SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended December 31, 1999
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
____________
Commission File Number 0-22153
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AMERITRANS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-2102424
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
747 Third Avenue
Fourth Floor - 4th Floor
New York, New York 10017
(Address of Registrant's (Zip Code)
principal executive office)
Registrant's telephone number, including area code: (800) 214-1047
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
The number of shares of Common Stock, par value $.0001 per share,
outstanding as of February 14, 2000: 1,745,600
<PAGE>
AMERITRANS CAPITAL CORPORATION
FORM 10-Q
Table of Contents
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements...................................................... 1
Consolidated Balance Sheets as of December 31, 1999
(unaudited) and June 30, 1999........................................... 2
Consolidated Statements of Operations -- For the Six Months
and the Three Months ended December 31, 1999 and 1998 (unaudited)....... 4
Consolidated Statements of Cash Flows -- For the Six
Months Ended December 31, 1999 and 1998 (unaudited)..................... 5
Notes to Consolidated Financial Statements................................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders....................... 16
Item 5. Other Information......................................................... 17
Item 6. Exhibits and Reports on Form 8-K.......................................... 18
Signatures.............................................................. 19
</TABLE>
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<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
On December 16, 1999, Ameritrans Capital Corporation (the "Company") acquired
Elk Associates Funding Corporation ("Elk") in a share-for-share exchange. Prior
to the acquisition, Elk had been operating independently and the Company had no
operations. The consolidated balance sheet of the Company as of December 31,
1999, the related statements of operations, and cash flows for the six months
ended December 31, 1999 and December 31, 1998 included in Item 1 have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the accompanying consolidated
financial statements include all adjustments (consisting of normal, recurring
adjustments) necessary to summarize fairly the Company's financial position and
results of operations. The results of operations for the six months ended
December 31, 1999 are not necessarily indicative of the results of operations
for the full year or any other interim period. These financial statements should
be read in conjunction with the audited financial statements and notes thereto
included in Elk's Annual Report on Form 10-K/A for the fiscal year ended June
30, 1999 as filed with the Commission.
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<PAGE>
AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 (Unaudited) and June 30, 1999
ASSETS
<TABLE>
<CAPTION>
December 31, 1999 June 30, 1999*
----------------- --------------
<S> <C> <C>
Loans receivable $ 58,029,360 $ 51,103,932
Less: allowance for loan losses (380,000) (380,000)
------------ ------------
57,649,360 50,723,932
Cash and cash equivalents 767,106 542,290
Accrued interest receivable 858,039 714,626
Assets acquired in satisfaction of loans 612,491 612,491
Receivables from debtors on sales of assets acquired
in satisfaction of loans 394,752 409,939
Equity securities 944,146 909,386
Furniture, fixtures and leasehold improvements, net 126,668 105,440
Prepaid expenses and other assets 538,733 492,697
------------ ------------
TOTAL ASSETS $ 61,891,295 $ 54,510,801
============ ============
</TABLE>
* Restated
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,1999 (Unaudited) and June 30, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 30, 1999 June 30, 1999*
----------------- --------------
<S> <C> <C>
LIABILITIES
Debentures payable to SBA $ 8,880,000 $ 8,880,000
Notes payable, banks 38,600,000 31,000,000
Accrued expenses and other liabilities 262,129 223,458
Accrued interest payable 414,548 354,918
Dividends payable 331,664 314,208
----------- -----------
TOTAL LIABILITIES 48,488,341 40,772,584
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value: 5,000,000 shares
authorized; 1,745,600 shares issued and outstanding, 175 175
Additional paid-in-capital 13,125,533 13,214,558
Restricted capital -0- 256,916
Retained earnings 15,493 4,815
Accumulated other comprehensive income 261,753 261,753
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 13,402,954 13,738,217
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $61,891,295 $54,510,801
=========== ===========
</TABLE>
* Restated
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months and Six Months Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
December 31, 1999 December 31, 1998 December 31, 1999 December 31, 1998
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest on loans receivable $ 1,502,653 $ 1,258,639 $ 2,906,923 $ 2,475,744
Fees and other income 176,755 87,642 291,316 219,204
Gain on sales of equity security 76,169 -0- 76,169 -0-
----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME 1,755,577 1,346,281 3,274,408 2,694,948
----------- ----------- ----------- -----------
OPERATING EXPENSES
Interest 818,863 617,983 1,546,047 1,192,115
Salaries and employee benefits 136,119 136,030 281,128 274,483
Legal fees 142,581 51,926 237,549 144,261
Miscellaneous administrative expenses 241,241 216,485 437,917 410,007
Loss on assets acquired in
satisfaction of loans, net 1,876 (1,547) 1,935 268
Directors' fee 5,250 4,500 20,250 13,250
Bad debt expense 81,050 19,890 81,050 48,965
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 1,426,980 1,045,267 2,605,876 2,083,349
----------- ----------- ----------- -----------
OPERATING INCOME 328,597 301,014 668,532 611,599
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 328,597 301,094 668,532 611,599
INCOME TAXES (BENEFIT) 8,772 (5,656) 11,983 (293)
----------- ----------- ----------- -----------
NET INCOME $ 319,825 $ 306,670 $ 656,549 $ 611,892
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
- - Basic 1,745,600 1,745,600 1,745,600 1,745,600
=========== =========== =========== ===========
- - Diluted 1,746,572 1,745,600 1,746,572 1,745,600
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE
- - Basic $ .1832 $ .1757 $ .3761 $ .3505
=========== =========== =========== ===========
- - Diluted $ .1831 $ .1757 $ .3760 $ .3505
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 656,549 $ 611,892
----------- -----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 24,985 18,375
Increase in accrued interest receivable (143,413) (82,454)
Increase in prepaid expenses and other assets (46,036) (136,715)
Increase in accrued expenses and other liabilities 38,671 59,272
Increase in accrued interest payable 59,630 75,113
----------- -----------
TOTAL ADJUSTMENTS (66,163) (66,409)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 590,386 545,483
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans receivable, assets acquired in
satisfaction of loans and receivables from debtors
on sales of assets acquired in satisfaction of loans (6,910,242) (6,286,934)
Purchases (sales) of equity securities - net (34,760) (195,947)
Acquisition of furniture, fixtures and leasehold
improvements (46,211) (11,134)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (6,991,213) (6,494,015)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable, banks, net 7,600,000 5,565,000
Dividends paid (628,416) (628,416)
Capitalization of restructuring costs (345,941)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 6,625,643 $ 4,936,584
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED), Continued
For the Six Months Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS $ 224,816 $(1,011,948)
CASH AND CASH EQUIVALENTS - Beginning 542,290 1,755,429
----------- -----------
CASH AND CASH EQUIVALENTS - Ending $ 767,106 $ 743,481
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- Organization and Summary of Significant Accounting Policies
Organization and Principal Business Activity
Ameritrans Capital Corporation (the "Company"), a Delaware corporation,
acquired all of the outstanding shares of Elk Associates Funding Corporation
("Elk"), on December 16, 1999 in a share for share exchange. Prior to the
acquisition, Elk had been operating independently and the Company had no
operations. The company is registered with the United States Securities and
Exchange Commission as a Business Development Company under the Investment
Company Act of 1940.
Elk is licensed by the Small Business Administration ("SBA") to operate as
a Small Business Investment Company ("SBIC") under the Small Business Investment
Act of 1958, as amended. Elk has also registered as a Business Development
Company under the Investment Company Act of 1940 to make business loans.
The Company makes loans to taxi owners to finance the acquisition and
operation of the medallion taxi businesses and related assets, and to other
small businesses in the New York City, Chicago, Miami, and Boston markets.
Loans and the Allowance for Loans Losses
Loans are stated at cost, net of participation with other lenders, less an
allowance for possible losses. This amount represents the fair value of such
loans as determined in good faith by the Board of Directors. The allowance for
loan losses is maintained at a level that, in the Board of Directors' judgement,
is adequate to absorb losses inherent in the portfolio. The allowance for loan
losses is reviewed and adjusted periodically by the Board of Directors on the
basis of available information, including the fair value of the collateral held,
existing risk of individual credits, past loss experience, the volume,
composition and growth of the portfolio, and current and projected economic
conditions. Because of the inherent uncertainty in the estimation process, the
estimated fair values of the loans may differ significantly from the values that
would have been used had a ready market existed for such loans and the
differences could be material. As of December 31, 1999 and June 30, 1999
approximately 80% and 79%, respectively, of all loans are collateralized by New
York City, Boston, Chicago, and Miami taxicab medallions.
Accounting Standard for Impairment of Loans
Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 114 as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan --
Income Recognition and Disclosure", a loan is determined to be impaired if it is
probable that the contractual amounts due will not be collected in accordance
with the terms of the loan. The SFAS generally requires that impaired loans be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. As all of the Company's loans are collateral dependent,
impairment is measured based on the fair value of the collateral. If the fair
value of the impaired loan is less than the recorded investment in the loan
(including accrued interest, net of deferred loan fees or costs, and unamortized
premium or discount) the Company recognized an impairment by creating a
valuation allowance with a corresponding charge to the provision for loan
losses. The Company evaluates all loans individually for impairment.
-7-
<PAGE>
Loans Receivable
Loans are placed on nonaccrual status once they become 180 days past due as
to principal or interest. In addition, loans that are not fully collateralized
and in the process of collection are placed on nonaccrual status when, in the
judgement of management, the ultimate collectibility of interest and principal
is doubtful.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all
short-term investments with an original maturity of three months or less to be
cash equivalents.
The Company has cash balances in banks in excess of the maximum amount
insured by the FDIC as of December 31, 1999 and June 30, 1999.
