As filed with the Securities and Exchange Commission on April 09, 1999
Registration No. 333-71089
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2/A
AMENDMENT 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RAMPART CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Texas 6159 76-0427502
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification
organization) Classification Code Number)
Number)
Rampart Capital Corporation
700 Louisiana, Suite 2550
Houston, Texas 77002
(713) 223-4610
(Address, including zip code and telephone
number, including area code, of registrant's principal
executive offices and principal place of business)
J. H. Carpenter
Rampart Capital Corporation
700 Louisiana, Suite 2550
Houston, Texas 77002
(713) 223-4610
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies To:
Maurice J. Bates, Esq. Norman R. Miller, Esq.
Maurice J. Bates, L. L. C. Wolin, Ridley & Miller LLP
8214 Westchester, Suite 500 3100 Bank One Center
Dallas, Texas 75225 1717 Main Street
(214) 692-3566 Dallas, Texas 75201-4681
(214) 939-4906
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective. If this Form is
filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box.
CALCULATION OF REGISTRATION FEE
- -
Proposed Proposed
maximum maximum
Amount to be offering aggregate offering Amount of
Title of each class of securities to be registered price price(1) registration fee
registered per share(1)
Common Stock, $.01 par value (2)......... 1,725,000 $10.00 $17,250,000 $5088.75
- -Representatives' Warrants................ 150,000 $.001 150 $1.00
Common Stock included in Underwriters' 150,000 $12.00 $1,800,000 $ 531.00
Warrants (3)
TOTAL $5,620.75
(1) Estimated solely for purposes of calculating the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933, as
amended.
(2) Includes 225,000 Shares of Common Stock issuable pursuant to the
Representative's over-allotment option.
(3) Represents shares of common stock issuable upon exercise of the
Representatives' Warrants, together with such additional
indeterminate number of shares of Common Stock as may be issued upon
exercise of such Representatives' Warrants by reason of the anti-dilution
provisions contained therein.
------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
1,500,000 Shares
RAMPART CAPITAL CORPORATION
Common Stock
Rampart Capital Corporation
700 Louisiana Street, Suite 2510
Houston, Texas 77002
We are a specialty financial services company that acquires undervalued
financial assets, primarily commercial debt portfolios and real estate at
substantial discounts. We collect the debt and sell the real estate and other
assets for profit. Additionally, we provide short-term bridge funding for real
estate projects.
This is an initial public offering of 1,500,000 shares of common stock of
Rampart Capital Corporation. Currently, there is no public market for our common
stock.
The underwriters' have an option to purchase an additional 225,000 shares to
cover over-allotments.
The Offering:
Per Share Total
Public Offering Price $10.00 $15,000,000
Underwriting discounts $ 0.975 $ 1,462,500
Proceeds to Rampart $ 9.025 $13,537,500
-----------------------
This investment involves a high degree of risk. See "Risk Factors" beginning on
page 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-----------------
REDSTONE SECURITIES, INC.
Prospectus dated , 1999
TABLE OF CONTENTS
Page
Prospectus Summary......................................................................3
Selected Consolidated Financial Information.............................................6
Risk Factors............................................................................7
Potential Decline in Value of Collateral and Paying Loans..........................7
Uncertain Nature of the Asset Acquisition and Resolution Business..................7
Potential Unavailability of Certain Federal Income Tax Benefits....................8
Reliance on Principal Officers: Charles W. Janke and J. H. Carpenter...............8
Period to Period Variances of Revenues and Collections.............................8
Future Acquisitions of Debt Portfolios, Real Estate and Other Assets...............9
Capital Requirements and Interest Rates............................................9
Dilution to New Shareholders.......................................................9
Influence on Voting by Charles W. Janke and J. H. Carpenter........................9
Absence of Prior Public Market-American Stock Exchange Listing.....................9
Shares of Common Stock Reserved Under 1998 Stock Option Plan.......................10
Effect of Underwriters' Warrants...................................................10
Underwriters' Influence on the Market..............................................10
Environmental Risk on Real Estate Acquired or Foreclosed...........................10
Use of Proceeds.........................................................................11
Dividend Policy.........................................................................12
Dilution................................................................................12
Capitalization..........................................................................13
Management's Discussion and Analysis
of Financial Condition and Results Of Operations ..................................14
Business................................................................................18
Additional Information..................................................................24
Management..............................................................................25
Certain Relationships and Related Transactions..........................................29
Principal shareholders..................................................................31
Certain Federal Income Tax Matters......................................................32
Description of Capital Stock............................................................35
Shares Eligible For Future Sale.........................................................36
Plan of Distribution....................................................................37
Legal Matters...........................................................................39
Experts.................................................................................39
Index to Financial Statements...........................................................40
PROSPECTUS SUMMARY
Unless otherwise indicated, the information herein has been adjusted to reflect
a 3,000 to 1 stock split in December 1998, and assumes the underwriters'
over-allotment option and the underwriters' warrants are not exercised.
Profile of Rampart's Business Activities
Rampart Capital Corporation is a specialty financial services company that
acquires undervalued financial assets, primarily in the form of commercial debt
portfolios and real estate, manages and services its asset portfolios, collects
the debt and sells real estate and other assets for profit, and
provides short-term bridge funding for real estate projects.
Typically, our discounted debt portfolios contain some or all of the
following: non-performing loans and other debt obligations, primarily
secured, under-performing loans, primarily real estate secured, paying
loans, primarily real estate secured, other forms of unsecured debt
obligations, real estate, and other assets.
Discounted Debt Portfolios
We purchase commercial loans and other commercial obligations at substantial
discounts from their legal balances by competitive bids and negotiated
purchases. We purchase our discounted debt portfolios from:
governmental entities, such as the Federal Deposit Insurance Corporation
("FDIC"), financial institutions, insurance companies, bankruptcy estates, and
liquidating trusts.
Undervalued Real Estate and other Assets
We acquire real estate and other assets in distressed situations at
substantial discounts below market values from: bankruptcy estates,
liquidating trusts, insurance companies, and local taxing authorities.
The majority of the real estate is sold at market value in the market
place. Because our cost basis in most properties is low, we have not
realized a loss on any property sold. In order to optimize profitability,
properties with significant upside market potential are managed for future
liquidation.
Bridge Funding
Short-term Bridge Funding
We also provide short-term bridge funding for selected real estate projects. Our
typical funding scenario requires that:
we purchase the real estate, we have a minimum preferential yield and an
equity participation , developers may purchase the real estate from us or
arrange for sales to third parties, subject to our approval, our equity
participation percentage increases at specific timetables, and we receive 100%
of the equity of the project at specified default dates.
We anticipate that this activity will be a significant portion of our
business expansion for both revenues and profits.
Potential availability of tax loss carryforwards Potential availability of
tax loss carryforwards
In July 1997, we acquired the remaining assets and corporations of the MCorp
Liquidating Trusts. As a result of this acquisition, management believes that
currently there may be approximately $56.1 million of net operating loss
carryforwards and built-in-losses (collectively "NOLs") subject to certain
possible limitations, which may be available to offset future taxable income of
the acquired corporations for federal and state income tax purposes. If the
Company is able to utilize the NOLs, it must be utilized against profits
occurring in the acquired corporations, which are operated as wholly-owned
subsidiaries, as opposed to consolidated profits realized by Rampart. We cannot
assure that sufficient profits, if any, can be generated in the acquired
corporations prior to the expiration of some or all of the potential NOLs.
However, most of our income is now generated through these subsidiaries and all
of our acquisitions and asset purchases since July 1997 have been made through
the subsidiaries. Most notable was our acquisition of the Newport Assets in
February 1999 through Rampart Properties Corporation, our subsidiary with the
greatest NOL carryforward. See "Risk Factors," "Business-The MCorp Acquisition
and -Acquisition of Newport Assets," "Certain Federal Income Tax Matters" and
"Notes to Financial Statements."
Business Strategy
Our business strategy is to continue to broaden and expand our core business
while building on our strengths and expertise. To achieve this objective, we
plan to do the following:
Expand the acquisition of discounted loan portfolios and real estate;
Broaden our sources of revenue and operating earnings by developing or acquiring
additional businesses that leverage our core strengths and management expertise;
Invest in fragmented or underdeveloped markets in which we have the investment
expertise to achieve attractive risk-adjusted rates of return; Pursue new
business opportunities, both domestic and foreign, through joint ventures,
thereby capitalizing on the expertise of partners who complement our skills; and
Maximize growth in earnings through our acquired subsidiaries, thereby
accelerating the utilization of potential NOLs.
Company Offices
Rampart is a Texas Corporation whose principal executive offices are located at
700 Louisiana, Suite 2510, Houston, Texas 77002; telephone number (713)
223-4610; facsimile: (713) 223-4814. The electronic mail address is
mail@rampartcapital.com.
The Offering
Shares offered ............................. 1,500,000 shares of common stock
Common Stock to be outstanding
after the Offering........................ 3,750,000 shares (1)
Use of Proceeds............................. Purchase of discounted asset portfolios, working capital and
other general corporate purposes.
Underwriting................................ This is a firm commitment underwriting. Redstone Securities,
Inc. will act as representative of the underwriters. We have
agreed to pay the underwriters a 9.75% discount on the gross
proceeds from the sale of the shares offered, a 2%
non-accountable expense allowance and to grant warrants to
purchase 150,000 shares at 165% of the offering price.
Proposed American Stock Exchange Symbols
Common Stock............................. ""
- -----------------
(1) Does not include:
Up to 225,000 shares to be issued upon exercise of the underwriters'
over-allotment option, 150,000 shares to be issued upon exercise of the
underwriters' warrants, and 375,000 shares reserved for issuance under the 1998
Stock Compensation Plan.
Selected Consolidated Financial Information
The following selected financial data has been derived from our audited balance
sheets and income statements for the fiscal years ended December 31, 1997 and
1998. This selected financial data should be read in conjunction with the
financial statements of Rampart and related footnotes included at the end of
this prospectus. See "Financial Statements."
Year Ended December 31,
---------------------------------
1997 1998
------------------ --------------
Operating Data:
Revenues $2,935,283 $6,843,785
Cost of Revenues 1,166,063 2,408,487
Operating Expenses 1,644,860 1,675,697
--------- ---------
Earnings before income tax 124,360 2,759,601
Income tax benefit (expense) 309,131 (694,891)
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Net income 433,491 2,064,710
Basic net income per common share $ 0.19 $ .92
Weighted average common shares outstanding 2,250,000 2,250,000
Year Ended December 31,
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1998 1998
1997 1998 Pro Forma (1) Adjusted (2)
-------------- ------------- --------------------- -------------------
Balance Sheet:
Working capital (3) - - -
Current assets (3) - - -
Current liabilities (3) - - -
Total assets $ 7,000,157 $ 7,966,549 $ 10,841,549 $ 17,701, 420
Total liabilities 5,901,542 4,803,224 7,678,224 1,500,595
Shareholders' equity 1,098,615 3,163,325 3,163,325 16,200,825
Weighted average common shares outstanding 2,250,000 2,250,000 2,250,000 3,750,000
Book value per share $ 0.49 $ 1.41 $ 1.41 $ 4.32
- -------
(1) Proforma effect of the acquisition of the Newport Assets. On February 1,
1999, through Rampart Properties Corporation, our wholly-owned subsidiary,
we acquired the real estate, receivables, and other assets of a bankrupt
estate from a trustee in bankruptcy for $2,875,000. See
"Business-Acquisition of Newport Assets".
(2) Adjusted to reflect the sale of 1,500,000 shares offered by this
prospectus at an offering price of $10.00 per share and application of
the net proceeds of $13,037,500.
(3) In our industry, short-term obligations are met by cash flow generated from
assets of indeterminable term. Consequently, consistent with industry
practice, our balance is presented on an unclassified basis.
RISK FACTORS
Investing in our shares involves a high degree of risk. Prospective investors
should consider the following factors in addition to other information set forth
in the prospectus before purchasing the shares. You should note that this
prospectus contains certain "forward-looking statements," including without
limitation, statements containing the words "believes," "anticipates,"
"expects," "intends," "plans," "should," "seeks to," and similar words. You are
cautioned that such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those in the forward-looking statements as a result of various
factors, including but not limited to, the risk factors set forth in this
prospectus. The accompanying information contained in this prospectus identifies
important factors that could cause such differences.
Potential Decline in Value of Collateral and Paying Loans Our lines of
business are particularly subject to:
Periods of economic slowdown or recession, rising interest rates, and
declining demand for real estate.
Although these conditions may increase the number of non-performing debt
and undervalued real estate portfolios available for acquisition at discounted
prices, such conditions could:
reduce marketability of our paying loans and real estate, thereby
increasing the time required to liquidate our assets, reduce the value or
demand for collateral securing paying loans, thereby increasing the risk of
paying loans becoming non-paying, and increase the cost of capital
invested, and
reduce the return on assets by lengthening the time that capital is
invested.
Uncertain Nature of the Asset Acquisition and Resolution Business This
industry developed approximately ten years ago. Initially, very little was known
about the profit potential of this industry, and there were few competitors. As
the industry matured, participants have become increasingly knowledgeable and
more sophisticated in evaluating and pricing assets. As a result, the
competition for asset portfolios has increased, resulting in higher prices and
lower resulting gross yields, the number of portfolios available for purchase
has declined since 1995, the majority of the sellers in today's market are not
governmental entities; therefore, more negotiated transactions and fewer bid
situations are available.
Because of state and federal regulations, commercial banks, thrifts and
insurance companies are required to allocate more regulatory capital to
non-performing assets. Consequently, it is often preferable from a regulatory
capital perspective for these entities to sell assets at substantial discounts
from legal balances. In the aggregate, these entities are among the most active
sellers of assets. If regulations were changed in the future to decrease the
regulatory capital required to be allocated to non-performing assets, these
entities would have less incentive to dispose of assets. To the extent these
entities retain non-performing assets rather than sell them, there would be a
decreased supply of assets available for purchase by Rampart and its
competitors. Any significant decrease in the supply of non-performing assets
available for purchase would likely result in significant decreases in revenues
in the discounted asset acquisition industry. We cannot assure that regulatory
changes will not be adopted.
Potential Unavailability of Certain Federal Income Tax Benefits
In the MCorp Acquisition, we acquired entities having NOLs in the amount of
approximately $55.8 million. There is little or no legal authority governing
many of the tax aspects of the MCorp Acquisition since many determinations
involving the use of the NOLs after such acquisitions are questions of fact.
Additionally, we have not obtained a private letter ruling from the Internal
Revenue Service ("IRS") or an opinion of counsel regarding the availability of
the NOLs. Therefore, we cannot assure that the IRS will not successfully
challenge the availability of some or all of the NOLs. The utilization of
certain of the NOLs could also potentially be limited or unavailable in the
future in the event of the occurrence of a second ownership change as defined in
the Tax Code. (Certain NOLs of the Company are currently limited due to a
previous ownership change concerning the acquisition of certain of the
subsidiaries of the Company.) In order to insure that a second change of
ownership does not occur, the two existing shareholders of the Company have
agreed to certain restrictions on the transfer of their shares so as to avoid an
ownership change and the application of Section 382 of the Tax Code which
defines such changes. See "Business-The MCorp Acquisition", "
Management-Restrictions on Transfer." and "Certain Federal Income Tax Matters."
