<PAGE>
As filed with the Securities and Exchange Commission on June 19, 1998
Registration No.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
==================================
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
==================================
SURETY CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 75-2065607
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
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 (Name, address, including zip code, and
telephone number, including area telephone number, including area
code, of Registrant's principal code, of agent for service)
executive offices)
==================================
Surety Capital Corporation
1997 Non-Qualified Stock Option Plan for Non-Employee Directors
1997 Non-Qualified Stock Option Plan for Officers and Key Employees
1998 Incentive Stock Option Plan
(Full title of the plans)
==================================
Copy to:
Margaret E. Holland
Tracy & Holland, L.L.P.
306 West Seventh Street, Suite 500
Fort Worth, Texas 76102-4982
817-335-1050
817-332-3140 (telecopy)
(Counsel for the Registrant)
==================================
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of Proposed Maximum Proposed Maximum Amount of
Securities to Amount to be Offering Price Aggregate Offering Registration
be Registered Registered(1) Per Share(2) Price(1)(2) Fee
- -----------------------------------------------------------------------------------------
Common Stock, 1,130,000 $4.69 $5,299,700 $1,564
par value $0.01 shares
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 146, there are also registered hereby such
indeterminate number of shares of Common Stock as may be issuable by
reason of the operation of the anti-dilution provisions of the 1997
Non-Qualified Stock Option Plan for Non-Employee Directors, the 1997
Non-Qualified Stock Option Plan for Officers and Key Employees, and
the 1998 Incentive Stock Option Plan.
(2) Calculated pursuant to Rule 457(h) solely for the purpose of
computing the registration fee based on the average of the high and
low prices of the Common Stock reported by the American Stock
Exchange on June 15, 1998.
____________________
PAGE
<PAGE>
PART I.
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION. *
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION. *
- ------------------------
* Information required by Part I to be contained in the Section
10(a) prospectus is omitted from this Registration Statement in
accordance with Rule 428 under the Securities Act of 1933, as
amended (the "Securities Act") and the "Note" to Part I of Form
S-8.
PAGE
<PAGE>
PART II.
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The Registrant hereby incorporates by reference into this
Registration Statement the documents listed below filed with the
Securities and Exchange Commission (the "Commission"):
(a) Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) Proxy Statement for the Annual Meeting of Stockholders
held on May 21, 1998;
(c) Quarterly Report on Form 10-Q for the quarter ended March
31, 1998;
(d) Current Report on Form 8-K dated February 4, 1998;
(e) Current Report on Form 8-K dated April 1, 1998, as amended
by Current Report on Form 8-K/A (Amendment No. 1) dated
April 1, 1998, and as further amended by Current Report on
Form 8-K/A (Amendment No. 2) dated April 1, 1998;
(f) Current Report on Form 8-K dated May 21, 1998; and
(g) The description of the Common Stock contained in the
Company's Registration Statements on Form 8-A12B/A
(Amendment No. 1) and Form 8-A12G/A (Amendment No. 1)
filed June 17, 1998.
In addition, all documents subsequently filed pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act") with the Commission, prior to the filing of a
post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of
filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Tracy & Holland, L.L.P., 306 West Seventh Street, Suite
500, Fort Worth, Texas 76102, has rendered an opinion as to the
legality of the Common Stock being registered hereby. Margaret E.
Holland, whose professional corporation is a partner of Tracy &
Holland, L.L.P., is also a director of the Registrant. Attorneys
whose professional corporations are partners of Tracy & Holland,
L.L.P. and employees of Tracy & Holland, L.L.P. in the aggregate own,
or have been granted options covering, 28,300 shares of Common Stock.
ITEM 6. 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.
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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.
The Certificate of Incorporation of the Company limits the
liability of directors to the full extent permitted by Delaware law.
The Certificate of Incorporation also provides that the Company will
indemnify directors and officers to the full extent provided by
Delaware law. 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 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 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
Exhibit Number Description
4.1 Certificate of Incorporation (filed as Exhibit 3(a)
to Registration Statement No. 33-1983 on Form S-1)
4.2 Certificate of Amendment of Certificate of
Incorporation, as filed with the Delaware Secretary
of State on April 8, 1987 (filed as Exhibit 3.02 to
the Annual Report on Form 10-K for the fiscal year
ended October 31, 1987)
4.3 Certificate of Amendment to the Certificate of
Incorporation, as filed with the Delaware Secretary
of State on April 4, 1988 (filed as Exhibit 3(a)
to the Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 1988)
4.4 Certificate of Designations Establishing Series of
Shares of Preferred Stock, as filed with the
Delaware Secretary of State on April 4, 1988
(filed as Exhibit 4(a) to the Quarterly Report on
Form 10-Q for the fiscal quarter ended April 30,
1988)
4.5 Certification of Elimination of Series of Shares of
Preferred Stock, as filed with the Delaware
Secretary of State on January 31, 1992 (filed as
4.04 to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1991)
4.6 Certificate of Amendment to the Certificate of
Incorporation, as filed with Delaware Secretary of
State on June 14, 1993 (filed as Exhibit 3.04 to
the Annual Report on Form 10-K for the fiscal year
ended December 31, 1993)
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<PAGE>
4.7 Form of Common Stock certificate (specimen) (filed
as Exhibit 4.01 to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1993)
4.8 Restated Bylaws of the Company (filed as Exhibit
3.05 to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1994)
4.9 Surety Capital Corporation 1997 Non-Qualified Stock
Option Plan for Non-Employee Directors and Form of
Stock Option Agreement (filed as Exhibit 10.15 to
the Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
4.10 Surety Capital Corporation 1997 Non-Qualified Stock
Option Plan for Officers and Key Employees and Form
of Stock Option Agreement (filed as Exhibit 10.14
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1997)
4.11 Surety Capital Corporation 1998 Incentive Stock
Option Plan (filed as Exhibit 10.17 to the Annual
Report on Form 10-K for the fiscal year ended
December 31, 1997)
4.12 Rights Agreement between Surety Capital Corporation
and Securities Transfer Corporation as Rights
Agent, dated as of June 17, 1997 (filed as Exhibit
1 to the Current Report on Form 8-K dated June 17,
1997); as amended by Amendment No. 1 to Rights
Agreement of Surety Capital Corporation, dated as
of March 10, 1998 (filed as Exhibit 4.01 to the
Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
5 Opinion of Tracy & Holland, L.L.P.*
23.1 Consent of Tracy & Holland, L.L.P. (contained in
the Opinion filed as Exhibit 5 to this Registration
Statement).*
23.2 Consent of Coopers & Lybrand L.L.P.*
23.3 Consent of Burnside & Rishebarger, PLLC.*
24 Power of Attorney (contained within Signature
Page).*
- ------------------------
* Filed herewith.
ITEM 9. UNDERTAKINGS.
(a) The undersigned 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:
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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 Statement;
(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.