Income Taxes
The Company has elected to be taxed as a Regulated Investment Company under
the Internal Revenue Code. A Regulated Investment Company will generally not be
taxed at the corporate level to the extent its income is distributed to its
stockholders. In order to be taxed as a Regulated Investment Company, the
Company must pay at least 90 percent of its net investment company taxable
income to its stockholders as well as meet other requirements under the Code. In
order to preserve this election for fiscal 2000, the Company intends to make the
required distributions to its stockholders in accordance with applicable tax
rules.
Depreciation and Amortization
Depreciation and amortization of furniture, fixtures and leasehold
improvements is computed on the straight-line method at rates adequate to
allocate the cost of applicable assets over their expected useful lives.
Net Income per Share
During the year ended June 30, 1998, the Company adopted the provision of
Statements of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS
No. 128"). SFAS No. 128 eliminates the presentation of primary and fully
dilutive earnings per share ("EPS") and requires presentation of basic and
diluted EPS. Basic EPS is computed by dividing income (loss) available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS is based on the weighted-average number of shares of common
stock and common stock equivalents outstanding at year end. Common stock
equivalents have been excluded from the weighted-average shares for 1998, as
inclusion is anti- dilutive. At December 31, 1999 and June 30, 1999 the Company
had 122,224 and 100,000 options outstanding, of which 52,224 and 30,000 options,
respectively, are considered anti-dilutive and the remaining 70,000 and 70,000
options, respectively, are dilutive and resulted in common stock equivalents of
972 and 5084 shares, respectively.
Loan Costs
Loan costs are included in prepaid expenses and other assets. Amortization
of loan costs is computed on the straight-line method over ten (10) years. At
December 31, 1999 and June 30, 1999, loan costs amounted to $117,104 and
$129,331, respectively, net of accumulated amortization of $126,877 and
$114,650, respectively.
-8-
<PAGE>
Assets Acquired in Satisfaction of Loans
Assets acquired in satisfaction of loans are carried at estimated fair
value less selling costs. Losses incurred at the time of foreclosure are charged
to the allowance for loan losses. Subsequent reductions in estimated net
realizable value are recorded as losses on assets acquired in satisfaction of
loans.
Basis of consolidation
The consolidated financial statements include the accounts of the Company,
Elk and EAF Holding Corporation ("EAF") which are wholly owned subsidiaries of
the Company. All intercompany transactions have been eliminated.
Use of Estimates in the Financial Statements
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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Estimates that are particularly susceptible to change relate to the
determination of the allowance for loan losses and the fair value of financial
instruments.
Comprehensive Income
During the year ended June 30, 1999, the Company adopted SFAS No. 130
"Reporting Comprehensive Income". SFAS 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income.
Stock-Based Compensation
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation"
was issued. SFAS 123 prescribes accounting and reporting standards for all
stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using the existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB25") and
related interpretations with pro forma disclosure of what net income and
earnings per share would have been had the Company adopted the new fair value
method. The Company intends to continue to account for its stock based
compensation plans in accordance with the provisions of APB 25.
Business Segment
During the year ended June 30, 1999, the Company adopted SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information", which
supersedes SFAS No. 14, "Financial Reporting for Segments of A Business
Enterprise". SFAS No. 131 establishes standards for the way the public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statement regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. The Company has
determined that under SFAS No. 131, it operates in one segment of financing
services. The Company's customers and operations are within the United States.
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<PAGE>
Loan Sales and Servicing Fee Receivable
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" was issued in June 1996. SFAS 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. This statement also provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. It requires that liabilities
and derivatives incurred or obtained by transferors as part of a transfer of
finanical assets be initially measured at fair value. SFAS 125 also requires
that servicing assets be measured by allocating the carrying amount between the
assets sold and retained interest based on their relative fair values at the
date of transfer. Additionally, this statement requires that the servicing
assets and liabilities be subsequently measured by (a) amortization in
proportion to and over the period of estimated net servicing income or loss and
(b) assessment for asset impairment or increased obligation based on their fair
values. SFAS 125 also requires the Company's excess servicing rights be measured
at fair market value and reclassified as interest only receivables and accounted
for in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities". As required by SFAS 125, the Company adopted in the new
requirements effective January 1, 1997. Implementation of SFAS 125 did not have
any material impact on the financial statements of the Company.
New Accounting Pronouncements
In April 1998, Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities" was issued. This SOP provides guidance on the financial
reporting of start-up costs and organization costs. It requires the costs of
start-up activities and organization costs to be expensed as incurred. The SOP
is effective for financial statements for fiscals year beginning after December
15, 1998. SOP No. 98-5 will not have a material impact on its financial
statements.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued and is required to be adopted in years beginning
after June 15, 1999, which has been deferred to June 30, 2000. Management does
not anticipate that the adoption of the new statement will have a significant
effect on results of operations or the financial position of the Company.
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<PAGE>
NOTE 2 -- Debentures Payable to SBA
At December 31, 1999 and June 30, 1999 debentures payable to the SBA
consist of subordinated debentures with interest payable semiannually, as
follows:
Current
Effective Principal
Issue Date Due Date Interest Rate Amount
---------- -------- ------------- ---------
September 1993 September 2003 6.12(1) $1,500,000
September 1993 September 2003 6.12 2,220,000
September 1994 September 2004 8.20 2,690,000
December 1995 December 2005 6.54 1,020,000
June 1996 June 2006 7.71 1,020,000
March 1997 March 2007 7.38(2) 430,000
----------
$8,880,000
==========
(1) Interest rate was 3.12% from inception through September 1998
(2) The Company is also required to pay an additional annual user fee of 1% on
this debenture
Under the terms of the subordinated debentures, the Company may not
repurchase or retire any of its capital stock or make any distributions to its
stockholders other than dividends out of retained earnings (as computed in
accordance with SBA regulations) without the prior written approval of the SBA.
NOTE 3 -- Notes Payable to Banks
At December 31, 1999 and June 30, 1999, the Company had loan agreements
with three (3) banks for lines of credit aggregating $40,000,000 and
$35,000,000, respectively. At December 31, 1999 and June 30, 1999, the Company
had $38,600,000 and $31,000,000, respectively, outstanding under these lines.
The loans, which mature through April 10, 2000, bear interest based on the
Company's choice of the lower of either the reserve adjusted LIBOR rate plus 150
basis points or the bank's prime rates including certain fees which make the
effective rates range from approximately prime minus 1/4% to prime minus 1/2%.
Upon maturity, the Company anticipates extending the lines of credit for another
year, as has been the practice in previous years.
Pursuant to the terms of the agreements the Company is required to comply
with certain terms, covenants and conditions. The Company pledged its loans
receivable and other assets as collateral for the above lines of credit and were
not required to maintain compensating balances.
NOTE 4 -- Preferred Stock
Pursuant to a preferred stock repurchase agreement dated November 10, 1994,
the Company repurchased all cumulative preferred stock from the SBA for $3.50
per share, or an aggregate $1,915,449. As a condition precedent to the
repurchase, the Company granted the SBA a liquidating interest in a newly
established restricted capital surplus account. The surplus account is equal to
the amount of the net repurchase discount. The initial value of the liquidating
interest was $3,557,261, which is being amortized over a 60-month period on a
straight-line basis. Under the repurchase agreement the liquidating interest
would become fixed at the level immediately preceding the event of default and
would not decline further until such time as the default is cured or waived. The
liquidating interest shall expire on (i) sixty months from the date of the
repurchase agreement, or (ii) if any event of default has occurred and such
default has been cured or waived, such later date on which the liquidating
interest is fully amortized. Should the Company voluntarily or involuntarily
liquidate prior to the amortization of the liquidating interest, any assets
which are available, after the payment of all debts of the Company, shall be
distributed first to the SBA until the fair market value of such assets is equal
to the amount of the liquidating interest. Such payment, if any, would be prior
in right to any payments
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<PAGE>
made to the Company's stockholders. The amount restricted under this agreement
at December 31, 1999 and June 30, 1999 was approximately $-0- and $256,916,
respectively.
During 1992, the Company authorized the issuance of 752,729 shares of a new
Series B cumulative preferred stock with a 4 percent dividend and a $10 par
value. All preferred shares are restricted solely for issuance to the SBA. No
sales of the Series B preferred shares have occurred to date. On September 30,
1996, Congress passed a law that in effect prevents the SBA from making any
further purchase of 4% preferred stock from any specialized small business
investment company.
In September 1998, the stockholders of the Company approved and in February
1999 the SBA approved an amendment to the Certification of Incorporation of the
Company eliminating all of the authorized Series A and Series B preferred stock
of the Company. This amendment to the Certificate of Incorporation was filed and
became effective on May 21, 1999.
NOTE 5 -- Common Stock
On December 16, 1999, the Company acquired Elk in a share-for-share
exchange. There are currently 5,000,000 shares authorized of $.0001 par value
common stock.
For the year ended June 30, 1998, Elk completed the sale, as part of a
private placement offering, of 462,000 shares of common stock. Total proceeds
from the sale of common stock amounted to $2,888,000, net of direct related
expenses of $115,000.
On January 13, 2000, The Company declared a cash dividend of $0.19 per
common share, for a total of $331,664 which was paid on January 27, 2000.
NOTE 6 -- Income Taxes
The provision for income taxes (benefit) for the periods ended December 31,
1999 and June 30, 1999, consists of the following:
December 31, 1999 June 30, 1999
----------------- -------------
Federal $ 2,063 $ 1,689
State and city 9,920 (2,458)
-------- -------
$ 11,983 $ (769)
======== =======
The above provision represents income taxes incurred on undistributed income for
the respective years.
