<PAGE> 1
As filed with the Securities and Exchange Commission on June 14, 1995
Registration No. 33-89264
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
POST-EFFECTIVE AMENDMENT NO. 1
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SURETY CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2065607
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
C. Jack Bean
1845 Precinct Line Road, 1845 Precinct Line Road,
Suite 100 Suite 100
Hurst, Texas 76054 Hurst, Texas 76054
(817) 498-2749 (817) 498-2749
(Address, including zip code and telephone (Name, address, including zip code
number, including area code, and telephone number, including area code,
of Registrant's principal executive offices) of agent for service)
</TABLE>
_____________________________________
Copy to:
DAN R. WALLER, P.C.
SECORE & WALLER, L.L.P.
ONE GALLERIA TOWER, SUITE 2290
13355 NOEL ROAD, LB 75
DALLAS, TEXAS 75240
_____________________________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the Amendment to the Registration Statement becomes
effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following: [ ]
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: [x]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================
Title of Each Amount Proposed Proposed Amount of
Class of Securities to be Maximum Maximum Registration
to be Registered Registered(1) Offering Price Aggregate Fee(1)
Per Share Offering Price
<S> <C> <C> <C> <C>
Common Stock, 1,287,400 $3.25 $5,905,948 $2,037
$0.01 per
Share Par Value
=========================================================================================================
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) For purposes of this calculation, the amount of shares to be
registered is presumed to be 667,400 shares offered by Selling
Shareholders and 620,000 shares offered by Registrant. The
Registration fee is estimated based upon the average of the high and
low market prices reported for the Common Stock of the Registrant
carried on the Primary List of the American Stock Exchange during the
week ended April 28, 1995, which was $4.5875 per share.
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 on such earlier date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE> 2
SURETY CAPITAL CORPORATION
FORM S-2
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Prospectus
No. Item Caption or Page
- ---- ---- ---------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Facing Page of Registration
Facing Page of Registration Front Cover Page of Prospectus . . . . . . . . . . Statement, ii, and 1.
2. Inside Front and Outside
Back Cover Pages of Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 and 15
3. Summary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Ratios of Earnings to Fixed Charges . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. Determination of Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . Not applicable
6. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not applicable
7. Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Description of Registrant's Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10. Interests of Named Experts and Counsel . . . . . . . . . . . . . . . . . . . . . . . Not applicable
11. Information with Respect to the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12. Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . . . . . 2
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
ii
<PAGE> 3
PROSPECTUS
SURETY CAPITAL CORPORATION
1,217,400 SHARES
COMMON STOCK
COMPANY SHARES. This Prospectus relates to the offer and sale of
620,000 shares of common stock, $0.01 par value, of Surety Capital Corporation
(the "Company") by the Company ("Company Shares"). The offer and sale of
Company Shares will terminate on October 31, 1995, unless extended for up to 60
days by the Company. The proceeds from the offer and sale of Company Shares
will be used to retire outstanding indebtedness of the Company of $1,750,000,
plus interest, and will represent approximately 17% of the total outstanding
common stock of the Company if all of the Company Shares are sold. Company
Shares may be offered and sold by persons who are officers and directors of the
Company. In addition, the firm of Cullum & Sandow Securities, Inc., a
registered broker/dealer which is a member of the National Association of
Securities Dealers, Inc., has entered into an agreement with the Company to
purchase 225,000 of the Company Shares on a firm commitment basis (See "Plan of
Distribution"). Company Shares may also be sold by other selected securities
broker/dealers that are members of the National Association of Securities
Dealers, Inc., with whom the Company will contract in the future. Company
Shares will not be sold in blocks of less than 1,000 shares. The Company must
receive subscriptions for a minimum of $1,750,000 in order to consummate the
offering. No minimum number of Company Shares must be sold in order to
consumate the offering.
SHAREHOLDERS' SHARES. This Prospectus also relates to the offer and
sale from time to time of 667,400 shares of common stock of the Company by
certain shareholders ("Selling Shareholders"). The shares of the Selling
Shareholders are to be registered on a continuing basis and will be priced at
the market price on the day of sale. The shares offered by the Selling
Shareholders represent approximately 22% of the current total outstanding
shares of common stock of the Company. The Selling Shareholders may sell their
stock, directly or through agents, dealers or underwriters, on terms to be
determined at the time of sale. To the extent required, the respective
purchase prices and public offering prices, the name of any agent, dealer or
underwriter and applicable discounts or commissions with respect to a particu-
lar offer by Selling Shareholders will be set forth in an accompanying
prospectus supplement. See "Selling Shareholders".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE. THESE SECURITIES INVOLVE A SIGNIFICANT DEGREE OF RISK.
SEE "RISK FACTORS."
NO PERSON, OR PERSONS ACTING TOGETHER, MAY ACQUIRE IN THE AGGREGATE
10% OR MORE OF THE COMPANY'S SHARES WITHOUT COMPLYING WITH THE PRIOR NOTICE
REQUIREMENTS OF THE BANK CHANGE OF CONTROL ACT.
The Company's common stock is traded on the Primary List of the
American Stock Exchange ("AMEX") under the symbol "SRY". As of the close of
the market on Monday, June 12, 1995, the price of the common stock was listed
at $3.50 per share.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Proceeds to Issuer
Price to Public Brokers Commissions or Selling Shareholders(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $3.25 $0.1625 $3.0875
Shares Offered
by Company(1) $2,015,000 $100,750 $1,914,250
Shares Offered by
Selling Shareholders(1) At the Market _____ _____
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Both the Company Shares and the Selling Shareholders' shares will be
offered on a continuous basis under Rule 415 of Regulation C
promulgated by the SEC under the Securities Act of 1933, as amended.
The shares of the Selling Shareholders may be sold at the market
price as quoted on the Primary List of the American Stock Exchange at
the time of sale or as negotiated between the buyer and seller and
any dealer or underwriter involved.
(2) Additional expenses related to this offering will total approximately
$180,787.00 The Company will pay these expenses from proceeds from
the sale of the Company Shares offered herein, or out of general
corporate funds.
The date of this Prospectus is June 14, 1995.
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed a Form S-2 Registration Statement under the
Securities Act of 1933, as amended, with the Securities and Exchange Commission
("Commission") with respect to the common stock offered pursuant to this
Prospectus. This Prospectus, which forms a part of the Registration Statement,
does not contain all of the information included in the Registration Statement
and the exhibits thereto. However, all material information is contained in
the Registration Statement and this Prospectus or in documents incorporated by
reference therein. In addition, the Company is subject to the informational
requirements of the Securities Exchange Act of 1934 (the "1934 Act") and in
accordance therewith files reports and other information with the Commission.
The Registration Statement filed with respect to this Prospectus, and all other
reports, proxy statements and other information can be inspected free of charge
at the offices of the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549; and at 411 W. Seventh Street, Eighth
Floor, Fort Worth, Texas 76102. Copies of such material may be obtained upon
the payment of prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The Company's common stock is traded on the American Stock Exchange
and copies of the Company's periodic reports, proxy statements, and other
information is also available for inspection at the American Stock Exchange at
86 Trinity Place, Fifth Floor Library, New York, NY 10006. The telephone
number at the American Stock Exchange is (212) 306-1290.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 33-1983) are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31,
1994 (the "1994 Form 10-K");
2. Definitive Proxy Statement dated April 5, 1995, in connection
with the Company's annual meeting of stockholders held on
April 28, 1995;
3. Report on Form 8-K, dated January 17, 1995;
4. Quarterly Report on Form 10-Q/A for the quarter ended June 30,
1994, as amended on February 6, 1995;
5. Report on Form 8-K/A, dated February 6, 1995; and
6. Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.
