUE" "WILL LIKELY
RESULT" AND "PROJECTED" AND SIMILAR EXPRESSIONS. THESE FORWARD-
LOOKING STATEMENTS ARE BASED ON THE COMPANY'S CURRENT EXPECTATIONS.
TO THE EXTENT ANY OF THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS CONSTITUTES A "FORWARD-LOOKING
STATEMENT", THE RISK FACTORS SET FORTH BELOW ARE CAUTIONARY STATEMENTS
IDENTIFYING SOME, BUT NOT NECESSARILY ALL, IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENT.
Impact of Interest Rates, Economic Factors and Real Estate Risk
---------------------------------------------------------------
The results of operations of financial service providers such as the
Company may be materially and adversely affected by changes in
prevailing economic conditions, including declines in real estate
market values, changes in interest rates and the monetary and fiscal
policies of the federal government. An investment in the Company will
be subject to the risks incident to the ownership and operation of
real estate, including risks associated with the general economic
climate, local real estate conditions, geographic or market
concentration, competition from other sources, the ability of the
Company or third-party borrowers to manage real properties,
governmental regulations and fluctuations in interest rates.
Dependence on Key Personnel
---------------------------
The success of the Company is substantially dependent on certain key
individuals. Should one or more of these individuals become
incapacitated or in some other way cease to participate in the
Company, its performance could be adversely affected.
The Company's success is also dependent upon the ability of the
Company to hire and retain lending, financial and marketing personnel.
Competition for qualified employees among financial companies is
intense, and the inability to attract, retain and motivate additional
highly skilled employees, could adversely affect the Company's
business and prospects. There can be no assurance that the Company
will be able to retain its existing personnel or attract additional
qualified employees.
<PAGE>
The Limited Operating History of Subsidiaries
---------------------------------------------
The Company's leasing and accounts receivable financing subsidiaries,
Source Capital Leasing Company and Source Capital Finance, Inc.,
respectively, commenced operations in 1997. The business of the
Company's accounts receivable financing subsidiary has not developed
as rapidly as anticipated. Consequently, the Company's short term
focus has been directed towards its real estate lending and leasing
activities. As the business of the Company is rapidly changing, the
history of the Company is only of limited relevance in considering the
risk factors inherent in and affecting the business of the Company in
the future. Prospects of the Company must be considered in light of
the risks, expenses and difficulties frequently encountered upon entry
into new areas of business. There can be no assurance that the
Company will be successful or profitable in its present or new areas
of operations.
Allowances for Losses on Loans and Leases
-----------------------------------------
Allowances for losses on loans, leases and real estate owned are
maintained at levels considered adequate by management and are
sufficient in Management's opinion to absorb probable losses currently
anticipated. Loss allowances are based on management's estimate of
the net realizable value or fair market value net of selling costs, of
the underlying collateral, as applicable. Management, in determining
the amount of the allowances, considers the current and anticipated
operating results and marketability of the collateral from which
repayment of the outstanding balances is expected. There can be no
assurance, however, that such allowances will be adequate to cover
actual losses.
Dilution
--------
Conversion Shares acquired as a result of the conversion of the
Debentures may suffer dilution in the future in connection with other
share issuances by the Company in connection with future financings,
the exercise of options outstanding or to be granted in the future,
and other transactions.
Competition
-----------
Competition in the markets in which Source competes is intense and
includes many regional and national regulated financial and other
institutions with substantially greater resources than Source. The
Company also competes against finance companies that provide low-cost
credit facilities to a proprietary customer base.
Shares Eligible for Future Sale
-------------------------------
The number of Conversion Shares issuable to the Selling Shareholders
represent a significant percentage of the outstanding shares of Common
Stock. Sale of the Conversion Shares after this offering in the
public market could materially adversely affect the market price of
the Common Stock. <PAGE>
Trading Market for Common Stock
-------------------------------
The Company's Common Stock is quoted on The Nasdaq SmallCap Market.
There currently are a relatively limited number of shares of Common
Stock in the hands of the public and a relatively limited trading
market for the Common Stock. Consequently, purchasers of Shares may
have a limited ability to dispose of their Shares in the public
market. Furthermore, there can be no assurance that a more active
trading market for the Common Stock will develop or, if developed,
that it would be sustained.