NOTE 7 -- Commitments and Contingencies
Interest Rate Swap
On June 8, 1998, the Company entered into a $10,000,000 interest rate Swap
transaction with a bank expiring on June 8, 2001. This Swap transaction was
entered into to protect the Company from an upward movement in interest rates
relating to outstanding bank debt. On October 15, 1998, the Company entered into
an additional interest rate Swap transaction with the same bank for $5,000,000
expiring on October 8, 2001. These Swap transactions were entered into to
protect the Company from an upward movement in interest rates relating to
outstanding bank debt (see Note 3 for terms and effective interest rates). These
Swap transactions call for a fixed rate of 5.86% and 4.95%, respectively, plus
1.5 basis points, making the effective rate 7.36% and 6.45%, respectively, for
the Company if the floating one month LIBOR rate is below the fixed rate then
the Company is obligated to pay the bank for the difference in rates. When the
one-month LIBOR rate is above the fixed rate then the bank is obligated to pay
the Company for the differences in rates.
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<PAGE>
Interest Rate Cap
At March 20, 1997, the Company was a party to one $5 million notional
interest rate cap. This cap, which expired on March 20, 1999, was purchased by
the Company to protect it from the impact of upward movements in interest rates
related to its outstanding bank debt. The cap provided interest rate protection
on the event that the three-month LIBOR rate exceeded 6.75 percent. The premium
paid for the purchase of this cap was amortized over its life and recorded as an
adjustment to interest expense. Payments received under this cap would be
credited to interest expense.
Loan commitments
At December 31, 1999 and June 30, 1999, the Company had commitments to make
loans totaling approximately $1,463,000 and $4,058,000, at interest rates
ranging from 8.25% to 18%.
NOTE 8 -- Fair Value of Financial Instruments
The following disclosures represent the Company's best estimate of the fair
value of financial instruments, determined on a basis consistent with
requirements of Statement of Financial Accounting Standards, "SFAS" No. 107,
"Disclosure about Fair Value of Financial Instruments".
The estimated fair values of the Company's financial instruments are
derived using estimation techniques based on various subjective factors
including discount rates. Such estimates may not necessarily be indicative of
the net realizable or liquidation values of these instruments. Fair values
typically fluctuate in response to changes in market or credit conditions.
Additionally, valuations are presented as of a specific point in time and may
not be relevant in relation to the future earnings potential of the Company.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Company will realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Loans Receivable -- The fair value of loans is estimated at cost net of the
allowance for loan losses. The Company believes that the rates of these loans
approximate current market rates.
Equity Securities -- The Company's equity securities as of December 31,
1999 consist of investments in corporations who own and operate Chicago Taxicab
Medallions (61%), a dry cleaner (3%), Miami Taxicab Medallions (7%) a
Telecommunications Company (24%), and an eyewear Internet company (5%).
Debentures Payable to Small Business Administration -- The fair value of
debentures as of December 31, 1999 and June 30, 1999 was approximately
$8,989,000, and were estimated by discounting the expected future cash flows
using the current rate at which the SBA has extended similar debentures to the
Company.
The fair value of financial instruments that are short-term or reprice
frequently and have a history of negligible credit losses is considered to
approximate their carrying value. Those instruments include balances recorded in
the following captions:
ASSETS LIABILITIES
Cash Notes payable, banks
Accrued interest receivable Accrued interest payable
Assets acquired in satisfaction of loans
Receivables from debtors on sales of
assets acquired in satisfaction of loans
NOTE 9 -- Subsequent Events
On January 18, 2000, the Company entered into an additional interest rate
swap transaction for $10,000,000 with a bank expiring January 8, 2001. This swap
transaction calls for a fixed rate of 6.57% plus 150 basis points or an
effective rate of 8.07%.
-13-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information contained in this section should be used in conjunction with the
Consolidated Financial Statements and Notes therewith appearing in this report
Form 10Q and Elk's Annual Report on Forms 10-KSB for the year ended June 30,
1999.
General
Ameritrans acquired Elk on December 16, 1999 in a share-for-share exchange. As
of December 31, 1999 Ameritrans had no separate operations. Elk is licensed by
the Small Business Administration (SBA) to operate as a Small Business
Investment Company (SBIC) under the Small Business Investment Act of 1958, as
amended. The Company has also registered as an investment company under the
Investment Company Act of 1940.
The Company primarily makes loans and investments to persons who qualify under
SBA Regulations as socially or economically disadvantaged and loans and
investments to entities which are at least 50% owned by such persons. The
Company also makes loans and investments to persons who qualify under SBA
regulation as "non- disadvantaged". The Company's primary lending activity is to
originate and service loans collateralized by New York City, Boston, Chicago,
and Miami Taxicab Medallions. The Company also makes loans and investments in
other diversified businesses.
Results of Operations
For the Six Months ended December 31, 1999 and 1998.
Total Investment Income.
The Company's investment income for the six months ended December 31, 1999
increased to $3,274,408 from $2,694,948 or (21.5%) for the six months as
compared with the six months ended December 31, 1998, respectively. This
increase was mainly due to an increase in the loan portfolio during the period.
The portfolio increased from $47,673,884 as of December 31, 1998 to $58,029,361
as of December 31, 1999, as part of the Company's strategy to maximize
shareholder rate of return by use of bank debt. In addition, there was a gain on
the sale of equity securities which amounted to $76,169.
Operating Expenses
Interest expenses for the six month period ended December 31, 1999
increased $353,932 ($1,546,047 from $1,192,115) over the similar period ended
December 31, 1998. This increase was mainly due to increased bank borrowings for
the period, and due to higher interest rates during the period ended December
31, 1999.
Other operating expenses for the six months ended September 30, 1999
increased $168,675 when compared with the similar period ended December 31,
1998. This increase was mainly due to increases in non-related legal fees
generated from an increase in the Chicago Medallion Market. This amount is
offset by additional origination fee income.
Results of Operations
For the Three Months ended December 31, 1999 and 1998
Total investment income.
The Company's investment income for the three months ended December 31,
1999 increased to $1,755,577 from $1,346,281 or by $409,296 or (30.5%) for the
three month period ended December 31, 1999 and December 31, 1998. This increase
was mainly due to an increase in the loan porfolio during the fiscal year. The
portfolio increased from $47,673,884 as of December 31, 1998 to $58,029,361 as
of December 31, 1999, as part of the Company's strategy to maximize shareholder
rate of return by use of bank debt.
Operating Expenses
Interest expense for the three month period ended December 31, 1999
increased $200,880 ($818,863 from $617,983) over the similar period ended
December 31, 1998. This increase was mainly due to increased bank borrowings for
the period.
Other operating expenses increased $180,833 when compared with the similar
three month period ended December 31, 1998. This increase was mainly due to a
increase in non-related legal fees incurred consistent with the increase of
investments in the Chicago Medallion market, as discussed above. This is offset
by additional origination fee income. In addition, bad debts increased $61,160
when compared with the similar period.
Balance Sheet and Reserves
Total assets increased $7,726,435 as of December 31, 1999 when compared
with total assets as of June 30, 1999. This increase was due to management's
decision to expand its portfolio in the Chicago Medallion Market plus increases
in the diversified loan portfolio. This expansion was financed by additional
bank debt of $7,600,000 in the six month period.
-14-
<PAGE>
Year 2000 Compliance
Prior to January 1, 2000, the Company had taken steps to address and
prevent problems in connection with the year 2000 ("Y2K"). Such problems were
expected to occur due to the inability of systems to properly recognize and
process date-sensitive information relating to the Y2K and beyond. Y2K issues
could have affected the Company's information technology systems ("IT") and
informationtion technology systems ("Non-IT").
The Company's main business operation is the operation of Elk. The Company
is a Small Business Investment Company licensed by the Small Business
Administration and as such, most of its business is making loans and investments
to small business concerns. The following are the IT systems that the Company
utilizes:
The Company uses a computer program to track its receivable loans ("Loan
Track"). To address Y2K, more than 18 months ago, the Company engaged the
consultant who originally developed Loan Track for the Company, to test, upgrade
and certify Loan Track as Y2K compliant. The consultant completed all of such
tasks and the Y2K-compliant Loan Track program is now in use in the Company's
regular operations. The Company also utilizes the standard Peachtree accounting
system for general in-house accounting functions. The version of peachtree,
currently in use by the Company, has been upgraded to be Y2K compliant.
The Company also utilizes other industry-wide programs such as Windows 95
and Word Perfect. The current versions are Y2K-compliant. In addition, during
the past twelve months and at the present, the Company has been replacing or
upgrading its computer hardware with equipment that has Y2K readiness. The
Company does not believe that it faces material Y2K issues with respect to its
Non-IT systems.
Costs in connection with Y2K compliance have been (i) to review and upgrade
existing IT systems, (ii) to analyze Y2K readiness of its banks and customers
and (iii) to analyze Non-It Y2K compliance. To date, such costs, have aggregated
approximately $10,000 and for the most part have been for IT review and
upgrades. Such costs are being treated as expenses. The Company spent
approximately $25,000 to replace certain hardware during the fiscal year ending
June 30, 1999 and spent an additional $35,000 during the six months ended
December 31, 1999. The Company has not experienced any Y2K difficulties
subsequent to January 1, 2000 and its information technology systems are
presently functioning properly and running in a routine manner. The cost of such
replacements will be capitalized and depreciated over a five year period.
-15-
<PAGE>
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on December 16, 1999 (the
"Annual Meeting").