If the Company is able to utilize the NOLs, it must be utilized against profits
occurring in the acquired corporations as opposed to consolidated profits
realized by Rampart. We cannot assure that sufficient profits, if any, can be
generated in the acquired corporations prior to the expiration of some or all of
the potential NOLs or that the IRS will not deny use of all or part of the NOLs.
However, most of our income is now generated through the acquired corporations
and all of our acquisitions and asset purchases since July 1997 have been made
through these subsidiaries.
Reliance on Principal Officers: Charles W. Janke and J. H. Carpenter
Rampart is dependent on the efforts of certain members of senior management,
particularly Charles W. Janke (Chairman of the Board and Chief Executive
Officer), J. H. Carpenter (President and Chief Operating Officer), Charles F.
Presley (Vice President, Treasurer and Chief Financial Officer) and Eileen
Fashoro, (Vice President and Assistant Secretary). If one or more of these
individuals become unable or unwilling to continue in his/her present role, our
business operations or prospects could be adversely impacted. None of these
individuals have entered into an employment agreement. We cannot assure that any
of the foregoing individuals will continue to serve in his or her current
capacity or for what time period this service might continue. We do not have
employment agreements with any of our executive officers.
Period to Period Variances of Revenues and Collections
Our method of revenue recognition for non-performing assets is based upon actual
cash collections received. Such collections have historically varied and will
likely continue to vary significantly from period to period. Consequently,
period to period reported revenue has historically varied and will likely
continue to vary. This variance may cause significant fluctuations in earnings
reported from period to period and, therefore, significant fluctuations in the
trading price of Rampart's shares.
Future Acquisitions of Debt Portfolios, Real Estate and Other Assets
We plan to grow through acquisitions of debt portfolios, real estate, and other
assets. Currently we do not have any negotiations for acquisitions pending.
However, we cannot assure or represent that we will be successful in
consummating any acquisitions on beneficial terms.
Capital Requirements and Interest Rates
A substantial portion of the proceeds of this offering will be utilized for
acquisitions of debt portfolios, real estate, and other assets. Therefore, we
may require additional capital to expand our operations. The Company may be
limited in the use of equity financing due to the restrictions on ownership
changes occasioned by Section 382 of the Tax Code, which may require debt
financing. There can be no assurance that any such debt financing will be
available on favorable terms. See "Use of Proceeds" and "Certain Federal Income
Tax Matters."
Execution of our business strategy depends to a significant degree on our
ability to obtain additional financing. Factors which could adversely affect
access to the capital markets, or the costs of such capital, include changes in
interest rates, general economic conditions and the perception in the capital
markets of the business, results of operations, leverage, financial condition
and business prospects.
Most of the indebtedness incurred bears interest at floating rates, which
change when certain short term benchmarks increase. If these benchmark rates
increase beyond what we had originally projected, our profitability will be
adversely affected. Additionally, if interest rates rise significantly, we may
be unable to meet these obligations. Even if we are able to service our asset
acquisition debt, significant increases in interest rates will depress margins
on the resolution of such asset portfolios, thereby decreasing overall earnings,
which may prevent meeting debt obligations we have incurred or may incur in the
future. Although we may be able to negotiate ceilings on interest rates or
otherwise hedge against such risk, we cannot assure that we will be able to do
so, or that we will be able to so hedge against this risk at a reasonable cost.
Dilution
Our current shareholders acquired their shares at a cost per share substantially
below the price being offered in this offering. Consummation of the offering
will result in a substantial increase in the value of the current shareholders'
holdings. In addition, the public offering price of the shares will be
substantially higher than the current book value per share. Consequently,
investors purchasing shares being offered will incur an immediate and
substantial dilution of their investment of approximately $5.68 per share or
approximately 56.8% as it relates to the resulting book value of the shares
after completion of this offering. See "Dilution."
Influence on Voting by Charles W. Janke and J. H. Carpenter
Upon completion of this offering, Charles W. Janke and J. H. Carpenter, officers
and directors, will own approximately 60.0% of the outstanding shares. Although
there are no agreements or arrangements between such persons with respect to
voting their shares, if they act together, they will be able to control the vote
on any election of directors and to substantially impact the vote on other
matters submitted to shareholders and thereby exert considerable influence over
the affairs of the Company. See "Principal Shareholders."
Absence of Prior Public Market - American Stock Exchange Listing
Prior to this offering, there was no public market for our common stock. We have
applied for listing of the shares on the American Stock Exchange. We cannot
assure that our listing application will be approved. Such listing, if approved,
does not imply that there will be a meaningful, sustained market for the shares.
We cannot assure that an active trading market for the shares will develop or
continue.
Shares of Common Stock Reserved under 1998 Stock Option Plan
We have reserved 375,000 shares of common stock for issuance to key employees,
officers, directors, and consultants under The 1998 Stock Compensation Plan. To
date no options have been granted under the 1998 Stock Compensation Plan. The
existence of these options may prove to be a hindrance to future equity
financing. See "Management - 1998 Stock Compensation Plan."
Effect of Underwriters' Warrants
The holders of the underwriters' warrants have four years starting one year from
the effective date of this offering to profit from a rise in the market price of
the shares causing dilution in the interests of the other shareholders. Further,
the terms on which we might obtain additional financing during that period may
be adversely affected by the existence of the underwriters' warrants. The
holders of the underwriters' warrants may exercise their warrants at a time when
we might be able to obtain additional capital through a new offering of shares
on terms more favorable than those provided herein. We have agreed that, under
certain circumstances, we will register under federal and state securities laws
the shares to be issued thereunder. Exercise of these registration rights could
involve expense at a time when we could not afford the expenditures and may
adversely affect the terms upon which we may obtain financing. See "Description
of Capital Stock" and "Plan of Distribution - Underwriters' Warrants."
Underwriters' Influence on the Market
A significant amount of the shares offered may be sold to customers of the
underwriters. Subsequently these customers may engage in transactions for the
sale or purchase of such shares through or with the underwriters. If they
participate in the market, the underwriters may exert a dominating influence on
the market, if one develops, for the shares. The price and the liquidity of the
shares may be significantly affected by the degree of the underwriters'
participation in the market. See "Description of Capital Stock" and "Plan of
Distribution Underwriters."
Environmental Risk on Real Estate Acquired or Foreclosed
Some of the real estate acquired through foreclosure or direct purchase and
real estate collateralized loans may have the risk of environmental problems. If
they exist, these problems consist primarily of underground storage tanks and
asbestos. To the extent we are able, prior to foreclosure or purchase, we
undertake to identify any environmental issues and assess their magnitude. The
decision to purchase or foreclose the property is based on an evaluation of the
environmental risk. After we acquire an asset, if a problem is identified, we
notify the appropriate environmental agency and engage certified environmental
consultants to evaluate and remedy the problem. If we were not able to correct
any environmental problems, we could be subject to potential liability under
environmental protection laws. See "Business - Investment in Real Estate and
Other Assets."
USE OF PROCEEDS
We expect to net approximately $13,037,500 from the proceeds of this offering
($15,068,500 if the over-allotment option is exercised in full). This assumes an
initial public offering price of $10.00 per share after deducting the
underwriters' discount and $500,000 of expenses relating to the offering. We
intend to use the net proceeds is as follows:
Amount %
-------------------- ------------
Acquisitions of undervalued real estate and discounted loans (1) $6,300,000 48.3
Temporarily reduce debt (2) 6,200,000 47.6
Working capital 537,500 4.1
==================== ============
$13,037,500 100.0
==================== ============
---------------
(1) We intend to use as much as $6,300,000 for future acquisitions of
undervalued real estate and discounted loan portfolios consistent with our
business strategy. Currently, we do not have any negotiations for
acquisitions pending.
(2) Our total debt increased by $2,875,000 for the purchase of the Newport
Assets. We plan to pay down our revolving credit facility until we have use for
the funds. The credit facility incurs interest at prime rate plus one percent.
Additionally, we will pay off the $1,400,000 debt to the Janke Family
Partnership, Ltd. incurred for the purchase (1) of the Newport Assets. This debt
has a fixed interest rate of 10%. See "Certain Relationships and Related
Transactions." Pending application of the net proceeds of this offering, the
Company may invest such net proceeds in interest-bearing accounts, United States
Government obligations, certificates of deposit or short-term interest-bearing
securities.
[GRAPHIC OMITTED]
DIVIDEND POLICY
We have never paid cash or other dividends on the common stock and do not
anticipate that we will pay cash dividends in the foreseeable future. The board
of directors plan to retain earnings for the development and expansion of
business. Any future determination as to the payment of dividends will be at the
discretion of the board of directors and will depend on a number of factors,
including future earnings, capital requirements, financial condition, and any
other factors that the board of directors may deem relevant.
DILUTION
As of December 31, 1998, our net tangible book value was $3,163,325 or $1.41 per
share based on 2,250,000 shares outstanding. The net tangible book value is the
aggregate amount of our tangible assets less our total liabilities. The net
tangible book value per share represents the total tangible assets, less total
liabilities, divided by the number of shares outstanding. After giving effect to
(i) the sale of 1,500,000 shares at an assumed offering price of $10.00 per
share, and (ii) the application of the estimated net proceeds, the pro forma net
tangible book value would increase to $16,200,825 or $4.32 per share. This
represents an immediate increase in net tangible book value of $2.91 per share
to current shareholders and an immediate dilution of $5.68 per share to new
investors or 56.8% as illustrated in the following table:
Public offering price per Share $10.00
Net tangible book value per Share before this offering $1.41
Increase per share attributable to new investors 2.91
------------
Adjusted net tangible book value per share after this 4.32
offering
--------------
Dilution per share to new investors $ 5.68
--------------
Percentage dilution 56.8%
The following table sets forth as of December 31,1998, the number of shares
purchased as a result of the offering, the total consideration paid, and the
average price per share paid by the current shareholders (before deducting
underwriting discounts and other estimated expenses) at an assumed offering
price of $10 per share.
Shares Purchased Total Consideration Average Price
-------------------------------- -------------------------------- -----------------
--------------- ----- ---------- -- ----------------- ----------- -----------------
Number Percent Amount Percent Per Share
--------------- -- -----------
--------------- ---------- ---------------- ----------- ----------- ----
Current Shareholders 2,250,000 60.0% $ 0% $0.00
750
New investors 1,500,000 40.0% 15,000,000 100.0% $10.00
------
(1)
--------------- ---------- ---------------- -----------
=============== ========== ================ ===========
Total 3,750,000 100.0% $15,000,750 100.0%
(2)
=============== ========== ================ ===========
--------
(1) Upon exercise of the over-allotment option, the number of shares held by
new investors would increase to 1,725,000 or 43.4% of the total number of
shares to be outstanding after the offering and the total consideration
paid by new investors will increase to $17,250,000. See "Principal
Shareholders."
(2) Does not include 750,000 shares issuable upon the exercise of (i) the
underwriters' over-allotment option, (ii) the underwriters' warrants, or
(iii) employee stock options. To the extent that these options and warrants
are exercised, there will be further share dilution to new investors.
CAPITALIZATION
The following table sets forth our capitalization (i) as of December 31, 1998
and (ii) on a pro forma as adjusted basis to give effect to the sale of
1,500,000 shares and the application of the estimated net proceeds. See "Use of
Proceeds."
December 31, 1998
-----------------------------------------------------------
---------------- --- ----------------- --- ----------------
(Actual) Pro Forma (1) (As Adjusted)
---------------- ----------------- ----------------
---------------- ----------------
Liabilities:
Notes payable (2) $3,740,488 $6,615,488 $437,859
-----------------
---------------- ----------------
Shareholders' equity
Preferred Stock, $.01 par value, 10,000,000 0 0
shares authorized; no shares issued actual or
adjusted (3)
Common Stock, $.01 par value $ 22,500 $ 22,500 $ 37,500
10,000,000 shares authorized,
2,250,000 shares issued and outstanding,
3,750,000 as adjusted (4)
Additional paid in capital 0 13,022,500
Retained earnings 3,140,825 3,140,825 3,140,825
---------------- ----------------
---------------- ----------------- ----------------
Total shareholders' equity $3,163,325 $3,163,325 $16,200,825
---------------- ----------------
---------------- ----------------- ----------------
Total capitalization $6,903,813 $9,778,813 $16,638,684
---------------- ----------------- ----------------
- -----------
(1) Proforma effect of the purchase of Newport Assets on February 1, 1999.
See "Business-Acquisition
of Newport Assets"
(2) Consistent with industry practice, the balance sheet is presented on an
unclassified basis. Accordingly, total capitalization as presented here
captures notes payable in its entirety.
(3) The preferred stock was authorized by the board of directors in
December 1998.
(4) Does not include 750,000 shares issuable upon the exercise of (i) the
underwriters' over-allotment option, (ii) the underwriters' warrants, or
(iii) employee stock options. To the extent that these options and warrants
are exercised, there will be further share dilution to new investors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read Rampart's Consolidated Financial Statements, related notes and
other financial information included in this prospectus in conjunction with this
discussion of our operations.
Results of Operations
Over the period from December 31, 1997 to December 31, 1998, we have increased
net revenues by 134% to $6.8 million from $2.9 million. As a percentage of
revenues, costs decreased 6.9% (43.8% compared to 36.9%) and operating expenses
decreased 35.7% (from 59.1% to 23.4%) for the same period. A comparative summary
of the earnings statement is shown below.
Operating Data: Year Ended
------------------------------
12/31/97 12/31/98
-------------- ------------
Revenues $ 2,935,283 $ 6,843,785
Cost of revenues 1,166,063 2,408,487
-------------- ------------
Gross Profit 1,769,220 4,435,298
General and
administrative expense 1,002,260 1,181,555
Interest expense 642,600 494,142
-------------- ------------
Earnings before income tax 124,360 2,759,601
Income tax benefit (expense) 309,131 (694,891)
-------------- ------------
Net income $ 433,491 $ 2,064,710
-------------- ------------
Basic net income per common $ 0.19 $ 0.92
share
-------------- ------------
-------------- ------------
Diluted net income per common $ 0.19 $ 0.92
share
-------------- ------------
Weighted average common shares 2,250,000 2,250,000
outstanding
-------------- ------------
[GRAFIC OMITTED]
The following table presents certain financial data, as a percentage of net
revenues, for the periods indicated:
Year Ended
------------------------------
12/31 1997 12/31/1998
------------------------------
------------- ------------
------------- ------------
Revenues 100.0% 100.0%
Cost of revenues 39.7 35.2
------------- ------------
------------- ------------
Gross Profit 60.3 64.8
General and administrative expense 34.1 17.3
Interest expense 22.0 7.2
------------- ------------
Earnings before income tax 4.2 40.3
Income tax benefit (expense) 10.6 (10.2)
------------- ------------
Net income 14.8 30.1
------------- ------------
Comparison of the Years Ended December 31, 1997 and December 31, 1998
In late 1996 the opportunities to purchase loan portfolios at advantageous
prices declined due to reductions in loan offerings and increased competition.