Nasdaq Maintenance Requirements; Risks of Low-Priced Stocks
-----------------------------------------------------------
The Securities and Exchange Commission has approved rules imposing
stringent criteria for the listing of securities on Nasdaq, including
standards for maintenance of such listing. The Common Stock is quoted
on The Nasdaq SmallCap Market; however, the Company still must meet
certain maintenance criteria. If the Company is unable to satisfy
Nasdaq's maintenance criteria in the future, its securities will be
subject to being de-listed and trading, if any, would thereafter be
conducted in the over-the-counter market in the so-called "pink
sheets," or the "electronic bulletin board" of the National
Association of Securities Dealers, Inc. ("NASD"). As a consequence of
such de-listing, an investor could find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, the Company's
securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in
connection with trades in any stock defined as a penny stock. The
Commission recently adopted regulations that generally define a penny
stock to be any equity security that has a market value of less than
$5.00 per share, subject to certain exceptions. Such exceptions
include any equity security listed on Nasdaq, and any equity security
issued by an issuer that has: (i) net tangible assets of at least $2
million, if such issuer has been in continuous operation for three (3)
years; (ii) net tangible assets of at least $5 million, if such issuer
has been in continuous operation for less than three (3) years; or
(iii) average annual revenue of at least $6 million, for the last
three (3) years. Unless an exception is available, the regulations
require delivery, prior to any transaction involving a penny stock, of
a disclosure schedule explaining the penny stock market and the risks
associated therewith.
In addition, if the Company's securities are not quoted on Nasdaq, or
the Company does not have $2 million in net tangible assets, trading
in the Common Stock would be covered by Rule 15g-9, promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act"), for non-
Nasdaq and non-Exchange-listed securities. Under such Rule, broker-
dealers who recommend such securities to persons other than
established customers and accredited investors must make a special
written suitability determination for the customer, and receive the
purchaser's written agreement to a transaction prior to sale.
<PAGE>
Securities are also exempt from this Rule if the market price is at
least $5.00 per share.
Although the Company's Common Stock is, as of the date of this
Prospectus, outside the definitional scope of the penny stock rules,
in the event the Common Stock was subsequently to become characterized
as a penny stock, the market liquidity for the Company's securities
could be severely affected. In such an event, the regulations on
penny stocks could limit the ability of broker -dealers to sell the
Company's securities, and thus the ability of purchasers of the
Company's securities to sell their securities in the secondary market.
Authorization of Preferred Stock
--------------------------------
The Company's Articles of Incorporation authorize the issuance of 10
million shares of Preferred Stock which may be issued by the Company's
Board of Directors without further action by the shareholders, in one
or more series and with such designations for each series as may be
authorized by the Board of Directors. Accordingly, the Board of
Directors is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or
other rights which could adversely affect the voting power or other
rights of the holders of the Common Stock. In the event of issuance,
the Preferred Stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control
of the Company. As of the date of this Prospectus, there were no
shares of Preferred Stock outstanding or reserved for issuance.
Common Stock Redemption
-----------------------
The Company's Articles of Incorporation provide that in the event a
person ("Acquiring Person") becomes a beneficial owner of more than
twenty percent (20%) of the shares of the Company's outstanding Common
Stock and any of such shares were acquired pursuant to a tender offer
the acceptance of which was not recommended by the Board of Directors,
each holder of shares of Common Stock, other than the Acquiring
Person, shall have a right for a period of thirty (30) days following
the mailing by the Company of a notice of right to demand redemption,
to have the shares of Common Stock held by such holder redeemed by the
Company at a redemption price equal to the greater of (i) the highest
price per share which shares of Common Stock held by the Acquiring
Person were acquired pursuant to a tender offer, regardless of when
such tender offer was made, or were acquired pursuant to any market
purchase or otherwise within eighteen (18) months prior to the notice
of right to demand redemption or (ii) the highest sales price per
share of the Common Stock for any trading day during the eighteen (18)
months prior to the mailing by the Company of the notice of right to
demand redemption. The existence of the Common Stock redemption
rights could be utilized, under certain circumstances, as a method of
discouraging, delaying, or preventing a tender offer or a change in
control of the Company. See DESCRIPTION OF CAPITAL STOCK -- Stock
Redemption, p. 8, for a more detailed description of Common Stock
Redemption Rights.