The Company will provide without charge to each person to whom this
Prospectus has been delivered, upon written or oral request of such person, a
copy of any or all of the documents that have been incorporated by reference in
this Prospectus, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Any such
requests should be directed to Mr. C. Jack Bean, Chairman of the Board, Surety
Capital Corporation, 1845 Precinct Line Road, Suite 100, Hurst, Texas 76054,
(817) 498-2749.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
THE SHARES Common stock of the Company, $.01 par value. The
Company is authorized to issue 20,000,000 shares and
presently has 3,040,829 issued and outstanding. The
common stock of the Company is traded on the American
Stock Exchange under the symbol "SRY". As of the
close of the market on Monday, June 12, 1995, the
stock was priced at $3.50 per Share.
THE COMPANY The Company is a bank holding company incorporated in
Delaware with main offices in Hurst, Texas. The
Company's principal asset is approximately 99% of the
outstanding common stock of Surety Bank, N.A. (the
"Bank"), a national banking association. The Bank,
with offices located in Hurst, Whitesboro, Wells,
Kennard, Chester, and Lufkin, Texas, engages in
general commercial and consumer banking and
concentrates its lending activities in the area of
insurance premium financing. As of April 30, 1995,
there were 416 stockholders of record. For
additional information, please contact the Company at
its principal executive offices, 1845 Precinct Line
Road, Suite 100, Hurst, Texas 76054 and its phone
number is (817) 498-8154.
THE OFFERING OF Common Stock 620,000 shares
COMPANY SHARES
Purchase Price per Share $3.25
Maximum Proceeds to Company from $1,914,250
Sales of Company Shares (Estimated)
USE OF PROCEEDS Proceeds from offer and sale of Company Shares will
first be used to repay outstanding indebtedness of
the Company of $1,750,000, plus interest. The
balance of the proceeds, if any, will be used either
to pay expenses associated with this offering or for
working capital of the Company. See "Use of
Proceeds". The Company will receive no proceeds from
the sale of shares of the Selling Shareholders. See
"Selling Shareholders".
MINIMUM PURCHASE Each purchaser of Company Shares must purchase a
minimum of 1,000 shares.
THE OFFERING BY Common Stock 667,400 shares
SELLING SHAREHOLDERS
Purchase Price per Share
At Market
Maximum Proceeds to Selling Shareholders $__________
from Sales of common stock (Estimated)
SELLING SHAREHOLDERS Each of the Selling Shareholders acquired their
shares in a private placement of the Company's common
stock in December 1994 at a price of $3.25 per share.
The Selling Shareholders are not, and never have
been, affiliates of the Company. Pursuant to an
agreement between the Company and each Selling
Shareholder, the Company is obligated to use its best
efforts to register the shares issued in the private
placement. See "Selling Shareholders."
3
<PAGE> 6
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following factors which individually or
cumulatively could result in the decline or loss in the value of the shares
offered:
THE OVERTON BANK & TRUST LOAN. On December 9, 1994, the Company
borrowed $1,750,000 from Overton Bank & Trust, N.A. ("Overton") bearing
interest at two percent above Overton's prime rate with principal and interest
due at maturity. This loan is due on June 7, 1995. The loan is secured by all
of the Shares of the Bank owned by the Company and by a personal guarantee of
C. Jack Bean, Chairman of the Board of the Company. The loan was obtained to
assist the Bank in acquiring the First National Bank, Whitesboro, Texas. The
Company intends to repay this loan with the proceeds from the offer and sale of
the Company Shares. If sufficient proceeds are not raised from this offering
by the maturity date of the indebtedness to retire the indebtedness in full,
the Company may have to use other means to repay the loan or may have to extend
all or a portion of the loan, which in turn, could materially affect earnings
of the Company and thus the market price of the common stock. See "Use of
Proceeds".
INSURANCE PREMIUM FINANCING CONCENTRATION MAY INCREASE RISK OF LOSSES.
As of December 31, 1994, insurance premium financing loans represented
approximately 32% of the total loans of the Bank. Such a high concentration of
insurance premium financing loans may expose the Bank to greater risk of loss
than would a more diversified loan portfolio, although no more than 10% of the
Bank's premium finance loans are made regarding policies issued by any one
insurance company.
ALLOWANCE FOR LOAN LOSSES. Based on management's analysis of current
historical data, the Bank endeavors to establish an adequate allowance for
possible loan losses. Loan losses different from the allowance provided by the
Bank could occur, and loan losses in excess of the allowance for loan losses
are possible. Loan losses in excess of the amount of the allowance could and
probably would have a material adverse effect on the financial condition of the
Bank and therefore the Company. At December 31, 1994, the Bank's allowance for
loan losses was 1.1% of total loans (net of unearned interest) and 574.8% of
total nonperforming loans. Management feels that all known losses in the
portfolio have been provided for.
EQUITY CAPITAL COMPLIANCE REQUIREMENTS FOR BANK AND COMPANY. Pursuant
to regulatory requirements, the Bank and the Company are required to maintain
certain levels of regulatory capital. Failure to meet these capital
requirements could expose the Company and/or the Bank to possible regulatory
administrative action or agreements, including, as to the Bank, limitations on
asset growth, restrictions on operations, restrictions on payment of dividends
or mandated disposition of assets. For bank holding companies with less than
$150 million in consolidated assets, the capital requirements are applied on a
bank-only basis. Generally, a national bank is required to maintain a minimum
ratio of 8% qualifying capital to risk-weighted assets. Qualifying capital
includes common stockholders' equity and, subject to certain limitations,
preferred stock, the allowance for loan losses, mandatory convertible debt and
subordinated debt. For purposes of calculating the ratio, assets are assigned
different risk weights ranging from 0% for risk-free assets such as cash to
100% for assets such as commercial loans. At December 31, 1994, the Bank had a
qualifying capital to risk-weighted assets ratio of 11.17%. In addition, the
Bank is required to maintain a minimum level of 3% core (generally equity)
capital to assets. At December 31, 1994, the Bank had a 10.13% ratio of core
capital to assets. There can be no assurance that the Company will be
successful in maintaining or raising capital for the Bank sufficient to meet
its needs.
DILUTION; ADDITIONAL FINANCING NEEDED. The price at which the Company
Shares are being offered is greater than the Company's book value per share as
of the effective date of the Registration Statement. While the capital raised
in this offering will increase the Company's book value per share, the price
paid by purchasers of the common stock will exceed the Company's book value per
share at the close of the offering. There can be no assurance that the
Company's present capital and financing will be sufficient to finance future
operations. If the Company sells additional shares of common and/or preferred
stock to raise funds in the future, the terms and conditions of the issuances
may have a dilutive effect or otherwise adversely impact existing shareholders.
4
<PAGE> 7
If additional financing becomes necessary, there can be no assurance that the
financing can be obtained on satisfactory terms. In this event, the Company
could be required to restrict its operations.
SHARES OWNED BY TENNESSEE RECEIVER'S OFFICE. Approximately 6% of the
total outstanding shares of the Company is currently held by the Tennessee
Receiver's Office (the "Liquidator") as a result of a Liquidation Order with
respect to Anchorage Fire & Casualty Insurance Company, a former stockholder of
the Company. Pursuant to the Liquidation Order, all assets of Anchorage
(including the shares of common stock of the Company owned by Anchorage) are
vested in the Liquidator. The Company is currently attempting to assist the
Liquidator in selling its shares. However, should the Liquidator attempt to
sell shares over a short period of time, such a transaction or transactions
could have a significant adverse effect on the market price for the common
stock.