(b) The undersigned registrant hereby undertakes 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
that is incorporated by reference in the Registration Statement shall
be deemed to be a new Registration Statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) 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.
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<PAGE>
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-8 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hurst, Texas,
on June 17, 1998.
SURETY CAPITAL CORPORATION
(Registrant)
By: /s/ C. Jack Bean
-------------------------
C. Jack Bean, Chairman of
the Board and Chief
Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents that each person whose signature
appears on the signature pages of this Registration Statement
constitutes and appoints C. Jack Bean, Bobby W. Hackler and B. J.
Curley, and each of them, or any one of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any or all amendments to
this Registration Statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, or any of them, full power and
authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents,
or any one of them or his substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------- -------------------------------- -------------
<S> <C> <C>
/s/ C. Jack Bean Chairman of the Board, Chief June 17, 1998
- ---------------- Executive Officer and Director
C. Jack Bean (Principal Executive Officer)
/s/ B. J. Curley Vice President, Secretary and June 17, 1998
- ---------------- Chief Financial Officer (Principal
B. J. Curley Accounting Officer)
/s/ Bobby W. Hackler Vice Chairman of the Board, June 17, 1998
- -------------------- Chief Operating Officer and
Bobby W. Hackler Director
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/s/ G. M. Heinzelmann, III President and Director June 17, 1998
- --------------------------
G. M. Heinzelmann, III
/s/ William B. Byrd Director June 17, 1998
- -------------------
William B. Byrd
/s/ Joseph S. Hardin Director June 17, 1998
- --------------------
Joseph S. Hardin
/s/ Margaret E. Holland Director June 17, 1998
- -----------------------
Margaret E. Holland
/s/ Michael L. Milam Director June 17, 1998
- --------------------
Michael L. Milam
/s/ Garrett Morris
- ------------------ Director June 17, 1998
Garrett Morris
/s/ Cullen W. Turner Director June 17, 1998
- --------------------
Cullen W. Turner
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PAGE
<PAGE>
PROSPECTUS
SURETY CAPITAL CORPORATION
1,130,000 SHARES
COMMON STOCK
This Prospectus relates to the offer and sale from time to time of
up to 1,130,000 shares of common stock, $0.01 par value (the "Shares"),
of Surety Capital Corporation (the "Company") by the Selling
Stockholders (the "Offering"), and is prepared in accordance with
General Instruction C to Form S-8, to be used in connection with the
resale of control securities to be acquired by the Selling Stockholders
pursuant to the exercise of options granted under (1) the Surety
Capital Corporation 1997 Non-Qualified Stock Option Plan for Non-
Employee Directors (the "Director Plan"), (2) the Surety Capital
Corporation 1997 Non-Qualified Stock Option Plan for Officers and Key
Employees (the "Officer Plan"), and (3) the Surety Capital Corporation
1998 Incentive Stock Option Plan (the "ISO Plan"). (The Director Plan,
the Officer Plan and the ISO Plan are collectively referred to herein
as the "Plans.") See "SELLING STOCKHOLDERS." The Common Stock
issuable upon exercise of the options granted under the Plans was
registered by the Company under the Securities Act pursuant to a
Registration Statement on Form S-8 filed with the Commission.
Selling Stockholders, directly or through agents, dealers or
underwriters, may sell the Shares from time to time on terms to be
determined at the time of sale. To the extent required, the specific
number of Shares to be sold, the names of the Selling Stockholders,
respective purchase prices and public offering prices, the name of any
agent, dealer or underwriter, and applicable discounts or commissions
with respect to a particular offer, will be set forth in an
accompanying Prospectus supplement. See "PLAN OF DISTRIBUTION."
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 any Selling
Stockholder. 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.
The Company's common stock is traded on the American Stock
Exchange ("AMEX") under the symbol "SRY."
NO PERSON, OR PERSONS ACTING TOGETHER, MAY ACQUIRE IN THE
AGGREGATE 10% OR MORE OF THE COMPANY'S COMMON STOCK WITHOUT FIRST
COMPLYING WITH THE PRIOR NOTICE REQUIREMENTS OF THE BANK CHANGE OF
CONTROL ACT.
PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION
UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 5 PRIOR TO AN
INVESTMENT IN THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE OPTIONS
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC-
URITIES 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 __________, 1998.
PAGE
<PAGE>
AVAILABLE INFORMATION
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 and other information with the
Securities and Exchange Commission (the "Commission"). The Company's
periodic reports, proxy and information statements and other
information can be inspected and copied at the public reference
facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549; and at the Commission's
regional offices located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material
may also be obtained upon the payment of prescribed rates by writing
to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The
Commission maintains a site on the World Wide Web that contains
reports, proxy statements and other information filed electronically
by issuers with the Commission, which site can be accessed at
http://www.sec.gov.
The Common Stock of the Company is traded on the AMEX and copies
of periodic reports, proxy and information statements and other
information is also available for inspection at the AMEX at
86 Trinity Place, Fifth Floor Library, New York, New York 10006. The
telephone number at the AMEX is 212-306-1290.
The Company has filed with the Commission a Registration
Statement on Form S-8 (the "Registration Statement") under the
Securities Act with respect to the Common Stock issuable upon
exercise of the options under the Plans. This Prospectus, which
constitutes a part of the Registration Statement, does not contain
all the information set forth in the Registration Statement and the
exhibits thereto. For further information with respect to the
Company and the Common Stock issuable upon exercise of the options
under the Plans, reference is hereby made to such Registration
Statement and exhibits. Statements contained herein concerning the
provisions of any documents are necessarily summaries of those
documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the
Commission. The Registration Statement and any amendments thereto,
including exhibits filed as a part thereof, are available for
inspection and copying as set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the
Commission are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended December
31, 1997;
(b) Proxy Statement for the Annual Meeting of Stockholders held on
May 21, 1998;
(c) Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
(d) Current Report on Form 8-K dated February 4, 1998;
(e) Current Report on Form 8-K dated April 1, 1998, as amended by
Current Report on Form 8-K/A (Amendment No. 1) dated April 1,
1998, and as further amended by Current Report on Form 8-K/A
(Amendment No. 2) dated April 1, 1998;
(f) Current Report on Form 8-K dated May 21, 1998; and
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(g) The description of the Common Stock contained in the Company's
Registration Statements on Form 8-A12B/A (Amendment No. 1) and
Form 8-A12G/A (Amendment No. 1) filed June 17, 1998.
All documents subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus from the respective
dates of filing of such documents. Any statement contained in this
Prospectus, in a supplement to this Prospectus or in a document
incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein, or in any
subsequently filed supplement to this Prospectus or in any document
that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will furnish without charge to each person to whom
this Prospectus has been delivered, upon written or oral request, a
copy of any or all documents incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such
documents). Written or oral requests for such copies should be
directed to Mr. B. J. Curley, Surety Capital Corporation, 1845
Precinct Line Road, Suite 100, Hurst, Texas 76054 (telephone: 817-
498-2749).