<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from the sale of any of or all of
the Shares of Common Stock being offered by the Selling Stockholders
hereunder. Expenses to be incurred by the Company in connection with
the registration of the Shares are estimated at approximately $32,379.
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership by the Selling Shareholders of shares of the
Company's Common Stock. The Selling Shareholders purchased the
Debentures from the Company in a private transaction in February 1998.
The Securities offered by this Prospectus will be acquired by the
Selling Shareholders upon conversion of the Debentures. The
Debentures are not convertible prior to the earlier of the close of
business on September 30, 1998 or the effective date of the
registration statement filed by the Company for the resale of the
Conversion Shares.
The Debentures issued by the Registrant to each of the Selling
Shareholders set forth the terms for conversion of the Debentures into
the Conversion Shares and provide that the conversion price for the
Debentures is $8.01 per share of Common Stock subject to adjustment in
certain events as more fully described in the Debentures and the
Indenture dated as of February 11, 1998 between the Company and
Bankers Trust Company, as Trustee (the "Indenture"). The Indenture,
including a form of the Debentures, was filed as Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated February 18, 1998. The
Selling Shareholders may sell all, less than all or none of the shares
of Common Stock. No Selling Shareholder is an affiliate of the
Company or has held a position, office or had any other material
relationship with the Company or any of its affiliates within the past
three years except as a security holder of the Company.
Number of
Name Shares Offered (1)(2)
---------------------------------------------- ---------------------
Cornerstone Partners Limited Partnership 74,906
210 South Old Woodward Avenue - #230
Birmingham, MI 48990
Financial Edge Fund, L.P. 18,726
One Financial Place
440 S. LaSalle, Suite 1021
Chicago, IL 60605
Bay Hill Fund Limited 18,726
2420 Camino Ramon, Suite 222
San Ramon, CA 94583
<PAGE>
Number of
Name Shares Offered (1)(2)
---------------------------------------------- ---------------------
Everest Partners, L.P. 74,906
200 Park Avenue, 21st Floor
New York, NY 10013
JDN Partners, L.P. 56,179
2420 Camino Ramon, Suite 222
San Ramon, CA 94583
Cerulean Partners Limited 3,745
c/o Miller & Jacobs Capital, LLC
237 Park Avenue, Suite 801
New York, NY 10017
Acadia Fund I, L.P. 105,992 (3)
237 Park Avenue, Suite 801
New York, NY 10017
Acadia Fund II, L.P. 1,872
237 Park Avenue, Suite 801
New York, N.Y. 10017
Avant Garde Investment Limited 13,233 (3)
c/o Jeff Miller
237 Park Avenue, Suite 801
New York, NY 10017
Mutual Financial Services Fund 174,781
51 John F. Kennedy Pkwy
Short Hills, NJ 07078
Heartland Value Plus Fund, a series 174,781
of Heartland Group, Inc.
790 N. Milwaukee Street
Milwaukee, WI 53202
Oppenheimer - Spence Financial Services 31,210
Partnership, L.P.
Oppenheimer & Close, Inc.
119 West 57th Street, Suite 1515
New York, NY 10019
Other (4) 7
--------
Total 749,064
========
Footnotes appear on Page 7.
<PAGE>
(1) At the present time (except as set forth in footnote 3 below),
none of the Selling Shareholders own any shares of Common Stock.
Each Selling Shareholder has the right to acquire the shares of
Common Stock issuable upon the conversion of the Debentures.
The number of shares shown in the table for each Selling
Shareholder has been calculated assuming a conversion price of
$8.01 per share.
(2) Assumes that all shares offered hereby are sold by the Selling
Shareholders to non-affiliates of the Selling Shareholders.
(3) In addition to the shares of Common Stock issuable upon the
conversion of the Debentures, Acadia Fund I, L.P., Acadia Fund
II, L.P., Cerulean Partners Limited and Avant Garde Investment
Limited presently own, respectively, 11,767 shares, 2,161 shares,
2,921 shares and 6,151 shares of Common Stock.