RELIANCE ON KEY PERSONNEL. The Company and the Bank are highly
dependent upon their executive officers and key employees. Specifically, the
Company considers the services of C. Jack Bean, G. M. Heinzelmann, III, and Bob
Hackler to be of vital importance to the success of the Company. The
unexpected loss of the services of any of these individuals, particularly Mr.
Bean, Chairman of the Board of the Company, could have a detrimental effect on
the Company and the Bank. The Bank is the beneficiary of a $500,000 key man
insurance policy on the life of Mr. Bean.
"SOURCE OF STRENGTH DOCTRINE." The Federal Reserve has announced a
policy sometimes known as the "source of strength doctrine" that requires a
bank holding company to serve as a source of financial and managerial strength
to its subsidiary banks. The Federal Reserve has interpreted this policy to
require that a bank holding company, such as the Company, stand ready to use
available resources to provide adequate capital funds to its subsidiary banks
during periods of financial stress or adversity. The Federal Reserve has
stated that it would generally view a failure to assist a troubled or failing
subsidiary bank in these circumstances as an unsound or unsafe banking practice
or a violation of Regulation Y or both, justifying a cease and desist order or
other enforcement action, particularly if appropriate resources are available
to the bank holding company on a reasonable basis. The requirement that a bank
holding company, such as the Company, make its assets and resources available
to a failing subsidiary bank could have an adverse effect on the Company and
its stockholders.
RESTRICTION ON BANK DIVIDENDS. The Company does not intend to pay
dividends in the near future. However, the payment of cash dividends by the
Company in the future will depend to a large extent on the receipt of dividends
from the Bank. The ability of the Bank to pay dividends is dependent upon the
Bank's earnings and financial condition. The payment of cash dividends by the
Bank to the Company and by the Company to its stockholders is subject to
statutory and regulatory restrictions. See "Description of Company's Common
Stock."
COMPETITION. There is significant competition among banks and bank
holding companies in the areas in which the Bank and the Company operate. The
Company believes that such competition among such banks and bank holding
companies, many of which have far greater assets and financial resources than
the Company, will continue to increase in the future. The Bank also encounters
intense competition in its commercial banking business from savings and loan
associations, credit unions, factors, insurance companies, commercial and
captive finance companies, and certain other types of financial institutions
located in other major metropolitan areas in the United States, many of which
are larger in terms of capital, resources and personnel. The casualty
insurance premium financing business of the Bank is also very competitive.
Large insurance companies offer their own financing plans, and other
independent premium finance companies and other financial institutions offer
insurance premium financing.
5
<PAGE> 8
GOVERNMENT REGULATION AND RECENT LEGISLATION. The Company and the
Bank are subject to extensive federal and state legislation, regulation and
supervision regarding banking and insurance premium financing. Recently
enacted or proposed legislation and regulations have had, will continue to have
or may have significant impact on the banking industry. Some of the
legislative and regulatory changes may benefit the Company and the Bank, while
others may increase the Company's costs of doing business and assist
competitors of the Company and the Bank. For example, under the Riegle-Neal
Interstate Banking and Branching Act of 1994 (the "Interstate Banking Act"),
banks may acquire branches through interstate mergers beginning in June 1997,
unless a state "opts out." The Texas Legislature has passed legislation to opt
out until 1999. The Governor is not expected to veto the bill. It is not
possible to predict whether this legislation will enhance or decrease the value
of stock of existing Texas based financial institutions. In addition, persons,
alone or acting in concert with others, seeking to acquire more than 10% of any
class of voting securities must comply with the Change in Bank Control Act.
Entities seeking to acquire more than 5% of any class of voting securities must
comply with the Bank Holding Company Act.
GENERAL ECONOMIC CONDITIONS AND MONETARY POLICY. The operating income
and net income of the Bank depend to a substantial extent on "rate
differentials," i.e., the differences between the income the Bank receives from
loans, securities and other earning assets, and the interest expense it pays to
obtain deposits and other liabilities. These rates are highly sensitive to
many factors which are beyond the control of the Bank, including general
economic conditions and the policies of various governmental and regulatory
authorities. For example, in an expanding economy, loan demand usually
increases and the interest rates charged on loans increase. Increases in the
discount rate by the Federal Reserve System usually lead to rising interest
rates, which affect the Bank's interest income, interest expense and investment
portfolio. Also, governmental policies such as the creation of a tax
deduction for individual retirement accounts can increase savings and affect
the cost of funds.
STOCK PRICE VOLATILITY. The market price of the Company's common
stock has been highly volatile in the past. There can be no assurance that the
market price of the Company's common stock will not be volatile in the future,
and no assurance that the market price will not decrease below the price at
which shares are offered herein.
USE OF PROCEEDS
SALES OF COMMON STOCK BY THE COMPANY. The Company intends to use the
proceeds from the sale of Company Shares to retire an indebtedness of
$1,750,000, plus interest, currently owed to Overton Bank & Trust, N.A.
("Overton"). The Overton loan is due on June 7, 1995. The interest rate on
the outstanding principal is two percent (2%) above Overton's prime rate. The
Company borrowed the funds in order to assist the Bank in the acquisition of
the First National Bank, N.A., Whitesboro, Texas. The loan is secured by all
of the stock of the Bank owned by the Company and by a personal guarantee of C.
Jack Bean, Chairman of the Board of the Company. Any proceeds remaining after
the discharge of the Overton loan will be used for the payment of expenses
associated with the offering and for working capital.
SALES OF COMMON STOCK BY THE SELLING SHAREHOLDERS. The 667,400 shares
of common stock offered herein by certain Selling Shareholders may be sold from
time to time for their own account (see "Selling Shareholders"). The Company
will not receive any proceeds from the sale of such shares. The Company has
agreed with the Selling Shareholders to include their shares in this
Registration Statement. All costs, expenses and fees incurred in connection
with the registration of the shares of the Selling Shareholders will be borne
by the Company. The Selling Shareholders will bear all selling costs
associated with the offer or sale of their shares.
6
<PAGE> 9
CAPITALIZATION
PRO FORMA BALANCE SHEET. The following table sets forth the unaudited
actual capitalization of the Company at March 31, 1995, and the pro forma
capitalization reflecting the sale by the Company of the Company Shares offered
herein. The pro forma assumes that 620,000 shares were sold for $3.25 per
share, with net proceeds of approximately $1,965,000. In adition, the pro
forma assumes that the entire Overton loan is repaid. The effects of the
increased capitalization and the repayment of the Overton loan on the pro forma
balance sheet at December 31, 1994 are immaterial and therefore no such balance
sheet is provided. See "Use of Proceeds".
<TABLE>
<CAPTION>
March 31, 1995
-----------------------------------------
Pro forma
Actual Maximum
----------- ------------
<S> <C> <C>
Note payable:
Short term note due July 7, 1995 $1,750,000 $ -0-
Stockholders' equity:
Common stock, $.01 par value;
Authorized - 20,000,000 shares;
Issued - 3,040,829 shares,
(3,660,829 as adjusted maximum) 30,408 36,608
Additional paid-in capital 8,113,214 10,078,214
Surplus 135,262 135,262
Unrealized gain on available-for-sale securities 45,208 45,208
------------ ------------
Total stockholders' equity 8,324,092 10,295,292
------------ ------------
Total capitalization $10,074,092 $10,295,292
============ ============
</TABLE>
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
7
<PAGE> 10
PRO FORMA INCOME STATEMENT. The following table sets forth the
unaudited actual results of operations for the first three months of 1995 and
an unaudited pro forma schedule showing the results of operations as adjusted
for net proceeds of $1,965,000 as if this offering were completed on January 1,
1995. This table is intended to reflect the elimination of the interest expense
associated with the Overton loan, the provision for income taxes and the
impact on earnings per share as a result of this offering. The effects of the
increased capitalization and the repayment of the Overton loan on the pro forma
year-end income statement for the twelve (12) month period ended December 31,
1994 were immaterial and therefore no such income statement is included.