The Company's shareholders were asked to take the following actions at the
meeting:
1. To consider and vote upon the adoption of an Agreement and Plan of Share
Exchange (the "Share Exchange Plan") dated as of October 21, 1999, between
the Company and Elk, pursuant to which each outstanding share of common
stock of Elk would be exchanged for one share of common stock of the
Company. Pursuant to this share exchange (the "Share Exchange"), the
ownership of each outstanding share of Elk common stock would automatically
vest in the Company (making the Company the holder of all outstanding
shares of Elk common stock), and the holders of the outstanding shares of
Elk common stock would automatically become entitled to receive one share
of the Company's common stock in exchange for each share of Elk common
stock held by them (making the former holders of Elk common stock the
holders of all of the shares of capital stock of the Company then
outstanding).
2. To elect 10 directors to serve until the next Annual Meeting and until
their successors are chosen and qualified.
3. To ratify and approve the selection by the Board of Directors of Marcum &
Kliegman, LLP as Elk's independent public accountants for the fiscal year
ended June 30, 1999.
4. To transact such other business as may properly come before the meeting or
any adjournment or adjournments of the meeting.
The Auditor and Agreement and Plan of Share Exchange Proposals were approved by
the affirmative vote of more than two-thirds of the shares of common stock
outstanding at the Annual Meeting. Each of the proposals received the following
votes:
<TABLE>
<CAPTION>
Votes cast for Against Abstensions Not voted
-------------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Share Exchange 1,409,974 1,000 200 32,422
Auditors Proposal 1,437,381 4,200 2,015
</TABLE>
With respect to the Board Proposal, the ten (10) individuals nominated for
director were elected by the affirmative vote of a majority of shares of common
stock present at the Annual Meeting. The nominees and votes each received were
as follows:
Votes cast for Withheld
-------------- --------
Gary C. Granoff 1,442,596 1,000
Ellen M. Walker 1,442,596 1,000
Lee A. Forlenza 1,442,596 1,000
Marvin Sabesan 1,442,596 1,000
Steven Etra 1,442,596 1,000
Paul Creditor 1,442,596 1,000
Allen Kaplan 1,442,596 1,000
John L. Acierno 1,442,596 1,000
John R. Laird 1,442,596 1,000
Howard F. Sommer 1,442,596 1,000
-16-
<PAGE>
ITEM 5. OTHER INFORMATION
The Company entered into an Agreement and Plan of Share Exchange (the
"Share Exchange Plan") with Elk on the 16th day of December, 1999. Pursuant to
the Share Exchange Plan, each outstanding share of the Elk's common stock was
exchanged on a one-for-one basis for shares of the Company's commmon stock. The
Company previously filed a Registration Statement on Form N-14 (File No.
333-63951) in connection with the Share Exchange Plan.
The Share Exchange Plan was approved by Elk's stockholders at a special
meeting of stockholders held on December 16, 1999. The Share Exchange Plan and
certain related transactions were also approved by the Securities and Exchange
Commission (the "Commission") and the U.S. Small Business Administration.
-17-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A. Agreement and Plan of Share Exchange, dated October 21, 1998 between Elk
and Ameritrans.*
1.1 Grid Demand Promissory Note dated August 27, 1999 between the Company and
Israel Discount Bank of New York.
1.2 Promissory Note date January 15, 2000 between the Company and Bank Leumi
USA and Letter of even date between aforementioned parrties.
1.3 Master Note dated October 4, 1999 between the Company and European American
Bank.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the fiscal quarter ended
December 31, 1999.
- ----------
* Incorporated by reference from the Company's Registration Statement filed
on Form N-14 (File No. 811-8847), filed September 22, 1998.
-18-
<PAGE>
AMERITRANS CAPITAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERITRANS CAPITAL CORPORATION
Date: February 15, 2000 By: /s/ Gary C. Granoff
-------------------
Gary C. Granoff
Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)
AMERITRANS CAPITAL CORPORATION
-19-
GRID DEMAND PROMISSORY NOTE
---------------------------
(Eurodollar/Prime Rates)
$16,000,000.00 New York, August 27,1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of ISRAEL
DISCOUNT BANK OF NEW YORK (hereinafter the "Bank") at its principal office,
located at 511 Fifth Avenue, New York, NY 10017, the principal sum of SIXTEEN
MILLION DOLLARS ($16,000,000.00), or, if less, the aggregate unpaid principal
amount of all advances made by the Bank (each an "Advance" and collectively, the
"Advances"), endorsed on the schedule attached hereto and made a part of this
Note, including additional pages, if any, attached, hereto (the "Schedule") on
the maturity date of each such Advance as shown or at demand. The undersigned
shall also pay to the Bank interest as set forth herein.
Each Advance hereunder which is a Eurodollar Advance (as defined below)
shall bear interest on the unpaid principal amount thereof for the Interest
Period applicable thereto at a rate per annum equal to LIBOR (as defined below)
determined for each Interest Period therefor in accordance with the terms of
this Note plus a margin of 150 basis points on the unpaid amount of all
Advances. Each Advance which is a Prime Rate Advance (as defined below) shall
bear interest on the unpaid principal amount thereof from the date thereof until
payment of such Prime Rate Advance in full at a fluctuating rate per annum equal
to the Prime Rate minus a margin of 1/2% per annum.
The undersigned shall notify the Bank not later than 12 noon three (3)
Business Days prior to each Advance hereunder which the undersigned requests to
maintain at a rate of interest based on LIBOR (a "Eurodollar Advance"), and not
later than 12 noon on the date of each Advance which the undersigned requests to
maintain at a rate of interest based on the Prime Rate (a "Prime Rate Advance").
All requests for Advances shall be irrevocable and shall be in the minimum
amount of $100,000. Each request by the undersigned for an Advance hereunder
shall specify whether the requested Advance is a Eurodollar Advance or a Prime
Rate Advance, the proposed date to fund the Advance, and if a Eurodollar Advance
is requested, the Interest Period applicable thereto.
Any Eurodollar Advance may be continued as a Eurodollar Advance upon
expiration of an Interest Period with respect thereto by complying with the
notice provisions contained in the definition of Interest Period; provided,
however, that no Eurodollar Advance may be continued as such when any Event of
Default of event which upon notice, passage of time or both would constitute an
Event of Default has occurred and is continuing but shall be automatically
converted to a Prime Rate Advance on the last date of the Interest Period.
The undersigned may elect from time to time to convert outstanding
Eurodollar Advances to Prime Rate Advances by giving the Bank at least three (3)
Business Days prior irrevocable notice of such election; provided that any
conversion of a Eurodollar Advance may be made only on the last day of an
Interest period with respect thereto. The undersigned may elect from time to
time to convert an outstanding Prime Rate Advance to a Eurodollar Advance by
giving the Bank irrevocable written notice of such election not later than 12
noon, three (3) business Days prior to the date of the minimum propose
conversion and further provided that (I) the conversion shall be in the minimum
principal amount of $100,000 and (ii) no Event of Default or event upon notice,
passage of time or both would constitute an Event of Default shall have occurred
and be continuing.
<PAGE>
The Bank may act without liability upon the basis of telephonic notice
believed by the Bank in good faith to be from the undersigned. The undersigned
shall immediately confirm to the Bank, in writing, each telephonic notice. All
Advances are made at the Banks' sole and absolute discretion and the Bank, at
its option and in its sole and absolute discretion and without notice to the
undersigned, may decline to make any Advance requested by the undersigned. The
undersigned hereby expressly authorizes the Bank to record on the attached
Schedule the amount and date of each Advance, the applicable rate of interest,
the applicable Interest Period, and each payment of principal and interest
thereon. In the event of any discrepancy between any such notation by the Bank
and any records of the undersigned, the records of the Bank and shall be
controlling and conclusive. The failure to make any notation to the Schedule
shall not limit or otherwise affect the obligations of the undersigned to repay
each Advance made by the Bank, in accordance with the terms hereof.
Interest shall be calculated on the basis of a 360-day year for the actual
number of days elapsed and shall be payable on the first day of each month
commencing on the first such date to occur after the date the Advance is made,
and on demand. All payments hereunder shall be payable in immediately available
funds in lawful money of the United States. The undersigned authorizes the Bank
to charge any of the undersigned's accounts for payments of principal or
interest. Any payment of principal or interest payable hereunder which is not
paid when due, whether at maturity, on demand, by acceleration, or otherwise,
shall bear interest from the date due until paid in full at a rate per annum
equal to five percent (5%) above the interest rate in effect with respect
thereto.
Subject to the terms and conditions hereof and the terms and conditions set
forth in any agreement in writing between the Bank and the undersigned, the
undersigned may borrow, repay in whole or in part, and reborrow on a revolving
basis, up to the maximum amount of this Note. Prime Rate Advances may be prepaid
without premium or penally together with accrued interest thereon to and
including the date of prepayment. Eurodollar Advances may be prepaid without
premium or penalty (except as provided in the next succeeding paragraph)
together with accrued interest thereon to and including the date of prepayment,
provided such prepayment date must be the last day of the then current Interest
Period of such Advance.
The outstanding balance (principal and accrued interest) of any Eurodollar
Advance may be prepaid in full or in part, on any Business Day, upon five (5)
days' prior written notice to the Bank of such prepayment, subject to a
prepayment premium in the amount of one (1%) percent per annum of the principal
amount of the Eurodollar Advance being prepaid. The Bank shall not be obligated
to accept any prepayment of a Eurodollar Advance unless it is accompanied by the
prepayment premium.
The undersigned has pledged or deposited with or endorsed and/or assigned
or caused to be assigned to the order of the Bank and delivered to the Bank as
collateral security for the payment of this Note and all Liabilities (as defined
hereinbelow) of the undersigned to the Bank the following property: Assignments
of liens on various New York City taxi medallions.