(4) Due to potential change in ownership of debentures prior to
conversion into Common Stock, the conversion rate could result in
7 additional shares of Common Stock being issued upon conversion,
due to rounding.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
-------
The authorized capital stock of the Company consists of 10 million
shares of Common Stock and 10 million shares of Preferred Stock, no
par value per share (the "Preferred Stock"). As of June 30, 1998,
1,355,679 shares of the Company's Common Stock were issued and
outstanding and, 252,000 shares were reserved for issuance under the
Company's Employee and Directors Stock Option Plans and 749,064 shares
of Common Stock were reserved for issuance upon conversion of the
Debentures. As of the date of this Prospectus, there were no shares
of Preferred Stock outstanding or reserved for issuance.
Common Stock
------------
Each share of the Company's Common Stock is entitled to such dividends
as may from time to time be declared by the Company's Board of
Directors from any funds legally available for dividends. Holders of
the Company's Common Stock are entitled to one vote per share.
Shareholders do not have the right to cumulate their votes in the
election of Directors. The holders of the Company's Common Stock have
no preemptive or other right to subscribe for any additional
securities of the Company. In the event of a liquidation of the
Company, after payment or provision for payment of all debts and
liabilities and subject to the right of the holders of Preferred Stock
of the Company which may be outstanding, the holders of the Company's
Common Stock will be entitled to share ratably the remaining assets of
the Company. Shares of the Common Stock are fully paid and non-
assessable. Shares of the Company's Common Stock are listed on NASDAQ
SmallCap market.
Preferred Stock
---------------
Under the provisions of the Company's Articles of Incorporation,
Preferred Stock may be issued by the Company's Board of Directors
without further action by the shareholders, in one or more series and
with such designation for each such series as may be authorized by the
Board of Directors. The Board of Directors is authorized to determine
for each series, the voting powers, if any; the dividend rate and
whether such dividends shall be cumulative or non-cumulative; the
price or prices and the time or times and the manner the Preferred
Stock shall be redeemable and the terms of any sinking fund for the
purchase or redemption; the rights of the holders of the Preferred
Stock upon any voluntary or involuntary dissolution of the Company;
the terms, if any, of conversion or exchange for any other securities
of the Company, including prices and rates of conversion or exchange;
and any other rights, preferences, qualifications, limitations or
restrictions not inconsistent with the Articles of Incorporation to
the full extent permitted by the laws of the State of Washington.
<PAGE>
All shares of Preferred Stock of any one series shall be identical to
each other in all respects, except the shares from any one series
issued at different times may differ as to the dates for which
dividends thereon, shall be cumulative. The Company has no series of
Preferred Stock outstanding.
Stock Redemption
----------------
Pursuant to Article XVI of the Company's Articles of Incorporation, in
the event that a person ("Acquiring Person") (a) who is the beneficial
owner, directly or indirectly, of more than 20% of the shares of
Common Stock outstanding, becomes the beneficial owner, directly or
indirectly, of any additional shares of Common Stock pursuant to a
tender offer, or (b) becomes the beneficial owner, directly or
indirectly, of more than twenty percent (20%) of the Common Stock
outstanding and any of such shares of Common Stock are acquired
pursuant to a tender offer, each holder of shares of Common Stock,
other than the Acquiring Person, its affiliates or associates, or a
transferee of the Acquiring Person, shall have the right for a period
of 30 days following the mailing by the Company of a notice of a right
to demand redemption, to have the shares of Common Stock held by such
holder redeemed by the Company at the Redemption Price determined as
described in the following paragraph; and each holder of securities
convertible into shares of Common Stock or of options, warrants or
rights exercisable to acquire Common Stock prior to such 30 day
period, other than the Acquiring Person, its affiliates or associates,
or a transferee of the Acquiring Person, shall have the right
simultaneously with the conversion of such securities or exercise of
such options, warrants or rights to have the shares of Common Stock to
be received thereupon by such holder redeemed by the Company at the
Redemption Price; provided, that no holder of shares of Common Stock
shall have the right to have shares of Common Stock redeemed by the
Company pursuant to Article XVI of the Articles of Incorporation, if
the Company, acting through a majority of its Board of Directors,
shall within ten days following the announcement or publication of
such tender offer, or following any amendment of such tender offer,
recommend that such tender offer be accepted by the holders of the
Common Stock.