NOTE REGARDING
FORWARD-LOOKING STATEMENTS
In this Prospectus, all statements other than statements of
historical fact regarding the Company's financial condition, results
of operation, business strategy and future acquisitions or operations
are "forward-looking statements." When used in this Prospectus,
words such as "believes," "anticipates," "intends," "expects,"
"should," and words of similar import identify a forward-looking
statement. Such forward-looking statements may involve numerous
assumptions about known and unknown trends, uncertainties, risks,
economic conditions and other factors which may ultimately prove to
be inaccurate. Certain of these factors are discussed in more detail
elsewhere in this Prospectus and in the Company's reports and filings
with the Commission incorporated by reference herein, including
without limitation under "Risk Factors" in this Prospectus and "Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Item 1. Business" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
These factors include the Company's ability to successfully redeploy
excess liquidity following the acquisition of TexStar as well as the
Company's ability to continue to make future acquisitions. Actual
results may differ materially from any future results expressed or
implied by such forward-looking statements. Prospective investors
are cautioned not to place undue reliance on such forward-looking
statements. The Company disclaims any obligation to update or to
publicly revise any of the forward-looking statements contained
herein to reflect future events or developments.
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SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements (including the notes
thereto) included herein and incorporated by reference in this
Prospectus. As used in this Prospectus, unless the context otherwise
requires, the term "Company" means Surety Capital Corporation and its
subsidiary Bank, and a description of activities conducted by the
Company includes activities conducted by the Bank.
THE COMPANY
GENERAL. Surety Capital Corporation (the "Company") is a bank
holding company with its principal executive offices located at 1845
Precinct Line Road, Suite 100, Hurst, Texas 76054 and its telephone
number is 817-498-2749. The Company, which is a Delaware
corporation, owns all of the outstanding shares of Surety Bank,
National Association (the "Bank"). The Company conducts substan-
tially all of its activities through the Bank. The Company operates
full-service banking offices in the Texas communities of Chester,
Converse, Hurst, Kennard, Lufkin, Midlothian, New Braunfels, San
Antonio, Schertz, Universal City, Waxahachie, Wells and Whitesboro.
At March 31, 1998, the Company had $177.9 million in total assets,
$156.1 million in total deposits and $16.2 million in stockholders'
equity, and its subsidiary Bank was "well-capitalized" under Federal
regulatory capital adequacy guidelines. With the completion of the
acquisition of TexStar National Bank ("TexStar") on April 1, 1998,
the Company's total assets, deposits and stockholders' equity was
increased to $243.3 million, $220.9 million and $16.2 million,
respectively. See "TexStar Acquisition."
BUSINESS STRATEGY. The Company's business strategy has two key
aspects: growth through acquisitions of community banks and an
emphasis on specialized lending, which it funds using relatively low
cost core retail deposits from its network of community banking
offices. The Company acquired its first community bank in December
1989. Since 1992, the Company has established twelve new
full-service branches by acquiring eleven community banks and
purchasing the deposits and certain assets of a branch of another
bank. The Company's most recent acquisition, completed on April 1,
1998, was TexStar, a community bank headquartered in Universal City,
Texas, with four branch locations in the greater San Antonio
metropolitan area. At April 1, 1998, TexStar had $70.3 million in
total assets, $64.8 million in deposits and $5.0 million in
shareholders' equity.
While the Company is actively pursuing its growth strategy, the
Company believes that growth is not prudent unless the acquired
assets and liabilities can be profitably deployed. It is in this
regard that the Company distinguishes itself from other community
banking organizations by balancing its traditional community bank
lending with the active development of lending niches such as
insurance premium financing. The ability to fund these lending
activities with relatively low cost deposits from the Company's
community bank network gives the Company a pricing advantage over
non-bank competitors for its loan products. The following is a
description of the Company's primary niche and traditional lending
activities:
* INSURANCE PREMIUM FINANCING. The Company's primary niche
product is insurance premium finance ("IPF") lending,
which involves the lending of funds to companies and
individuals for the purpose of financing their purchase of
property and casualty insurance. The Company markets this
product through over 5,000 independent insurance agents
and maintains a loan portfolio consisting of receivables
from nearly 600 insurance companies. At March 31, 1998,
the Company reported total gross IPF loans of $42.4
million (approximately 42% of gross loans), a 5% increase
over the December 31, 1997 total balance of $40.4 million
in IPF loans (40% of gross loans). The loans are
relatively short term, generally with maturities of eight
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to nine months. The down payment and monthly installments
on each loan are calculated such that at all times the
equity or value of the unearned premium in the policy
exceeds the net balance due on the loan. If the borrower
does not make the loan payments on time, the Company has
the right, after notice to the borrower, to cancel the
insurance policy and to receive the entire amount of the
unearned premium from the insurance company writing the
insurance. The unearned premium is then applied to the
net loan balance. The primary risk in IPF lending is not
that a borrower will default on the loan but that an
insurance company will default on payment of the unearned
premium following a default by a borrower. No lending is
without risk, but specialized products may present
different types of risks than traditional loans.
* MEDICAL CLAIMS FACTORING. The Company has historically
been engaged in medical claims factoring, purchasing
primarily insurance company claims from a variety of
health care providers. During 1997 the Company
experienced a dramatic increase in the amount of medical
claims receivables outstanding over 120 days. At December
31, 1997, the Company reported $3.1 million in net medical
claims receivables, representing 2.0% of interest-bearing
assets of the Company, after charge-offs of $2.0 million
against the allowance for medical claims receivable losses
and an additional provision of $3.7 million to the
allowance. The interest income from medical claims
receivables accounted for 9.6% of the total gross interest
income of the Company for 1997. With new management and
additional staffing in place as of January 1998, primarily
focused on the collection of the outstanding receivables
over 120 days, the Company is currently monitoring the
factoring program under its new underwriting guidelines to
assess its profitability and its future as a niche product
of the Company. As of March 31, 1998 the Company had
collected approximately $886,000 of medical claims
receivables charged off or provided for at December 31,
1997.
* TRADITIONAL LENDING ACTIVITIES. The Company diversifies
its lending risks by balancing its specialty lending with
traditional loans. At March 31, 1998, the Company had
approximately $49.4 million in gross IPF loans, with the
other half of its loan portfolio in traditional community
bank loans, including real estate, commercial and
installment loans. The Company believes that its
specialized lending products help it achieve a higher loan
portfolio yield than it could achieve on traditional
community bank loans alone.
RISK FACTORS
In addition to the other information contained in this
Prospectus or incorporated into this Prospectus by reference, the
following factors should be considered carefully in evaluating the
Company, its business and prospects before purchasing any of the
Common Stock offered hereby. An investment in the securities of the
Company may pose risks unique to the Company, or unique to the
financial services industry, which are not posed by other
investments.