The term "Security" shall include the property described above and shall
also include the following property: All personal property (exclusive of
inventory) not, owned or hereafter acquired and wherever located, including, but
not limited to, all furniture, fixtures, equipment, leasehold improvements,
instruments, accounts including, without limitation, accounts owing from credit
card servicing companies or other similar agencies, documents, contract rights,
chattel paper, rights and claims for the payment of monies arising from sales
made to customers through the use of credit cards, and general intangibles,
(including, without limitation, trademarks and trade names), together with all
replacements, additions, products and cash and non-cash proceeds of all the
foregoing, and the balance of every deposit account of the undersigned with the
Bank and any other claim of the undersigned against
<PAGE>
the Bank, now or hereafter existing, and all money, instruments, securities,
documents, chattel paper, credits, claims demands and any other property, rights
and interests of the undersigned which at any time shall come into the lawful
possession or custody or under he control of the Bank or any of its agents,
associates or correspondents, for any purpose, and shall include the proceeds of
any thereof. The Bank shall be deemed to have possession of any of the Security
in transit to or set apart for it or any of its agents, associates or
correspondents.
The term "Liabilities" shall include this Note and all other indebtedness,
obligations and liabilities of any kind of the undersigned to the Bank and also
to others to the extent of their participations granted to or interests therein
created or acquired for them by the Bank, now or hereafter existing, arising
directly between the undersigned and the Bank or acquired outright,
conditionally or as collateral security from another by the Bank, absolute or
contingent, joint and/or several, secured or unsecured, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, or direct or indirect, including liabilities to the bank of the
undersigned as a member of any partnership, syndicate, association or other
group, and whether incurred by the undersigned as principal, surety, indorser,
guarantor, accommodation party or otherwise.
As security for the payment of all the Liabilities, the undersigned hereby
grant to the bank a security interest in, and a general lien upon and/or right
of set-off of, the Security.
The right is expressly granted to the Bank, its discretion and without
notice to or containing the signature of the undersigned, to file one or more
financing statements under the Uniform Commercial Code naming the undersigned as
debtor and the Bank as secured party and indicating therein the types or
describing the items of Security herein specified and forwarding a copy thereof,
after filing, to the undersigned. Without the prior written consent of the Bank
the undersigned will not file or authorize or permit to be filed in any
jurisdiction any such financing or like statement in which the Bank is not named
as the sole secured party covering the Security set forth herein.
The Bank, at its discretion, whether any Liabilities be due may, in its
name or in the name of the undersigned or otherwise, demand sue for, collect or
receive any money or property at any time payable or receivable on account of or
in exchange for, or make an compromise or settlement deemed desirable with
respect to, any of the Security, but shall be under no obligation so to do, or
the Bank may extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, or release, any of the Security, without thereby
incurring responsibility to, or discharging or otherwise affecting any liability
of, the undersigned. The Bank shall not be required to take any steps necessary
to preserve any rights of prior parties to any of the Security. Upon default
hereunder or in connection with any of the Liabilities (whether such default be
that of the undersigned or of any other party obligated thereon), the Bank shall
have the rights and remedies prided by law; and the Bank may sell or cause to be
sold in the Borough of Manhattan, New York City, or elsewhere, in one or more
sales or parcels, at such price as the bank may deem best, and for cash or on
credit or for future delivery, without assumption of any credit risk, all or any
of the Security, at any brokers' board or at public or private sale, without
demand of performance or notice of intention to sell or of time or place of sale
(except such notice as is required by applicable statue and cannot be waived),
and the Bank or anyone else may be the purchaser of any or all of the Security
so sold and thereafter hold the same, absolutely free from any claim or right of
whatsoever kind, including any equity or redemption, of the undersigned, any
such demand, notice or right and equity hereby waived and released. The
undersigned will pay to the Bank all reasonable out of pocket expenses
(including reasonable expense for legal services of every kind) of, or
incidental to, the enforcement of any of the provisions hereof or of any of the
Liabilities, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement of any of the Security or receipt of the
proceeds thereof, and for the care of the Security and defending or asserting
the rights and
<PAGE>
claims of the bank in respect thereof, by litigation or otherwise, including
expense of insurance, and all such expenses shall be indebtedness within the
terms of this Note. The Bank, at any time, at its option, may apply the net cash
receipts from the Security to the payment of principal of and/or interest on any
of the Liabilities, whether or not then due, making proper rebate of interest or
discount. Notwithstanding that the Bank, whether in its own behalf and/or in
behalf of another and/or of others, may continue to hold Security and regardless
of the value thereof, the undersigned shall be and remain liable for the payment
in full, principal and interest, of any balance of the Liabilities and expenses
at any time unpaid.
Upon the occurrence of any of the following specified events of default (of
an "Event of Default"): (1) default by the undersigned in making any payment of
principal, interest, or any other amount payable under this note when due; or
(2) default by the undersigned in the due payment of any indebtedness for
borrowed money or in the observance or performance of any covenant or condition
contained in any agreement or instrument evidencing, securing, or relating to
any such indebtedness, and continuance of any such default for a period
sufficient to cause or permit the acceleration of the maturity thereof; or (3)
default in the observance of performance of any other agreement of the
undersigned set forth herein and continuance of any such default for thirty (30)
days after notice thereof to the undersigned; or (4) any representation or
warranty made by the undersigned herein or in any certificate furnished by the
undersigned pursuant to the provisions hereof, proves untrue in any material
respect; (5) the undersigned becomes insolvent of bankrupt, is generally not
paying its debts as they become due, or makes an assignment for the benefit of
creditors, or a trustee or receiver is appointed for the consent of the
undersigned, or if appointed without the consent of the undersigned, such
Trustee or Receiver is not discharged within (30) days, or bankruptcy,
reorganization, liquidation or similar proceedings are instituted by or against
the undersigned under the laws of any jurisdiction, and if instituted against
the undersigned are consented to by it or remain undismissed for thirty (30)
days, or a write or warrant of attachment or similar process shall be issued
against a substantial part of the property of the undersigned and shall not be
released or bonded within thirty (30) days after levy; then, in any such event,
and at any time thereafter, if any Event of Default shall then be continuing,
the principal and the accrued interest in respect of each advance under this
note shall become, immediately due and payable without presentment, demand ,
protest or other notice of any kind, all of which are expressly waived by the
undersigned.
As used herein the following terms shall have the following meanings:
"Bank" shall be deemed to include the bank, its successors and assigns and
any holder thereof.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Interest Period" with respect to any Eurodollar Advance means:
(a) initially, the period commencing on the date such Eurodollar Advance is
made and ending one, two or three months thereafter as selected by the
undersigned; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Advance and ending
one, two or three months thereafter, as selected by the undersigned by
irrevocable written notice to the Bank not less than three (3) Business
Days prior to the last day of the then current Interest period with respect
to such Eurodollar Advance. In the event the undersigned fails to notify
the Bank as provided above, then in that event, the Bank has the option, in
its sole discretion, to chose on behalf of the undersigned an Interest
Rate; and
<PAGE>
(c) provided, however, that all the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period pertaining to a Eurodollar Advance would
otherwise end on a day which is not a Business Day, the interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest period
into another calendar month, in which event such Interest Period shall
end on the immediately preceding Business Day; and
(ii) if the undersigned shall fail to give notice as provided in
clause (b) above, the undersigned shall be deemed to have requested
conversion of the affected Eurodollar Advance to a Prime Rate Advance
on the last day of the then current Interest Period with respect
thereto; and
(iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
period) shall end of the last Business Day of a calendar month.
"Prime Rate" shall mean a fluctuating rate per annum equal to the rate of
interest publicly announced by the Bank at its principal office from time to
time as its Prime Rate. Any change in the Prime Rate shall be effective on the
date such change is announced by the Bank.
"LIBOR" shall mean with respect to the Interest Period pertaining to a
Eurodollar Advance, the rate per annum as quoted on telerate page 3750 at 11:00
o'clock new York Time on the second Business Day prior to the beginning of such
Interest Period.
"Undersigned" shall mean if this note is signed by more than one party,
unless otherwise stated herein, shall mean the "undersigned and each of them"
and each undertaking herein contained shall be their joint and several
undertaking. The Bank may proceed against one or more of the undersigned at one
time or from time to time as it elects in its sole and absolute discretion.
In the event that the Bank shall have determined (which determination shall
be conclusive and binding upon the undersigned) that, by reason of circumstances
affecting the London interbank market, adequate and reasonable means do not
exist for ascertaining LIBOR for any requested Interest Period or with respect
to the continuation of a Eurodollar Advance beyond the expiration of the then
current Interest Period with respect thereto, the Bank shall forthwith give
notice of such determination, confirmed in writing, to the undersigned. If such
notice is given, any outstanding Eurodollar Advance shall be converted, ont eh
last day of the then current Interest period with respect thereto, to a Prime
Rate Advance. Such notice shall be withdrawn by the Bank when the Bank shall
determine that adequate and reasonable means exist for ascertaining LIBOR.
Notwithstanding anything to the contrary contained elsewhere in this Note,
if any change after the date hereof in law, rule, regulation, guideline or order
or in the interpretation thereof by any governmental authority charged with the
administration thereof, shall make it unlawful for the Bank to make or maintain
any Advance as a Eurodollar Advance, then, by written notice to the undersigned,
the Bank may require that the Eurodollar Advance be converted to a Prime Rate
Advance, whereupon the Eurodollar Advance shall be automatically converted to a
Prime Rate Advance as of the date of such notice to the undersigned.
<PAGE>
In the event that any change in applicable law or regulation, or in the
interpretation thereof by any governmental authority charged with the
administration thereof, shall impose on or deem applicable to the Banks any
reserve requirements against this Note or the Line or impose upon the Bank any
other costs or assessments, the undersigned shall pay to the Bank on demand an
amount sufficient to compensate the Bank for the additional cost resulting from
the maintenance or imposition of such reserves, costs or assessments.