<TABLE>
<CAPTION>
Income Statement
for the three months ended March 31, 1995
-------------------------------------------------------
Pro forma
Adjustments
Actual Debit Credit Pro Forma
---------- ------- ------- -----------
<S> <C> <C> <C> <C>
Total interest income $2,210,333 $2,210,333
Total interest expense 781,131 50,055 (A) 731,076
---------- ----------
Net interest income before provision for loan 1,429,202 1,479,257
losses
Provision for loan losses 45,000 45,000
---------- ----------
Net interest income 1,384,202 1,434,257
----------
Total noninterest income 368,292 368,292
Total noninterest expense 1,542,130 17,019 (A) 1,559,149
---------- ----------
Net income $210,364 $ 243,400
========= ==========
Net income per share $0.07 $ 0.07
===== ==========
Weighted average shares outstanding 3,040,829 620,000 (B) 3,660,829
</TABLE>
(A) To record elimination of interest expense on short term debt (the amount
recorded in the first quarter was $50,055) and the related income tax
effect (tax rate of 34% used) of the interest expense reduction. The
short term debt will be paid off with the proceeds from the offering.
(B) To record the addition of 620,000 shares of common stock outstanding as
if the offering were completed on January 1, 1995 assuming all shares
offered are sold.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company earned $210,364 and $112,832 during the three months ended
March 31, 1995 and 1994, respectively. Total interest income increased 93% to
$2,210,333 from $1,144,315, while total interest expense increased 186% to
$781,131 from $272,980, resulting in a 64% increase in net interest income
(before provision for loan losses) to $1,429,202 from $871,335. The Company's
loan growth between these two periods was concentrated within the real estate
lending, commercial loans and the medical claims receivable financing. Real
estate lending increased by 797% to $16,041,646 from $1,788,802, commercial
lending increased by 198% to $15,857,674 from $5,327,177, and medical claims
receivable financing increased by 103% to $4,141,435 from $2,043,890. This
growth is attributed to management's marketing efforts and the acquisition of
the First National Bank, Whitesboro and the Farmers Guarantee State Bank of
Kennard. The average volume of consumer, commercial, and real estate lending
increased 153%, with a decrease in average yields on those loans from 12% to
11%. The 34% increase in the average volume of insurance premium loans was
accompanied by no change in the average yield on those loans of 12%. The
average balance of interest bearing deposits increased 117%, while the average
rate paid increased from 2.5% to 3.4%. The increase in average rate paid for
interest bearing liabilities moved higher as a result of increased interest
rates within the marketplace and the interest expense associated with the short
term note. On March 31, 1995, the Bank sold its secured credit card program to
Bank IV, Oklahoma City, Oklahoma, for a gain of approximately $30,000.
The Company recorded a $45,000 provision for loan losses during the
three months ended March 31, 1995 compared to $28,552 provision for loan losses
during the three months ended March 31, 1994. As the Company's ratio of net
charge-offs to average loans remained unchanged at 0% for these periods, the
Company provided amounts, through charges to earnings, to maintain the
allowance for loan losses at an adequate level. Management feels that all
known losses in the portfolio have been recognized.
The Company's noninterest income increased 47% to $368,292 from
$250,417 for the three months ended March 31, 1995 and 1994, respectively.
This increase compares to a corresponding increase in average noninterest
bearing deposits of 69% to $12,197,290 from $7,226,728 for these same periods.
Noninterest expense increased 47%, primarily the result of a 43%
increase in salaries and employee benefits and a 50% increase in general and
administrative expenses. The increase in salaries and benefits was due
primarily to additional staffing required by the merger of the acquired banks
and the Bank's loan and deposit growth. Increases in general and
administrative expenses relate primarily to legal and professional fees and
FDIC assessments.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
9
<PAGE> 12
SURETY CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Assets:
Cash and cash equivalents 11,354,543 11,194,360
Investment securities and interest bearing deposits in 15,858,960 21,028,442
financial institutions
Net loans 67,459,955 63,965,402
Premises and equipment, net 2,341,530 2,393,601
Accrued interest receivable 576,366 623,737
Other assets 3,070,799 3,088,769
------------ ------------
Total assets $100,662,153 $102,294,311
============ ============
Liabilities:
Total deposits 90,117,511 92,027,122
Other liabilities 2,220,550 2,201,508
------------ ------------
Total liabilities 92,338,061 94,228,630
------------ ------------
Shareholders' equity 8,324,092 8,065,681
------------ ------------
Total liabilities and shareholders' equity $100,662,153 $102,294,311
============ ============
</TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended March 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1995 1994
------------ ------------
<S> <C> <C>
Interest income 2,210,333 1,144,315
---------- -----------
Total interest expense 781,131 272,980
---------- -----------
Provision for loan losses 45,000 28,552
---------- ------------
Net interest income 1,384,202 842,783
---------- -----------
Noninterest income 368,292 250,417
---------- -----------
Noninterest expense:
Salaries and employee benefits 707,219 493,246
Occupancy and equipment 218,687 141,153
General and administrative 515,355 343,469
---------- -----------
Total noninterest expense 1,441,261 977,868
---------- -----------
Income before income taxes 311,233 115,332
Income tax expense 100,869 2,500
---------- -----------
Net income $ 210,364 $ 112,832
========== ===========
Net income per share of common stock $ 0.07 $ 0.05
========== ===========
Weighted average shares outstanding 3,113,483 2,373,429
========== ===========
</TABLE>
10
<PAGE> 13
SELLING SHAREHOLDERS
The Selling Shareholders acquired their shares from the Company in December
1994 at a price of $3.25 per share through a private placement of securities
conducted under Regulation D of the Securities Act of 1933. The purchase
price was determined by arm's length negotiations. In the private placement,
pursuant to a Contingent Stock Rights Agreement with the Selling Shareholders,
the Company agreed to issue additional common stock or other securities to the
Selling Shareholders in the event (1) their shares were not registered by
December 25, 1995 or (2) other shares of common stock of the Company are sold
at a price less than $3.25 per share. The rights of the Selling Shareholders
under such agreement terminate 10 days after the earlier of July 1, 1995 or the
receipt by the Company of gross proceeds of $1,750,000 or more from sales of
common stock or other securities.
The following table sets forth certain information as of December 31, 1994
regarding the common stock beneficially owned by the Selling Shareholders.
None has occupied any position or office or had any other material relationship
with the Company.
<TABLE>
<CAPTION>
Number of Shares of Percentage of Shares
Number of Shares of Common Stock of common stock
Number of Shares of Percentage of Shares Common Stock Owned After Sale of Owned After Sale of
Common Stock of Common Offered by Shares Offered by Shared Offered
Name Beneficially Owned(1) Stock Outstanding(2) This Prospectus This Prospectus(3) By this Prospectus
- ---- --------------------- -------------------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Robert M. Adams 50,000 1.64% 50,000 0 0%
The Advantage Special 124,000 4.08% 124,000 0 0%
Fund
Evergreen Limited 151,500 4.98% 151,500 0 0%
Market Fund
Investors Capital Fund 16,200 0.53% 16,200 0 0%
John Hancock Bank & 303,700 9.99% 303,700 0 0%
Thrift Opportunity
Fund
James H. Levi 16,000 0.53% 16,000 0 0%
Edward G. Shufro 6,000 0.20% 6,000 0 0%
TOTAL 667,400 21.95% 667,400 0 0%
</TABLE>
(1) Each of the parties named has sole voting and dispositive power with
respect to the shares reported.
