0000950137-01-503707.txt : 20011009
0000950137-01-503707.hdr.sgml : 20011009
ACCESSION NUMBER: 0000950137-01-503707
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20011017
FILED AS OF DATE: 20010925
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SURETY CAPITAL CORP /DE/
CENTRAL INDEX KEY: 0000784932
STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021]
IRS NUMBER: 752065607
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-12818
FILM NUMBER: 1744029
BUSINESS ADDRESS:
STREET 1: 1501 SUMMIT AVENUE
CITY: FORT WORTH
STATE: TX
ZIP: 76102
BUSINESS PHONE: 8173355955
MAIL ADDRESS:
STREET 1: 1501 SUMMIT AVENUE
CITY: FORT WORTH
STATE: TX
ZIP: 76102
FORMER COMPANY:
FORMER CONFORMED NAME: K CAPITAL INC
DATE OF NAME CHANGE: 19870407
DEF 14A
1
c65141def14a.txt
DEFINITIVE NOTICE & PROXY
1
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
SURETY CAPITAL CORPORATION
--------------------------
Name of the Registrant as Specified In Its Charter
N/A
---
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
Title of each class of securities to which transaction applies: Aggregate
number of securities to which transaction applies:
Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
Proposed maximum aggregate value of transaction:
Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
Amount Previously Paid:
Form, Schedule or Registration Statement No.:
Filing Party:
Date Filed:
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SEPTEMBER 19, 2001
Dear Fellow Shareholders:
Once again Surety Capital Corporation ("SRYP") and its subsidiary, Surety Bank
(the "Bank") have gone through several changes. During January, 2001, I
temporarily assumed the position of Chairman of the Board and Chief Executive
Officer of SRYP and the Bank. During March, 2001 I became your permanent
Chairman of the Board and Chief Executive Officer. Being the largest
shareholder, I felt it important to improve the Bank's results and get value for
the shareholders.
The first item of business was to create a marketing plan. Your officers had a
strategic planning session during January, 2001 for this purpose. Debbie
Sanchez, one of our officers in San Antonio, came up with the name "Beariffic"
banking. We now have a new logo. "Beariffic" banking is a concierge service
devised for small business and professional people, the group forgotten at most
major banks. It includes preferential loan rates, free checking accounts for the
principles and their employees, internet banking, free ATM cards, overdraft
protection, special leasing program and rates, guaranteed best rates on CDs, no
fee traveler's and cashier's checks, and if desired, pick up deposit services.
We are enjoying substantial success with "Beariffic" banking.
We are aggressively monitoring and reducing all expenses. Presently, we are
consolidating many of our banks' functions into a centralized location. This is
being accomplished through the Internet, scanning and image documentation.
Since the 1st of January, 2001, there have been several press releases. One was
the filing of our applications for two branch banks, for which we received
regulatory approval. Another release was our lowering prime rate by 1/2% on
February 28, 2001 for small business and professional people. We were the first
bank in the nation to do this, almost three weeks prior to anyone else.
As you can see, your proposed Board of Directors is totally different. Your new
board includes senior officers of the Bank and influential individuals in the
community. Each member of the proposed board has been very instrumental in
getting new business for the bank and attempting to maximize shareholder
profits.
We have also initiated an Advisory Board in Whitesboro, Fort Worth and San
Antonio. These boards include influential people, such as, City Council Members,
the Mayor, the Police and Fire Chiefs, Superintendent of Schools, Chairman of
the Black Chamber of Commerce, past Chairman of the Hispanic Chamber of
Commerce, medical doctors, insurance brokers, leading business people from
Laredo, etc.
Our Insurance Premium Finance Division has deteriorated over the past year. This
was primarily caused by negative publicity in March, 2000. We are presently
overcoming these obstacles with an aggressive marketing plan, new innovations
and unique concepts. We recently hired a new sales manager who is developing the
"IPF" sales force. We intend to have the Insurance Premium Finance Division
growing once again with good business.
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Internet banking was successfully introduced to all our customers on February 1,
2001. Look at our website, WWW.SURETYBANK.COM, to see a demonstration.
With the new Board of Directors, new management team, new marketing plan and new
branches, we see the Bank and the holding company having a much improved 2001.
The Bank for the first time is finally showing internal deposit growth without
having to buy other banks.
The Bank for the first time is showing loan growth not generated by "IPF",
"brokered arrangements" or participations.
The Bank, for the first time in a couple of years, is finally showing positive
cash flow.
The Bank has Presidents for all of its locations in San Antonio. All of the
Presidents have received honors from their previous employers, namely, Frost
Bank and Wells Fargo. In the short time they have been on our team, they have
demonstrated excellent business development skills, management skills and
energy.
You shareholders finally have a major league team filled with first round picks.
Our vision is profitability and growth! Any obstacle in our path will only be a
minor detour in our quest for shareholder value.
We entered into a formal agreement with the Office of the Controller of Currency
in November, 1998. This Formal Agreement still remains in place, although the
bank is currently in compliance with all requirements. Hopefully, we will be
operating without this Formal Agreement next time I address the shareholders.
However, due to the Formal Agreement, the bank can not pay dividends to the
holding company. Therefore, we are unable to meet the holding company's
financial obligations, i.e., debenture interest and operating expenses. I have
guaranteed these payments for 2001. All loans made for this purpose are
evidenced by a note payable which is convertible into stock of the holding
company at $0.36 per share.
I encourage all shareholders to call me to discuss any suggestions, ideas or
concerns. Your Board of Directors and I are here to serve all shareholders to
the best of our ability.