Prior to 1997, in order to accelerate collections on our purchased loan
portfolios, we offered substantial discounts for quick cash settlements. The
cash flow from accelerated settlements was used to acquire more asset pools and
pay down debt. During 1997, we changed our corporate strategy of giving
substantial discounts for the resolution of debt obligations and the sale of
foreclosed real estate. We decided to maximize collections, even if the recovery
period was extended. This strategic change was in response to the rising costs
of acquiring new asset pools. We believed that the additional costs to maximize
collections on existing assets would provide a higher yield than the potential
yield to be realized by purchasing higher cost portfolios. We also believed that
the strategy of maximizing collections is necessary to maintaining viable yields
on new assets purchased.
During 1998, we collected $799,926 on notes that we originally assessed as
worthless. Because of our original assessment, none of the acquisition costs
were allocated to these notes. Collections in the future on these notes may be
expected to be as successful because they are secured by collateral which is
subject to foreclosure. A comparative summary of the Company's collections from
inception to date on notes for which no original cost was allocated and notes
for which a cost basis was allocated is set forth in the table in
"Business-Investment in Discounted Debt Portfolios and Services."
The 134% increase in net revenues from 1997 to 1998 is partially due to the
strategy change, to the timing of settlement negotiations, resolution of
litigation and the sale of a large real estate holding ($1,875,000 selling
price). The $2,666,000 increase in gross profit from $1,769,000 in 1997 to
$4,435,000 in 1998 without a corresponding increase in General and
Administrative costs is primarily due to the sale of one large real estate
holding ($1,125,000 gross profit) with the balance due to the change in strategy
discussed above. We believe the positive effects of our change in collection
strategy will be increasingly evident during future periods.
Gross profit increased from 60.3% in 1997 to 64.8% in 1998 primarily due to
a change in the rate of cost recognition used by several of our
subsidiaries during 1998. The critical variable in our modified cost
recovery method of cost recognition is the rate of amortization that is
used in order to recognize costs in consistent proportion with the
collections from the asset pools. Accordingly, our rate of amortization is
based on the cost of asset pools as compared to total projected
collections. Historical collections significantly in excess of projections
create a need to periodically adjust the rate of cost amortization. During
1998, the rate of amortization of several of our subsidiaries was decreased
because of favorable collection experience on assets within these
subsidiaries.
General and Administrative expenses for 1998 increased by 17.9% to
$1,181,555 from $1,002,260 in 1997. We did not add any additional staff to
generate the additional revenues. The primary reason these expenses
increased was due to performance bonuses to non-shareholder employees and
profit sharing payout to Janke family entities.
Interest expense decreased $148,458 in 1998 to $494,142 from $642,600 in
1997. This decrease is due to cash flow being used to reduce debt.
Liabilities, exclusive of deferred federal income taxes, decreased
$1,746,000 in 1998.
Because of the policy change in 1997 and the timing in the sale of a large
real estate holding, earnings as a percentage of revenues increased from
4.2% in 1997 to 40.3% in 1998. Because of the variability in the timing of
our revenues and the increased costs in acquiring new assets, we may not be
able to sustain such high earnings percentages.
Liquidity and Capital Resources
We have financed capital requirements with bank debt and borrowings from
shareholders and related parties. As of December 31, 1998, we had no outstanding
debt to shareholders or related parties, however, on February 1, 1999, the Janke
Family Partnership,. Ltd. loaned $1.4 million for the acquisition of the Newport
Assets. We have a $5,000,000 revolving line of credit with Southwest Bank of
Texas, NA. The line of credit is secured by the purchased debt portfolios and
foreclosed real estate. As of December 31, 1998, the line of credit had an
outstanding balance of $3,303,000 and available credit of $1,697,000. As a
result of the acquisition of Newport Assets, the balance on the line of credit,
as of March 31, 1998, was $4,173,161 with available credit of $826,839. We are
in compliance with all of the loan covenants governing the credit facility.
Whenever acquisitions have required more funding than available through our
revolving credit facility a major shareholder and/or related parties have
provided temporary funding for acquisitions. However, we cannot assure that this
funding source will be available in the future.
Our cash requirements for calendar 1999 and in the future will depend upon
continued profitable operations and the level of future acquisitions. The net
proceeds from this offering, anticipated future profitable operations, and
temporary loans from a major shareholder are expected to provide for capital
requirements over the course of the next twelve months. We could be required to
seek additional financing prior to the end of twelve months, if:
plans or assumptions change, there are unanticipated changes in business
conditions, or the proceeds of this offering prove to be insufficient to
fund operations.
Year 2000 Compliance
We are aware of the issues associated with the year 2000 as it relates to
information systems. A new information system certified by the supplier to be
Year 2000 compliant was installed in 1998. The cost of the new computers and
software was approximately $25,000. Based on the nature of our business, we do
not expect to experience material business interruption due to the impact of
Year 2000 compliance on our customers and vendors. Since our system is Year 2000
compliant and we are not dependent on vendors, there will not be any significant
additional expenditure. Year 2000 issues should not affect our liquidity,
financial positions, or results of operations.
Accounting Standards
The Financial Accounting Standards Board ("FASB") periodically issues statements
of financial accounting standards. In April 1997, FASB issued Statement of
Financial Accounting Standards (SFAS) No. 128. The new standard replaces primary
and fully diluted earnings per share with basic and diluted earnings per share.
We are required to adopt SFAS No. 128 in the year ending December 31, 1998. We
have adopted SFAS No. 128 for the year ended December 31, 1998 and for all
periods presented.
In June 1997, the FASB issued SFAS No. 130 and 131. SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components. SFAS No. 131 establishes standards for reporting about
operating segments, products and services, geographic areas, and major
customers. The standards became effective for calendar years beginning
after December 15, 1997. We have adopted these standards for the year ended
December 31, 1998 and for all periods presented. SFAS No. 130 and 131 will
not have a material effect on our financial condition or reported results
of operation.
In February 1998, the Financial Accounting Standards Board issued SFAS 132,
Employers' Disclosures about Pensions and Other Post retirement Benefits -
An Amendment of FASB Statements No. 87,88, and 106. This Statement revises
employers' disclosures about pension and other post retirement benefit
plans. It does not change the measurement or recognition of those plans.
Rather, it standardizes the disclosure requirements for pensions and other
post retirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan
assets that will facilitate financial analysis, and eliminates certain
disclosures that are no longer useful. This Statement became effective
February 1998. It will not have a material effect on our financial
condition or results of operations.
In August 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. This
statement, which applies to all entities, requires derivative instruments
to be measured at fair value and recognized as either assets or liabilities
on the balance sheet. The statement is effective for fiscal years beginning
after June 15, 1999 with earlier application encouraged but permitted only
as of the beginning of any fiscal quarter beginning after June 1998.
Retroactive application is prohibited. We do not believe this statement
will be applicable to our financial condition or our results of operations.
In December 1998, the Financial Accounting Standards Board issued SFAS 134
"Accounting for Mortgaged-Backed Securities Retained after the
Securitization of Mortgage Loans held for Sale by a Mortgage Banking
Enterprise", which amends SFAS 65. This statement is effective for the
fiscal quarter beginning after December 15, 1998. It will not have a
material effect on our financial condition or results of operations.
BUSINESS
Organization, Operations & Strategy
We are a specialty financial services company that commenced business operations
in 1994. Our office is located at 700 Louisiana, Suite 2510, Houston, Texas
77002. Our primary business activities are:
acquiring undervalued financial assets, primarily in the form of discounted
commercial debt portfolios and real estate; managing and servicing our
purchased asset portfolios; collecting the debt and selling the real estate
for profit; and providing short-term bridge funding for real estate
projects.
We plan to increase our business through purchases of:
undervalued real estate and other assets from business bankruptcies;
portfolios of assets being sold by real estate investment trusts;
non-performing and under-performing assets by insurance companies; real
properties with delinquent property taxes from local taxing authorities;
debt portfolios from privately-held entities in the business of acquiring
and resolving discounted assets looking for exit strategies which would
generate long-term capital gain tax treatment; non-performing debt
portfolios from financial institutions; distressed assets in selected
foreign markets; and through the increased demand for short-term bridge
financing for selected real estate projects.
We plan to maximize utilization of NOLs obtained from the MCorp acquisition
by:
optimizing profitability within the acquired subsidiaries which have NOLs
by concentrating future asset purchases within the companies.
Principal Acquisitions
The two acquisitions described below have been our two largest purchases of
undervalued financial assets in the last two years.
Acquisition of MCorp Subsidiaries and Assets
In March 1989, MCorp Inc., a large bank holding company, filed for protection
under the federal bankruptcy laws and in 1994 the bankruptcy court approved a
plan of reorganization and liquidation of MCorp. The court ordered that the
assets of MCorp be transferred into three grantor trusts for the benefit of the
creditors ("MCorp Liquidating Trusts" or "Trusts"). In July 1997, we acquired,
through competitive bid, certain corporate subsidiaries and assets (the "MCorp
Acquisition") from the MCorp Liquidating Trusts. The following table sets forth
a classification of the assets, which were purchased for $1,303,913.
Allocation of Purchase price
---------------------------------
Cash $ 427,589
Paying loans (principal balances of $2,432,000) 801,692
Foreclosed real property (approximate tax assessed value of $189,000) 79,442
Legal claims with unknown status 0
---------------------------------
Total Purchase Price $ 1,308,723
Less: Cash acquired 427,589
=================================
Net purchase price $ 881,134
=================================
Because of the unknown potential for collection of the legal balances on claims
with unknown status, we did not allocate any cost basis to those loans. As of
December 31, 1998, we had collected $875,535 or about 99.4% of the net purchase
price of the entire asset portfolio by selling some of the foreclosed real
estate, collecting some of the paying loans and collecting $174,000 on three of
the claims with unknown status. Based on our evaluation of future cash
recoveries of the remaining assets as of December 31, 1998, we presently
estimate additional recoveries of approximately $1.3 million (excluding
interest) from the sale of the real estate and collection of outstanding debt
over the next three years. If we attain our projected collections, total
recoveries on the MCorp assets would be approximate $2.2 million.
Incidental to the acquisition of the assets described above, the entities
acquired in the MCorp Acquisition had NOLs and Built-in-Losses of approximately
$55.8 million of which approximately $360,000 was utilized in 1998. We believe
that these NOLs, subject to certain possible limitations, may be used to offset
future taxable income of the acquired corporations. If the Company is able to
utilize the NOLs, it must be utilized against profits occurring in the acquired
corporations as opposed to consolidated profits realized by Rampart. We cannot
assure that sufficient profits, if any, can be generated in the acquired
corporations prior to the expiration of some or all of the potential NOLs. Nor
can we assure that the Internal Revenue Service will not deny use of all or a
part of the NOLs. See "Risk Factors", "Certain Federal Income Tax Matters" and
Notes to Financial Statements.
Acquisition of Newport Assets
On February 1, 1999, we purchased from the Liquidating Trustee in Bankruptcy in
the Federal Bankruptcy Court in the Southern District of Texas for a purchase
price of $2,875,000, all of the real estate, receivables and other assets of the
bankruptcy liquidation estate (the "Bankruptcy Estate") of Newport Partners. The
assets were acquired free and clear of all liens, claims and encumbrances.
Simultaneously with the purchase of the assets from the Liquidating Trustee , we
sold a portion of the real estate, easement rights, property assessment rights,
and property maintenance obligations to the New Property Owners' Association of
Newport for $850,000, payable interest only in the first year and monthly
installments of principal and interest at 10 % per annum for 9 years, beginning
February 1999.
The assets purchased from the Bankruptcy Estate are summarized below:
Description of Real Estate Acreage 18-hole public play golf course
124.53 Clubhouse and conference center (32,040 square feet of
improvements) 23.34 Platted reserve for 9-additional golf holes
for planned expansion 81.18
Undeveloped acreage 382.70
308 fully developed lots 61.60
282 partially developed lots 56.40
Platted and unplatted reserves 77.54
------
Sub-total 807.29
Description of Real Estate Parcels Sold to New Property Owners
Association:
Swimming Pool and 4 tennis courts 7.17
Recreational Restricted Reserves 81.52
Sub-total 88.69
Total Acreage Purchased 895.98
Other assets purchased included receivables for property assessments in the
amount of $3.2 million and furniture, fixtures, inventory and equipment with a
market value of about $75,000.
The purchase was financed by borrowing $1.475 million from our revolving credit
facility with Southwest Bank of Texas, N.A. and $1.4 million from the Janke
Family Partnership, Ltd. The Bank recorded a first lien secured interest on the
assets and the Janke Family Partnership, Ltd. was granted a second lien
position. The purchase was made through Rampart Properties Corporation, our
wholly-owned subsidiary, to utilize the NOLs attributable to that subsidiary.
See "Certain Relationships and Related Transactions".
Industry & Competition; History of Operations
Our industry, commonly called the distressed asset business, started
approximately ten years ago when the FDIC and the Resolution Trust Corporation
("RTC") began liquidating large portfolios of notes and real estate acquired
from failed banks and savings institutions. Initially, there were few
participants in the business. The two principal officers of Rampart were active
participants at the start-up of the industry and were involved in acquisitions
of assets with face values in excess of $400 million while associated with
another company. As the industry matured, more knowledgeable and sophisticated
investors entered the business. Numerous investment companies and partnerships
were established to buy distressed assets. Additionally, bank and other
financial institutions have been active purchasers of discounted assets in
recent years. Since 1994, according to the FDIC's database, over 300 separate
entities have purchased debt and/or real estate portfolios from the FDIC.
Rampart began acquiring distressed debt portfolios and other assets in 1994,
primarily on a competitive bid basis from the FDIC and RTC. In 1995, we began
acquiring assets from healthy financial institutions, banks, and insurance
companies, interested in eliminating non-performing assets from their
portfolios. These acquisitions were made on both a competitive bid and
negotiated purchase basis. In 1996 we began to negotiate purchases of assets,
primarily debt and real estate, from bankruptcy estates and liquidating trusts.
In July 1997, we consummated the MCorp Acquisition with a net cash outlay of
$881,134 in which we acquired paying loans with principal balances of $2.4
million, claims with unknown status with legal balances of approximately $34
million and foreclosed real estate with a cost basis of approximately$189,000.
The subsidiaries acquired in the MCorp Acquisition have approximately $57
million in NOLs and Built-in-Losses which we believe can be used to offset
future taxable income generated by the acquired corporate entities, subject to
certain possible limitations. See "-The MCorp Acquisition" and "Certain Federal
Income Tax Matters."