CONTINGENT APPROVAL BY THE OFFICE OF THE COMPTROLLER OF THE
CURRENCY. In connection with the acquisition of TexStar by the
Company through the merger of TexStar with the Bank (the "Merger"),
the Office of the Comptroller of the Currency ("OCC") conditionally
approved the Merger, contingent upon (1) the Company contributing at
least $4,000,000 in additional capital to the Bank, (2) the Bank
maintaining certain OCC-mandated capital ratios in excess of the
minimum "well-capitalized" capital ratios through December 31, 2000,
and (3) in the event of the failure of the Bank to maintain such
minimum capital ratios, the Company initiating efforts to bring the
Bank back into compliance with such minimum capital ratios. At March
31, 1998, the Bank was "well-capitalized" under Federal regulatory
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capital adequacy guidelines and in compliance with the OCC-mandated
capital ratio levels. No assurance can be given, however, that the
Bank will remain "well-capitalized" under such guidelines and in
compliance with the OCC-mandated capital ratio levels. If the Bank
fails to maintain such OCC-mandated capital levels through
December 31, 2000, the Company is required (1) to contribute
additional capital to the Bank, which, if necessary, may be obtained
by the Company through a traditional loan from a financial
institution or through an offering of the Company's securities, or
(2) to liquidate some of the assets of the Bank. No assurance can be
given that the Company will be successful in such efforts. The
issuance of additional securities by the Company may have a dilutive
effect on the Common Stock issuable upon exercise of the options
granted under the Plans. In the event the Bank fails to maintain
such OCC-mandated capital ratios, the OCC may impose a number of
corrective measures on the Bank, including (1) the imposition of
restrictions on certain activities involving asset growth,
acquisitions, branch establishment, expansion into new lines of
business, declaration and payment of dividends, and transactions with
affiliates, (2) the imposition of certain additional mandated capital
raising activities, and (3) as a last resort, the appointment of a
receiver or conservator of the Bank.
POSSIBLE MARKET VOLATILITY OF COMMON STOCK. A public trading
market having the desired characteristics of depth, liquidity and
orderliness depends upon the presence in the marketplace of willing
buyers and sellers of Common Stock at any given time, which presence
is dependent upon the individual decisions of investors and general
economic and market conditions over which the Company has no control.
The stock market has from time to time experienced extreme price and
volume volatility. These market fluctuations may be unrelated to the
operating performance of particular companies whose shares are traded
and may adversely affect the market price of the Common Stock. In
addition, during periods of extreme market volatility, investors may
be unable to obtain prompt execution of buy or sell orders in the
Common Stock.
INSURANCE PREMIUM FINANCING CONCENTRATION. As of March 31,
1998, insurance premium financing ("IPF") loans totaled $42.4
million, representing approximately 42% of the total gross loans of
the Company. Such a high concentration of IPF loans may expose the
Company to different types of risks and a greater risk of loss than
would a more traditional commercial and consumer loan portfolio. In
traditional loan products, the primary risk is that a borrower will
fail to repay the loan. However, when a borrower fails to repay an
IPF loan, typically the insurance policy is canceled and the unearned
premium is paid to the lender. Significant risks posed by IPF loans
normally not present in traditional loans include the risk that an
insurance company will become insolvent or otherwise unable to meet
its obligations, or that someone will obtain IPF loans for fictitious
policies where the Company does not have recourse to an insurance
company for insurance premiums. Losses or other difficulties
encountered by any one insurance company, or fraudulent activity by
an insurance company or agent, could have a material adverse effect
on the Company. In addition, financial difficulties or regulatory or
structural changes affecting the insurance industry generally may
have a material adverse effect on the Company. The Company extends
IPF loans with an average maturity of nine months. Most of these
loans are repaid in monthly installments. Most of the IPF loans are
generated through independent insurance agents, who are not obligated
to refer business to the Company. If the Company is unable to
generate new IPF loans to replace those being repaid, it will have to
originate other types of loans or make other investments, some or all
of which may not be as profitable for the Company. As the Company
expands through acquisitions such as TexStar, the Company must
increase the aggregate amount of IPF loans originated on a continuous
basis in order to maintain its current net interest margin.
MEDICAL CLAIMS FACTORING. As of December 31, 1997, the Company
had approximately $6.2 million of medical claims receivables
outstanding 120 days or more from the date of funding by the Company,
or 61% of its total medical claims receivables. At December 31,
1996, the Company had approximately $1.4 million of medical claims
receivables, or 22% of total medical claims receivables, outstanding
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120 days or more. It has been the Company's experience that,
historically, approximately 80% of its medical claims receivables
would be collected within 60 to 120 days and approximately 20% of
such receivables would remain outstanding over 120 days. The Company
determined that charge-offs of $2.0 million against the allowance for
medical claims receivable losses as well as a provision for an
additional $3.7 million were warranted in the fourth quarter of 1997,
which resulted in the Company recording a $3.4 million loss for 1997.
Upon recognition of the charge-offs and additional reserves, the
Company believes it was adequately reserved at December 31, 1997 for
all receivables greater than 120 days outstanding since funding date.
New management of the medical claims factoring division, in place by
the end of January 1998, has made a commitment to vigorously pursue
collecting the portfolio of outstanding receivables over 120 days.
At this time, however, the Company cannot predict the likely amount
of any such recoveries. As of March 31, 1998, the Company had
collected approximately $886,000 of medical claims receivables
charged off or provided for at December 31, 1997 and had
approximately $4,234,000 of medical claims receivables over 120 days.
The Company is currently monitoring the factoring program under its
new underwriting guidelines to assess its profitability and its
future as a niche product of the Company. As with IPF loans, losses
or difficulties encountered by one medical claims payor, or
fraudulent activity by any one medical claims payor or medical
services provider, could have a material adverse effect on the
Company. In addition, financial difficulties or regulatory or
structural changes affecting medical services providers or medical
claims payors generally may have a material adverse effect on the
Company.
POTENTIAL NEGATIVE IMPACT FROM THE ACQUISITION OF TEXSTAR. As a
result of the acquisition of TexStar on April 1, 1998, the Company's
asset size increased from $177.9 million to $243.3 million. The
Company's loan-to-deposit ratio decreased from 63.2% to 60.0%. The
Company anticipates that the acquisition of TexStar will negatively
impact the Company's net interest margin, return on assets and return
on shareholders' equity in the near term. The acquisition may also
negatively impact earnings per share in the near term. The future
prospects of the Company will depend, in significant part, on a
number of factors, including, without limitation, the Company's
ability to integrate TexStar; its ability to compete effectively in
the greater San Antonio metropolitan market area; its success in
retaining earning assets, including loans, acquired with TexStar; and
its ability to generate new earning assets with attractive yields.