Yours very truly,
/s/ Richard N. Abrams
Richard N. Abrams
Chairman of the Board
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SURETY CAPITAL CORPORATION
1501 SUMMIT AVENUE
FORT WORTH, TEXAS 76102
(817) 335-5955
September 21, 2001
Dear Stockholder:
On behalf of the board of directors and management of Surety Capital
Corporation, we cordially invite you to attend our annual meeting of
stockholders, to be held at 4:00 p.m. on Wednesday, October 17, 2001, at our
main office located at 1501 Summit Avenue in Fort Worth, Texas. The accompanying
notice of annual meeting of stockholders and proxy statement discuss the
business to be conducted at the meeting. At the meeting we shall report on our
operations and the outlook for the year ahead. In addition, included in the
booklet with the proxy statement is a copy of our 2000 annual report on form
10-KSB.
Your board of directors has nominated seven persons to serve as directors.
Your board of directors also recommends that you approve and an amendment to the
Amended and Restated 1998 Incentive Stock Option Plan of Surety Capital
Corporation and that you ratify the appointment of Fisk & Robinson, P.C. to
continue as our independent public accountants for 2001 fiscal year. In
addition, there is a stockholder proposal which will be voted upon at the
meeting.
We encourage you to attend the meeting in person. WHETHER OR NOT YOU PLAN
TO ATTEND, HOWEVER, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN
IT IN THE ACCOMPANYING POSTPAID RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This
will ensure that your shares are represented at the meeting.
We look forward with pleasure to seeing and visiting with you at the
meeting.
Very truly yours,
SURETY CAPITAL CORPORATION
/s/ Richard N. Abrams
Richard N. Abrams
Chairman and Chief Executive Officer
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SURETY CAPITAL CORPORATION
1501 SUMMIT AVENUE
FORT WORTH, TEXAS 76102
(817) 335-5955
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 17, 2001
To the stockholders of
SURETY CAPITAL CORPORATION
The annual meeting of the stockholders of Surety Capital Corporation, a
Delaware corporation, will be held at our main office located at 1501 Summit
Avenue in Fort Worth, Texas on Wednesday, October 17, 2001 at 4:00 p.m., local
time, for the following purposes:
1. to elect seven directors for a term of one year;
2. to approve and ratify the amendment of the Amended and Restated 1998
Incentive Stock Option of Surety Capital Corporation;
3. to approve the appointment of Fisk & Robinson, P.C. as our independent
public accountants for the 2001 fiscal year;
4. to vote upon a stockholder proposal; and
5. to transact such other business as may properly be brought before the
meeting and any adjournments or postponements of the meeting.
The board of directors has fixed the close of business on September 18,
2001 as the record date for the determination of stockholders entitled to notice
of, and to vote at, the meeting. In the event there are not sufficient votes for
a quorum or to approve or ratify any of the foregoing proposals at the time of
the meeting, the meeting may be adjourned or postponed in order to permit
further solicitation of proxies.
By order of the Board of Directors
/s/ Richard N. Abrams
Richard N. Abrams
Chairman and Chief Executive Officer
Fort Worth, Texas
September 21, 2001
6
SURETY CAPITAL CORPORATION
1501 SUMMIT AVENUE
FORT WORTH, TEXAS 76102
(817) 335-5955
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by
the board of directors of Surety Capital Corporation of proxies to be voted at
the annual meeting of stockholders to be held at our main office located at 1501
Summit Avenue in Fort Worth, Texas on Wednesday, October 17, 2001, at 4:00 p.m.,
local time, and at any adjournments or postponements of the meeting.
The board of directors would like to have all stockholders represented at
the meeting. If you do not expect to be present, please sign and return your
proxy card in the enclosed self-addressed, stamped envelope. You may revoke your
proxy at any time before it is voted, by:
- giving written notice to our corporate secretary, provided your
written notice is received prior to the annual meeting or any
adjournments or postponements of the meeting;
- submitting a later dated proxy; or
- by attending the annual meeting and choosing to vote in person.
The giving of a proxy will not affect your right to vote in person if you attend
the meeting.
We are the holding company for Surety Bank National Association, with its
main office in Fort Worth, Texas. In addition to its main office in Fort Worth,
Surety Bank has branch offices in Converse, New Braunfels, San Antonio, Schertz,
Universal City and Whitesboro, Texas. Surety Bank also operates two mobile
branches which serve Dallas, Tarrant, Bexar and Travis counties.
Our principal executive office is located at 1501 Summit Avenue, Fort
Worth, Texas 76102. This proxy statement and the accompanying proxy card are
being mailed to stockholders on or about September 21, 2001. Our 2000 Form
10-KSB, which includes consolidated financial statements of Surety Capital and
our subsidiary, is enclosed with this proxy statement.
Only holders of record of our common stock at the close of business on
September 18, 2001, will be entitled to vote at the annual meeting or any
adjournments or postponements of the meeting. On September 18, 2001, we had
7,624,511 shares of common stock, par value $0.01 per share, issued and
outstanding. In the election of directors, and for all other matters to be voted
upon at the annual meeting, each issued and outstanding share is entitled to one
vote.
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All shares of common stock represented at the annual meeting by properly
executed proxies received prior to or at the annual meeting, and not revoked,
will be voted at the annual meeting in accordance with the instructions thereon.
If no instructions are indicated, properly executed proxies will be voted for
the nominees and for adoption of the proposal set forth in this proxy statement.
A majority of the shares of the common stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the annual
meeting. Abstentions and broker non-votes will be counted for purposes of
determining a quorum. Directors shall be elected by a plurality of the votes
present in person or represented by proxy at the meeting and entitled to vote.
In all other matters, the affirmative vote of a majority of shares required to
constitute a quorum and voting on the subject matter shall be required to
constitute stockholder approval. Abstentions will be counted as votes against a
proposal and broker non-votes will have no effect on the vote.