Investment in Discounted Debt Portfolios & Services
Our primary business is the acquisition of non-performing portfolios of
commercial loans and other commercial obligations. These debt portfolios are
purchased at substantial discounts from their legal balances by competitive bids
and negotiated purchases. Sources of discounted debt portfolios are:
governmental entities, such as the FDIC, financial institutions, insurance
companies, bankruptcy estates, and liquidating trusts.
Typically, our discounted debt portfolios contain some or all of the
following: non-performing loans and other debt obligations, primarily secured,
under-performing loans, primarily real estate secured, paying loans, primarily
real estate secured, other forms of unsecured debt obligations, real estate, and
other assets.
Rampart currently owns paying notes receivable with principal balances
totaling $4,987,811 as of December 31, 1998. These notes have a cost basis of
$1,625,673, or 32.6 percent of outstanding principal balances. The majority of
these notes are secured by real estate and mature within three to five years.
Additionally, Rampart has non-performing debt, secured and unsecured, with
a cost basis of $2,218,805 as of December 31, 1998. These assets are in various
stages of resolution, including litigation and bankruptcy. While there can be no
assurance that any recoveries will be realized on these assets, we estimate a
minimum recovery of $3.5 million over the next three years.
Success in this business segment is dependent on management's ability to
assess value on the asset pools being purchased, predominantly by review of the
seller's records. Because we purchase assets primarily from failed institutions,
bankruptcies, and other distressed situations, the information available for
review prior to purchase is often aged and incomplete. We allocate the purchase
price of the portfolio to each individual note based on management's assessment
of potential collections. Our success in assessing value under these
circumstances is shown in the analysis below:
No. of Original Collections Estimated
Loans Cost Basis to Date Remaining
Allocation Collections
-------- -------------- -------------- ---------------
Assets originally assessed as worthless and subsequently 33 $ $ 1,565,857 $ 1,791,000
collected 0
Assets originally assessed as collectible and subsequently 47 406,894 33,817 0
impaired
-------- -------------- -------------- ---------------
Subtotal 80 $ 406,894 $ 1,599,674 $ 1,791,000
Remaining assets acquired 282 14,355,403 19,406,424 13,545,000
-------- -------------- -------------- ---------------
All assets purchased from inception to 12/31/98 362 $14,762,297 $21,006,098 $15,336,000
-------- -------------- -------------- ---------------
During the initial review, we allocate a zero cost basis to those
individual notes which appear to have no potential for collection. After the
purchase is consummated, subsequent in-depth reviews are performed on each of
the note files. Based on the more current information derived from the in-depth
reviews, we decide whether or not to pursue for collection. As noted in the
schedule above, we have made significant collections ($1,565,857) on 33 notes
that we initially assessed to be worthless. Conversely, we have written off or
written down 47 notes with a cost basis of $406,894 with cumulative collections
of $33,817, thus realizing a loss of $373,077. Overall, we have collected
$1,192,780 in excess of the allocated costs on 80 loans where management's
original assessment of value was based on incomplete information. The estimated
remaining collections of $1,791,000 are predominantly secured by real estate. We
cannot assure that this performance will continue in the future; however, our
conservative valuation procedures should result in valuation exceptions being
generally favorable.
Investment in Real Estate and other Assets
A major portion of our business is managing real estate and other assets
acquired by foreclosure on non-performing debt and real estate purchased below
our assessment of market values. We sell the majority of the real estate and
other assets in an orderly manner in the marketplace. However, some of our real
estate properties, in our opinion, have significant potential for increased
market value. We manage these properties for future liquidation at optimum price
levels. None of these properties have a cost basis greater than ten percent of
our total assets. However, the earnings from these properties are significant
contributors to our current profitability and we believe that the ultimate sale
of the properties will generate significant future earnings. Some of these
properties are summarized below:
Classified as Commercial Rental Property:
Retail Center, Dallas, Texas 40,000 square foot retail center, 100%
occupied $250,000 annual net cash flow Substantial upside potential on rents and
market value Cost basis of $390,203 after depreciation Market value of
$1,500,000 based on broker's opinion of value Held for market appreciation,
earnings and future sale.
Retail Center, San Antonio, Texas 15,000 square foot retail center prime
location, 100% occupied $125,000 annual net cash flow Cost basis of $360,00
after depreciation Market value of $1 million based on broker's opinion of value
Held for market appreciation, earnings and future sale
Classified as Purchased asset pools:
12 acres on South Padre Island, Texas Undeveloped commercial waterfront
property Allocated cost basis on this property is zero Market value of $750,000
based on broker's opinion of value Currently offered for sale Underground
storage facility, Montgomery County, Texas 40,000 square foot underground
storage facility 37 acres of land Cost basis of $75,000 Market value of $900,000
based on a broker's opinion of value Currently offered for sale
Classified as Investment real estate:
None of our investment real estate has been owned long enough for
significant appreciation over original costs.
We determine that the properties we foreclose or purchase do not have
significant environmental problems before we acquire title to these properties.
Some of the real estate acquired had remedial environmental problems. These
problems consisted primarily of underground storage tanks and asbestos. When
environmental issues are identified, we notify the appropriate state agency and
engage a certified environmental consultant/contractor to evaluate and remedy
the problem. Once the problems are remedied and the proper certifications are
obtained from the agencies, we sell or manage the properties. We have never
suffered a loss on a property that had environmental issues. As of the date of
this prospectus, the remedial costs have not been significant and we attempt to
recover all environmental costs in our selling price.
All of the real estate properties are insured for property damage based on
replacement value and all of the properties have liability insurance coverage up
to $10 million.
Short-term Bridge Funding on Real Estate Projects
A newer business activity includes short-term bridge funding for selected real
estate projects. Our typical funding situation requires that:
we own the real estate, developers buy-back the properties with
preferential yields and equity participation to Rampart, our equity
participation percentage increases at specific timetables, and we receive 100%
of the equity of the project at specified default dates.
In 1998, we acquired land at a cost of $1,100,731 to provide bridge funding
for developers. A portion of the projects have been sold for development,
leaving $875,745 of investment real estate at December 31, 1998. We anticipate
that activity will be a significant portion of our business expansion in terms
of volume and profits.
Legal Proceedings
We are not parties in any lawsuit, pending or threatened, which management
believes should have a material effect on our financial position.
Employees
We have a permanent staff of seven employees - two executive officers, four
professional staff, which includes two administrative officers, and one clerical
staff. Additionally, we have established a network of contract due diligence
professionals and field support personnel to perform fieldwork and supplement
our permanent staff, when needed. We believe that we have solid relationships
with our employees. None of our employees are members of any labor union.
Office Facilities
Our corporate offices are located in the Bank of America building (previously
the NationsBank building), 700 Louisiana, Suite 2510, Houston, Texas, 77002. We
have about 2,000 square feet of office space. Of this space, a major law firm
provides about 1,200 square feet to Rampart. We also have use of the law firm's
meeting rooms, law library, reception facilities, and other facilities within
the firm on an as needed basis. The law firm performs approximately 60% of our
legal work and, as an accommodation, provides the space and facilities without
charge. The balance of our space is leased on a month to month basis. Additional
lease space is available in the event expansion is required. Currently, we do
not have a written lease agreement.
Additional Information
Rampart has not previously been subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have filed
with the Securities and Exchange Commission (the "Commission") a registration
statement on Form SB-2 (including any amendments thereto) under the Securities
Act with respect to the shares offered. This prospectus does not contain all of
the information, exhibits, and schedules contained in the registration
statement. For further information about Rampart and the shares, you should read
the registration statement, the exhibits and any schedules attached. Statements
made in this prospectus regarding the contents of any contract or document filed
as an exhibit to the registration statement are not necessarily complete and, in
each instance, you are referred to a copy of each contract, document or exhibit
filed with the registration statement.. Each such statement is qualified in its
entirety by such reference. The registration statement, the exhibits, and the
schedules filed with the Commission may be inspected, without charge, at the
Commission's public reference facilities. These facilities are located at:
Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549,
Northwestern Atrium Center, 500 West Madison Street, Room 1400, Chicago,
Illinois 60661; and Suite 1300, Seven World Trade Center, New York, New York
10048.
Copies of the materials may also be obtained at prescribed rates by writing
to the Commission, Public Reference Section, 450 Fifth Street, NW, Washington,
D.C. 20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission at http://www.sec.gov.
As a result of this offering, Rampart will become subject to the reporting
requirements of the Exchange Act. Therefore, we will file periodic reports,
proxy statements, and other information with the Commission. Following the end
of each calendar year, we will furnish our shareholders with annual reports
containing audited consolidated financial statements certified by independent
public accountants and proxy statements. For the first three quarters of each
calendar year, we will provide quarterly reports containing unaudited
consolidated financial information.
Rampart intends to apply for listing of the shares on the American Stock
Exchange ("Amex"). We cannot assure that our shares will be accepted for
listing. Our reports, proxy statements, and other information will be available
for inspection at the principal office of the Amex at 86 Trinity Place, New
York, New York 10006.
MANAGEMENT
Directors and Executive Officers
Our directors and executive officers as of March 31, 1999 are identified below:
Name Age Position
Charles W. Janke 54 Chairman, Chief Executive Officer, & Director
J.H. (Jim) Carpenter 57 President, Chief Operating Officer, Secretary &
Director
Charles F. Presley 49 Vice-President, Chief Financial Officer,
Treasurer & Controller
James W. Christian 45 Director
James J. Janke 45 Director
Our directors are elected at each annual meeting of shareholders. The
officers are elected annually by the board of directors. Officers and directors
hold office until their respective successors are elected and qualified or until
their earlier resignation or removal.
Charles W. Janke was Chairman, President, Chief Executive Officer, and
director of Rampart since its organization in March 1994. He relinquished his
position as President to Mr. Carpenter effective January 1, 1999 and continues
as a director. Prior to the organization of Rampart, Mr. Janke `s primary
activity was private investments. During 1992 and 1993, Mr. Janke invested in
Laidlaw Holdings, Inc., a securities investment firm. During this period he
provided mezzanine and bridge financing for several firms, all of which became
listed on the NASDAQ Exchange. Mr. Janke's ownership in Laidlaw Holdings, Inc.
was less than 1% and he has no current ownership. During the period 1989 through
1992, Mr. Janke provided acquisition funding for a company that acquired in
excess of $400 million in residential mortgage portfolios in association with a
major securities firm. After a brief retirement, he funded the start-up of
Rampart and became active in its management. For the period 1975 through 1985,
Mr. Janke was a stockholder and officer in Centurian National Group, Inc., a
cemetery and funeral home holding company, which was acquired by Service
Corporation International, a public corporation.
J. H. Carpenter was elected President and Chief Operating Officer in
December 1998 to become effective January 1, 1999. He has been Vice President
and a director since the organization of the Company in March 1994. For the
period October 1991 through March 1994, Mr. Carpenter was a shareholder and
president of two closely held corporations that acquired commercial debt from
the RTC. During the period, 1989 to October 1991, Mr. Carpenter was associated
with a company that acquired, in conjunction with a major securities firm,
purchased and sold over $400 million in residential mortgage portfolios. From
1970 through 1981, Mr. Carpenter was Vice President and Treasurer of Camco,
Incorporated, a publicly traded oil tool manufacturing company.
Charles F. Presley was elected Vice President and Chief Financial Officer
in December 1998 to become effective January 1, 1999 and has been the controller
for Rampart since March 1996. He is responsible for accounting, federal and
state tax compliance, internal controls, and also has investigation and
litigation support responsibilities. For the 15 years prior to his tenure with
Rampart, Mr. Presley was the principal practitioner in a Certified Public
Accounting practice in Houston, Texas.
James W. Christian was elected a director of the Company in December
1998 to become effective January 1, 1999. Mr. Christian is a member of the
Houston, Texas law firm, Christian & Smith L. L. P. where he has practiced
since 1990. Mr. Christian specializes in litigation, corporate and real
estate law.
James J. Janke was elected a director of the Company in 1996. Mr.
Janke is Vice President and General Manager of a top 100 Ford dealership
where he has been employed since 1976. He serves on the Board of Directors
of the Houston Auto Dealers Association, the Houston Livestock Show and
Rodeo, a charitable organization, and the Better Business Bureau of
Houston. Charles W. Janke and James J. Janke are brothers.
Outside Directors
We will appoint one director who is not an officer, employee, or 5% shareholder
upon conclusion of the offering as designated by the representative of the
underwriters. The director nominee designated by the representative of the
underwriters is Robert A. Shuey, III. Mr. Shuey is a director and Chief
Executive Officer of Euromed, Inc., which owns all of the outstanding stock of
Redstone Securities, Inc., the representative of the underwriters in this
offering. Mr. Shuey has been a director of Euromed since July 1996 and Chief
Executive Officer since December 1998. Prior thereto, he had been Manager of
Investment Banking with Tejas Securities Group, Inc. since September 1997. He
has been in the investment banking business for more than the past five years,
with National Securities Corporation from September 1996 until August 1997; with
La Jolla Securities Corporation from April 1995 until August 1996, with Dillon
Gage Securities Corporation from January 1994 until April 1995 and Dickinson &
Co. from March 1993 to December 1993. Mr. Shuey is a member of the Board of
Directors of AutoBond Corporation, Westower Corporation and Transnational
Financial Corporation. Mr. Shuey is a graduate of Babson with a degree in
Economics and Finance.
Compensation of Directors
Directors who are also employees will not receive any remuneration in their
capacity as directors. Outside directors will receive travel expense
reimbursement and $1,000 per meeting attended.
Executive Compensation
The following table sets forth the compensation awarded to, earned by, or paid
to the Chief Executive Officer and the other officer (the "Named Executive
Officers") of the Company who received compensation of over $100,000 for the
fiscal years ended December 31, 1998, 1997 and 1996.:
Summary Compensation Table
Name and Annual Compensation All Other
---------------------------------
Principal Position Fiscal Year Salary Bonus Compensation
- --------------------------- ------------------------ --------------- -------------- --------------------
Charles W. Janke 1998 132,886 -- --
Chief Executive 1997 123,562 -- --
Officer
1996 226,824
- --------------------------- ------------------------ --------------- -------------- --------------------
J. H. Carpenter 1998 131,659 -- --
President 1997 122,437 -- --
1996 120,222
- --------------------------- ------------------------ --------------- -------------- --------------------
In the future, we intend to compensate officers in accordance with the
recommendations of a compensation committee consisting entirely of outside
directors.
Restrictions on Transfer
On January 21, 1999, Charles W. Janke and J.H. Carpenter entered into a Share
Transfer Restriction Agreement with Rampart. Janke and Carpenter agreed, for a
period of three years and one day from the consummation of this offering, not to
sell, assign, transfer, or otherwise dispose of any shares of Rampart in a
transaction which would cause an ownership change under Section 382 of the
Internal Revenue Code of 1986. Rampart agreed not to issue any new shares of
common stock or preferred stock for the same period.
Employment Agreements
We do not have employment agreements with any employees.