Any consents, agreements, instructions or requests pertaining to any
matter in connection with this Note, signed by any one of the undersigned, shall
be binding upon all of the undersigned. This Note and the Line shall not be
assigned by the undersigned without the Bank's prior written consent.
The undersigned in any litigation (whether or not arising out of or
relating to this Note or any other obligations or liability of the undersigned
to the bank) in which the bank and the undersigned shall be adverse parties,
waives trial by jury and the right to interpose any defense, set-off or
counterclaim of any nature or description. The undersigned agrees to pay on
demand all of the bank's reasonable out of pocket costs and expenses, including
reasonable counsel fees, in connection with collection of any amounts due to the
Bank and enforcement of its rights under this Note.
The undersigned agrees that the action, proceeding or claim against it
arising out of, or relating in any way to, this Note may be brought and enforced
in the courts of the State of New York or of the United States of America for
the Southern District Court of New York, and hereby irrevocably submits to each
such jurisdiction, which jurisdiction shall be non-exclusive. With respect to
any such action, proceeding or claim, the undersigned consents to accept service
of process and any legal summons to be served upon the undersigned and consents
that same may be served by mailing a copy by certified and/or regular mail
hereof to the undersigned at the last known address of the undersigned appearing
on the records of the Bank. Such mailing shall be deemed personal service and
shall be legal and binding upon the undersigned in any such action or claim.
Within thirty days after such mailing the undersigned shall appear, answer or
otherwise move in respect of each summons, complaint or other process. Should
the undersigned fail to appear, answer within said thirty day period, the
undersigned shall be deemed in default and judgment may be entered by the Bank
against the undersigned for the amount as demanded in any summons, complaint or
other process so served.
No modification or waiver of any provision of this note and no consent by
the Bank to any departure therefrom by the undersigned shall be effective unless
such modification or waiver shall be in writing and signed by a duly authorized
officer of the Bank, and the same shall then be effective only for the period
and on the conditions and for the specific instances specified in such writing.
no failure or delay be the Bank in exercising any right, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any rights, power of privilege.
In the event any one or more of the provision in this Note should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
This Note shall be construed according to and governed by the laws of the
Sate of New York.
ELK ASSOCIATES FUNDING CORP.
[ S E A L ] By: ________________________
Name:
Title:
By:________________________
Name:
Title:
<PAGE>
Secured
Schedules Attached to Grid Demand Promissory note
(Eurodollar/Prime Rates) in the amount of $16,000,000.00
for ELK ASSOCIATES FUNDING CORP
Initial
Amount of Interest Date of Amount of Total Notation
Date Loan Rate Maturity Repayment Outstanding Made by
- ---- --------- -------- -------- --------- ----------- -------
bank leumi USA
- --------------
January 15, 2000
Elk Associates Funding Corporation ("Borrower")
747 Third Avenue
New York, NY 10017
Attn: Mr. Gary Granoff, President
Dear Mr. Granoff:
Reference is made to promissory note dated January 15, 2000 in the
principal amount of $8,000,000.
You have agreed that for good and valuable consideration including but not
limited to the extension and increase of credit accommodations to Borrower, in
the amount of $8,000,000 that letter agreement dated January 20, 1998, shall
continue to be in full force and effect with respect to credit accommodations
now or in the future outstanding to Borrower.
You have agreed that the fist paragraph os such letter is modified to
provide as follows:
"In order to induce you to make and/or continue loans for the account of
the undersigned pursuant to Promissory Note (Grid) dated January 15,
2000, as such note is hereafter modified, extended, renewed or replaced
with other notes, the Borrower will, and will cause each affiliate and
subsidiary (to the extent applicable) to:".
Please confirm your agreement to the foregoing by signing and returning a
copy of this letter to the undersigned.
Very truly yours,
BANK LEUMI USA
By:________________________________
Fran Davis, Vice President
By:________________________________
Iris Schechter, Vice President
<PAGE>
Consented and agreed to
ELK ASSOCIATES FUNDING CORPORATION
By:____________________________
Gary Granoff, President
By:____________________________
Margaret Chance, Secretary
<PAGE>
"THIS NOTE SUPERSEDES, REPLACES AND INCREASES THE PRINCIPAL AMOUNT OF THAT
CERTAIN PROMISSORY NOTE (GRID) DATED SEPTEMBER 13, 1999 IN THE ORIGINAL
PRINCIPAL AMOUNT OF $8,000,000.00"
PROMISSORY NOTE (GRID)
New York, N.Y. January 15, 2000 $8,000,000
For value received, ELK ASSOCIATES FUNDING CORP. promises to pay to the
order of BANK LEUMI USA (the "Bank"), at its offices at 579 Fifth Avenue, New
York, New York, the principal sum of Eight Million Dollars ("Maximum Principal
Amount") or, if less, the aggregate unpaid principal sum of all loans made by
the Bank, in its sole discretion, to the maker of this Note from time to time.
The principal sum of each such loan shall be payable November 1, 1999.
Within the limits of the Maximum Principal Amount, the maker may borrow,
prepay, and reborrow in the manner provided herein.
Each loan shall bear interest (from the date of such loan), at the option
of the maker, at a rate per annum which shall be equal to (a) the rate of
interest designated by the Bank, and in effect from time to time, as its
"Reference Rate" minus 1/2% per annum, adjusted when said Reference Rate changes
(the maker acknowledges that the Reference Rate may not necessarily represent
the lowest rate of interest charged by the Bank to customers) or (b) 1 1/2% per
annum above the Libor Rate (Reserve Adjusted)(1)
- ----------
(1)"Libor Rate means, relative to any Interest Period (hereinafter defined)
for loans made pursuant to this Note and which bear interest at the "Libor Rate
(Reserve Adjusted), the rate of interest per annum determined by the Bank to be
the arithmetic mean (rounded upward to the next 1/16th of 1%) of the rates of
interest per annum at which dollar deposits in the approximate amount of the
amount of the loan to be made or continued hereunder by the Bank and having a
maturity comparable to such Interest Period would be offered to the Bank in the
London Interbank market at its request at approximately 11:00 a.m. (London time)
two Business Days prior to the commencement of such Interest Period.
"Libor Reserve Percentage" means, relative to any Interest Period for loans
hereunder, the percentage (expressed as a decimal, rounded upward to the next
1/100th of 1%) in effect on such day (whether or not applicable to the Bank)
under regulations issued from time to time by the Federal Reserve System Board
for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Federal Reserve System Board).
"Libor Rate (Reserve Adjusted)" means, relative to any loan to be made or
continued hereunder for any Interest Period, the rate of interest per annum
(rounded upwards to the next 1/16th of 1%) determined by the Bank as follows:
Libor Rate = Libor Rate
-------------------------------
(Reserve Adjusted) 1.00 - Libor Reserve Percentage
<PAGE>
for a one, two or three month term, as elected by the maker and calculated by
the Bank, in the manner hereinafter provided, but in no event in excess of the
maximum rate permitted by applicable law; provided, that in the even the Bank
shall have determined that by reason of circumstances affecting the Libor Rate
(Reserve Adjusted) adequate and reasonable means do not exist for ascertaining
the Libor Rate (Reserve Adjusted) for any Interest Period, the applicable rate
of interest during such Interest Period shall be equal to its Reference Rate
minus 1/2% per annum adjusted when said Reference Rate changes, but in no event
in excess of the maximum rate permitted by law; further provided that if, at the
end of any Interest Period, the maker has failed to timely notify the Bank of
its election of the choice of interest rate for or length of the next Interest
Period, then the interest rate in effect thereafter shall be at the Libor Rate
(Reserve Adjusted) plus 1 1/2% per annum for an Interest Period the length of
which shall be the same length as the immediately preceding Interest Period
unless such Interest Period would end after the stated maturity date of this
Note, in which case the Interest Period shall be of a duration equal to the next
longest Interest Period which would end prior to such scheduled maturity date,
provided further that no Libor Rate (Reserve Adjusted)-based loan shall be made
less than one month before the stated maturity date of this Note or after the
occurrence and continuance of an Event of Default or an event which, upon
notice, passage of time or both would constitute an Even of Default. Interest
hereunder shall be payable on the last day of each Interest Period and at
maturity (whether by acceleration or otherwise). The term "Interest Period" as
used in this Note shall mean a period of one, two or three month(s), as elected
by the maker by written or facsimile notice to the Bank given not later than
12:00 noon three Business Days prior to the commencement of an Interest Period.
No Interest Period shall extend beyond the stated maturity date of this Note.
The initial Interest Period shall begin on the last day of the immediately
preceding Interest Period. The Bank shall give notice to the maker of the
interest rate determined for each interest Period as provided herein, and such
notice shall be conclusive and binding upon the maker for all purposes absent
manifest effort. The maker shall pay to the Bank to compensate it for any loss,
cost or expense that the Bank determines is attributable to any prepayment of a
loan made by the Bank to the maker using the Libor Rate (Reserve Adjusted). Such
compensation shall include an amount equal to the excess (if any) of (i) the
amount of interest that otherwise would have accrued on the principal amount so
prepaid for the period from the date of such prepayment to the last day of the
then current Interest Period for such loan at the applicable rate of interest
for such loan provided for herein over (ii) the amount of interest that
otherwise would have accrued on such principal amount at a rate per annum equal
to the interest component of the amount the Bank would have bid in The London
Interbank market for dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by the Bank). The term "Business Day" shall mean any day
of the year on which the Bank is open for business (as required or permitted by
law or otherwise) and on which dealings in U.S. dollar deposits are carried on
in London, England.