The Redemption Price available pursuant to Article XVI of the Articles
of Incorporation shall be the greater amount determined on either of
the following bases (but in no event shall the Redemption Price be
less than the amount of shareholders' equity in respect of each
outstanding Common Share as determined in accordance with generally
accepted accounting principles and as reflected in any published
report by the Company as at the fiscal year quarter ending immediately
preceding the mailing by the Company of the notice of right to demand
redemption):
<PAGE>
(a) the highest price per share of Common Share, including any
commission paid to brokers or dealers for solicitation or
whatever, at which shares of Common Shares held by the Acquiring
Person were acquired pursuant to a tender offer regardless of
when such tender offer was made or were acquired pursuant to any
market purchase or otherwise within eighteen months prior to the
mailing by the Company of the notice of right to demand
redemption. If the consideration paid in any such acquisition of
Common Stock consisted, in whole or part, of consideration other
than cash, the Board of Directors of the Corporation shall take
such action, as in its judgment it deems appropriate, to
establish the cash value of such consideration, but such
valuation shall not be less than the cash value, if any, ascribed
to such consideration by the Acquiring Person; or
(b) the highest sale price per share of Common Stock for any trading
day during the eighteen months prior to the mailing by the
Company of the notice of right to demand redemption. The sale
price for any trading day shall be the last sale price per share
of Common Stock traded on the national Association of Securities
Dealers Automated Quotation System or other national securities
exchange or, if Common Stock are not then traded on a national
securities exchange, the mean of the closing bid and asked price
per share of common Stock.
PLAN OF DISTRIBUTION
The sale of all or a portion of the shares of Common Stock offered
hereby by the Selling Shareholders may be effected from time to time
at prevailing market prices at the time of such sales, at prices
related to such prevailing prices, at fixed prices that may be
changed, or at negotiated prices. The Selling Shareholders may effect
such transactions by selling directly to purchasers in negotiated
transactions, to dealers acting as principals or through one or more
brokers, or any combination of these methods of sale. In addition,
shares may be transferred in connection with the settlement of call
options, short sales or similar transactions that may be effected by
the Selling Shareholders. Dealers or brokers may receive compensation
in the form of discounts, concessions or commissions from the Selling
Shareholders. The Selling Shareholders and any brokers or dealers
that participate in the distribution may under certain circumstances
be deemed to be "underwriters" within the meaning of the Securities
Act, and any commissions received by such brokers or dealers and any
profits realized on the resale of shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act. The
Company and the Selling Shareholders may agree to indemnify such
brokers or dealers against certain liabilities, including liabilities
under the Securities Act.
<PAGE>
Pursuant to the terms of the Registration Rights Agreement dated
February 11, 1998 between the Company and Pacific Crest Securities,
Inc. as Placement Agent for the Debentures, the Company is obligated
to keep the Registration Statement effective for the period ending on
February 11, 2000 or until the holder of the shares of Common Stock
issuable upon the conversion of the Debentures have completed the
distribution of such shares, whichever occurs first. There is no
assurance that any of the Selling Shareholders will sell any or all of
the shares of common Stock offered hereby.
The Company has agreed to pay the expenses incurred in connection with
the registration of the shares of Common Stock offered hereby. The
Selling Shareholders will be responsible for all selling commissions,
transfer taxes and related charges in connection with the offer and
sale of such shares.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon
for the Company by Witherspoon, Kelley, Davenport & Toole, P.S.,
Spokane, Washington.
EXPERTS
The consolidated balance sheet as of December 31, 1996 and the
consolidated statements of income, changes in stockholder's equity and
cash flows for the year ended December 31, 1996 incorporated by
reference in this Prospectus have been incorporated herein in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and
auditing.
The consolidated balance sheet as of December 31, 1997 and the
consolidated statements of income, changes in stockholders' equity and
cash flows for the year ended December 31, 1997 incorporated by
reference in this Prospectus have been audited by BDO Seidman, LLP,
independent certified public accountants, and are incorporated herein
in reliance upon such report given upon the authority of said firm as
experts in accounting and auditing.