Indemnification and Limitation of Liability
As permitted by the Texas Business Corporation Act, we intend to maintain
insurance against any liability incurred by our officers and directors in
defense of any actions to which they may be made parties by reason of their
positions as officers and directors if it can be obtained at a reasonable cost.
The Company has been advised that it is the position of the Securities and
Exchange Commission that insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
1998 Stock Compensation Plan
In December 1998, the Board of Directors adopted the 1998 Stock Compensation
Plan (the "Plan"). The Plan was also approved by the shareholders in December
1998. Under the Plan, up to 375,000 shares of our Common Stock may be granted as
incentive compensation to:
employees, officers, directors, and consultants to Rampart or any
parent, subsidiary or affiliate of Rampart.
The number of shares reserved and the shares granted are subject to
adjustment in the event of any subdivision, combination, or
reclassification of shares. The Plan will terminate in 2008. Either
incentive stock options ("ISO's") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or non-qualified options, or
both may be granted at the discretion of the Board of Directors or a
committee of the Board of Directors (the "Committee"). The exercise price
of any option will not be less than the fair market value of the shares at
the time the option is granted. The options granted are exercisable within
the times or upon the events determined by the Board or Committee set forth
in the grant, but no option is exercisable beyond ten years from the date
of the grant. The Board of Directors or Committee administering the Plan
will determine:
whether each option is to be an ISO or non-qualified stock option, the
number of shares, the exercise price, the period during which the option
may be exercised, and any other terms and conditions of the option.
The holder of an option may pay the option price in: cash, or shares
of the Company with a fair market value equal to the purchase price, or
partly in shares and partly in cash.
The options can only be transferred by will or by the laws of descent
and distribution. Except in the case of death, disability or change in
control, no option shall be exercisable after an employee ceases to be an
employee unless extended for not more than 90 days by the Committee. An
optionee who was a director or advisor to the Company may exercise his
options at any time within three months after his status as a director of
advisor is terminated, unless his termination was caused because of death
or disability. If an optionee's employment as an employee, director, or
advisor, is terminated because of permanent disability, the Committee shall
have the right to extend the exercise period for not longer than one year
from the date of termination.
The Plan also permits the award of Stock Appreciation Rights ("SARs")
to optionees. The Committee may award to an otionee, with respect to each
share of Common Stock covered by an option (a "Related Option"), a related
SAR permitting the optionee to be paid the appreciation on the Related
Option. A SAR granted with respect to an ISO must be granted together with
the Related Option. A SAR granted with respect to a Non-qualified Option
may be granted together with or subsequent to the grant of the Related
Option. The exercise of the SAR shall cancel and terminate the right to
purchase an equal number of shares covered by the Related Option.
The Plan can be amended or terminated at any time. The plan is
administered by the Compensation Committee of the Board of Directors, which
is composed entirely of directors who are "disinterested persons" as
defined in Rule 16b-3 of the Securities Exchange Act of 1934, as amended.
Currently, options have not been granted to anyone.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the last three years, Charles W. Janke, Chairman and Chief Executive
Officer, and members of his immediate family or trusts loaned funds to Rampart
as shown below as part of the funds required to purchase two loan portfolios.
The lenders were paid interest and given a participation in the net cash profits
of the recovery from the portfolios. Net cash profits for purposes of profit
participation were defined as gross collections less direct collection costs.
Date Lending Party Amount Stated Profit Effective
Interest Participation % Interest Rate
Rate
January 1, 1996 Janke Family Partnership, Ltd. $100,000 12% 0% 12%
May 22, 1996 C.W. Janke Trust $112,500 12% 1.4625%, 27.1%
6.5825%
May 22, 1996 H. Y. Janke Trust $112,500 12% 1.4625%, 27.1%
6.5825%
May 22, 1996 Alfred Janke $112,500 12% 3.655% 23.9%
All of these loans, including interest and profit participation of $ 171,588,
were paid in 1997 and 1998. There are no balances outstanding as of this date.
Furthermore, the Janke Family Limited Partnership has pledged certificates of
deposits as collateral for our bank financing. We could not have received the
amount of financing without this pledge. In order to compensate the family
limited partnership for the reduced yield on the money invested in the
certificates and pledged as collateral, we have paid an additional 6% interest
per year on the certificates pledged. We paid additional interest of $102,000 in
1997 and $84,000 in 1998, as the amount pledged as collateral has been reduced.
During 1998, InSource Financial Corporation, a company owned and controlled by
J. H. Carpenter, President and director, sold its interest in a real estate
mortgage and judgment lien to Rampart for $334,000. As of the date of this
prospectus, Rampart had collected approximately $375,000 on this mortgage and
judgment. InSource purchased the lien in 1995 for approximately $250,000,
including capitalized costs.
In 1998, we sold for $525,000, a property to a consortium of buyers consisting
of Mr. Carpenter, Mr. Janke, trusts for two of Mr. Janke's children, the Janke
family limited partnership, and Southwest Commerce Partners No. 1, Ltd., a
partnership in which Mr. Janke has a 25% interest for an amount equal to the
highest third party offer received on the property. We took 10% interest bearing
notes that mature in three years as payment for the property. We purchased the
property in 1994 as part of a debt portfolio purchased from the FDIC and
allocated a cost basis of $100,000 to the property.
In 1994, Southwest Commerce Partners No. 1, Ltd., a limited partnership in which
Mr. Janke has a 25% interest, contributed approximately $52,000 for its interest
in the purchase of two portfolios of non-performing debt from the FDIC. The
partnership received a 6.25% profit interest in the acquired portfolios. As of
December 31, 1998, all of the funds contributed by the partnership have been
repaid and the partnership retains a 6.25% profit interest in the assets
remaining in the acquired portfolios.
On February 1, 1999, we acquired through Rampart Properties Corporation, our
wholly-owned subsidiary, the real estate and other assets from the bankruptcy
estate of Newport Partners, LLC for $2,875,000. The Janke Family Partnership,
Ltd. loaned $1,400,000 to Rampart Properties Corporation to provide a portion of
the funding for the purchase. The balance of the purchase price was advanced by
Southwest Bank of Texas, N.A. against our revolving line of credit. The Janke
Family Partnership, Ltd. was secured by a real estate note secured by a deed of
trust which was secondary to the security interest of Southwest Bank. The real
estate note provides for monthly payments of interest only at a 10% annual
interest rate, commencing March 31, 1999. The maturity date of the note is
December 31, 1999. We intend to retire the Janke Family Partnership, Ltd. note
from the proceeds of this offering. See "Use of Proceeds" and
"Business-Acquisition of Newport Assets".
We believe that all of the foregoing transactions were on terms no less
favorable than would have been received at the time of the transaction if
transacted with unaffiliated third parties. Any future transactions between
Rampart and its officers and directors, principal shareholders and affiliates,
will be approved by a majority of the board of directors, including a majority
of the independent, disinterested outside directors. These future transactions
will be on terms no less favorable to Rampart than could be obtained from
unaffiliated third parties.
PRINCIPAL SHAREHOLDERS
The following table identifies the beneficial ownership of the common stock as
of March 31, 1999 by:
each beneficial owner of more than 5% of the outstanding shares of
common stock; each director of the Company; the Named Executive Officers,
and all directors and executive officers as a group
Unless noted each beneficial owner has sole investment and voting power for the
shares beneficially owned.
Shares Owned
-------------------------------------------------------------------------
Prior to Offering After Offering
---------------------------------- -- -----------------------------------
Name and Address of Owner Number Percent Number Percent
- --------------------------------------------- --------------- -------------- ---------------- --------------
Charles W. Janke (1) 1,500,000 66.7% 1,500,000 40.0%
2147 Del Monte, Houston, Texas 77019
J. H. Carpenter (2) 750,000 33.3% 750,000 20.0%
700 Louisiana, Suite 2510, Houston, Texas
77002
Charles F. Presley -- --
4119 Tasselwood Lane, Houston, Texas 77014
James J. Janke -- --
1145 North Shepherd, Houston, Texas 77008
James W. Christian -- --
5 Martin Lane, Houston, Texas 77055
--------------- -------------- ---------------- --------------
--------------- -------------- ---------------- --------------
All Executive Officers and Directors as a 2,250,000 100.0% 2,250,000 60.0%
group (5 persons)
--------------- -------------- ---------------- --------------
- -----------
(1) Mr. Janke's shares are owned by a family limited partnership in which
Mr. Janke is the general partner
(2) The majority (600,000) of Mr. Carpenter's shares is owned by a family
limited partnership. The general partner is a closely held corporation whose
stock is owned by trusts for the benefit of Mr. Carpenter's children and
grandchildren. Mr. Carpenter is sole director and officer of this corporation
and has voting power over its stock. The balance of Mr. Carpenter's shares
(150,000 shares) is held by a corporation which is solely owned and controlled
by Mr. Carpenter.
CERTAIN FEDERAL INCOME TAX MATTERS
The following discussion is a summary of certain of the significant federal
income tax matters with respect to the availability of the NOLs acquired by
Rampart in the MCorp Acquisition. We have not obtained a private letter ruling
from the IRS or an opinion of counsel regarding the availability of the NOLs.
The following discussion also does not address any aspect of state and local
taxation, including, without limitation, the effect of state law limitations on
the use of NOLs.
This summary is based on the Internal Revenue Code (the "Code"), Treasury
Regulations promulgated and proposed thereunder (the "Regulations"), judicial
decisions, and published administrative rules and pronouncements of the IRS as
in effect on the date hereof. Changes in such rules or new interpretations
thereof may have retroactive effect and could therefore significantly affect the
tax consequences described below.
Basis for availability of NOLs
On July 10, 1997, we acquired five corporate subsidiaries of the MCorp
Liquidating Trusts. The five corporate subsidiaries had existing NOLs on the
acquisition date. Generally, corporations that have experienced an ownership
change under Code section 382 can utilize NOLs only to a limited extent.
However, there is an exception to the general rule when the loss corporations
are under the jurisdiction of a bankruptcy court and the acquiring corporation
is a creditor of the entity in bankruptcy. Our ability to utilize the NOLs is
based for the most part upon this exception. In addition to the NOLs that may be
utilized under the bankruptcy exception, the Company also has NOLs that are
subject to the limitations of Code section 382. In addition to Code section 382,
other limitations arising out of the consolidated federal income tax regulations
can also work to limit the use of the NOLs.
How certain ownership changes effect NOLs How certain ownership
changes effect NOLs In general, whenever there is a more that 50% ownership
change of a corporation during a three-year testing period, the ownership
change rules in Code section 382 limit the corporation's utilization of
pre-change NOLs on an annual basis following the ownership change to the
product of the fair market value of the stock of the corporation
immediately before the ownership change and the long-term tax exempt rate
then in effect (which is an interest rate published monthly by the IRS). A
more than 50% ownership change occurs when the percentage of stock of the
corporation owned by one or more five-percent shareholders has increased by
more than 50 percentage points (determined by value) over the lowest
percentage of the corporation's stock owned by the same shareholders during
the three-year testing period. In any given year, the annual limitation
imposed by section 382 of the Code may be decreased by built-in losses or
increased by built-in gains realized after, but accruing economically
before, the ownership change.
The effect of the ownership change rules of section 382 of the Code may be
ameliorated by an exception that applies in the case of federal bankruptcy
reorganizations. Under the bankruptcy exception to section 382 of the Code, if
the reorganization results in an exchange by qualifying creditors and
stockholders of their claims and interests for at least 50% of the debtor
corporation's stock (determined by vote and value), then the general ownership
change rules will not apply. Instead, the debtor corporation will be subject to
a different tax regime under which NOLs are not limited on an annual basis but
are reduced by certain provisions which are not applicable to the MCorp
acquisition. However, because the bankruptcy exception is based upon factual
determination and upon legal issues with respect to which there is uncertainty,
there can be no assurance that the IRS will not challenge the amount or
availability of the NOLs of the acquired corporations. Moreover, if the
bankruptcy exception applies, the Tax Code provides that any more than 50%
ownership change of the debtor within a two- year period will result in
forfeiture of all of the debtor's NOLs incurred through the date of such second
ownership change.
Certain limitations to use of NOLs
The Regulations provide limits on the use of NOLs when corporations that were
members of a former consolidated group join in the filing of a consolidated
federal income tax return of another group. Since the MCorp corporations were
acquired from a consolidated group, and Rampart will file a consolidated federal
income tax return, the separate return limitation year ("SRLY") rules apply to
these NOLs. Generally, these NOLs are available only to the extent that the
acquired corporation generates taxable income in the Rampart consolidated group.
In addition, the SRLY limitations operate after any annual limitations imposed
by Code section 382.
Company's basis for NOLs availability
Because of the application of the bankruptcy exception, the Company believes
that the general ownership change rules of section 382 do not apply to limit the
utilization of certain of the Company's NOLs. In addition, the Company believes
that it has not experienced a more than 50% ownership change since the prior
ownership change, therefore, the Company's NOLs have not been forfeited under
section 382(1)(5)(D). However, while the bankruptcy exception applies to most of
the NOLs, the remaining NOLs are subject to the operation of section 382 of the
Code. In order to prevent a second change in ownership, the Company's
shareholders have agreed to certain restrictions on the transfers of stock
within the appropriate time limits.
The Company's 1997 Consolidated Federal Income Tax Return identified
approximately $51.2 million of NOLs. In addition, we have identified
approximately $8.4 million of items that had no fair market value as of the
acquisition date. The write off of these items will generate built-in-losses
that will be written off for tax purposes in 1998. The following is a list of
our NOLs and built-in losses:
Pre-acquisition NOLs of Rampart 1,400,000
NOLs subject to 382 limitation and SRLY limitations 2,400,000
NOLs and Built-in losses not subject to 382 limitation but
subject to SRLY limitations 55,800,000
Total NOLs and Built-in-losses $59,600,000
Less: NOLs subject to 382 limitation and SRLY limitations 2,400,000
Less: NOLs utilized in 1998 (1) 1,122,000
---------
Less: NOLs subject to 382 limitation and SRLY limitations $56,078,000
===========
- -----------
(1) NOLs utilized in 1998 are comprised of $758,000 of pre-acquisition
NOLs of Rampart and $364,000 of acquired NOLs.
Although we have $59.6 million in total NOLs, our Code section 382
limitation NOLs, for all practical purposes, are not utilizable. Further,
we utilized approximately $1,122,000 of NOL in 1998. Hence, we expect $56.1
million of the NOLs to be available. However, the $56.1 million of the NOLs
will only be available to the extent that the specific acquired
subsidiaries with the NOLs have taxable income in the future to offset
their NOLs under the SRLY rules. Since July 1997, all of our acquisitions
and asset purchases have been made through our acquired subsidiaries and
most of our income is generated through these subsidiaries. We plan to
continue to maximize utilization of the NOLs by making acquisitions and
purchases through our acquired subsidiaries.