ELECTION OF DIRECTORS
At the annual meeting of the stockholders, our bylaws provide that the
board shall consist of such number of directors as a shall be determined by
resolution of the board. By a resolution adopted by the board on July 20, 2001,
the number of directors comprising the board was set at seven. The board has
nominated the seven individuals named below to serve as directors.
The affirmative vote of the holders of a majority of the issued and
outstanding shares of common stock represented and entitled to vote at the
annual meeting or any adjournment is necessary for the election of directors.
Assuming the receipt by each person of the affirmative vote of at least a
majority of the shares of common stock represented at the annual meeting, the
seven persons receiving the greatest number of votes will be elected as
directors.
Set forth below is information concerning the nominees for election,
including the age, year first elected a director and business experience during
the previous five years. The nominees, if elected at the annual meeting of
stockholders, will each serve for a one year term. We have no knowledge that any
of the nominees will refuse or be unable to serve, but if any of the nominees
becomes unavailable for election, the holders of the proxies reserve the right
to substitute another person of their choice as a nominee when voting at the
meeting. THE BOARD RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR.
NOMINEES
DIRECTOR
NAME AGE POSITION WITH SURETY CAPITAL SINCE
---- --- ---------------------------- -----
Richard N. Abrams 60 Chairman of the Board, Director and Chief 2000
Executive Officer
Charles M. Ireland 54 President and Director 1999
Garrett Morris 86 Director 1994
David F. Chappell 58 Director 2001
Thomas J. Kwentus 51 Director 2001
Guy J. Butts 30 Director 2001
Milton M. Bley 55 Director 2001
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All of our directors will hold office for the one year terms indicated, or
until their earlier death, resignation, removal or disqualification, and until
their respective successors are duly elected and qualified, and all executive
officers hold office for a term of one year. There are no arrangements or
understandings between any of the directors, executive officers or any other
person pursuant to which any of our directors or executive officers have been
selected for their respective positions.
The business experience of each nominee for the past five years is as
follows:
RICHARD N. ABRAMS has served as a director of Surety Capital since May 2000
and was named Chairman of the Board of Directors and Chief Executive Officer in
March 2001. He has served as Chairman of the Board and Chief Executive Officer
of Funeral Financial Systems, Ltd. (a special purpose finance company that
specializes in the funeral industry) since August 1985, and of Executive
Offices, Ltd. (a shared office building) since October 1986. Mr. Abrams has also
served as Chairman of the Board of FuneraLeasing, Ltd. (a leasing company that
specializes in the funeral industry) since December 1998. Mr. Abrams is a
certified public accountant. Mr. Abrams has served as a director of Surety Bank
since March 2000.
CHARLES M. IRELAND has served as a director of Surety Capital since August
1999 and served as Chairman of the Board and Chief Executive Officer of Surety
Capital from September 1999 until March 2001, when he became President. Mr.
Ireland has also served as President of Surety Bank since July 1999, and has
served as a director of Surety Bank since August 1999. He was previously
employed by Landmark Bank from August 1997 to July 1999, most recently as Senior
Vice President/Senior Lender in its Denison, Texas banking facility. From
December 1985 to July 1997 Mr. Ireland served as a Senior Vice President of
NationsBank, Texas N.A.
GARRETT MORRIS has served as a director of Surety Capital since May 1994.
He was a member of the law firm of Morris and Schieffer from 1989 to 2000. Since
2000, he has been a sole practitioner. Mr. Morris has served as a director of
Surety Bank since May 1994.
DAVID F. CHAPPELL has served as a director of Surety Capital since 2001. He
is an attorney and a partner with Chappell, Hill & Lowrance, L.L.P. in Fort
Worth, Texas.
THOMAS KWENTUS has served as a director of Surety Capital since 2001. Mr.
Kwentus is a certified public accountant and has his own private practice,
located in Fort Worth, Texas.
GUY J. BUTTS has served as the President of the Whitesboro Bank Center of
Surety Bank since 2001 and has served as a director of Surety Capital since
2001. Prior to joining Surety Bank, Mr. Butts was with First National Bank of
Durant and the American Bank of Texas.
MILTON M. BLEY has served as a director of Surety Capital since 2001. Mr.
Bley is a principal of Bley Investment Group, Inc., a broker-dealer and
investment advisory firm, located in Fort Worth, Texas.
No family relationships exist among the executive officers and directors of
Surety Capital. No director presently holds any other directorships in companies
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 or subject to the requirements of Section 15 of the
Exchange Act.
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BOARD COMMITTEES AND MEETINGS
In 2000, there were two committees of the board of directors: a
compensation committee, which administers our equity incentive plans and sets
the compensation for our executive officers, and an audit committee. In 2001,
the Company added a nomination committee and a strategic planning committee.
The audit committee currently consists of directors Chappell, Bley and
Abrams. During 2000 the audit committee met once. A copy of the audit committee
charter is attached to this proxy statement as Exhibit A. Included among the
functions performed by the audit committee are:
- meeting with our independent public accountants to review the annual
audit and its results;
- implementing internal audit controls and procedures of Surety Capital
and Surety Bank; and
- making recommendations to the board as to the engagement of our
independent public accountants.
The compensation committee currently consists of directors Bley, Chappell,
Morris and Abrams. During 2000 the compensation committee met twice. Included
among the functions performed by the compensation committee are:
- the administration of our 1988, 1995 and 1998 Incentive Stock Option
Plans, the 1996 Stock Option Plan for Directors, and the 1997
Non-Qualified Stock Option Plan for Non-Employee Directors and the
1997 Non-qualified Stock Option Plan for Officers and Key Employees;
- ensuring the reasonableness and appropriateness of senior management
compensation arrangements and levels; and
- overseeing director compensation arrangements.