(2) Based on 3,040,829 shares of common stock outstanding at December 31,
1994.
(3) This assumes the sale by all of the Selling Shareholders of the shares
offered in this Prospectus. At this time the Company has not been
advised by any of the Selling Shareholders of any plans, if any, to
sell the shares owned by each.
The Selling Shareholders and any underwriter, dealer or agent that
participates with the Selling Shareholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "1933 Act"), and any discounts or commissions received by
them and any profit on the resale of the shares purchased by them may be deemed
to be underwriting discounts and commissions under the 1933 Act. The Company
will not receive any proceeds from the offer and sale of shares of the Selling
Shareholders, but will pay certain offering expenses regarding the preparation
of this Registration Statement and related matters. Offering expenses incurred
by the Selling Shareholders may consist of underwriting discounts, selling
commissions and fees of their own attorneys, none of which is currently
estimable.
11
<PAGE> 14
PLAN OF DISTRIBUTION
SALES OF THE COMPANY SHARES. The Company Shares may be offered and
sold by officers and directors of the Company and by other securities
broker/dealers that contract to offer and sell the shares in a particular state
as hereafter engaged by the Company and that are members of the National
Association of Securities Dealers, Inc. ("Selling Broker/Dealers"). Selling
Broker/Dealers will be paid a sales comission of 5%. In addition, Cullum &
Sandow Securities, Inc., Dallas, Texas, has contracted to purchase 225,000
Company Shares at $3.25 per share less a selling concession of 5% on a firm
commitment basis. Purchasers acquiring Company Shares through a Selling
Broker/Dealer should direct payment to the Company which in turn will remit
sales commissions to the Selling Broker/Dealer. The Company estimates that the
total maximum compensation to be paid to Selling Broker/Dealers would be
approximately $100,250 if the maximum number of shares are sold. The Company
will not sell shares in blocks of less than 1,000 shares. The offering will
terminate on October 31, 1995 unless extended by the Company, in its sole
discretion, for up to 60 days thereafter, or until December 31, 1995.
SALES OF SHARES OF THE SELLING SHAREHOLDERS. Shares owned by a
Selling Shareholder may be sold from time to time directly by such Selling
Shareholder. Alternatively, the Selling Shareholders may from time to time
offer their respective shares in one or more transactions (which may involve
block transactions) (i) through underwriters; (ii) through dealers; (iii) "at
the market" to or through a market maker or into an existing trading market, in
the over-the- counter market or otherwise, or in other ways not involving
market makers or established trading markets; (iv) in privately negotiated
transactions; or (v) in a combination of any such transactions. Such
transactions may be effected by any Selling Shareholder at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. At the time a particular
offer of shares is made, a prospectus supplement, if required, will be
distributed that will set forth the aggregate amount of shares being offered
and the terms of the offering, including the name or names of any underwriters,
dealers or agents, any discounts, commissions and other items constituting
compensation from the Selling Shareholder and any discounts, commissions or
concessions allowed or reallowed or paid to dealers.
If an underwriter or underwriters are utilized in a firm commitment
public offering, the Selling Shareholders will execute a firm commitment
underwriting agreement with such underwriters. If a dealer is utilized in the
sale of its shares, the Selling Shareholder will sell such shares to the
dealer, as principal. The dealer may then resell such shares to the public at
varying prices to be determined by such dealer at the time of resale. Sales of
Shares by Selling Shareholders may be "at the market" and not at a fixed price
and may be made to or through one or more underwriters, acting as principal or
as agent, as shall be specified in an accompanying prospectus supplement.
Other sales may be made, directly or through agents, to purchasers outside
existing trading markets. The place and time of delivery for a particular
offer of the shares will be set forth in an accompanying prospectus supplement,
if required.
DESCRIPTION OF COMPANY'S COMMON STOCK
COMMON STOCK. The Company is authorized to issue twenty million
(20,000,000) shares of common stock, par value $0.01 per share, 3,040,829 of
which shares were issued and outstanding as of April 30, 1995 (not including
106,980 shares issuable upon the exercise of outstanding stock options and
warrants). In 1994, the Company's common stock was traded in the Emerging
Companies section of the AMEX for approximately ten (10) months, from February
23 through December 31. During that period 829,900 shares were traded against
an average number of shares outstanding of 2,393,841.
Holders of shares are entitled to one vote per share, without
cumulative voting, on all matters to be voted on by shareholders. Therefore,
the holders of more than 50% of the shares voting for the election of directors
can elect all the directors and the remaining holders of shares will not be
able to elect any directors. Subject to preferences that may be applicable to
any outstanding preferred stock, shareholders are entitled to
12
<PAGE> 15
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, shareholders are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preference of any outstanding preferred stock. Shares have
no preemptive or other subscription rights, and there are no conversion rights
or redemption or sinking fund provisions with respect to such shares.
PREFERRED STOCK. The Company is authorized to issue one million
(1,000,000) shares of preferred stock, par value $0.01 per share, none of which
are issued and outstanding as of the date of this Prospectus. The Board of
Directors of the Company may establish series of preferred stock with such
rights and preferences as may be fixed and determined by the Board of
Directors.
DIVIDEND POLICY. The Company does not currently intend to pay
dividends in the foreseeable future, but intends to retain any future earnings
for use in the business of the Company and the Bank. Payment of any dividends
in the future will be made at the discretion of the Board of Directors of the
Company and will depend upon the operating results and financial condition of
the Company and the Bank, their capital requirements, general business
conditions and other factors. Additionally, the Federal Reserve has announced
a policy sometimes known as the "source of strength doctrine" which requires
that "a bank holding company shall serve as a source of financial and
managerial strength to its subsidiary banks and shall not conduct its
operations in an unsafe and unsound manner." The Federal Reserve has
interpreted this policy to require that a bank holding company, such as the
Company, make its resources available to a subsidiary bank that is threatened
with failure. The source of strength doctrine could operate to prevent a bank
holding company such as the Company from making dividend payments to its
shareholders even though otherwise permitted to do so by other applicable law.
The payment of cash dividends by the Company in the future will depend to a
large extent on the receipt of dividends from the Bank. The ability of the
Bank to pay dividends is dependent upon the Bank's earnings and financial
condition. In addition, the payment of cash dividends by the Bank to the
Company and by the Company to its shareholders is subject to statutory and
regulatory restrictions.
ANTI-TAKEOVER MEASURES. The Company has adopted certain measures that
it believes to be in the best interest of the Company in order to prevent, to
the extent reasonably possible, a hostile takeover by a third party or the loss
of certain key employees of the Corporation. Specifically, the Company has
entered into agreements with C. Jack Bean, Chairman of the Board, G.M.
Heinzelmann, III, President, and Bobby W. Hackler, Vice President, providing
that, in the event of a change in control of the Company and any or all of them
are terminated as employees of the Company or are materially relieved of their
duties, the Company will pay to such employee three times his base annual
salary at the time of termination or relief from duties as a lump sum severance
payment or the equivalent value in common stock of the Company based upon the
prevailing market price for the common stock at the time of termination or
relief from duties.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar of the
common stock is Securities Transfer Corporation, 16910 Dallas Parkway, Suite
100, Dallas, Texas 75248.
STOCK OPTIONS. The Company has adopted a Stock Option Plan for key
and executive employees, under which options to purchase 71,480 shares of
common stock are outstanding exercisable at prices which range from $2.343 to
$7.2188. Options covering up to 100,000 shares may be issued under the 1995
Stock Option Plan.
WARRANTS. There is presently one outstanding warrant issued by the
Company in June 1994. The warrant entitles the holders to purchase 35,500
shares of the Company's common stock at an exercise price of $4.50 per share.
The warrant will expire on June 17, 1995.