NOLs can be carried forward for 15 years from the date they arise. If
the NOLs are not used within the 15-year period, they expire. The following
is a summary of our NOLs and these expiration dates:
NOLs Expiration Schedule
Year Amount
1999 $1,458,000
2000 1,827,000
2001 0
2002 10,377,000
2003 13,305,000
2004+ 29,111,000
=================
$ 56,078,000
==================
Our NOLs and built-in-losses will not fully expire until 2015. See
Notes to Financial Statements.
Existing Shareholder Restrictions to Protect NOLs
Certain changes in the ownership of Rampart could cause an additional limitation
of the use of the NOLs acquired with the MCorp Corporations. We have taken
precautions to prevent these ownership changes from happening. Prior to this
offering, Charles W. Janke and J. H. Carpenter were the only two 5%
shareholders. If they retain ownership of more than 50% of Rampart for at least
three years following this offering, an ownership change causing a limitation on
the use of the NOLs will not occur. The shareholders have entered into a Share
Transfer Restriction Agreement with Rampart not to reduce their ownership to
less than 50% ownership as defined in the Code and Regulations for three years
and one day following this offering.
DESCRIPTION OF CAPITAL STOCK
Common Stock
We are authorized to issue 10,000,000 shares of common stock, $0.01
par value. As of December 31, 1998, there were 2,250,000 shares of common
stock issued and held by 3 holders of record. Shareholders are entitled to
share ratably in any dividends paid on the common stock when, as and if
declared by the Board of Directors. Each share of common stock is entitled
to one vote. Cumulative voting is denied. There are no preemptive or
redemption rights available to shareholders of common stock. Upon
liquidation, dissolution or winding up of Rampart, the holders of common
stock are entitled to share ratably in the net assets legally available for
distribution. All outstanding shares of common stock and the shares to be
issued in this offering will be fully paid and non-assessable.
Preferred Stock
The board of directors, without further action by the shareholders, is
authorized to issue up to 10,000,000 shares of preferred stock, $.01 par value.
The preferred shares may be issued in one or more series. The terms as to any
series, as relates to any and all of the relative rights and preferences of
shares, including without limitation, preferences, limitations or relative
rights with respect to redemption rights, conversion rights, voting rights,
dividend rights and preferences on liquidation will be determined by the Board
of Directors. The issuance of preferred stock with voting and conversion rights
could have an adverse affect on the voting power of the holders of the common
stock. The issuance of preferred stock could also decrease the amount of
earnings and assets available for distribution to holders of the common stock.
In addition, the issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control. We have no plans or commitments to
issue any shares of preferred stock.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the common stock will be American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 3,750,000 shares of common stock
issued and outstanding. Of these shares, the 1,500,000 shares sold in this
offering (1,725,000 if the over-allotment option is exercised in full) will be
freely tradable in the public market without restriction under the Securities
Act, except shares purchased by an "affiliate" (as defined in the Securities
Act) of Rampart. The remaining 2,250,000 shares (the "Restricted Shares"), will
be "restricted shares" within the meaning of the Securities Act. Restricted
Shares cannot be publicly sold unless registered under the Securities Act or
sold in accordance with an applicable exemption from registration, such as that
provided by Rule 144 under the Securities Act. In general, under Rule 144, as
currently in effect, a person (or persons whose shares are aggregated) is
entitled to sell Restricted Shares if at least one year has passed since the
later of the date such shares were acquired from Rampart or any affiliate of
Rampart. Rule 144 provides, however that within any three-month period such
person may only sell up to the greater of 1% of the then outstanding shares of
common stock (approximately 37,500 shares following the completion of this
offering) or the average weekly trading volume in our shares during the four
calendar weeks immediately preceding the date on which the notice of the sale is
filed with the Commission. Sales pursuant to Rule 144 also are subject to
certain other requirements relating to manner of sale, notice of sale and
availability of current public information. Anyone who is not an affiliate for a
period of at least 90 days is entitled to sell Restricted Shares under Rule 144
without regard to the limitations if at least two years have passed since the
date such shares were acquired from us or any affiliate. Any affiliate is
subject to such volume limitations regardless of how long the shares have been
owned or how they were acquired. After this offering, the two executive officers
will own 2,250,000 shares of the common stock. Our officers, directors and
shareholder directors will enter into an agreement with the underwriters
agreeing not to sell or otherwise dispose of any shares for one year after the
date of this prospectus without the prior written consent of the underwriters'.
We cannot predict the effect, if any, that offer or sale of these shares would
have on the market price. Nevertheless, sales of significant amounts of
Restricted Shares in the public markets could adversely affect the fair market
price of the shares, as well as impair our ability to raise capital through the
issuance of additional equity shares.
PLAN OF DISTRIBUTION
Underwriters
Under the terms and conditions of the underwriting agreement, the Company has
agreed to sell to the underwriters named below, and each of the underwriters,
for whom Redstone Securities, Inc. (the "representative") is acting as the
representative, have severally agreed to purchase the number of shares set forth
opposite its name in the following table.
Underwriters Number of Shares
Redstone Securities, Inc.
=========
Total 1,500,000
===========
The underwriters have advised us that they propose to offer the shares
to the public at the initial public offering price per share set forth on
the cover page of this prospectus and to certain dealers at such price less
a concession of not more than $___ per Share. These dealers may re-allow
$____ to other dealers. The Representative will not reduce the public
offering price, concession and re-allowance to dealers until after the
offering is completed. Regardless of any reduction, we will receive the
amount of proceeds set forth on the cover page of this prospectus.
We have granted to the underwriters an option, exercisable during the
45-day period after the date of this prospectus, to purchase up to 225,000
additional Shares to cover over-allotments, if any. The option purchase
price is the same price per share we will receive for the 1,500,000 shares
that the underwriters have agreed to purchase. If the underwriters exercise
such option, each of the underwriters will purchase its pro-rata portion of
such additional shares. The underwriters will sell the additional shares on
the same terms as those on which the 1,500,000 shares are being sold.
The underwriters can only offer the shares through licensed securities
dealers in the United States who are members of the National Association of
Securities Dealers, Inc. and may allow the dealers any portion of its nine
and three-quarters (9.75%) percent commission.
The underwriters will not confirm sales to any discretionary accounts
without the prior written consent of their customers.
Under the terms of the Underwriting Agreement, the holders of the
2,250,000 Restricted Shares have agreed that, for one year after the date
of this prospectus and subject to certain limited exceptions, without the
prior written consent of the Representative, they will not:
sell, contract to sell, or otherwise dispose of any shares, any
options to purchase shares, or any securities convertible into, exercisable
for, or exchangeable for shares.
Substantially all of such shares would be eligible for immediate
public sale following expiration of the lock-up periods, and subject to the
provisions of Rule 144. However, the holders of such 2,250,000 shares have
agreed with Rampart that they will not dispose of their shares to the
extent such disposition would jeopardize the NOLS. In addition, Rampart has
agreed, that until 365 days after the date of this prospectus and subject
to certain exceptions, without the prior written consent of the
Representatives, Rampart will not:
issue, sell, contract to sell, or otherwise dispose of any shares, any
options to purchase any shares, or any securities convertible into,
exercisable for, or exchangeable for shares in this offering, the issuance
of common stock upon the exercise of outstanding options or warrants or the
issuance of options under its employee stock option plan are not included
in the restrictions we agreed to. See "Shares Eligible for Future Sale."
We have agreed to pay the representative a non-accountable expense
allowance of 2.00% of the gross amount of the shares sold ($300,000 on the
sale of the shares offered) at the closing of the offering. The
representative will pay the underwriters' expenses in excess of the 2%
allowance. If the expenses of underwriting are less than the 2% allowance,
the excess shall be additional compensation to the underwriters. If this
offering is terminated before its successful completion, we may be
obligated to pay the representative a maximum of $50,000 on an accountable
basis for expenses incurred by the underwriters in connection with this
offering. In addition to the non-accountable expense allowance, we estimate
that we will incur other costs of approximately $200,000 for legal,
accounting, listing, printing, and filing fees.
We have agreed that, for a period of five years from the closing of
the sale of the shares, we will nominate for election as a director a
person designated by the representative. If the representative has not
exercised that right, the representative shall have the right to designate
an observer, who shall be entitled to attend all meetings of the board and
receive all correspondence and communications sent by us to the members of
the board. The representative has not yet identified the person who is to
be nominated for election as a director or designated as an observer.
The underwriting Agreement provides for indemnification among Rampart
and the underwriters against certain civil liabilities, including
liabilities under the Securities Act. In addition, the underwriters'
warrants provide for indemnification among Rampart and the holders of the
underwriters' warrants and underlying shares against certain civil
liabilities, including liabilities under the Securities Act, and the
Exchange Act.
Underwriters' Warrants
Upon the closing of this offering, we have agreed to sell to the underwriters
for nominal consideration, the underwriters' warrants. The underwriters'
warrants are exercisable at 165% of the public offering price for a four-year
period starting one year from the effective date of this offering. The
underwriters' warrants may not be sold, transferred, assigned or hypothecated
for a period of one year from the date of this offering except to the officers
of the underwriters and their successors and dealers participating in the
offering and/or their partners or officers. The underwriters' warrants will
contain anti-dilution provisions providing for appropriate adjustment of the
number of shares subject to the warrants under certain circumstances. The
holders of the underwriters' warrants have no voting, dividend or other rights
as shareholders of Rampart with respect to shares underlying the underwriters'
warrants until the underwriters' warrants have been exercised. For four years
from the one year anniversary of this offering, we have granted to the holders
of the underwriters' warrants or underlying shares "piggyback" registration
rights with respect to any registration statement we may file, other than in
connection with employee stock options, mergers, or acquisitions. The holders of
the underwriters' warrants and underlying shares shall have the right to require
us to include their shares in such registration statement at our expense. For
the term of the underwriters' warrants, the holders of the warrants will be
given the opportunity to profit from a rise in the market value of our shares,
with a resulting dilution in the interest of other shareholders. The holders of
the underwriters' warrants can be expected to exercise the underwriters'
warrants at a time when we would, in all likelihood, be able to obtain needed
capital by an offering of our unissued shares on terms more favorable than those
provided by the underwriters' warrants. This could adversely affect the terms on
which we could obtain additional financing. Any profit realized by the
underwriters on the sale of the underwriters' warrants or shares issuable upon
exercise of the underwriters' warrants will be additional underwriting
compensation.
Determination of Offering Price
The initial public offering price was determined by negotiations between the
representative and us. The factors considered in determining the public offering
price include:
our revenue growth since organization, the industry in which we
operate, our business potential and earning prospects, and the general
condition of the securities markets at the time of the offering.
The offering price does not bear any relationship to our assets, book
value, net worth or other recognized objective criteria of value.
Prior to this offering, there was no public market for the shares, and we cannot
assure that an active market will develop.
Stabilization; Passive Market Making Transactions
Certain persons participating in this offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the shares, including
overallotment, entering stabilization bids, effecting syndicate covering
transactions, and imposing penalty bids. In connection with this offering,
certain underwriters may engage in passive market making transactions in the
shares on the Amex in accordance with Rule 103 of Regulation M.
American Stock Exchange Listing
We will apply for listing of the common stock on the American Stock Exchange
under the trading symbol "." The listing is contingent, among other things, upon
our obtaining 400 shareholders.
LEGAL MATTERS
Maurice J. Bates L.L.C., Dallas, Texas, will pass on the validity of the
issuance of the shares. Wolin, Ridley & Miller L.L.P., Dallas, Texas, will
pass on certain legal matters for the underwriters in connection with the
sale of the shares.
EXPERTS
Pannell Kerr Forster of Texas P. C., independent certified public
accountants, has audited our financial statements for the fiscal years
ended December 31, 1997 and 1998. Our financial statements are included in
this prospectus and registration statement in reliance upon the report of
said firm and upon their authority as experts in accounting and auditing.
RAMPART CAPITAL CORPORATION
Index to Financial Statements
Page
Report of Pannell Kerr Forster of Texas, P.C., Independent Public Accountants..................................F-1
Consolidated Balance Sheets as of December 31, 1998 and 1997...................................................F-2
Consolidated Statements of Operations for the Years Ended December 31, 1998
and 1997.......................................................................................................F-3
Consolidated Statements of Shareholders' Equity for the Years Ended December
31, 1998 and 1997..............................................................................................F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998
and 1997.......................................................................................................F-5
Notes to Financial Statements................................................................................F6-F19
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Rampart Capital Corporation
We have audited the accompanying consolidated balance sheets of Rampart Capital
Corporation and subsidiaries (the "Company") as of December 31, 1998 and 1997,
and the related consolidated statements of operations, shareholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Rampart Capital
Corporation and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Houston, Texas
January 29, 1999, except for PANNELL KERR FORSTER OF TEXAS, P.C.