A total of 12 regularly scheduled and 3 special meetings were held by the
board of directors of Surety Capital during 2000. During 2000, all directors
attended at least 75 percent of the meetings of the board and the committees on
which they serve.
COMPENSATION OF DIRECTORS
Surety Capital's and Surety Bank's board of directors consist of the same
members and both organizations hold meetings on the same dates. In 2000, the
bank paid each director $500 for each bank meeting attended. In 2001, the cash
compensation was stopped and each outside director now will receive 2,000 shares
of unregistered common stock for each board meeting attended and 1,000 shares
for each committee meeting attended.
We have adopted the 1996 Stock Option Plan for Directors and the 1997
Non-Qualified Stock Option Plan for Non-Employee Directors. Under the 1996 and
1997 Directors Plans, an aggregate of 250,000 shares of our common stock were
set aside for issuance pursuant to the exercise of options granted thereunder.
The 1996 Directors Plan is a formula plan pursuant to which annual options are
automatically granted to our directors who are not our employees at fair market
value. All options under the 1996 Directors Plan are non-qualified stock
options, and vest one year following the date of grant. On the first business
day of each calendar year, each non-employee director is automatically granted
an option to purchase 2,000 shares of our common stock at 100% of fair market
value on the grant date. In
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2000, each non-employee director received an option to purchase 2,000 shares of
our common stock at an exercise price of $0.74 per share. The 1997 Directors
Plan provided for the one time grant of 25,000 non-qualified stock options to
directors who were not employees at fair market value. In 1997, each
non-employee director received an option to purchase 25,000 shares of our common
stock at exercise prices ranging from $4.18 to $5.375 per share. These options
vest over five years.
We also adopted the 2000 Non-Qualified Stock Option Plan for advisory
directors. Under the provisions of the plan, 100,000 shares were allocated for
non-qualified stock options to advisory directors. Grantees are awarded 10-year
options to acquire shares at the market price on the date the option is granted.
The options vest and become fully exercisable based on a vesting schedule as
determined by the compensation committee on the date of grant. On November 6,
2000, grantees were awarded options to acquire 28,000 shares of our common stock
at $0.55 per share, which vest and become fully exercisable on November 6, 2001.
In addition, in consideration for the extraordinary time and effort the
members of the board of directors have given to the company and the bank,
various members of the board were awarded shares of unregistered common stock at
the August, 2001 board meeting. The awards were as follows: Mr. Abrams received
400,000 shares, Mr. Chappell received 60,000 shares, Mr. Bley received 30,000
shares, Mr. Kwentus received 15,000 shares and Mr. Morris received 10,000
shares. Mr. Abrams also received shares of restricted stock which will vest upon
certain events. Pursuant to the grant, Mr. Abrams will receive 300,000 shares of
common stock when the Office of the Comptroller of the Currency terminates the
formal agreement entered into by Surety Bank prior to Mr. Abrams' affiliation;
200,000 shares if he remains as the Chief Executive Officer until the end of the
2002 fiscal year; and he will receive one share of common stock for every $3.00
of net profit realized by Surety Bank, as determined on a quarterly basis with a
maximum of 400,000 shares over any two year period.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by Surety Capital and Surety Bank to or on behalf
of our Chief Executive Officer during 2000. There were no other executive
officers who earned over $100,000 in 2000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------------------------------------------------------------------------|
NAME AND YEAR SALARY($)(1) BONUS($) | ALL OTHER
PRINCIPAL POSITION | COMPENSATION
| ($)
-----------------------------------------------------------------------------------------------------------------
Charles M. Ireland 2000 $ 105,500 $ -- $ ---
Chairman of the Board, Chief Executive 1999 $ 44,250 $ 20,000 $ ---
Officer and President of Surety Capital;
President and Chief Executive Officer of
Surety Bank; President of the Fort Worth
branch of Surety Bank (2)
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-------------------------
(1) Includes salary and directors' fees paid by Surety Bank, before any
salary reduction for contributions to Surety Bank's Savings Plan under Section
401(k) of the Internal Revenue Code of 1986, as amended.
(2) Mr. Ireland became an employee of Surety Capital in July 1999 and was
elected to these positions in September 1999. In March 2001, Mr. Ireland was
named President and no longer serves as Chief Executive Officer or the Chairman
of the Board for Surety Capital.
STOCK OPTION PLANS
OPTION GRANTS. No stock options were granted in fiscal year 2000 to Mr.
Ireland.
OPTION EXERCISES AND HOLDINGS. The following table provides information
with respect to the Chief Executive Officer concerning the exercise of incentive
stock options during the last fiscal year and unexercised incentive stock
options held as of the end of the last fiscal year under the Stock Option Plans:
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
-----------------------------------------------------------
| Value of
| Number of Unexercised
| Unexercised In-the-Money
| Options at Options at
| FY-End (#) FY-End ($)
|-----------------------------------------------
Shares Value |
Acquired Realized | Exercisable/ Exercisable/
Name on Exercise (#) ($)(1) | Unexercisable Unexercisable(2)
----------------------------------------------------------------------------------------------------------
Charles M. Ireland --- $ --- 33,333 / 66,667 $0/$0
-------------------------
(1) Mr. Ireland did not exercise any incentive stock options in 2000.
EMPLOYMENT AGREEMENT
We have entered into an employment agreement with Charles M. Ireland.