No assurance can be given that the Company will be able to accomplish
any of the foregoing. No assurance can be given that the Company
will be able to achieve results in the future similar to those
achieved in the past or that the Company will be able to manage
effectively the growth resulting from the acquisition of TexStar.
The former officers and directors of TexStar are not subject to
non-competition agreements and may compete against the Company.
FUTURE GROWTH. Fueled by acquisitions, the total assets of the
Company have increased from $49.0 million at December 31, 1993 to
$243.3 million at April 1, 1998. There can be no assurance that the
Company will grow as rapidly in the future as it has in the past.
The Company may decide that it will not pursue further acquisitions,
or the Company may not be able to locate and complete favorable
acquisition opportunities in the future. In recent years, the
aggregate number of community banks in Texas has decreased, primarily
through mergers and acquisitions, and the competition for
acquisitions has increased. If the Company does not make
acquisitions in the future, it may not be able to sustain its
historical growth rate.
RELIANCE ON KEY PERSONNEL. The Company is dependent upon its
executive officers and key employees. Specifically, the Company
considers the services of C. Jack Bean, G. M. Heinzelmann, III, Bobby
W. Hackler and B. J. Curley to be important to the success of the
Company. The unexpected loss of the services of any of these
individuals could have a detrimental effect on the Company. Mr. Bean
will retire as Chairman of the Board and Chief Executive Officer of
the Company and as Chairman of the Board of the Bank effective August
31, 1998. Mr. Bean, however, will retain his positions as a director
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of both the Company and the Bank and will continue to serve in a
consulting capacity following his retirement. The Boards of
Directors of the Company and the Bank have named Mr. Hackler to
succeed Mr. Bean as Chairman of the Board and Chief Executive Officer
of the Company and as Chairman of the Board of the Bank effective
upon Mr. Bean's retirement. Although the Company has entered into
agreements with these individuals designed to provide incentives to
remain in the Company's employ, the Company has not requested
non-competition agreements from these individuals. The Company has
entered into Change in Control Agreements with Messrs. Bean,
Heinzelmann, Hackler and Curley under which each will receive certain
benefits if their employment is terminated other than for cause, or
constructively terminated following a change in control of the
Company.
INTEREST RATE RISK. The Company's earnings depend to a
substantial extent on "rate differentials," i.e., the differences
between the income the Company 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 Company, including
general economic conditions and the policies of various governmental
and regulatory authorities. The Company has attempted to structure
its asset and liability management strategies to mitigate the impact
on net interest income of changes in market interest rates. However,
there can be no assurance that the Company will be able to manage
interest rate risk so as to avoid significant adverse effects in net
interest income. From time to time, maturities of assets and
liabilities are not balanced, and a rapid increase or decrease in
interest rates could have an adverse effect on the net interest
margin and results of operations of the Company. The nature, timing
and effect of any future changes in Federal monetary and fiscal
policies on the Company and its results of operations are not
predictable.
REGULATION AND SUPERVISION. The Company and the Bank are
subject to extensive Federal and state regulation and supervision,
which is intended primarily for the protection of insured depositors
and consumers. In addition, the Company and the Bank are subject to
changes in Federal and state law, as well as changes in regulations,
governmental policies and accounting principles. The effects of any
such potential changes cannot be predicted, but could adversely
affect the business and operations of the Company and the Bank.
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON ABILITY OF
SUBSIDIARIES TO PAY DIVIDENDS. The Company owns all the outstanding
common stock of the Bank. As a holding company without significant
assets other than its ownership of all of the common stock of the
Bank, the Company's ability to meet its cash obligations, including
debt service on $4,350,000 aggregate principal amount of 9%
convertible subordinated notes due 2008 (the "Notes") issued by the
Company pursuant to a private placement completed on March 31, 1998,
in order to finance in part the acquisition of TexStar, is dependent
upon the payment of dividends by the Bank on its common stock. The
declaration of dividends by the Bank is subject to the discretion of
the Board of Directors of the Bank and applicable regulatory
requirements. The payment of dividends by the Bank is subject to the
provisions of 12 U.S.C. section 60 which provides that no dividend may be
declared or paid without the prior approval of the OCC if the total
of all dividends, including the proposed dividend, in any calendar
year exceeds the total of the Bank's net profits for that year
combined with its retained net profits of the preceding two years.
The Bank incurred an accumulated loss for fiscal years 1997 and 1996
in the amount of $1,544,756. Under 12 U.S.C. section 60, the Bank
currently is precluded from declaring a dividend, without the prior
approval of the OCC, until it has profits in excess of $1,544,756.
As of March 31, 1998, the Company had profits of $332,346. No
assurance can be given if and when the Bank will attain the requisite
level of profitability which will permit it to declare and pay
dividends. As of March 31, 1998, the Company had $6,959,708
available in cash, which represents approximately 18 years of
interest payments on the Notes. The Company may use such cash for
debt service on the Notes and other expenses.
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NO DIVIDENDS. The Company has not previously paid any cash
dividends on its Common Stock. The Company currently intends to
retain earnings to support future growth, rather than using earnings
to pay dividends. The payment of any 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 are both subject to certain statutory and
regulatory restrictions.
COMPETITION. There is significant competition among banks and
bank holding companies, many of which have far greater assets and
resources than the Company, in the areas in which the Company
operates. The Company 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 other types of financial institutions, many of
which are larger in terms of capital, resources and personnel than
the Company. The casualty IPF business of the Company is also very
competitive. Large insurance companies offer their own financing
plans, and other independent premium finance companies and other
financial institutions offer IPF loans. The Company believes that
such competition will increase in the future. In addition, the
manner in which and the means by which financial services are
delivered to customers have changed significantly in the past and can
be expected to continue to change in the future. It is not possible
to predict the manner in which existing technology, and changes in
existing technology, will affect the Company. Changes in technology
are likely to require additional capital investments to remain
competitive. Although the Company has invested in new technology in
the past, there can be no assurance that the Company will have
sufficient financial resources or access to the proprietary
technology which might be necessary to remain competitive in the
future.
TEXSTAR ACQUISITION
On April 1, 1998 the Company acquired TexStar National Bank
("TexStar"), a community bank headquartered in Universal City, Texas,
which is located in the growth corridor northeast of San Antonio,
Texas. TexStar has four branch locations in Converse, New Braunfels,
San Antonio and Schertz, all located in the greater San Antonio
metropolitan area. At April 1, 1998, TexStar had $70.3 million in
total assets, $64.8 million in deposits and $5.0 million in
shareholders' equity. TexStar offers interest-bearing and non-
interest-bearing depository accounts and makes real estate,
commercial and consumer loans.