If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for the
Bank to make Libor Rate (Reserve Adjusted)-based loans, or to maintain interest
rates based on Libor, then in the former event, any obligation of the Bank
contained herein or in any agreement of the Bank to make available such unlawful
Libor Rate (Reserve-Adjusted)-based loans shall immediately be cancelled, and in
the latter event, any such unlawful Libor Rate (Reserve Adjusted)-based loans
then outstanding shall be converted, at the Bank's option, so the interest on
the outstanding principal balance subject hereto is determined in relation to
the Reference Rate as hereinabove provided; provided however, that if any such
Change in Law shall permit any Libor Rate (Reserve Adjusted)-based loans to
remain in effect until the expiration of the Interest Period applicable thereto,
then such permitted Libor Rate (Reserve
<PAGE>
Adjusted)-based loans shall continue in effect until the expiration of such
Interest Period. Upon the occurrence of any of the foregoing events, maker shall
pay to the Bank immediately upon demand such amounts as may be necessary to
compensate the Bank for any fines, fees, charges, penalties or other costs
incurred or payable by the Bank as a result thereof and which are attributable
to any Libor Rate (Reserve Adjusted) options make available to maker hereunder,
and any reasonable allocation made by the Bank among its operations shall be
conclusive and binding upon maker.
If any Change in Law or compliance by the Bank with any request or
directive (whether or not having the for of law) from any central bank or other
governmental authority shall:
(A) subject the Bank to any tax, duty or other charge with respect to any
Libor Rate (Reserve Adjusted) options, or change the basis of taxation
of payments to the Bank of principal, interest, fees or any other
amount payable hereunder (except for changes in the rate of tax on the
overall net income of the Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by any office of the Bank;
or
(C) impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank of
making, renewing or maintaining any Libor Rate (Reserve Adjusted)-based loan
hereunder and/or to reduce any amount receivable by the Bank in connection
therewith, then in any such case, maker shall pay to the Bank immediately upon
demand such amounts as may be necessary to compensate the Bank for any
additional costs incurred by the Bank and/or reductions in amounts received by
the Bank are attributable to any Libor Rate (Reserve Adjusted)-based loan made
to maker hereunder, any reasonable allocation made by the Bank among its
operations shall be conclusive and binding upon maker.
The Bank is hereby authorized to enter on the schedule attached hereto the
amount of each loan and each payment of principal thereon, without any further
authorization on the part of the maker or any endorser or guarantor of this
Note, but the Bank's failure to make such entry shall not limit or otherwise
affect the obligations of the maker or any endorser or guarantor of this Note.
In the event that any other Liabilities (as hereinafter indicated) of maker to
the Bank are due at anytime that the Bank receives a payment from maker on
account of this Note or any such other liabilities of maker, the Bank may apply
such payments to amounts due under this Note or any such other Liabilities in
such manner as the Bank, in its discretion, elects, regardless of any
instructions from the maker to the contrary.
The maker and each endorser and guarantor of this Note acknowledge and
agree that the use of this form of Note is for their convenience, and there is
no obligation on the part of the Bank to make loans to the maker whatsoever.
Interest shall be computed on the basis of a 360-day year.
Each maker or endorser authorizes (but shall not require) the Bank to debit
any account maintained by the maker or endorser with the Bank, at any date on
which the payment of principal or of interest an any of the Liabilities is due,
in an amount equal to any unpaid portion of such payment. If the time for
payment of principal of or interest on any of the Liabilities or any other money
payable hereunder or with respect to any of the Liabilities becomes due on a day
on which the Bank's offices are
<PAGE>
closed (as required by law or otherwise), such payment shall be made on the next
succeeding business day, and such extension shall be included in computing
interest in connection with such payment. All payments by any maker or endorser
of this Note on account of principal, interest or fees hereunder shall be made
in lawful money of the United States of America, in immediately available funds.
All Property (as hereafter defined) held by the Bank shall be subject to a
security interest in favor of the Bank or holder hereof as security for any and
all Liabilities. The term "Property" shall mean the balance of every deposit
account of the maker with the Bank or any of the Bank's nominees or agents and
all other obligations of the Bank or any of its nominees or agents to the maker,
whether not existing or hereafter arising, and all other personal property of
the maker (including without limitation all money, accounts, general
intangibles, goods, instruments, documents and chattel paper) which, or evidence
of which, are not or at any time in the future shall come into the possession or
under the control of or be in transit to the Bank or any of its' nominees or
agents for any purpose, whether or not accepted for the purposes for which it
was delivered. The term "Liabilities" shall mean the indebtedness evidenced by
this note and all other indebtedness, liabilities or obligations of any kind of
the maker (or any partnership or other group of which the maker is a member) to
(a) the Bank, (b) any group of which the bank is a member, or (c) any other
person if the Bank has a participation or other interest in such indebtedness,
liabilities or obligation, whether (i) for the Bank's own account or as agent
for others, (ii) acquired directly or indirectly by the Bank from the maker or
others, (iii) absolute or contingent, joint or several, secured or unsecured,
liquidated or unliquidated, due or not due, contractual or tortious, now
existing or hereafter arising, or (iv) incurred by the maker as principal,
surety, endorser, guarantor or otherwise, and including without limitation all
expenses, including attorneys' fees, incurred by the Bank i connection with any
such indebtedness, liabilities or obligations or any of the Property (including
any sale or other disposition of the Property).
Upon the happening, with respect to any maker, endorser or guarantor of
this Note or any assets of any such maker, endorser or guarantor, of any of the
following events (each an "Event of Default"): death of the maker, endorser or
guarantor or any member of the maker, endorser or guarantor (if a partnership);
the failure to furnish the Bank with any requested information or failing to
permit inspection of books or records by the Bank or any of its agents; the
making of any misrepresentation to the Bank in obtaining credit for any of them;
dissolution (if a corporation or partnership); the making of a mortgage or
pledge; the commencement of a foreclosure proceeding; default in the payment of
principal or interest on this Note or int eh payment of any other obligation of
any said maker, endorser or guarantor held by the Bank or holder hereof or in
the performance or observance of any covenant or agreement contained in the
instrument evidencing such obligation; default in the payment of principal of or
interest on any indebtedness for borrowed money owed to any other person or
entity (including any such indebtedness in the nature of a lease) or default in
the performance or observance of the terms of any instrument pursuant to which
such indebtedness was created or is secured, the effect of which default is to
cause or permit any holder of any such indebtedness to cause the same to become
due prior to its stated maturity (and whether or not such default is waived by
the holder thereof); a change in the financial condition or affairs of any of
them which in the opinion of the Bank or subsequent holder hereof materially
reduces his, their or its ability to pay his, their or its obligation; the
suspension of a business; the making of an assignment for the benefit of
creditors, of the appointment of a trustee, receiver or liquidator for the
maker, endorser or guarantor or for any guarantor under any bankruptcy,
reorganization, arrangement of debt, insolvency, readjustment of debt,
receivership, liquidation or dissolution law or statute (including, if the
maker, endorser or guarantor is a partnership, its dissolution pursuant to any
agreement or statute), or the commencement of any such proceedings without the
consent of the maker, endorser or guarantor, as the case may be, and such
proceedings shall continue discharges for a period of 30 days; the sending of
notice of an intended bulk sale; the entry of judgements or any attachment, levy
or execution against any of his, their or its properties shall not be released,
discharged,
<PAGE>
dismissed, stayed or fully bonded for a period of 30 days or more after its
entry, issue or levy, as the case may be; or the issuance of a warrant of
distraint or assertion of a lien for unpaid taxes, this Note, if not then due or
payable on demand , shall become due and payable immediately without demand or
notice and all other debts or obligations or the makers and endorsers hereof to
the bank of holder hereof, whether due or not due and whether direct or
contingent and howsoever evidenced, shall, at the option of the Bank or holder
hereof, also become due and payable immediately without demand or notice. After
this Note becomes due, at stated maturity or on acceleration, any unpaid balance
hereof shall bear interest from the date it becomes due until paid at a rate per
annum 3% above the rate borne by this Note when it becomes due or, if such rate
shall not be lawful with respect to the undersigned, then at the highest lawful
rate. The liability of any party to commercial paper held by the bank or holder
hereof, other thank the makers and endorsers hereof, shall remain unaffected
hereby and such parties shall remain liable thereon in accordance with the
original tenor thereof. Each maker and endorser agrees that if an attorney is
retained to enforce or collect this Note or any other obligations by reason of
non-payment of this Note when due or made due hereunder, a reasonable attorney's
fee shall be paid in addition, which fees shall be as follows: 15% of the
principal,interest and all other sums due and owing to the payee or holder of
the reasonable value of the attorney's services, whichever is greater.
This Note shall be governed by the laws of the State of New York and shall
be binding upon the maker and each endorser and the maker's and each endorser's
heirs, administrators, successors and assigns. The maker and each endorser
hereby irrevocably consent to the jurisdiction of any New York State or Federal
court located in New York City over any action or proceeding arising out of any
dispute between the maker and each endorser and the Bank, and the maker further
irrevocably consents to the service of process in any such action or proceeding
by the mailing of a copy of such process to the maker at the address set forth
below. In the event of litigation between the Bank and the maker of nay matter
connected with this Note or resulting from transactions hereunder, the right to
a trial by jury is hereby waived by the Bank and the maker. The maker also
waives the right to interpose any set-off or counterclaim of any nature. The
Bank or any holder may accept late payments, or partial payments, even though
marked "payment in full" or containing words of similar import or other
conditions, without waiving any of its rights. no amendment, modification or
waiver of any provision of this Note nor consent to any departure by maker
therefrom shall be effective, irrespective of any course of dealing, unless the
same shall be in writing and signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
The rights and remedies of the Bank provided for hereunder (including but
not limited to the right to accelerate Liabilities of maker and to realize on
any security for any such Liabilities) are cumulative with the rights and
remedies of the Bank available under any other instrument or agreement or under
applicable law.