13
<PAGE> 16
INFORMATION WITH RESPECT TO THE COMPANY
INFORMATION ACCOMPANYING THIS PROSPECTUS. Certain financial and other
information with regard to the Company is set forth in the Company's Annual
Report on Form 10-K for the period ending December 31, 1994 and the Quarterly
Report on Form 10-Q for the period ended March 31, 1995, both of which
accompany this Prospectus. There have been no material events or changes that
have occurred with respect to the Company since these documents were filed with
the Securities and Exchange Commission.
The Company is not currently a party to any material legal proceedings.
LEGAL OPINION
Certain matters with respect to the validity of the shares have been
passed upon by Secore & Waller, L.L.P., Dallas, Texas.
EXPERTS
The consolidated Financial Sheets of the Company as of December 31,
1994 and 1993 and the related consolidated Statements of Operations,
Shareholders Equity, and Cash Flows for each of the three years in the period
ended December 31, 1994 have been incorporated by reference herein in reliance
on the report of Coopers & Lybrand, L.L.P. independent accountants, given on
the authority of that firm as experts in accounting and auditing. The
financial statements of the First National Bank, N.A., Whitesboro, Texas and
the Farmers State Bank of Kennard, Kennard, Texas as of December 31, 1993 and
for each of the three years in the period ended December 31, 1993, have been
incorporated by reference herein also in reliance on the report of Coopers &
Lybrand, L.L.P. and given on the authority of that firm as experts in
accounting and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
(the "Act") empowers a corporation to indemnify its directors and officers and
to purchase insurance with respect to liability arising out of their capacity
as directors and officers. The Act further provides that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, vote of the shareholders, or otherwise.
Section 6.04 of the Company's Bylaws provides that the Company shall
indemnify all persons to the full extent allowable by law who, by reason of the
fact that they are or were a director of the Company, become a party or are
threatened to be made a party to any indemnifiable action, suit or proceeding.
The Company shall pay, in advance of the final disposition of any indemnifiable
action, suit or proceeding under this bylaw, all reasonable expenses incurred
by the director, upon receipt of an undertaking by or on behalf of the director
to repay such amount if it is ultimately determined that he is not entitled to
be indemnified by the Company under the law. The Company may indemnify persons
other than directors, such as officers and employees, as permitted by law. The
Company may purchase and maintain insurance on behalf of directors, officers
and other persons against any liability asserted against him, whether or not
the Company would have the power to indemnify such person against such
liability, as permitted by law.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the Company,
pursuant to the foregoing provisions or otherwise, the Company 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. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 of whether such indemnification by it is against
public policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
14
<PAGE> 17
PROSPECTUS
SURETY CAPITAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management's Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Company's Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Information with Respect to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Indemnification of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such an offer or solicitation in such
jurisdiction. No person has been authorized to give any information or to make
any representations other than those contained in this Prospectus or the
documents incorporated by reference herein in connection with the offering made
hereby, and, if given or made, such information or representations must not be
relied upon as having been authorized by the Company or the Selling
Shareholders. Neither the delivery of this Prospectus or any prospectus
supplement nor any sale made hereunder or thereunder shall, under any
circumstances, create any implication that the information herein or therein is
correct as of any time subsequent to the date of such information.
15
<PAGE> 18
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. All of the
amounts shown are estimates, except the Securities and Exchange Commission
registration fee. The amount of sales commissions assumes that 620,000 shares
of Company Shares will be sold by a registered broker-dealer which may or may
not occur. All expenses will be borne by the Company.
<TABLE>
<S> <C>
Sales Commissions $ 100,750.00
Registration Fee $ 2,037.00
Printing Expenses $ 3,000.00
Legal Fees and Expenses $ 55,000.00
Accounting Fees and Expenses $ 20,000.00
Miscellaneous $ -0-
-------------
Total $ 180,787.00
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
(the "Act") empowers a corporation to indemnify its directors and officers and
to purchase insurance with respect to liability arising out of their capacity
as directors and officers. The Act further provides that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, vote of the shareholders, or otherwise.
Section 6.04 of the Company's Bylaws provides that the Company shall
indemnify all persons to the full extent allowable by law who, by reason of the
fact that they are or were a director of the Company, become a party or are
threatened to be made a party to any indemnifiable action, suit or proceeding.
The Company shall pay, in advance of the final disposition of any indemnifiable
action, suit or proceeding under this bylaw, all reasonable expenses incurred
by a director, upon receipt of an undertaking by or on behalf of a director to
repay such amount if it is ultimately determined that he is not entitled to be
indemnified by the Company under the law. The Company may indemnify persons
other than directors, such as officers and employees, as permitted by law. The
Company may purchase and maintain insurance on behalf of directors, officers
and other persons against any liability asserted against him, whether or not
the Company would have the power to indemnify such person against such
liability, as permitted by law.
Item 16. Exhibits.
The exhibits listed on the accompanying Exhibit Index are filed as
part of this Registration Statement and such Exhibit Index is hereby
incorporated by reference.
Item 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
II-1
<PAGE> 19
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in the Registration Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration State- ment.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(3) 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.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the 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.
(5) To deliver or cause to be delivered with the Prospectus, to
each person to whom the Prospectus is sent or given, the latest annual report
to security holders that is incorporated by reference in the Prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not set
forth in the Prospectus, to deliver, or cause to be delivered to each person to
whom the Prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the Prospectus to provide such
interim financial information.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of 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. 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 Act and
will be governed by the final adjudication of such issue.
(7) For purposes of determining any liability under the Securities
Act of 1933, 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.
(8) For the purpose of determining any liability under the
Securities Act of 1933, 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.
II-2
<PAGE> 20
SIGNATURES
Pursuant to 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 S-2 and has duly caused this
Post-effective Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Hurst,
Texas on the 13th of June, 1995.