The Company acquired TexStar through the merger of TexStar into
the Bank, pursuant to which the Bank acquired all of the assets, and
assumed all of the liabilities, of TexStar (the "Merger"). The
purchase price for TexStar was approximately $19.36 per share of
TexStar common stock outstanding (total cash consideration:
$9,772,000), which was paid to the shareholders of TexStar in
connection with the Merger. The acquisition of TexStar was financed,
in part, through a private placement by the Company of $4,350,000
aggregate principal amount of 9% convertible subordinated notes due
2008 (the "Notes") and Common Stock issuable upon conversion of the
Notes (the "Original Offering"). The Notes were offered by the
Company through Hoefer & Arnett, Incorporated, a San Francisco-based
investment banking firm, on a best efforts basis.
The OCC conditionally approved the Merger, contingent upon (1)
the Company contributing at least $4,000,000 in additional capital to
the Bank, (2) the Bank maintaining certain OCC-mandated capital
ratios in excess of the minimum "well-capitalized" capital ratios
through December 31, 2000, and (3) in the event of the failure of the
Bank to maintain such minimum capital ratios, the Company initiating
efforts to bring the Bank back into compliance with such minimum
capital ratios. A portion of the proceeds from the Original Offering
($4,000,000) was contributed by the Company to the Bank to satisfy
the OCC's capital contribution requirement. At March 31, 1998, the
Bank was "well-capitalized" under Federal regulatory capital adequacy
guidelines and in compliance with the OCC-mandated capital ratio
levels.
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At March 31, 1998, TexStar's loan portfolio consisted of $18.4
million of real estate loans (53.2% of the gross loan portfolio),
$12.3 million of commercial loans (35.5% of the gross loan
portfolio), and $3.9 million of installment loans (11.3% of the gross
loan portfolio). At March 31, 1998, TexStar's total nonaccrual loans
were approximately $220,000 (0.5% of the gross loan portfolio). The
allowance for possible loan losses was $820,625, or 372.4% of total
nonperforming loans, and 2.4% of the gross loan portfolio. Other
real estate owned by TexStar was $454,300 at March 31, 1998. TexStar
reported a net loss after taxes of $831,858 for the three months
ended March 31, 1998. At March 31, 1998, TexStar's loan-to-deposit
ratio was 53.5%. The Company intends to use the excess liquidity
acquired with TexStar to fund additional IPF loans.
TexStar is a Statewide Preferred Lender under the government
guaranteed United States Small Business Administration ("SBA")
lending program. Under this program, TexStar originates and funds
loans qualifying for guarantees from SBA. These guarantees range
from 70% to 90% of principal and up to 120 days of accrued interest.
In addition, in the event of a default and liquidation of one of
these loans the SBA pays its pro rata share of the liquidation costs.
The SBA-guaranteed portion of these loans is generally sold into the
secondary market with servicing retained. The guaranteed portion is
sold for a premium (approximately 7% to 10% of the SBA-guaranteed
portion) with a servicing fee of at least 1% of the guaranteed
portion retained. At March 31, 1998, TexStar had originated $2.1
million in SBA loans with the $1.5 million SBA-guaranteed portion
sold in the secondary market. The remaining $0.6 million in
unguaranteed portion of these loans remains in TexStar's loan
portfolio, together with a $0.1 million in SBA loans originated in
the first quarter of 1998, the guaranteed portion of which had not as
of March 31, 1998 been sold in the secondary market. During the
first quarter of 1998 an additional $655,469 in guaranteed portion of
loans originated in 1997 or earlier were sold in the secondary
market. TexStar has been making SBA loans for approximately four
years and has not experienced a default and liquidation regarding any
of these loans. The Company is considering expanding the generation
of SBA loans because of TexStar's Statewide Preferred Lender status.
USE OF PROCEEDS
The Company will not receive any part of the proceeds from the
sale of the Common Stock issuable upon exercise of options by the
Selling Stockholders granted by the Company to such Selling
Stockholders pursuant to the Plans.
SELLING STOCKHOLDERS
The Common Stock offered hereby was originally acquired by the
Selling Stockholders pursuant to the exercise of stock options
granted to the Selling Stockholders pursuant to the Plans. The
Common Stock issuable upon exercise of the options granted under the
Plans was registered by the Company under the Securities Act pursuant
to a Registration Statement on Form S-8 filed with the Commission.
The Common Stock issuable upon exercise of the options may be offered
and sold from time to time by the Selling Stockholders named herein
pursuant to this Prospectus.
The following table sets forth certain information as of June 1,
1998 regarding the Common Stock of the Company beneficially owned by
the Selling Stockholders that may be offered pursuant to this
Prospectus. Such information has been obtained from the Selling
Stockholders. None of the Selling Stockholders has, or within the
past three (3) years has had, any position, office or other material
relationship with the Company or any of its predecessors or
affiliates, except as noted below.
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</TABLE>
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Under
This Offering (3)
---------------------
Number Percentage
of Shares of of Shares of
Shares Subject Common Stock Common Stock
Position, Beneficially Acquired Under to Options Owned Owned
Office or Owned Plans & Held Outstanding After Sale After Sale
Material Prior to Subject to Under the Under this Under this
Name (1) Relationship Offering (2) This Offering Plans (4) Offering (5) Offering (6)
- ---------------- ----------------- ------------ -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
C. Jack Bean Chairman of the 219,084(10) 0 125,000(8) 184,084 2.86%
Board and Chief 10,000(9)
Executive Officer
William B. Byrd Director 14,800(11) 0 25,000(7) 9,800 less than 1%
Barry Carroll Former Officer 5,000(12) 0 5,000(8) 0 0
Robert E. Crews Executive Vice 5,200(13) 0 25,000(8) 200 less than 1%
President and
Chief Operations
Officer of the Bank
B. J. Curley Vice President, 27,956(14) 0 75,000(8) 12,956 less than 1%
Chief Financial
Officer and Secretary
Bobby W. Hackler Vice Chairman of the 67,777(15) 0 125,000(8) 42,777 less than 1%
Board and Chief
Operating Officer
Joseph S. Hardin Director 200,583(16) 0 25,000(7) 195,583 3.04%
G. M. Heinzelmann, III President 70,016(17) 0 125,000(8) 45,016 less than 1%
Margaret E. Holland Director 5,000(18) 0 25,000(7) 0 0
Michael L. Milam Director 44,250(19) 0 25,000(7) 39,250 less than 1%
Garrett Morris Director 9,250(20) 0 25,000(7) 4,250 less than 1%
Cullen W. Turner Director 110,100(21) 0 25,000(7) 105,100 1.64%
Frank M. Wagnon Executive Vice 5,000(22) 0 25,000(9) 0 0
President =========== === ========== ======= ============
TOTAL 784,016 0 665,000 639,016 9.94%
</TABLE>
(1) Except as otherwise noted, each of the persons named has sole
voting and dispositive power with respect to the shares
reported.
(2) Includes all shares which have been or may have been acquired
under the Plans subject to options except those shares not
exercisable within sixty (60) days from the date of this
Prospectus, and includes all other shares for which beneficial
ownership is deemed pursuant to Rule 13d-3 under the Exchange
Act.