Note 14, as to which the date
is February 12, 1999
RAMPART CAPITAL CORPORATION
Consolidated Balance Sheets
December 31,
1997 1998
Assets
Cash $ 21,514 $ 583,629
Purchased asset pools, net 6,284,374 4,513,332
Commercial rental property, net 380,854 732,156
Investment real estate 224,986 1,100,731
Notes receivable from related parties - 525,000
Property and equipment, net 20,522 36,249
Other assets 67,907 475,452
------------ -----------
Total assets $7,000,157 $7,966,549
---------- ----------
Liabilities and Shareholders' Equity
Notes payable $5,333,164 $3,740,488
Notes payable to related parties 331,147 -
Accounts payable and accrued expenses 127,231 291,812
Federal income taxes payable - 12,624
Deferred tax liability 110,000 758,300
----------- -----------
Total liabilities 5,901,542 4,803,224
---------- ----------
Commitments and contingencies
Shareholders' equity
Common stock ($.01 par value;
10,000,000 shares authorized;
2,250,000 shares issued and
outstanding) 22,500 22,500
Retained earnings 1,076,115 3,140,825
---------- ----------
Total shareholders' equity 1,098,615 3,163,325
---------- ----------
Total liabilities and shareholders' equity $7,000,157 $7,966,549
---------- ----------
See notes to consolidated financial statements
RAMPART CAPITAL CORPORATION
Consolidated Statements of Operations
Year Ended December 31,
1997 1998
Collections on asset pools $2,555,363 $6,121,106
Net rental and other income 379,920 722,679
----------- -----------
Total revenue 2,935,283 6,843,785
Asset pool amortization (1,166,063) (2,408,487)
---------- ----------
Gross profit 1,769,220 4,435,298
General and administrative expenses (1,002,260) (1,181,555)
Interest expense (642,600) (494,142)
----------- -----------
Income before income tax benefit (expense) 124,360 2,759,601
Income tax benefit (expense) 309,131 (694,891)
----------- -----------
Net income $ 433,491 $2,064,710
----------- ----------
Basic net income per common share $.19 $.92
---- ----
Diluted net income per common share $.19 $.92
---- ----
Average common shares outstanding 2,250,000 2,250,000
--------- ---------
See notes to consolidated financial statements
RAMPART CAPITAL CORPORATION
Consolidated Statements of Shareholders' Equity
Common Retained
Stock Earnings Total
Balance, December 31, 1996 $22,500 $ 642,624 $ 665,124
Net income - 433,491 433,491
------------ ----------- -----------
Balance, December 31, 1997 22,500 1,076,115 1,098,615
Net income - 2,064,710 2,064,710
------------ ---------- ----------
Balance, December 31, 1998 $22,500 $3,140,825 $3,163,325
------- ---------- ----------
See notes to consolidated financial statements
RAMPART CAPITAL CORPORATION
Consolidated Statements of Cash Flows
Year Ended December 31,
1997 1998
Cash flows from operating activities
Net income $ 433,491 $2,064,710
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation 13,852 15,394
Asset pool amortization 1,166,063 2,440,213
Purchase of asset pools (299,961) (504,373)
Other costs capitalized with asset pools (856,686) (524,798)
Decrease (increase) in other assets 1,410 (407,545)
Decrease (increase) in accounts payable
and accrued expenses (133,413) 164,581
Increase in federal income taxes payable - 12,624
Increase (decrease) in deferred tax liability (309,000) 648,300
----------- -----------
Net cash provided by operating activities 15,756 3,909,106
------------ ----------
Cash flows from investing activities
Acquisition of subsidiaries, net of cash
acquired (881,134) -
Purchase of investment real estate - (434,040)
Purchase of property and equipment - (22,423)
----------------- -----------
Net cash used by investing activities (881,134) (456,463)
------------ -----------
Cash flows from financing activities
Payments on notes payable to related
parties (100,000) (331,147)
Proceeds from notes payable 1,931,601 1,222,629
Payments on notes payable (1,003,000) (3,257,010)
Financed asset sales to related parties - (525,000)
----------------- -----------
Net cash provided (used) by financing activities 828,601 (2,890,528)
------------ ----------
Net increase (decrease) in cash (36,777) 562,115
Cash at beginning of period 58,291 21,514
------------- ------------
Cash at end of period $ 21,514 $ 583,629
------------- -----------
See notes to consolidated financial statements
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 1 - Nature of Business and Summary of Significant Accounting Policies
Description of business
Rampart Capital Corporation (the "Company"), established in March
1994, is a specialized financial services company which acquires,
manages, services and disposes of portfolios of undervalued
assets, primarily non-performing commercial debt and other forms
of legal obligations and real estate (asset pools). A significant
portion of the debts are secured by real estate or other assets.
The Company purchases these asset pools at substantial discounts
from their outstanding legal principal amounts from financial
institutions, regulatory agencies and bankruptcy courts. Purchased
asset pools are primarily acquired by public sealed bid sales of
portfolios of loans, by sealed bid sales limited to a small number
of invited participants and by negotiated transactions on behalf
of the Company. Additionally, the Company provides short-term
bridge financing for real estate projects.
Basis of consolidation
The consolidated financial statements include the accounts of
Rampart Capital Corporation and all of its subsidiaries.
Intercompany accounts and transactions have been eliminated.
Purchased asset pools
At the acquisition date, the purchased asset pools consist of
non-performing debts and legal obligations, including commercial
and industrial loans, commercial real estate loans, multifamily
residential loans, judgments and deficiency balances. The majority
of the debts were non-performing and purchased at substantial
discounts from their outstanding legal principal amounts. At the
acquisition date, the aggregate cost of the purchased asset pool
is allocated to individual assets based on their relative values
within the pool.
Subsequent to acquisition, the purchased asset pools are
periodically revalued and carried at the lower of (i) cost or (ii)
fair value less any estimated costs to sell. The estimated fair
value is calculated by projecting cash flows on an asset by asset
basis through management's estimates that reflect the credit and
interest rate risk inherent in the assets. Any allowance to reduce
cost to fair value on purchased asset pools is recorded as a
provision for possible loss on the purchased asset pools during
the period determined. No material allowances or provisions were
required to adjust the carrying values of the purchased asset
pools as of December 31, 1998 or 1997.
Revenue is recognized in the amount of collections on purchased
asset pools. Collections on asset pools arise from (i) payments by
debtors in full or partial settlement of their loan or judgement
obligation, or (ii) the Company's sale of real estate acquired
pursuant to foreclosure or settlement of a debtor obligation.
Amortization of the purchased asset pools is recognized for
financial statement purposes based on the ratio of the total cost
to total estimated collections on the purchased asset pools.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(Continued)
Purchased asset pools (continued)
Rents collected on real estate, other than commercial rental
property, in the purchased asset pools are recognized as part of
the collections on asset pools.
Commercial rental property
Rents collected on commercial rental property are recognized as
rental income is collected. Sales of commercial rental property
are generally recorded using the full accrual method of accounting
for sales of real estate, assuming the conditions for recognition
are met.
Investment real estate
The Company provides short term bridge funding for selected real
estate projects by acquiring land and contracting to sell the land
to or through developers. Revenues and associated costs are
recognized at the time of sale assuming the criteria for sales
recognition are met.
Foreclosed assets
Foreclosed assets acquired in settlement of notes are recorded at
the lower of allocated cost or fair market value. Costs relating
to the development and improvement of foreclosed assets are
capitalized, whereas those relating to holding foreclosed assets
are charged to expense.
Property and equipment
Property and equipment is stated at cost less accumulated
depreciation. Depreciation for financial reporting purposes is
provided using the straight-line method over the estimated useful
lives of the assets. Estimated useful lives of the assets range
from three to five years. Commercial rental property is
depreciated over 40 years.
Expenditures for major acquisitions and improvements are
capitalized; expenditures for maintenance and repairs are charged
to expense as incurred. When property and equipment are sold or
retired, the cost and related accumulated depreciation are removed
from the accounts and any gain or loss is reflected in income.
Income taxes
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes. This statement requires the use of an asset and
liability approach for financial accounting and reporting purposes
and also requires deferred tax balances to be adjusted to reflect
the tax rates in effect when those amounts are expected to be
payable or refundable.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(Continued)
Income taxes (continued)
Deferred income taxes are provided for differences in timing in
reporting certain expenses for financial statement and Federal
income tax purposes. Deferred income taxes result primarily from
the use of a modified cost recovery method for financial statement
reporting and the cost recovery method for tax reporting in
recognizing asset pool amortization.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant estimates include the estimation of future
collections on purchased asset pools used in determining the value
of individual assets within the purchased asset pool and the
periodic revaluation for possible loss. Actual results could
differ materially from those estimates.
Concentration of credit risk
The Company maintains its cash with major U.S. banks and, from
time to time, these amounts exceed the Federally insured limit of
$100,000. The terms of these deposits are on demand to minimize
risk. The Company has not incurred losses related to these
deposits.
The majority of the notes receivable included in the asset pools
are concentrated in Texas and substantially all of the real estate
is located in Texas.
Fair value of financial instruments
SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," requires that the Company disclose estimated fair
values of it's financial instruments. Fair value estimates,
methods and assumptions are set forth below.
The carrying amount of cash and accounts payable and accrued
expenses approximates fair value at December 31, 1998 and 1997 due
to the short-term nature of such accounts. The carrying amount of
notes receivable from related parties approximates fair value as
of December 31, 1998.
Purchased asset pools are carried at the lower of cost or
estimated fair value. The estimated fair value is management's
estimate of potential collections calculated on an asset-by-asset
basis. The carrying value of the purchased asset pools is
$6,284,374 and $4,513,332 as of December 31, 1998 and 1997,
respectively. The estimated fair value of the purchased asset
pools is $15,336,000 and $12,379,000 as of December 31, 1998 and
1997, respectively.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 1 - Nature of Business and Summary of Significant Accounting Policies
(Continued)
Fair value of financial instruments (continued)
Management believes that the stated interest rates of notes
payable approximate market rates for instruments with similar
credit risk. Accordingly, the carrying value of notes payable is
believed to approximate fair value.
Reclassifications
Certain reclassifications have been made to the 1997 financial
statements to conform with the 1998 presentation. These
reclassifications had no effect on the 1997 net income or
shareholders' equity.
New accounting standards
In November 1998, the Financial Accounting Standards Board
("FASB") issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities", which established accounting and
reporting standards for derivative instruments and hedging
activities. It requires that entities recognize all derivatives as
either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The
provisions of this statement are effective for all fiscal quarters
of all fiscal years beginning after June 15, 1999. In December
1998, the FASB issued SFAS 134 "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise", which amended
SFAS 65. This statement is effective for the first fiscal quarter
beginning after December 15, 1998. The Company believes that
neither standard will have a material impact on their financial
statements or disclosures thereto.
Note 2 - Acquisitions
During 1997, the Company acquired certain corporate subsidiaries
and assets of MCorp Trust, MCorp Financial Trust, and MCorp
Management Trust (collectively the "MCorp Trusts"). The MCorp
Trusts were created pursuant to a confirmed Plan of Reorganization
in the Chapter 11 bankruptcy estates of MCorp, Inc., MCorp
Management, Inc., and MCorp Financial, Inc.
The acquisition (the "MCorp Acquisition") has been accounted for
as a purchase. The purchase price of $881,134, net of cash
acquired of $427,589, was allocated to purchased asset pools. The
results of the operations of the acquired businesses have been
included in the Company's consolidated results of operations from
the date of acquisition. The impact of these acquisitions on the
results of operations for 1997 is not material, except as
described in Note 7.
Additionally, in 1997, the Company acquired 100% of the
outstanding common stock of two other unrelated entities by
executing against a judgment creditor.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 3 - Commercial Rental Property, Net
Commercial rental property consists of the following:
December 31,
1997 1998
Commercial rental property, at cost $390,203 $750,204
Accumulated depreciation (9,349) (18,048)
---------- ---------
Commercial rental property, net $380,854 $732,156
-------- --------
Gross rental income from the property amounted to
$713,286 and $340,629 for 1998 and 1997, respectively.
Non-cash transactions
During the year ended December 31, 1998, the Company reclassified
asset pool assets with a cost basis of $360,001 and $296,304 to
commercial rental property and investment real estate,
respectively. The cost basis of these assets while held for sale
was lower than the fair value less the estimated costs to sell, so
no allowance had been established by the Company. Accordingly, no
basis adjustment was recognized in connection with the
reclassification.
Note 4 - Notes Receivable From Related Parties
During June 1998, the Company sold a property from its asset pool
to related parties in exchange for five notes receivable totaling
$525,000. Note principal plus interest at 10% per annum is due
June 2001 for each of the notes. The Company recognized $210,000
of asset pool amortization in connection with this sale. The cost
basis originally allocated to this property at the time of sale
approximated $268,000.
Note 5 - Property and Equipment
Property and equipment consists of the Company's furniture and
equipment and is recorded at cost. Accumulated depreciation on the
Company's furniture and equipment amounted to $42,446 and $35,751
as of December 31, 1998 and 1997, respectively.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 6 - Notes Payable
Notes payable consist of the following:
Notes payable
December 31,
1997 1998
$5,000,000 bank line of credit, secured by notes receivable and
real estate comprising the purchased asset pools and a
shareholder's certificate of deposit; principal payable based on
proceeds from disposition and payments received on the purchased
asset pools; interest payable monthly at the bank's prime rate
plus 1.0% per annum (8.8% and 10% as of December 31, 1998 and
1997, respectively), with the remaining unpaid principal and
interest due December 31, 1999 $3,933,164 $3,302,629
$2,000,000 term note payable to bank, secured by notes receivable
and real estate comprising the purchased asset pools and a
shareholder's certificate of deposit; principal payments of
$100,000 due quarterly beginning December 1997; interest payable
monthly at the bank's prime rate plus 1.5% per annum. Entire
principal and
interest paid September 30, 1998 1,400,000 -
$441,705 term note payable to a third party corporation, secured
by real estate; principal and interest payments of $24,827 due
semi-annually beginning December 1998; bearing a stated interest
rate of 9.5% per annum, with
the remaining unpaid principal and interest due June 2002 - 437,859
----------------- -----------
$5,333,164 $3,740,488
---------- ----------
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 6 - Notes Payable (Continued)
Notes payable to related parties
December 31,
1997 1998
Unsecured promissory notes payable to various trusts and
individuals affiliated with a Company officer, accruing interest
at 12% per annum, with all outstanding principal and interest due
December 31, 1998, paid
February 1998 $ 331,147 -
----------- ------------
$ 331,147 $ -
----------- -----------
Interest paid during 1998 and 1997 on all of the Company's debt
instruments, approximated $449,000 and $642,000, respectively,
including $90,000 and $152,000 paid to related parties during 1998
and 1997, respectively. Of the amounts paid to related parties
during 1998 and 1997, $84,000 and $102,000, respectively, were to
a shareholder for the pledge of the shareholder's personal
collateral against the Company's notes payable to bank.
Non-cash transaction
During the year ended December 31, 1998, the Company acquired
investment real estate for $585,117, comprised of a cash payment
of $143,412 and a $441,705 non-recourse note payable to the
seller.
Note 7 - Income Taxes
The deferred tax liability as of December 31, 1998 and 1997 arises
from the use of different methods of recognition of asset pool
amortization for financial statement purposes and Federal tax
purposes. A modified cost recovery method, whereby the
amortization recognized in conjunction with collections on
individual asset pool components is recognized in the ratio of
total asset pool acquisition costs to total asset pools
collections, is used for financial statement purposes. The cost
recovery is used for Federal income tax purposes. The Company's
deferred tax asset as of December 31, 1998 and 1997 consists of
net operating loss carryforwards ("NOLs") of approximately
$56,100,000 and $2,481,000, which expire from 2008 through 2012.
At December 31, 1998, based upon further review of the MCorp
Acquisition (see Note 2) and completion of the Company's 1997
Federal income tax return, management believes the Company has a
reasonable position to support full utilization of the NOLs
related to the MCorp Acquisition. Accordingly, management believes
the Company has available NOLs of approximately $56,100,000 at
December 31, 1998.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 7 - Income Taxes (Continued)
The ultimate realization of the resulting net deferred tax asset
is dependent upon generating sufficient taxable income within the
appropriate subsidiaries prior to expiration of the NOLs. Due to
the nature of these NOLs and since realization is not assured,
management has established a valuation allowance relating to the
deferred tax asset. The ability of the Company to realize the
deferred tax asset is periodically reviewed and the valuation
allowance adjusted accordingly.