SURETY CAPITAL CORPORATION
By: /s/ C. Jack Bean
------------------------------------
C. Jack Bean, Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ C. Jack Bean Chairman of the Board and Director June 13, 1995
- ------------------------------- (Principal Executive Officer)
C. Jack Bean
/s/ Bob Hackler Chief Financial Officer, Vice President, June 13, 1995
- ------------------------------- Secretary and Director
Bob Hackler (Principal Financial and Accounting Officer)
/s/ Cullen W. Turner Director June 13, 1995
- -------------------------------
Cullen W. Turner
/s/ G. M. Heinzelmann Director June 13, 1995
- -------------------------------
G. M. Heinzelmann
/s/ Garrett Morris Director June 13, 1995
- -------------------------------
Garrett Morris
</TABLE>
II-3
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Exhibit
Number Description
- ------ -----------
<S> <C>
1.01 Selling agreement between Surety Capital Corporation and Cullum & Sandow Securities, Inc. with respect
to the firm commitment underwriting of 225,000 shares of the Company's Common Stock dated June 13, 1995. ***
2.01 Reorganization agreement by and between First National Bank, N.A.; Lloyd W. Butts; D.C. Deegan; Norman
Denton; Murriel Gilbreath; Robert S. Light; Joe B. Turner, Jr.; Surety Bank N.A.; and Surety Capital
Corporation; dated May 24, 1994. (10)
2.02 Reorganization agreement by and between the Farmers Guarantee State Bank of Kennard; Dr. Frank A. Smith
III; Surety Bank N.A.; and Surety Capital Corporation, dated February 4, 1994; and agreement to merge
the Farmers Guarantee State Bank of Canard with and into Surety Bank, N.A. under the charter of Surety
Bank, N.A. and under the title of Surety Bank, N.A., dated February 4, 1994 (8)
4.01 Certificate of Incorporation of the Company. (1)
4.02 Amendment to the Certificate of Incorporation, dated April 8, 1987. (2)
4.03 Restated Bylaws of the Company. (2)
4.04 Certificate of Amendment to the Company's Certificate of Incorporation, as filed with the Delaware
Secretary of State on April 4, 1988. (4)
4.05 Form of Common Stock certificate (specimen). (3)
4.06 Certification of Elimination of Series of Shares of Preferred Stock of the Company as filed with the
Delaware Secretary of State on January 31, 1992. (7)
4.07 Certificate of Amendment to Company's Certificate of Incorporation as filed with Delaware Secretary of
State on June 14, 1993. (11)
5.01 Opinion of Secore & Waller, L.L.P with respect to the validity of the shares to be registered and
issued.**
10.01 Letter Loan Agreement between Overton Bank and Trust, N.A. and the Surety Capital Corporation, dated
December 9, 1994 with respect to a loan in the amount of $1,750,000.00.**
10.02 Pledge Agreement by and between Surety Capital Corporation and Overton Bank and Trust, N.A., dated
December 9, 1994.**
10.03 Promissory Note made by Surety Capital Corporation to Overton Bank and Trust N.A. in the amount of
$1,750,000.00, dated December 9, 1994.**
</TABLE>
II-4
<PAGE> 22
<TABLE>
<S> <C>
10.04 Guaranty Agreement entered into by C. Jack Bean with Overton Bank and Trust, N.A. with respect to the
repayment by Surety Capital Corporation of loan from Overton Bank and Trust, N.A., dated December 9,
1994.**
10.05 Uniform Commercial Code Financing Statement UCC-1 completed with respect to Overton Bank & Trust,
N.A.'s security interest in the Shares of Stock of Surety Bank, N.A., owned by Surety Capital
Corporation.**
10.06 A form of Contingent Stock Right granted by the Company to Robert M. Adams, with respect to the right
to receive additional shares of Common Stock in the event the Company fails to register with the
Securities and Exchange Commission those shares purchased in the December 1994 private placement with
schedule identifying omitted agreements with substantially identical terms.**
10.07 A form of Contingent Stock Right offered to Robert M. Adams, with respect to the right to purchase
additional shares of Common Stock in the event the Company subsequently offers Company securities on
terms more favorable than those offered to the purchasers in the private placement with identifying
schedule setting forth omitted Contingent Stock Right agreements with substantially identical terms.**
10.08 Surety Capital Corporation 1988 Incentive Stock Option Plan of Surety. (7)
10.09 Form of Change in Control Agreement dated August 16, 1994, as entered into between the Company and C.
Jack Bean with schedule identifying parties to substantially similar agreements.**
10.10 Lease agreement between Precinct Office Park Joint Venture, as landlord, and the Company, as tenant,
regarding offices located in Hurst, Texas, dated December 1, 1989. (6)
10.11 Renewal of Promissory Note in the original principal amount of $1,750,000, with Surety Capital
Corporation as borrower, and Overton Bank and Trust, N.A. as lender, dated March 9, 1995. (8)
10.12 Surety Capital Corporation 1995 Incentive Stock Option Plan. (8)
13.01 Annual Report to shareholders for the fiscal year ended December 31, 1994. (8)
13.02 Quarterly report on form 10-Q for the three months ended March 31, 1995. **
13.03 Annual Report on Form 10-K for the year ended December 31, 1994. **
23.01 Consent of Coopers & Lybrand, L.L.P. with respect to the Financial Statements prepared for the
Company dated March 27, 1995.**
23.02 Consent of Coopers & Lybrand, L.L.P. with respect to the Financial Statements prepared for the First
National Bank, N.A.**
23.03 Consent of Coopers & Lybrand, L.L.P. with respect to the Financial Statements prepared for the Farmers
Guarantee State Bank of Kennard.**
23.04 Consent of Secore & Waller, L.L.P.**
</TABLE>
II-5
<PAGE> 23
<TABLE>
<S> <C>
23.05 Consent of Coopers & Lybrand, L.L.P. with respect to the financial statement prepared by for the Company, dated
May 19, 1995.**
27 Financial Data Schedule**
99.01 Form of Subscription Agreement Regarding Offering of Company's Common Stock.**
</TABLE>
NOTES TO EXHIBIT INDEX
(1) Filed with Registration Statement No. 33-1983 on Form S-1 and
incorporated by reference herein.
(2) Filed with the Company's Form 10-K dated October 31, 1987 and
incorporated by reference herein.
(3) Filed with the Company's Form 8-K dated May 17, 1988 and
incorporated by reference herein.
(4) Filed with the Company's Form 10-Q for the quarter ended April
30, 1988 and incorporated by reference herein.
(6) Filed with the Company's Form 10-K dated December 31, 1990 and
incorporated by reference herein.
(7) Filed with the Company's Form 10-K dated December 31, 1991 and
incorporated by reference herein.
(8) Filed with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 and incorporated by
reference herein.
(9) Filed with the Company's Quarterly Report on Form 10-Q for the
three months ended March 31, 1995 and incorporated by
reference herein.
(10) Filed with the Company's Form 8-K dated December 8, 1994 and
incorporated by reference herein.
(11) Filed with the Company's Form 10-K dated December 31, 1993 and
incorporated by reference herein.
** Filed previously.
*** Filed herein.
II-6
<PAGE> 1
EXHIBIT 1.01
[SURETY CAPITAL CORPORATION LETTERHEAD]
June 13, 1995
Mr. Tim Cullum
Cullum & Sandow Securities, Inc.
1601 Elm Street
Suite 4343
Dallas, TX 75201-4721
In re: Selling Agreement For Form S-2 Registration Statement
Dear Mr. Cullum:
The undersigned, Surety Capital Corporation (the "Company"), by this
letter confirms its agreement (the "Agreement") with Cullum & Sandow
Securities, Inc. (the "Dealer") with respect to the offer and sale of a
registered securities offering by the Company. Specifically, the Company has
filed a Form S-2 Registration Statement with the Securities and Exchange
Commission which provides for the registration of certain shares of unissued
common stock of the Company (the "Company Shares"), which statement went
effective on June 2, 1995 and was priced at $3.25 per share on June 9, 1995.
The Dealer and the Company hereby agree that the terms and conditions
of the Agreement are as follows:
SECTION 1. THE OFFERING. The Offering sponsored by the
Company shall be made exclusively on the basis of a prospectus, a Form 10-K for
the period ended 12/31/94 and a Form 10-Q for the period ended 3/31/95,
prepared by the Company and delivered to the Dealer for distribution to
offerees as set forth in Section 4 (the "Prospectus"). The period of
subscription of the Offering shall be as set forth in the Prospectus.
SECTION 2. PARTICIPATION OF DEALER. On the basis of the
representations, warranties and covenants of the parties contained in this
Agreement, but subject to the terms and conditions herein set forth, Dealer
agrees to acquire from the Company, on a firm commitment basis acting in its
capacity as an underwriter of Company Shares, a total of 225,000 Company
Shares, payment to be made when a Post-Effective Amendment No. 1 to the
Registration Statement is declared effective with the Securities and Exchange
Commission. The price for the Company Shares so acquired pursuant to this
Agreement shall be the sum of $3.25 per share less a selling concession of 5%
per each Company Share acquired for a net price of $3.0875 per share.
<PAGE> 2
Mr. Tim Cullum
Cullum & Sandow Securities, Inc.