<PAGE>
No dealer, salesperson or any other person has been authorized to give
any information or to make any representation other than those
contained in this Prospectus in connection with the offer made by this
Prospectus, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or
the underwriters. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the
Company since the date hereof or that the information herein or
incorporated by reference herein is correct as of any time subsequent
to the date of this Prospectus. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, by anyone in
any jurisdiction in which such offer or solicitation is not authorized
or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such
offer or solicitation.
_________________
TABLE OF CONTENTS
Available Information
Information Incorporated by Reference
Risk Factors
Use of Proceeds
Selling Shareholders
Description of Capital Stock
Plan of Distribution
Legal Matters
Experts
749,064
Common Stock
(No Stated Par Value)
SOURCE CAPITAL CORPORATION
_______________
PROSPECTUS
_______________
September ____, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
-----------------------------------------------------
The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered, other
than underwriting discounts and commissions. All of the amounts shown
are estimates except the Securities and Exchange Commission
registration fee and the Nasdaq Market listing fee.
Securities and Exchange Commission registration fee $ 1,879
Nasdaq SmallCap Market listing fee $ 7,500
Printing and engraving expenses $ 3,500
Legal fees and expenses $ 10,000
Accounting fees and expenses $ 8,000
Miscellaneous $ 1,500
--------
Total $ 32,379
========
Item 15. Indemnification of Directors and Officers
---------------------------------------------------
Washington law permits and the Bylaws of the Registrant provide that
each Director or officer now or hereafter serving the Registrant, and
each person who at the request of or on behalf of the Registrant is
now serving or hereafter serves as a Director or officer of any other
corporation shall be indemnified by the Registrant to the fullest
extent provided by law against all costs, expenses, judgments, and
liabilities, including attorneys' fees, reasonably incurred by or
imposed upon him or her in connection with or resulting from any
claim, action, suit, or proceeding, civil, criminal, administrative,
or investigative, in which he or she is or may be made a party by
reason of being or having been such Director or officer by reason of
any action alleged to have been taken or omitted by him or her as such
Director or officer, whether or not he or she is a Director or officer
at the time of incurring such costs, expenses, judgments, and
liabilities, provided that he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the
best interests of the Registrant. The termination of any action,
suit, or proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent shall not, of itself,
create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the
best interests of the Registrant.
The Registrant's Bylaws further provide that the Registrant shall
indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or
in the right of the Registrant to procure a judgment in the
Registrant's favor by reason of the fact that such person is or was a
director, trustee, officer, employee or agent of the Registrant, or is
<PAGE>
or was serving at the request of the Registrant as a director,
trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees) and amounts paid in settlement
actually and reasonably incurred by such person in connection with the
action or suit or settlement of such action or suit if reasonably
believed to be in or not opposed to the best interests of the
Registrant, and, with respect to amounts paid in settlement, the
settlement of the suit or actions was in the best interests of the
Registrant; provided, however, that no indemnification shall be made
in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable for gross negligence or willful
misconduct in the performance of such person's duty to the Registrant
unless and only to the extent that, the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of such liability, but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnify for such expenses as such court shall deem proper. The
termination of any action or suit by judgment or settlement shall not,
of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Registrant.
The indemnification described above shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any
law, Bylaw, agreement, vote of shareholders or disinterested directors
or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, trustee,
officer, employee or agent and shall inure to the benefit of the
heirs, spouses, executors, and administrators of such a person.
The Registrant has the power to purchase and maintain insurance on
behalf of any person who is or was a director, trustee, officer,
employee or agent of the Registrant, against any liability asserted
against such person and incurred by such person in any such capacity
or arising out of such person's status as such, whether or not the
Registrant would have the power to indemnify such person against such
liability. The Registrant maintains insurance policies which insure
its officers and directors against certain liabilities.
The Registrant's Restated Articles of Incorporation further provide
that to the full extent from time to time permitted by law, no
director of the Registrant shall be personally liable to the
Registrant or its shareholders for damages for conduct as a director.
However, Section 23B.08.320 provides that provisions such as the one
contained in the Registrant's Restated Articles of Incorporation shall
not eliminate or limit the liability of a director for acts or
omissions that involve intentional misconduct by a director or a
knowing violation of law by a director, for conduct involving certain
distributions to shareholders in violation of the Washington Business
Corporation Act, or for any transaction from which the director will
personally receive a benefit of money, property or services to which
the director is not legally entitled.