Pursuant to the agreement, in the event that Mr. Ireland's employment is
terminated by us, for any reason other than for "cause," as defined in the
agreement, or if Mr. Ireland terminates his employment for "good reason," as
defined in the agreement, then Mr. Ireland will receive a lump sum cash payment
equal to his annual base salary. In the event Mr. Ireland terminates his
employment for any reason other than for a "good reason," and within two months
thereafter either has not accepted employment with another company or has
accepted employment at another company at an annual salary less than his annual
salary with us, then Mr. Ireland will be entitled to receive a lump sum cash
payment equal to one-sixth of his annual base salary.
STOCK OPTION PLANS. The board has adopted the 1988, 1995 and 1998 Incentive
Stock Option Plans of Surety Capital Corporation and the 1997 Non-Qualified
Stock Option Plan for Officers and Key Employees of Surety Capital Corporation
(the "Stock Option Plans"). The 1988, 1995 and 1998 Stock Option Plans have been
approved by our stockholders. The purpose of the Stock Option Plans is to
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attract and retain capable employees and provide an incentive to such employees
to remain in our employ.
Options for the purchase of our common stock under the Stock Option Plans
may be granted to officers or key employees selected from time to time by the
board. However, we are proposing an amendment for your approval to amend the
1998 plan to allow all employees to be eligible for options, at the discretion
of the compensation committee. The exercise price for any options granted
pursuant to the Stock Option Plans must be at least equal to the fair market
value of the common stock on the date the options are granted. Under the Stock
Option Plans, an aggregate of 1,200,000 shares of common stock were set aside
for issuance pursuant to the exercise of options granted thereunder, of which
733,333 shares are subject to outstanding options and 308,825 shares remain
available for grant. To exercise the options, grantees must pay the exercise
price in cash or common stock, or any combination of cash and common stock.
Options granted under the 1988, 1995 and 1998 Stock Option Plans are incentive
stock options and options granted under the 1997 Stock Option Plan are
non-qualified stock options.
The Stock Option Plans contain certain "change in control" provisions
designed to attract and retain valued employees and to ensure that such
employees' performance is not undermined by the possibility, threat or
occurrence of a change in control. The 1988 and 1995 Plans provide that in the
event of a change in control of Surety Capital (in the form of a dissolution or
liquidation or a merger or consolidation in which Surety Capital is not the
surviving corporation) any options granted under the plans become fully
exercisable, notwithstanding any vesting schedule relating to such options to
the contrary. The 1997 and 1998 Plans provide for the acceleration of any
applicable vesting schedule upon a "change in control," which definition not
only includes the dissolution or liquidation of Surety Capital or a merger or
consolidation in which Surety Capital is not the surviving corporation, but also
the acquisition by a person or group of 20% or more of the combined voting power
of the our capital stock or under certain circumstances a change in the
constitution of the board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, no executive officer of Surety Capital served as a member of
the compensation committee of another entity in which one of the executive
officers of such entity served on our compensation committee, the board of
directors of another entity in which one of the executive officers of such
entity served on our compensation committee or the compensation committee of
another entity in which one of the executive officers of such entity served as a
member of our board of directors.
During 2000, the members of the compensation committee, if also an
employee, did not participate in any decisions pertaining to his or her own
compensation.
BENEFICIAL OWNERSHIP
BY MANAGEMENT
The following table shows beneficial ownership of shares of our common
stock by all current directors, nominees for director and named executive
officers individually, and together with all current executive officers of the
Company as a group, as of August 28, 2001:
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--------------------------------------------------------------------------------
Amount and
Name of Individual Nature of
or Number of Beneficial Percent
Persons In Group Ownership (1) of Class (2)
--------------------------------------------------------------------------------
Richard N. Abrams 1,266,744(3) 16.2%
Charles M. Ireland 44,583(4) *
Garrett Morris 166,749(5) 2.2%
David F. Chappell 115,555(6) 1.5%
Thomas J. Kwentus 17,777 *
Guy J. Butts 0 --
Milton M. Bley 99,000(7) 1.1%
All directors and 1,710,408(8) 21.6%
executive officers as
a group (7 persons
--------------------
* Less than 1% of all the issued and outstanding shares of common stock.
(1) Based on information furnished by persons named and, except as
otherwise indicated below, each person has sole voting and dispositive
power with respect to all shares of common stock owned by such person.
(2) Based on 7,624,511 shares of common stock issued and outstanding at
August 28, 2001, as adjusted for shares convertible or exercisable
within sixty (60) days which are deemed outstanding for a specific
stockholder pursuant to Rule 13d-3(d)(1) under the Securities Exchange
Act of 1934.
(3) Includes 184,444 shares of common stock which are convertible from
notes and 2,000 shares which Mr. Abrams has the right to acquire
within sixty (60) days from the date hereof. Also includes 65,100
shares owned by Funeral Financial Systems, Ltd., a company under the
control of Mr. Abrams. Does not include the restricted stock described
on page 5.
(4) Includes 33,333 shares of common stock which Mr. Ireland has the right
to acquire within sixty (60) days from the date hereof.
(5) Includes 19,000 shares of common stock which Mr. Morris has the right
to acquire within sixty (60) days from the date hereof.
(6) Includes 55,000 shares of common stock which Mr. Chappell has the
right to acquire within sixty (60) days from the date hereof.
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(7) Includes 27,777 shares of common stock which Mr. Bley has the right to
acquire within sixty (60) days from the date hereof and 30,777 shares
owned by Mr. Bley's spouse or minor child.
(8) Includes 321,554 shares of common stock which the directors and
executive officers have a right to acquire within sixty (60) days from
the date hereof pursuant to options or convertible notes.
5.0% STOCKHOLDERS
The following table sets forth certain information with respect to our
stockholders who were known to be beneficial owners of more than five percent
(5%) of the issued and outstanding shares of the common stock as of August 28,
2001, except for Richard N. Abrams, whose ownership interest is disclosed in the
preceding table.