Deferred income taxes have been established for the effects of
differences in the bases of assets and liabilities for financial
reporting and income tax purposes. The provision for income tax
expense (benefit), consisting entirely of deferred income taxes,
is reconciled with the Federal statutory rate as follows:
1997 1998
Amount Rate Amount Rate
Tax at statutory rate $ 42,284 34.0% $938,264 34.0%
Utilization of net operating
loss carryforward (325,710) (261.9) (221,619) (8.0)
State and other, net (25,705) (20.5) (21,754) (0.8)
---------- ----- ---------- ----
Income tax (benefit) expense $(309,131) (248.4)% $694,891 25.2%
--------- ------ -------- ----
Significant components of the Company's deferred tax assets and
liabilities are summarized as follows:
December 31,
1997 1998
Book basis of purchased asset pools,
net, in excess of tax basis $(1,065,000) $(1,468,000)
Net operating loss carryforward 955,000 19,075,000
Valuation allowance - (18,365,300)
----------------- -----------
Deferred tax liability, net $ (110,000) $ (758,300)
------------- ------------
The Company has recorded a valuation allowance against a majority
of the deferred tax assets because the realization of the deferred
tax assets is contingent on the future profitability of the
Company. The changes in the valuation account applicable to the
deferred tax asset primarily relate to management's position taken
during 1998 with regard to the availability of NOL's related to
the MCorp Acquisition (see Note 2).
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 7 - Income Taxes (Continued)
December 31,
1997 1998
Valuation allowance at beginning of year $ - $ -
Increase for the year - 18,365,300
------------------- -----------
Valuation allowance at end of year $ - $18,365,300
------------------ -----------
Income taxes paid during 1998 and 1997 were $14,500 and $0,
respectively.
Note 8 - Commitments and Contingencies
Litigation
The Company is involved in various legal proceedings in the
ordinary course of business. In the opinion of management, the
resolution of such matters should not have a material adverse
impact on the financial condition, results of operations or
liquidity of the Company. Subsequent to December 31, 1998, the
Company evaluated its financial exposure to litigation and
environmental risks associated with loan related assets and
foreclosed real estate and elected to transfer and realign its
assets based upon the element of risk associated with the
different types of asset pools. Management believes that this
restructuring of its assets within existing corporate entities
will provide greater protection of its financial condition.
Operating leases (as lessee)
The Company leases vehicles under operating leases which expire
November 2000. Future minimum rental payments required by these
leases are estimated as follows:
Year Ending
December 31,
1999 $ 10,000
2000 9,000
---------
Total $19,000
Total expense incurred under these and other month-to-month rental
agreements approximated $33,000 and $22,000 during 1998 and 1997,
respectively.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 8 - Commitments and Contingencies (Continued)
Operating leases (as lessor)
The Company has long-term lease agreements with tenants in their
San Antonio and Dallas commercial rental property locations.
Future minimum payments required under these leases are estimated
as follows:
Year Ending
December 31,
1999 $392,000
2000 314,000
2001 154,000
2002 13,000
----------
Total $873,000
Office space
The Company's offices are located in a major downtown Houston
office building. A portion of its space is leased to the Company
on a month-to-month basis and a portion is provided as an
accommodation by the firm providing legal counsel to the Company.
Note 9 - Segment Reporting
The Company operates in three business segments (i) collections on
discounted debt portfolios, (ii) commercial real estate, and (iii)
bridge funding of investment real estate. The collection of debt
instruments segment services paying loans and non-performing loans
and judgments. The non-performing loans and judgments are acquired
at deeply discounted prices. The commercial real estate segment
holds foreclosed property for the production of rental income. The
bridge funding of investment real estate segment acquires land to
provide bridge funding for developers. The acquisitions generally
occur in conjunction with an agreement for one or more developers
to acquire portions of the real estate on a specific timetable.
Financial information by reportable operating segment is as
follows:
As of and for the year ended December 31, 1998
Collections on
Discounted Commercial Investment
Debt portfolios Real Estate Real Estate Totals
Revenue $6,034,566 $713,286 $ 95,933 $6,843,785
Segment profit 2,363,953 350,759 44,889 2,759,601
Segment assets 5,378,303 957,142 875,745 7,211,190
Depreciation and amortization - 8,699 - 8,699
Capital expenditures 997,446 - 875,745 1,873,191
Net interest expense 391,955 52,259 49,928 494,142
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 9 - Segment Reporting (Continued)
As of and for the year ended December 31, 1997
Collections on
Discounted Commercial Investment
Debt Portfolios Real Estate Real Estate Totals
Revenue $2,594,654 $340,629 $ - $2,935,283
Segment profit 16,895 107,465 - 124,360
Segment assets 6,284,374 605,840 - 6,890,214
Depreciation and amortization - 9,349 - 9,349
Capital expenditures 2,282,095 - - 2,282,095
Net interest expense 588,725 53,875 - 642,600
Reconciliation of reportable segment assets to the Company's
consolidated totals as of December 31 are as follows:
Assets 1997 1998
------ --------------- ---------
Total assets for reportable segments $6,890,214 $7,211,190
Cash not allocated to segments 21,514 563,629
Other assets not allocated to segments 88,429 191,730
------------ -----------
Consolidated total assets $7,000,157 $7,966,549
---------- ----------
Note 10 - Stock Split and Preferred Stock Authorization
In December 1998, the Board of Directors approved (i) an increase
in the authorized number of shares of common stock to 10,000,000,
(ii) a 3,000-for-1 stock split of issued and outstanding common
shares and (iii) authorization of 10,000,000 shares of $.01 par
value preferred stock. All common shares, per share and option
information in the accompanying financial statements has been
restated to reflect the effect of the split and change in
authorized shares.
Note 11 - Stock Compensation Plan
In December 1998, the 1998 Stock Compensation Plan (the "Plan")
was approved by the Board of Directors ("Board") and by the
shareholders. The provisions of the Plan provide for 375,000
shares of Company common stock to be granted as incentive
compensation to employees, officers, directors and/or consultants
of the Company and its subsidiaries. The number of shares and the
shares granted are subject to adjustment in the event of any
change in the capital structure of the Company. Further, the Plan
provides for issuance, at the discretion of the Board, of (i)
incentive stock options ("ISO's") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended, or (ii)
non-qualified options. The exercise price of any option will not
be less than the fair market value of the shares at the time the
option is granted, and exercise will be required within 10 years
of the grant date. The Plan will terminate in 2008.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 11 - Stock Compensation Plan (Continued)
The Plan permits the award of Stock Appreciation Rights ("SARs")
to optionees. The Committee may award to an optionee, with respect
to each share of Common Stock covered by an option (a "Related
Option"), a related SAR permitting the optionee to be paid the
appreciation on the Related Option. A SAR granted with respect to
an ISO must be granted together with the Related Option. A SAR
granted with respect to a non-qualified option may be granted
together with or subsequent to the grant of the Related Option.
The exercise of the SAR shall cancel and terminate the right to
purchase an equal number of shares covered by the Related Option.
There have been no options granted under the Plan.
Note 12 - Related Party Transactions
During 1998, the Company acquired, for $334,000, an interest in a
real estate mortgage and judgment lien from an entity controlled
by a Company officer. Collections are expected to exceed $375,000.
Note 13 - Revenue Concentrations
During 1997, collections from a single debtor accounted for
approximately 15% of the total revenue of the Company. During
1998, proceeds from a single transaction amounted to 26% of total
revenue of the Company.
Note 14 - Subsequent Event
Proposed public offering
In January 1999, the Company filed a Registration Statement with
the SEC for the sale of 1,500,000 shares of common stock.
Asset acquisition (unaudited)
On February 1, 1999, the Company acquired all of the assets of a
bankruptcy liquidation estate, including real estate, receivables,
and other assets for $2,875,000. The assets were acquired from the
Liquidating Trustee in Federal Bankruptcy Court. The acquisition
was financed with $1,475,000 of bank debt and $1,400,000 borrowed
from the Company's majority shareholder. The purchase price will
be allocated to the individual asset components based on
management's estimate of relative market value.
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 14 - Subsequent Event (Continued)
Asset acquisition (unaudited) (continued)
Condensed pro forma financial information to give effect as if the
transaction occurred as of December 31, 1998 is as follows:
December 31, Proforma December 31,
1998 Adjustments 1998 (Pro forma)
Total Assets $7,966,549 $2,875,000 $10,841,549
Total Liabilities 4,803,224 2,875,000 7,678,224
Shareholders' Equity 3,163,325 - 3,163,325
The pro forma consolidated income and earnings per share would not
have been materially different from the reported amounts during
1997 or 1998 and, accordingly, are not presented.
The assets acquired include:
Acres
Real estate
18-hole golf course 124.53
Country Club and driving range 23.34
Expansion site - 9 holes for golf course 81.18
Undeveloped acreage 382.70
311 fully developed lots 61.60
286 undeveloped platted lots 56.40
Platted and unplatted reserves 77.54
Pool and 4 tennis courts 7.17
Restricted reserves 81.52
-------
Total acreage 895.98
Delinquent Homeowner's Association
receivables, involving over 1,000 lots $3.2 million
Other assets $ 75,000
RAMPART CAPITAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998
Note 14 - Subsequent Event (Continued)
Asset acquisition (unaudited) (continued)
On February 12, 1999, the Company sold the following assets and
the developer's property maintenance assessment rights and
obligations for an $850,000 note secured by a deed of trust on the
assets sold:
Acres
Pool and 4 tennis courts 7.17
Restricted reserves 81.52
Total acreage 88.69
Note 15 - Year 2000 Issues
The Company developed and implemented a plan to modify its
information technology to be ready for the Year 2000 and has
converted its critical data processing systems. The costs of the
conversion were not significant. Management feels the nature of
the Company's business does not give rise to significant exposure
from noncompliance by vendors or suppliers. While additional
testing will be conducted on its systems through the Year 2000,
the Company does not expect the year 2000 issues to have a
significant effect on operating activities.
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or any Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or an
offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstance, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to the date hereof.
OFFERING PRICE
$
PER UNIT
Rampart
Capital
Corporation
Prospectus
, 1999
Redstone Securities, Inc.
(214) 692-3544
Until ____ , 1999 (25 days from the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Pursuant to Section 2.02-1 of the Texas Business Corporation Act, a
corporation may indemnify an individual made a party to a proceeding because the
individual is or was a director against liability incurred in his official
capacity with the corporation including expenses and attorneys fees.
Article VI of the Restated Articles of Incorporation provides as
follows:
"The Corporation shall indemnify any director or officer, or former
director or officer of the Corporation, or any person who may have served at its
request as a director or officer of another corporation of which this
Corporation owns shares of capital stock or of which it is a creditor to the
fullest extent permitted by the Texas Business Corporation act and as provided
in the By-laws of the Corporation."
Article VII of the by-laws provides as follows:
"Section 1. Indemnification.
The corporation shall indemnify its present or former directors and
officers, employees, agents and other persons to the fullest extent permissible
by, and in accordance with, the procedures contained in Article 2.02 of the
Texas Business Corporation Act. Such indemnification shall not be deemed to be
exclusive of any other rights to which a director, officer, agent or other
person may be entitled, consistent with law, under any provision of the articles
of Incorporation or By-laws of the corporation, any general or specific action
of the board of directors, the terms of any contract, or as may be permitted or
required by law."
"Section 2. Insurance and Other Arrangements
"Pursuant to Section R of Article 2.02-1of the Texas Business
Corporation Act, the corporation may purchase and maintain insurance or another
arrangement on behalf of any person who is or was a director, officer, employee,
or agent or the corporation or who is or was serving at the request of the
corporation a a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, jpin venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted against him or
her and incurred by him or her in such capacity or arising out of his or her
status as such person, whether or not the corporation would have the power to
indemnify him or her against that liability under article 2.02-1 of the Texas
Business Corporation Act." Item 25. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the public offering by the Company
of the securities offered hereunder are as follows:
Securities and Exchange Commission Filing Fee $5,088.75
NASD Filing Fee* 2,432.00
American Stock Exchange Application and Listing Fee 20,000.00
Accounting Fees and Expenses* 40,000.00
Legal Fees and Expenses 80,000.00
Printing* 40,000.00
Fees of Transfer Agent and Registrar* 5,000.00
Underwriters' Non-Accountable Expense Allowance 300,000.00
Miscellaneous* 27,479.25
---------
Total* $500,000.00
===========
- ----------------
* Estimated.
Item 26. Recent Sales of Unregistered Securities
There were no transactions by the Registrant during the last three
years involving the sale of securities which were not registered under the
Securities Act:.
Item 27. Exhibits
Exhibit No Item
Exhibit 1.1 Form of Underwriting Agreement.(3)
Exhibit 1.2 Form of Underwriters' Warrant Agreement.(3)
Exhibit 3.1 Restated Articles of Incorporation of the Registrant. (3)
Exhibit 3.2 Bylaws of the Registrant (3)
Exhibit 5.1 Opinion of Maurice J. Bates L.L.C.(1)
Exhibit 10.1 1998 Stock Compensation Plan (3)
Exhibit 10.2 Share Transfer Restriction Agreement. (3)
Exhibit 10.3 Opinion of REOC Corp. as to value of Jefferson Street Property. (1)
Exhibit 10.4 Opinion of REOC Corp as to value of San Antonio Property. (1)
Exhibit 10.5 Opinion of John Thobe, M.S. as to value of South Padre Island Property. (1)
Exhibit 10.6 Opinion of Top Guns Land Company, Inc. as to value of Montgomery County, Texas Property.
(1)
Exhibit 10.7 Sixth (current) Amendment to Loan Agreement with Southwest Bank of Texas N. A.(1)
Exhibit 10.8 Purchase and Sale Agreement for Newport Assets. (1)
Exhibit 10.9 Copy of Janke Family Partnership, Ltd. Note for Newport Assets purchase. (1)
Exhibit 21 Subsidiaries of the Registrant. (3)
Exhibit 23.1 Consent of Pannell Kerr Forster of Texas, P. C., Certified Public Accountants.(1)
Exhibit 23.2 Consent of Maurice J. Bates, L.L.C. is contained in his opinion filed as Exhibit 5.1 to
this registration statement.(1)
Exhibit 23.3 Consent of Robert A. Shuey, III as director-designee. (1)
Exhibit 27 Financial Data Schedule (1)
--------------
(1) Filed herewith (2) To be filed by amendment (3) Previously filed.
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(3) For the purpose of determining any liability under the
Securities Act, treat each post-effective amendment that
contains a form of prospectus as a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering of those securities.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised
that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy, as
expressed in the Act and is, therefore, unenforceable.
(5) In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
shares of the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(6) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was
declared effective.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas on April 8 ,1999.
Rampart Capital Corporation.
By: /s/ Charles W. Janke
Charles W. Janke, Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Charles W. Janke and J. H.
Carpenter, and each for them, his true and lawful attorney-in-fact and agent,
with full power of substitution and re-substitution, for him and in his name,
place and stead, in any and all capacities (until revoked in writing), to sign
any and all further amendments to this Registration Statement (including
post-effective amendments), and to file same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person thereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or
their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Charles W. Janke Chairman of the Board April 8,1999
Charles W. Janke Principal Executive Officer)
/s/ J. H. Carpenter President April 8,1999
J. H. Carpenter Director
/s/ Charles W. Presley Vice President, Chief Financial April 8,1999
Charles W. Presley Officer, Treasurer
(Principal Financial Officer)
/s/ James J. Janke Director April 8,1999
James J. Janke
/s/ James W. Christian Director April 8,1999
James W. Christian