<PAGE>
The foregoing summaries are necessarily subject to the complete text
of the applicable statutes, the Restated Articles and the Bylaws of
the Registrant referred to above and are qualified in their entirety
by reference thereto.
Item 16. Exhibits
------------------
The exhibits listed on the Exhibit Index on Page II-5 of this
Registration Statement are filed herewith, incorporated by reference
or will be filed by amendment.
Item 17. Undertakings
----------------------
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sale are being
made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration
Statement (or the most recent post-effective amendment
hereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in this Registration Statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in
this Registration Statement or any material change to
such information in this Registration Statement;
provided, however, that the undertakings set forth in
paragraph (i) and (ii) above shall not apply if the
information required to be included in a
post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Securities
Exchange of 1934 (the "Exchange Act") that are
incorporated by reference in this Registration
Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be 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 thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
<PAGE>
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be 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 thereof.
3. Insofar as indemnification of liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described under Item 15 above, 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 Securities Act and is, therefore, unenforceable.
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 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 Securities Act
and will be governed by the final adjudication of such issue.
4. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a 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.
(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be 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 thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to
believe that it meets all the requirements for filing on Form S-3 and
has duly caused this Pre-Effective Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Spokane, State of Washington, on
September 21, 1998.
SOURCE CAPITAL CORPORATION
By /s/ D. MICHAEL JONES
----------------------------------
D. Michael Jones
Chief Executive Officer, President
and Director
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to the Registration Statement has been
signed below by the following persons in the capacities indicated on
September 21, 1998.
Signature Title
------------------------------ --------------------------------------
/s/ D. MICHAEL JONES Chief Executive Officer, President
------------------------------ and Director
D. Michael Jones
/s/ ALVIN J. WOLFF * Chairman of the Board and Director
------------------------------
Alvin J. Wolff, Jr.
/s/ LESTER L. CLARK * Vice President, Secretary-Treasurer
------------------------------ and Chief Financial Officer
Lester L. Clark
/s/ CLARENCE H. BARNES * Director
------------------------------
Clarence H. Barnes
/s/ JOHN FRUCCI * Director
------------------------------
John Frucci
/s/ CHARLES G. STOCKER * Director
------------------------------
Charles G. Stocker
/s/ DANIEL G. NELSON * Director
------------------------------
Daniel G. Nelson
<PAGE>
/s/ ROBERT E. LEE * Director
------------------------------
Robert E. Lee
*By: /s/ D. MICHAEL JONES
-------------------------
D. Michael Jones
Attorney-In-Fact
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
4.1. Articles of Incorporation of Registrant. Incorporated by
reference to Exhibit A to Registrant's Current Report on
Form 8-K dated February 7, 1994.
4.2 Articles of Amendment to the Articles of Incorporation of
Registrant. Incorporated by reference to Exhibit C to
Registrant's Current Report on Form 8-K dated May 16, 1996.
4.3 By-Laws of Registrant, as amended. Incorporated by reference to
Exhibit A to Registrant's Current Report on Form 8-K dated
February 7, 1994.
4.4 Indenture dated February 11, 1998 between Registrant and Bankers
Trust Company. Incorporated by reference to Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated February 11, 1998.
4.5 Form of 7-1/2% Convertible Subordinated Debenture Due March 1,
2008 issued by the Registrant to each Selling Shareholder.
Incorporated by reference to Exhibit A to Exhibit 4.1 filed with
the Registrant's Current Report on Form 8-K dated February 11,
1998.
4.6 Registration Rights Agreement between the Registrant and Pacific
Crest Securities Inc. Incorporated by reference to Exhibit 10.3
filed with the Registrant's Current Report on Form 8-K dated
February 11, 1998.
5.1 Opinion of Witherspoon, Kelley, Davenport & Toole, P.S.
previously filed.
23.1 Consent of Witherspoon, Kelley, Davenport & Toole, P.S.
Included in Exhibit 5.1 to this Registration Statement.
23.2 Consent of BDO Seidman, L.L.P. previously filed.
23.3 Consent of PricewaterhouseCoopers LLP previously filed.
24.1 Power of Attorney. Set forth on the signature pages of the
signed Registration Statement.
<PAGE>