--------------------------------------------------------------------------------
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial of Class(2)
Ownership(1)
--------------------------------------------------------------------------------
Carlson Capital, L.P. (3) 519,300 6.8%
301 Commerce Street, Suite 3300
Fort Worth, Texas 76102
Pine Capital Management, Incorporated(4) 528,647 6.9%
353 Sacramento Street, 10th Floor
San Francisco, California 94111
Cullen W. Turner(5) 471,377 6.2%
Rodney A. Abrams(6) 575,055 7.5%
-----------------
(1) Based on information furnished by the entities named and,
except as otherwise indicated below, each entity has sole
voting and dispositive power with respect to all shares of
common stock owned by such entity.
(2) Based on 7,624,511 shares of common stock issued and
outstanding at August 28, 2001, as adjusted for shares
convertible or exercisable within sixty (60) days which are
deemed outstanding for a specific stockholder pursuant to Rule
13d-3(d)(1) under the Securities Exchange Act of 1934.
(3) As reported on a Schedule 13D/A filed on April 26, 1999 with the SEC.
(4) As reported on a Schedule 13G/A filed on February 6, 2001.
Pine Capital Management, Incorporated has shared dispositive
power with its clients, none of which own over five percent
(5%) of the issued and outstanding shares, and no voting power
with respect to these shares.
(5) As reported in a Schedule 13G/A filed on January 31, 2001 with the SEC.
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(6) As reported on a Schedule 13G filed on April 9, 2001. Rodney Abrams
is the son of Richard Abrams, the Chairman of the Board.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our company's directors, executive officers and holders of more than
ten percent (10%) of the common stock to file with the SEC initial reports of
ownership and reports of changes in ownership of the common stock. Such persons
are required by SEC regulations to furnish us with copies of all Section 16(a)
reports they file with the SEC.
Based solely on our review of the copies of such forms it has received
during the year, we believe that during 2000, all of our directors, executive
officers and holders of more than ten percent (10%) of our common stock complied
with all Section 16(a) filing requirements. To the best knowledge of our
management, during fiscal year 2000 no director, officer or ten percent (10%)
beneficial owner of our common stock failed to file with the SEC any required
reports on Form 3, 4 or 5 regarding transactions in our securities.
TRANSACTIONS WITH MANAGEMENT
From time to time, we make loans to our officers, directors and
principal stockholders, and their affiliates. All loans to such persons are made
in the ordinary course of business; are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons; and do not involve more than the
normal risk of collectibility or present other unfavorable features.
During 2000 we paid $176,985.64 for legal services to Holland, Johns &
Schwartz, L.L.P. (formerly Tracy & Holland, L.L.P.), a law firm in which
Margaret E. Holland is a partner. Ms. Holland was also a director of Surety
Capital and Surety Bank in 2000. Ms. Holland also accepted a note for
approximately $38,000 in connection with additional fees due to Ms. Holland's
firm. The note does not bear interest and matures December 31, 2001. During
2000, we also paid approximately $19,400 for legal services to Chappell, Hill &
Lowrance, L.L.P, a law firm in which Mr. Chappell, a director, is a partner. In
2000, we also paid approximately $9,600 to Mr. Kwentus, as a consultant, for
various accounting work. In addition, the bank has recently begun to use Mr.
Bley's investment management firm for financial advisory services for its bond
portfolio.
In 2000, certain current and former members of our board and an
employee lent us $260,000. The notes do not bear interest and mature January 2,
2002. $260,000 of the notes are convertible, at the option of the note holder,
into shares of common stock at the rate of $0.36 per share. In March 2001,
certain directors committed to loan an additional $460,000 in 2001, if
necessary, to enable the Company to meet its cash obligations in 2001. Any
advances under the commitment will be evidenced by non-interest bearing notes
convertible into the our common stock at the lower of $0.36 per share or 75% of
the average bid price during the ten day period prior to any advance. All
converted stock will be unregistered.
PROPOSAL TO AMEND STOCK OPTION PLAN
On August 17, 2001, the board of directors adopted resolutions
approving the amendment of the Amended and Restated 1998 Incentive Stock Option
Plan of Surety Capital Corporation, subject to shareholder approval, to allow
tax qualified incentive stock options to be issued to all of our employees, at
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the discretion of the of the compensation committee. Currently, only our
officers and other "key employees" are eligible to receive options under the
plan. Attached to this proxy statement as Exhibit B is a copy of the 2001
Amended and Restated 1998 Incentive Stock Option Plan which will amend and
restate the current plan.
REQUIRED AFFIRMATIVE VOTE
The affirmative vote of the holders of a majority of the shares of
common stock present in person or by proxy at the annual meeting is required to
approve the amendment to the stock option plan.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT TO THE STOCK
OPTION PLAN.
AUDIT COMMITTEE REPORT
The incorporation by reference of this proxy statement into any
document filed with the Securities and Exchange Commission by us shall not be
deemed to include the following report unless the report is specifically stated
to be incorporated by reference into such document.
The audit committee assists the board in carrying out its oversight
responsibilities for our financial reporting process, audit process and internal
controls. The audit committee also reviews the audited financial statements and
recommends to the board that they be included in our annual report on Form 10-K.
The committee is comprised solely of independent directors.
The audit committee has reviewed and discussed our audited financial
statements for the fiscal year ended December 31, 2000 with our management and
Fisk & Robinson, L.P., our independent auditors. The committee has also
discussed with Fisk & Robinson, L.P. the matters required to be discussed by SAS
61 (Codification for Statements on Auditing Standards) as well as having
received and discussed the written disclosures and the letter from Fisk &
Robinson, L.P. required by Independence Standards Board Statement No. 1
(Independence Discussions with Audit Committees). Based on the review and
discussions with management and Fisk & Robinson, L.P., the committee has
recommended to the board that the audited financial statements be included in
our annual report on Form 10-KSB for the fiscal year ended December 31, 2000 for
filing with the Securities and Exchange Commission.