June 13, 1995
Page 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants that:
(a) it is a corporation duly and validly organized and is
validly existing and in good standing as a corporation under the laws
of the state in which it is organized;
(b) it will deliver to the Dealer a reasonable number of
copies of the Prospectus;
(c) All action required to be taken by the Company to
offer and sell the securities under state or federal law will be taken
as of the date of the Company's sale of Company Shares to the Dealer;
(d) the Prospectus will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances
under which they were made, not misleading;
(e) this Agreement, when fully executed by or on behalf
of the Company and the Dealer, shall constitute a valid and binding
agreement of the Company;
(f) the execution and delivery of this Agreement and the
incurrence of the obligations set forth herein and the consummation of
the transactions contemplated in this Agreement and the Prospectus
will not constitute a breach of or default under (i) any instrument by
which the Company is bound; or (ii) any order, rule or regulation
(applicable to the Company) issued by any court, governmental body or
administrative agency having jurisdiction over the Company;
(g) with respect to those activities undertaken by it,
the Company will endeavor to ensure that the Offering shall comply, in
all respects, with the requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and the
securities or "blue sky" laws of any state jurisdiction in which an
offer and/or sale takes place;
(h) it agrees to advise the Dealer of any material
adverse change in the condition, financial or otherwise, of the
Company from the latest date as of which such condition is set forth
in the Prospectus; and there shall be no material transactions entered
into by the Company from the date as of which the financial condition
of the Company is set forth in the Prospectus other than transactions
in the usual course of business or transactions;
<PAGE> 3
Mr. Tim Cullum
Cullum & Sandow Securities, Inc.
June 13, 1995
Page 3
(i) no litigation or proceeding at law or in equity is
currently pending before any federal or state authority which would
materially and adversely affect the business, operations or financial
condition of the Company, and neither the execution and delivery of
this Agreement, the consummation of the transactions herein
contemplated, nor the fulfillment of or compliance with the terms
hereof will conflict with, or result in a breach of, any of the terms,
provisions, or conditions of any agreement or instrument to which the
Company is a party; and
(j) neither the Company nor any authorized person acting
on behalf of the Company, directly or indirectly, or through an
authorized agent (other than the Dealer), shall sell, offer for sale,
or solicit offers to subscribe for or buy, or otherwise approach or
negotiate with respect to, or shall sell or offer for sale, or solicit
offers to subscribe for or buy with the intention, in whole or part,
of unlawfully violating the registration requirements of the
Securities Act of 1933, as amended, or securities or "blue sky" laws
of any jurisdiction.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE DEALER. The Dealer
represents and warrants that:
(a) it, or any person acting on its behalf, will not
offer or solicit any offers to subscribe for or buy, or otherwise
negotiate with any person with respect to the Offering, on the basis
of any communications or documents, except a Prospectus;
(b) it is a securities broker-dealer registered with the
Securities and Exchange Commission and the National Association of
Securities Dealers, Inc., and that it and its agents shall be
registered in the states in which the Dealer shall offer or sell the
Offering; and
(c) it shall comply with the requirements of Rule 15c2-8
applicable to the delivery of the Prospectus to the extent applicable.
SECTION 5. COVENANTS OF THE COMPANY. The Company covenants with the
Dealer that:
(a) the Company will pay all expenses associated with the
printing and delivery to the Dealer of a reasonable number of copies
of the Prospectus and, to the extent necessary, to qualify the
Offering under the securities laws of the states in which the Offering
is offered and sold;
(b) if any event relating to or affecting the Company
shall occur during the term of any Offering, as a result of which it
is necessary, in the opinion of
<PAGE> 4
Mr. Tim Cullum
Cullum & Sandow Securities, Inc.
June 13, 1995
Page 4
counsel to the Company, to amend or supplement the Prospectus so that
it will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, the Company shall at its expense forthwith prepare and
furnish to the Dealer a reasonable number of copies of an amendment or
amendments of, or supplement or supplements to, the Prospectus, which
the Dealer shall promptly deliver to all offerees then being
solicited; and
(c) the Company will deliver to the Dealer such reports
and documents as the Company is required, under the terms of the
Prospectus or any document referred to therein, to furnish to its
prospective purchasers.
SECTION 6. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company under this Agreement are subject to the accuracy of
and compliance with the Dealer's representations and warranties set forth in
Section 5 and to the performance by the Dealer of its obligations hereunder.
SECTION 7. INDEMNIFICATION OF DEALER BY THE COMPANY. The Company
agrees to indemnify and hold harmless Dealer, its officers, directors,
employees, agents and registered representatives, from and against any and all
losses, claims and damages arising out of any claim asserted against Dealer as
a result of its efforts in connection with the offer and sale of the Offering,
including claims asserted under the Securities Act of 1933 and the Securities
Exchange Act of 1934, which claims arise out of any misstatement of material
fact or omission to state a material fact in the Prospectus. The Company shall
not indemnify Dealer for any losses, claims or damages arising out of any act
of Dealer constituting willful misconduct, bad faith or gross negligence, or
arising out of any oral misrepresentations or omissions of material fact by
Dealer. This indemnity shall not apply to proceedings initiated against Dealer
by any governmental regulatory authority and shall only extend to civil
proceedings instituted by purchasers of Common Shares of the Offering.
SECTION 8. NOTICES. All communications under this Agreement shall be
in writing, and, if sent, shall be mailed, delivered or telegraphed and
confirmed to the Dealer at the address initially set forth above or as changed
by you in written notice to the Company, or if sent to the Company, shall be
mailed, delivered or telegraphed and confirmed to it at at its executive
offices.
SECTION 9. PARTIES. This Agreement shall inure to the benefit of,
and be binding upon, the Dealer, any person which controls the Dealer, Dealer's
Agents and its successors, and upon the Company, its controlling person(s) and
its representative successors; this Agreement and its conditions and provisions
are for the sole and exclusive benefit of the parties and their representative
successors and controlling persons, and for the benefit of no other person,
firm or corporation.
<PAGE> 5
Mr. Tim Cullum
Cullum & Sandow Securities, Inc.
June 13, 1995
Page 5
SECTION 10. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
SECTION 11. PRIOR AGREEMENTS; AMENDMENT. This Agreement replaces and
supersedes, in its entirety, all prior selling agreements, whether oral or
written, between the Company and the Dealer. This Agreement may be modified or
amended only by a subsequent written agreement executed by the Company and the
Dealer.
SECTION 12. ARBITRATION. IN THE EVENT THAT A DISPUTE ARISES BETWEEN
THE DEALER AND THE COMPANY, OR ANY OF THEIR RESPECTIVE AGENTS AND EMPLOYEES,
SAID DISPUTE ARISING OUT OF, IN CONNECTION WITH OR AS A RESULT OF THE EXECUTION
OF THIS AGREEMENT, OR AS A RESULT OF THE OFFER AND SALE OF THE OFFERING BY THE
DEALER, THE UNDERSIGNED HEREBY EXPRESSLY AGREE THAT SAID DISPUTE SHALL BE
RESOLVED THROUGH ARBITRATION RATHER THAN LITIGATION, AND AGREE TO SUBMIT THE
DISPUTE TO THE AMERICAN ARBITRATION ASSOCIATION, DALLAS, TEXAS FOR RESOLUTION.
THE UNDERSIGNED FURTHER AGREE THAT ANY HEARING SCHEDULED AFTER AN ARBITRATION
PROCEEDING IS COMMENCED SHALL TAKE PLACE IN DALLAS COUNTY, TEXAS.
Upon execution by the parties hereto, this instrument will become a
binding agreement upon the Dealer and the Company in accordance with its terms.
Very truly yours,
SURETY CAPITAL CORPORATION
By: /s/ C. Jack Bean
---------------------------------------
Mr. C. Jack Bean, Chairman of the Board
Date: June 14, 1995
-------------------------------------
CULLUM & SANDOW SECURITIES, INC.
By: /s/ Tim Cullum
--------------------------------------
Date: June 14, 1995
-------------------------------------