(3) For each of the Selling Stockholders, the sum of these two
columns is the total number of Shares which may be offered for
his or her account pursuant to the Prospectus. The sum of the
totals of these two columns equals the total number of Shares
registered under this Offering; however, not all of the Shares
are subject to options exercisable within sixty (60) days.
(4) Includes 145,000 Shares subject to options exercisable within
sixty (60) days and 520,000 Shares subject to options not
exercisable within sixty (60) days that were granted pursuant to
the Plans.
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<PAGE>
(5) Does not include any Shares that have been acquired or may be
acquired pursuant to the Plans.
(6) Based on 6,426,348 shares of Common Stock outstanding at June 1,
1998, which assumes the exercise of all options underlying the
Shares offered hereby, including Shares subject to options not
exercisable within sixty (60) days that were granted pursuant to
the Plans.
(7) Represents options granted under the Director Plan.
(8) Represents options granted under the Officer Plan.
(9) Represents options granted under the ISO Plan.
(10) Includes 172,193 shares of Common Stock owned of record; 11,891
shares of Common Stock which Mr. Bean has the right to acquire
within sixty (60) days from the date hereof pursuant to options
granted to him under the 1995 Incentive Stock Option Plan of the
Company; 25,000 shares of Common Stock which Mr. Bean has the
right to acquire within sixty (60) days from the date hereof
pursuant to options granted to him under the Officer Plan; and
10,000 shares of Common Stock which Mr. Bean has the right to
acquire within sixty (60) days from the date hereof pursuant to
options granted to him under the ISO Plan.
(11) Includes 7,800 shares of Common Stock owned of record; 2,000
shares of Common Stock which Mr. Byrd has the right to acquire
within sixty (60) days from the date hereof pursuant to options
granted to him under the 1996 Stock Option Plan for Non-Employee
Directors of the Company; and 5,000 shares of Common Stock which
Mr. Byrd has the right to acquire within sixty (60) days from
the date hereof pursuant to options granted to him under the
Director Plan.
(12) Includes 5,000 shares of Common Stock which Mr. Carroll has the
right to acquire within sixty (60) days from the date hereof
pursuant to options granted to him under the Officer Plan.
(13) Includes 200 shares of Common Stock owned of record; and 5,000
shares of Common Stock which Mr. Crews has the right to acquire
within sixty (60) days from the date hereof pursuant to options
granted to him under the Officer Plan.
(14) Includes 1,500 shares of Common Stock owned of record; 11,456
shares of Common Stock which Mr. Curley has the right to acquire
within sixty (60) days from the date hereof pursuant to options
granted to him under the 1995 Incentive Stock Option Plan of the
Company; and 15,000 shares of Common Stock which Mr. Curley has
the right to acquire within sixty (60) days from the date hereof
pursuant to options granted to him under the Officer Plan.
(15) Includes 3,228 shares of Common Stock owned of record; 39,549
shares of Common Stock which Mr. Hackler has the right to
acquire within sixty (60) days from the date hereof pursuant to
options granted to him under the 1988 and 1995 Incentive Stock
Option Plans of the Company; and 25,000 shares of Common Stock
which Mr. Hackler has the right to acquire within sixty (60)
days from the date hereof pursuant to options granted to him
under the Officer Plan.
(16) Includes 191,583 shares of Common Stock held by a trust for
which Mr. Hardin serves as a co-trustee; 4,000 shares of Common
Stock which Mr. Hardin has the right to acquire within sixty
(60) days from the date hereof pursuant to options granted to
him under the 1996 Stock Option Plan for Non-Employee Directors
of the Company; and 5,000 shares of Common Stock which Mr.
Hardin has the right to acquire within sixty (60) days from the
date hereof pursuant to options granted to him under the
Director Plan.
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(17) Includes 8,956 shares of Common Stock owned of record; 36,060
shares of Common Stock which Mr. Heinzelmann has the right to
acquire within sixty (60) days from the date hereof pursuant to
options granted to him under the 1988 and 1995 Incentive Stock
Option Plans of the Company; and 25,000 shares of Common Stock
which Mr. Heinzelmann has the right to acquire within sixty (60)
days from the date hereof pursuant to options granted to him
under the Officer Plan.
(18) Includes 5,000 shares of Common Stock which Ms. Holland has the
right to acquire within sixty (60) days from the date hereof
pursuant to options granted to her under the Director Plan.
(19) Includes 250 shares of Common Stock owned of record; 35,000
shares of Common Stock held by Dallas Fire Insurance Company,
which is a wholly-owned subsidiary of a corporation in which Mr.
Milam has a 50% ownership interest; 4,000 shares of Common Stock
which Mr. Milam has the right to acquire within sixty (60) days
from the date hereof pursuant to options granted to him under
the 1996 Stock Option Plan for Non-Employee Directors of the
Company; and 5,000 shares of Common Stock which Mr. Milam has
the right to acquire within sixty (60) days from the date hereof
pursuant to options granted to him under the Director Plan.
(20) Includes 4,250 shares of Common Stock owned of record; and 5,000
shares of Common Stock which Mr. Morris has the right to acquire
within sixty (60) days from the date hereof pursuant to options
granted to him under the Director Plan.
(21) Includes 25,300 shares of Common Stock owned of record; 20,800
shares of Common Stock held by a trust for which Mr. Turner
serves as trustee; 55,000 shares of Common Stock held by an
estate for which Mr. Turner serves as executor; 4,000 shares of
Common Stock which Mr. Turner has the right to acquire within
sixty (60) days from the date hereof pursuant to options granted
to him under the 1996 Stock Option Plan for Non-Employee
Directors of the Company; and 5,000 shares of Common Stock which
Mr. Turner has the right to acquire within sixty (60) days from
the date hereof pursuant to options granted to him under the
Director Plan.
(22) Includes 5,000 shares of Common Stock which Mr. Wagnon has the
right to acquire within sixty (60) days from the date hereof
pursuant to options granted to him under the ISO Plan.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from sales of
the Shares owned by the Selling Stockholders. Generally, all costs,
expenses and fees incurred in connection with the registration of the
Shares offered hereby will be borne by the Company. However, the
Selling Stockholders will bear all brokerage commissions and
discounts and other costs and expenses attributable to the sale of
their Shares offered hereby.
Shares owned by a Selling Stockholder may be sold from time to
time to purchasers directly by such Selling Stockholder.
Alternatively, the Selling Stockholders 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" into an existing trading market, 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 Stockholder at market prices prevailing at
the time of sale, at prices related to such prevailing market prices,
-13-
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<PAGE>
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 Stockholder 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 Stockholders will execute a
firm commitment underwriting agreement with such underwriters. If a
dealer is utilized in the sale of its Shares, the Selling Stockholder
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 "at the market" and not at a fixed price into an
existing trading market for the Shares, 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.