David F. Chappell
Garrett Morris
Richard N. Abrams
INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders will be asked to approve the appointment of Fisk &
Robinson, L.P. as our independent public accountants for the 2001 fiscal year. A
proposal will be presented at the annual meeting to ratify the appointment of
Fisk & Robinson, L.P. If the appointment of Fisk & Robinson, L.P. is not
ratified, the matter of the appointment of independent public accountants will
be considered by the board of directors. Representatives of Fisk & Robinson,
L.P. are expected to be present at the meeting and will be given the opportunity
to make a statement if they desire to do so and will be available to respond to
appropriate questions.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THIS APPOINTMENT.
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AUDIT FEES
Our independent auditor during 2000 was Fisk & Robinson, L.P. The
aggregate fees and expenses billed by Fisk & Robinson, L.P. in connection with
the audit of our annual financial statements as of and for 2000 and for the
required review of our financial information included in our Form 10-QSB filings
for the year 2000 was approximately $241,822.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees incurred for these services for the year 2000.
ALL OTHER FEES
The aggregate fees and expenses billed by Fisk & Robinson, L.P. for all
other services rendered to us for 2000 was approximately $13,000.
The audit committee, after consideration of the matter, does not
believe that the rendering of these services by Fisk & Robinson, L.P. to be
incompatible with maintaining its independence as our principal accountant.
STOCKHOLDER PROPOSAL
The following proposal was presented to us by Mr. Cullen W. Turner, a
stockholder who owns 471,377 shares of common stock and who resides at 2501
Norwood Drive, Hurst, Texas 76504.
"The officers of Surety Capital Corporation will enter into a
contract or contracts for the best possible sale of all assets of
the corporation and then the proceeds obtained from the sale will
be used to pay off all debts and the remaining money will be
distributed to all shareholders."
THE BOARD MAKES NO RECOMMENDATION WITH RESPECT TO MR. TURNER'S
PROPOSAL.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in our proxy
materials relating to the next annual meeting of stockholders must be received
at our principal executive offices located at 1501 Summit Avenue, Fort Worth,
Texas 76102. Attention: Charles M. Ireland, President, no later than March 15,
2001, and must otherwise comply with the notice and other provisions of our
bylaws.
GENERAL
Your proxy is solicited by the board of directors and we will bear the
cost of solicitation of proxies. In addition to the solicitation of proxies by
use of the mails, officers, directors and regular employees of Surety Capital or
Surety Bank, acting on our behalf, may solicit proxies by telephone, telegraph
or personal interview. We will, at our expense, upon the receipt of a request
from brokers and other custodians, nominees and fiduciaries, forward proxy
soliciting material to the beneficial owners of shares held of record by
individuals.
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OTHER BUSINESS
It is not anticipated that any action will be asked of the stockholders
other than that set forth above, but if other matters properly are brought
before the meeting, the persons named in the proxy will vote in accordance with
their best judgment.
FAILURE TO INDICATE CHOICE
If any stockholder fails to indicate a choice in items (1), (2) and (3)
on the proxy card, the shares of such stockholder shall be voted (FOR) in each
instance. If any stockholder fails to indicate a choice in item (4) on the proxy
card, the proxies will (ABSTAIN) from a vote.
By order of the Board of Directors
/s/ Richard N. Abrams
Richard N. Abrams
Chairman and Chief Executive Officer
Fort Worth, Texas
September 21, 2001
ALL STOCKHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
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Exhibit A
CHARTER
THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
SURETY CAPITAL CORPORATION
The Audit Committee is appointed by the Board of Directors to assist the
Board in monitoring (1) the integrity of the financial statements of the
Corporation, (2) the compliance by the Corporation with legal and regulatory
requirements, (3) the effectiveness of internal controls, (4) the performance of
the Corporation's internal and external auditors, (5) policy standards and
guidelines for risk management and (6) financial transactions, capital
management and financial planning and performance. The Committee shall have
responsibility and authority with respect to the matters stated in this charter
for the Corporation and its subsidiaries.
The members of the Committee shall be appointed by the Board of Directors
and shall meet the independence and experience requirements of the New York
Stock Exchange and other applicable laws and regulations. The Committee shall
consist of not less than three directors, including a Chairman. The presence of
fifty percent of the members of the Committee shall constitute a quorum of the
Committee, and the act of the majority of the members present at any meeting at
which a quorum is present shall be the act of the Committee. The Committee shall
meet at least four times annually although more frequent meetings may be
necessary as determined by the chairman.
The Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Committee may request any
officer or employee of the Corporation or the Corporation's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Committee shall make regular reports to the Board of Directors.
The Committee shall:
1. Meet with the independent auditor to review the planning of its audit of
the Corporation's financial statements.
2. Review the Corporation's annual audited financial statements with
management.
3. Review the representations of management and the findings of the
independent auditor as to the effectiveness of the Corporation's systems of
internal controls in order to obtain reasonable assurance that the
Corporation's annual and quarterly financial reports are prepared in
accordance with generally accepted accounting principles and are free from
material fraud or error.
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4. Review with management, internal audit and the independent auditor
significant accounting and reporting principles and practices applied by
the Corporation in preparing its financial statements, including a
discussion with the independent auditor regarding its judgments about the
quality of the Corporation's accounting principles used in financial
reporting.
5. Review changes to the Corporation's accounting principles and practices
that materially impact the Corporation's consolidated financial statements.
6. Discuss with the independent auditor matters relating to the conduct of the
audit as required by professional auditing standards.
7. Review with the independent auditor any problems or difficulties the
auditor may have encountered in its work and any management letter provided
by the auditor.
8. Discuss and recommend to the Board of Directors whether the Corporation's
audited financial statements should be included in the Corporation's annual
report on Form 10-K.
9. Review with management and the independent auditor the Corporation's
quarterly financial results and assess the quality of the Corporation's
earnings.
10. Recommend to the Board of Directors the appointment of the independent
auditor, which firm shall be ultimately accountable to the Committee and
the Board of Directors.
11. Approve the fees to be paid to the independent auditor.
12. Receive periodic written statements from the independent auditor
delineating all relationships between the auditor and the Corporation,
discuss with the auditor any disclosed relationships or services that may
impact the objectivity and independence of the outside auditor, and if so
determined by the Committee, recommend that the Board of Directors take
appropriate action in response to the auditor's report to satisfy itself of
the independence of the auditor.
13. Evaluate together with the Board of Directors the performance of the
independent auditor and, if so determined by the Committee, recommend that
the Board of Directors replace the independent auditor.
14. Review appointment and replacement of the Internal Auditor and review
annually the responsibilities, budget and staffing of the internal audit
function.
15. Review and approve where appropriate, risk management policies and
procedures, including limits and limit allocations for credit risk, market
risk, investment risk, liquidity risk and operating risk.
16. Review significant operational and customer service issues and monitor
remediation of
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such issues as appropriate.
17. Review and approve guidelines relating to the issuance of securities and
capital actions.
18. Review acquisitions, joint ventures and strategic arrangements from the
perspective of assessing the risks assumed by such actions and implementing
controls, if necessary, to limit such risks.
19. Review reports of significant issues prepared by internal audit and other
risk oversight functions.
20. Review the assessment of management regarding compliance by subsidiary
banks with laws and regulations designated by the FDIC as being essential
for safety and soundness, and compliance by subsidiary banks with
regulations of the OCC relating to fiduciary activities.
21. Review within the purview of this Charter those policies of the Corporation
with regard to which applicable laws, rules and regulations require Board
of Directors' approval and permit delegation to an appropriate committee of
the Board of Directors.
22. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Corporation's annual proxy statement.
23. Review the Corporation's Code of Conduct and any significant violations
reported by management or internal audit.
24. Review the significant results of regulatory examinations of the
Corporation.
25. Review with the Corporation's Chief Legal Firm matters that may have a
material impact on the Corporation's consolidated financial statements.
26. Meet at least annually with the Internal Auditor and the independent
auditor in separate executive sessions and meet periodically in such
sessions with any other persons whom the Committee deems appropriate.
27. Review and reassess the adequacy of this Charter periodically and recommend
any proposed changes to the Board of Directors for approval.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Corporation's financial statements are complete and accurate
and are in accordance with
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generally accepted accounting principles. This is the responsibility of
management, the internal auditor, and the independent auditor. Nor is it the
duty of the Committee to conduct investigations, to resolve disagreements, if
any, between management and the independent auditor or to assure compliance with
laws and regulations and the Corporation's Code of Conduct.
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PROXY FOR COMMON SHARES ON BEHALF OF BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE STOCKHOLDERS OF
SURETY CAPITAL CORPORATION TO BE HELD OCTOBER 17, 2001
The undersigned hereby appoints Richard N. Abrams and Thomas Kwentus, or
either of them acting in the absence of the other, with power of substitution,
attorneys and proxies, for and in the name and place of the undersigned, to vote
the number of shares of common stock that the undersigned would be entitled to
vote if then personally present at the annual meeting of the stockholders of
Surety Capital Corporation, to be held at 1501 Summit Avenue, Fort Worth, Texas
76102, on Wednesday, October 17, 2001, at 4:00 p.m., local time, or any
adjournments or postponements of the meeting, upon the matters set forth in the
notice of annual meeting and proxy statement, receipt of which is hereby
acknowledged, as follows:
1. ELECTION OF DIRECTORS:
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below) listed below
[ ] [ ]
Richard N. Abrams, Charles M. Ireland, Garrett Morris, David F. Chappell, Thomas
J. Kwentus, Guy J. Butts, and Milton M. Bley
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
2. APPROVE AND RATIFY THE AMENDMENT TO THE AMENDED AND RESTATED 1998 INCENTIVE
STOCK OPTION OF SURETY CAPITAL CORPORATION:
[ ] [ ] [ ]
For Against Abstain
3. APPROVE THE APPOINTMENT OF FISK & ROBINSON, L.P. AS OUR INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001:
[ ] [ ] [ ]
For Against Abstain
4. APPROVE THE FOLLOWING STOCKHOLDER PROPOSAL:
"The officers of Surety Capital Corporation will enter into a
contract or contracts for the best possible sale of all assets of
the corporation and then the proceeds obtained from the sale will
be used to pay off all debts and the remaining money will be
distributed to all shareholders."
[ ] [ ] [ ]
For Against Abstain
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5. In accordance with their discretion, upon all other matters that may
properly come before the meeting and any adjournments or postponements
of the meeting.
[ ]
Withhold Authority
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES LISTED UNDER PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 AND WILL
ABSTAIN FROM PROPOSAL 4.
Dated: , 2001
--------------------------------
Signature(s)
--------------------------------
--------------------------------
NOTE: PLEASE DATE PROXY AND SIGN IT EXACTLY AS NAME OR NAMES APPEAR ABOVE. ALL
JOINT OWNERS OF SHARES SHOULD SIGN. STATE FULL TITLE WHEN SIGNING AS EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC. PLEASE RETURN SIGNED PROXY IN THE
ENCLOSED ENVELOPE.
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