Any brokers or dealers that participate with the Selling
Stockholders in offers and sales of the Shares offered hereby (and
any other participating brokers and dealers) may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions or discounts
received by such broker-dealers and any profit on the sale of the
Shares by such broker-dealers may be deemed underwriting discounts
and commissions under the Securities Act.
LEGAL OPINION
Tracy & Holland, L.L.P., 306 West Seventh Street, Suite 500,
Fort Worth, Texas 76102, has rendered an opinion as to the legality
of the Common Stock being registered hereby. Margaret E. Holland,
whose professional corporation is a partner of Tracy & Holland,
L.L.P., is also a director of the Company. Attorneys whose
professional corporations are partners of Tracy & Holland, L.L.P. and
employees of Tracy & Holland, L.L.P. in the aggregate own, or have
been granted options covering, 28,300 shares of Common Stock.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996
and the consolidated statements of operations, shareholders' equity,
and cash flows for each of the three years in the period ended
December 31, 1997, incorporated by reference in this Prospectus, have
been incorporated 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 TexStar National Bank as of December
31, 1997 and 1996 and the related statements of income, changes in
stockholders' equity and cash flows for the years then ended
incorporated in this Prospectus by reference to the Company's Current
Report on Form 8-K/A (Amendment No. 1) dated April 1, 1998 have been
so incorporated in reliance on the report of Burnside & Rishebarger,
PLLC, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
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<PAGE>
==================================== =====================================
==================================== =====================================
SURETY CAPITAL CORPORATION
TABLE OF CONTENTS
Page
--------------------------
AVAILABLE INFORMATION 2
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE 2
NOTE REGARDING
FORWARD-LOOKING STATEMENTS 3 1,130,000 Shares
Common Stock
SUMMARY 4 $0.01 par value
RISK FACTORS 5
TEXSTAR ACQUISITION 9
USE OF PROCEEDS 10
--------------------------
SELLING STOCKHOLDERS 10 PROSPECTUS
--------------------------
PLAN OF DISTRIBUTION 13
LEGAL OPINION 14
___________, 1998
EXPERTS 14
==================================== =====================================
==================================== =====================================
PAGE
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- ------------------------------------------------------------
5 Opinion of Tracy & Holland, L.L.P.
23.1 Consent of Tracy & Holland, L.L.P. (contained in the Opinion
filed as Exhibit 5 to this Registration Statement).
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Burnside & Rishebarger, PLLC.
24 Power of Attorney (contained within Signature Page).
EXHIBIT 5
TRACY & HOLLAND, L.L.P.
(A REGISTERED LIMITED LIABILITY PARTNERSHIP THAT INCLUDES PROFESSIONAL
CORPORATIONS)
ATTORNEYS AT LAW
306 WEST SEVENTH STREET, SUITE 500
FORT WORTH, TEXAS 76102-4982
J. DAVID TRACY, P.C.
J. WALKER HOLLAND, P.C. FAX (817) 332-3140
MARGARET E. HOLLAND, P.C. TELEPHONE (817) 335-1050
GEORGE T. JOHNS, P.C. METRO (817) 429-9463
LEWIS D. SCHWARTZ, P.C. EMAIL [email protected]
June 17, 1998
Surety Capital Corporation
1845 Precinct Line Road, Suite 100
Hurst, Texas 76054
Re: Registration Statement on Form S-8 - Surety Capital Cor-
poration 1997 Non-Qualified Stock Option Plan for Non-
Employee Directors, 1997 Non-Qualified Stock Option Plan for
Officers and Key Employees, and 1998 Incentive Stock Option
Plan
Gentlemen:
Pursuant to your request, we have examined copies of (1) the 1997
Non-Qualified Stock Option Plan for Non-Employee Directors (the
"Director Plan") of Surety Capital Corporation (the "Company"), which
was approved by the Board of Directors effective January 2, 1997; (2)
the 1997 Non-Qualified Stock Option Plan for Officers and Key Employees
of the Company (the "Officer Plan"), which was approved by the Board of
Directors effective January 2, 1997; and (3) the 1998 Incentive Stock
Option Plan of the Company (the "ISO Plan"), which was approved by the
Board of Directors on March 10, 1998 and by the stockholders of the
Company at the annual meeting of stockholders held on May 21, 1998.
(The Director Plan, the Officer Plan and the ISO Plan are collectively
referred to herein as the "Plans.") We have also examined the
Certificate of Incorporation of the Company, as amended, the Restated
Bylaws of the Company, and corporate proceedings of the Company as
reflected in minutes of meetings of the stockholders and the Board of
Directors of the Company.
Based upon our examination of the foregoing papers and documents,
together with the examination of such other papers and documents and the
investigation of such matters of law as we have deemed relevant or
necessary in rendering this opinion, we hereby advise you that we are of
the opinion that:
Shares of the Common Stock of the Company purchasable upon the
exercise of any option granted under the Plans will, upon issuance by
the Company in accordance with the terms of the respective agreements
under which such options may be granted, be duly and validly issued, and
will be fully paid and nonassessable, whether such shares shall
PAGE
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Surety Capital Corporation
June 17, 1998
Page 18
theretofore have been authorized but unissued shares of the Common Stock
of the Company or shares reacquired by the Company and held by it as
treasury shares, provided that the purchase price under each such
agreement shall be at least equal to the par value of the shares issued
thereunder.
We consent to the use of this opinion in connection with the
Registration Statement on Form S-8 and the Prospectus constituting a
part thereof filed by the Company with the Securities and Exchange
Commission for the registration under the Securities Act of 1933, as
amended, of (1) 150,000 shares of the Common Stock of the Company under
the Director Plan, (2) 480,000 shares of the Common Stock of the Company
under the Officer Plan, and (3) 500,000 shares of the Common Stock of
the Company under the ISO Plan, and (4) an undetermined number of
additional shares as may become issuable thereunder as required by the
anti-dilution provisions of the Plans.
Very truly yours,
TRACY & HOLLAND, L.L.P.
By: Margaret E. Holland, P.C.,
Partner
By: /s/ Margaret E. Holland
------------------------
Margaret E. Holland,
President
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of Surety Capital Corporation on Form S-8 (File No.
333-_____) of our report dated February 4, 1998, except as to the
information presented in the last paragraph of Note 17, for which
the date is March 17, 1998, on our audits of the financial state-
ments of Surety Capital Corporation. We also consent to the
reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Fort Worth, Texas
June 18, 1998
EXHIBIT 23.3
CONSENT OF BURNSIDE & RISHEBARGER, PLLC
We consent to the inclusion in the Form S-8 Registration of Surety
Capital Corporation of our report, dated January 23, 1998, on our audits
of the financial statements of TexStar National Bank, San Antonio, Texas
as of December 31, 1997 and 1996, and for the two years ended December
31, 1997. We also consent to the reference to our firm under the
caption "Experts."
BURNSIDE & RISHEBARGER, PLLC
San Antonio, Texas
June 17, 1998