The undersigned, if more than one, shall be jointly and severally liable
hereunder.
ELK ASSOCIATES FUNDING CORP.
By:
Gary Granoff, President
By:
Margaret Chance, Secretary
(Address)
747 Third Avenue
New York, New York 10017
VALUE RECEIVED
EAB
MASTER NOTE (Eurodollar/Prime Rate)
- --------------------------------------------------------------------------------
This Note replaces and supersedes that certain Master note (Eurodollar/ Prime
Rate) dated November 30, 1998 in the principal amount of $14,000,000 from the
undersigned to the Bank.
$16,000,000 Date: October 4, 1999
FOR VALUE RECEIVED, the undersigned, a New York corporation, promises to
pay to the order of EUROPEAN AMERICAN BANK (the "Bank"), on or before December
31, 1999, (the "Maturity Date"), the sum of Sixteen Million Dollars
($16,000,000), or if less, the aggregate unpaid principal amount of all advances
made by the Bank pursuant to the line of credit (each an "Advance" and
collectively, the "Advances"), not to exceed an aggregate amount at any one time
outstanding of Sixteen Million Dollars ($16,000,000), available to the
undersigned hereunder (the "Line") together with interest thereon as set forth
herein.
Each Advance hereunder which is a Eurodollar Advance (as defined below)
shall bear interest on the unpaid principal amount thereof for the Interest
Period applicable thereto at a rate per annum equal to the Reserve Adjusted
Libor determined for each Interest Period therefor in accordance with the terms
of this Note plus a margin of 1 1/2% per annum. Each Advance which is a Prime
Rate Advance (as defined below) shall bear interest on the unpaid principal
amount thereof from the date thereof until payment of such Prime Rate Advance in
full at a fluctuating rate per annum equal to 1/2% below the rate of interest as
is publicly announced by the Bank as its Prime Rate. The undersigned shall
notify the Bank not later than 12 noon three Business Days prior to each Advance
hereunder which the undersigned requests to maintain at a rate of interest based
on Reserve Adjusted Libor (a "Eurodollar" Advance), and not later than 12 noon
on the date of each Advance which the undersigned request to maintain at a rate
of interest based on the Prime Rate (a "Prime Rate Advance"). All requests for
Advances shall be irrevocable and shall be in the minimum amount of $100,000.
Each request by the undersigned for an Advance hereunder shall specify whether
the requested Advance is a Eurodollar Advance or a Prime Rate Advance, the
proposed date to fund the Advance, and if a Eurodollar Advance is requested, the
Interest Period applicable thereto.
Any Eurodollar Advance may be continued as a Eurodollar Advance upon
expiration of an Interest Period with respect thereto by complying with the
notice provisions contained in the definition of Interest Period; provided,
however, that no Eurodollar Advance may be continued as such when any Event of
Default or event which upon notice, passage of time or both would constitute an
Event of Default has occurred and is continuing but shall be automatically
converted to a Prime Rate Advance on the last date of the Interest Period in
effect when the Bank is notified of such default or Event of Default.
The undersigned may elect from time to time to convert outstanding
Eurodollar Advances to Prime Rate Advances by giving the bank at least three
Business Days prior irrevocable notice of such election: provided that any
conversion of a Eurodollar Advance may be made only on the last day of an
Interest Period with respect thereto. The undersigned may elect from time to
time to convert an outstanding Prime Rate Advance to a Eurodollar Advance by
giving the Bank irrevocable written notice of such election not later than 12
noon, three Business Days prior to the date of the proposed conversion and
further provided that (i) the conversion shall be in the minimum principal
amount of $100,000 and (ii) no Event of Default or event upon notice, passage of
time or both would constitute an Event of Default shall have occurred and be
continuing. Notwithstanding the foregoing, no Advance may be
<PAGE>
converted to or continued as a Eurodollar Advance if the Interest Period would
extend beyond the Maturity Date.
Interest in respect of Prime Rate Advances shall be payable on the first
day of each month commending on the first such date to occur after the date the
Advance is made, and on the Maturity Date. Interest in respect of Eurodollar
Advances shall be payable on the last day of the Interest Period in respect
thereof. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. All payments hereunder shall be payable in
immediately available funds in lawful money of the United States. The
undersigned authorizes the Bank to charge any of the undersigned's accounts for
payments of principal or interest. Any payment of principal or of interest
payable hereunder which is not paid when due, whether at maturity, by
acceleration, or otherwise, shall bear interest from the date due until paid in
full at a rate per annum equal to three percent (3%) above the rate otherwise
payable with respect thereto.
All requests for advances shall be irrevocable and shall be for a minimum
of $100,000 and must be received by the Bank no later than 12:00 noon on the
date of the proposed advance. The Bank may act without liability upon the basis
of telephonic notice believed by the Bank in good faith to be from the
undersigned. In each such case, the undersigned hereby waives the right to
dispute the Bank's record of the terms of such telephonic notice. The
undersigned shall immediately confirm to the Bank in writing each telephonic
notice. All advances under the Line are at the Bank's sole and absolute
discretion and the Bank, at its option and in its sole and absolute discretion
and without notice to the undersigned, may decline to many any advance requested
by the undersigned.
Subject to the terms and conditions hereof and the terms and conditions set
forth in any agreement in writing between the Bank and the undersigned, the
undersigned may borrow, repay in whole or in part, and reborrow on a revolving
basis, up to the maximum amount of the Line. Prime Rate Advances may be prepaid
without premium or penalty together with accrued interest thereon to and
including the date of prepayment. Eurodollar Advances may be prepaid without
premium or penalty (except as provided in the next succeeding paragraph)
together with accrued interest thereon to and including the date of prepayment,
provided such prepayment date must be the last day of the then current Interest
Period of such Advance. The Bank shall maintain its records to reflect the
amount and date of each advance and of each payment of principal and interest
thereon. All such records shall, absent manifest error, be conclusive as to the
outstanding principal amount hereof; provided, however, that the failure to make
any notation to the Bank's records shall not limit or otherwise affect the
obligations of the undersigned or repay each advance made by the Bank, in
accordance with the terms hereof.
The undersigned agrees to indemnify the Bank and hold the Bank harmless
from any loss or expense which the Bank may sustain or incur, including without
limitation, interest or fees payable by the Bank to lenders of funds obtained by
it in order to maintain a Eurodollar Advance hereunder, as a consequence of (a)
default by the undersigned in payment of the principal amount of interest on a
Eurodollar Advance, (b) default by the undersigned in making any prepayment of a
Eurodollar Advance after the undersigned gives notice in accordance with this
Note and/or (c) the making of any payment of a Eurodollar Advance on a day which
is not the last day of the then applicable Interest Period with respect thereto.
When claiming indemnification under this paragraph, the Bank shall provide to
the undersigned a statement explaining the amount of any such loss or expense
which statement shall in the absence of manifest error be conclusive with
respect to the undersigned. The indemnity obligations hereunder shall survive
payment in full of the Note.
As security for the payment of this Note and all other obligations and
liabilities of the undersigned to the Bank, whether now or hereafter existing,
join, several, direct, indirect, absolute, contingent,
<PAGE>
secured, matured or unmatured, the undersigned grants to the Bank a right of
setoff against, a continuing security interest in, and an assignment and pledge
of all moneys deposits (general or special), securities and other property of
the undersigned and the proceeds thereof, now or hereafter held by the Bank on
deposit, in safekeeping, in transit or otherwise, at any time credited by or due
from the Bank to the undersigned, or in which the undersigned shall have an
interest.
Upon the occurrence and continuance of any of the following (each an "Event
of Default"): (a) default in the payment when due of any amount hereunder; (b)
filing by or against the undersigned of a petition commencing any proceeding
under any bankruptcy, reorganization, rearrangement, readjustment or debt,
dissolution or liquidation law or statute of any jurisdiction, now or hereafter
in effect; (c) making by the undersigned of an assignment for the benefit of
creditor; (d) petitioning or applying to any tribunal for the appointment of a
custodial, receiver or trustee for the undersigned or for a substantial part of
its assets; (e) death or incapacity of the undersigned (if an individual); (f)
entry of any judgement or order of attachment, injunction, or governmental tax
lien or levy issued against the undersigned or against any property of the
undersigned; (g) consent by the undersigned to assume, suffer or allow to exist,
without prior written consent of the bank, any lien, mortgage, assignment or
other encumbrance on any of its assets or personal property, now owned or
hereafter acquired, except those liens, mortgages, assignments or other
encumbrances in existence on the date hereof and consented to in writing by the
Bank; (h) default in the punctual payment or performance of this or any other
obligation to the bank or to any other lender at any time; (i) the existence or
occurrence at anytime of one or more conditions or events which, in the sole
opinion of the Bank, has resulted or is reasonably likely to result in a
material adverse change in the business, properties for financial condition of
the undersigned; (j) failure on request to furnish any financial information or
to permit inspection of the books and records of the undersigned; (k) any
warranty, representation or statement in any application, statement or agreement
with the Bank proves false in any material respect; (l) default in the
observance or performance of any covenant or agreement of the undersigned herein
or in any other agreement between the Bank and the undersigned; or (m) any of
the foregoing events (other than the event described in clause (a)) shall occur
with respect to any guarantor of the undersigned's obligations hereunder then
this Note shall, at the sole option of the Bank, become dues and payable without
notice or demand; provided, however, if an event described in clause (b), clause
(c) or clause (d) above occurs, this Note shall automatically become due and
payable.
Upon the occurrence and during the continuance of an Event of Default, the
Bank shall be entitled to setoff against and apply to the payment hereof the
balance of any account or accounts maintained with the Bank by the undersigned
and to exercise any other right or remedy granted hereunder, or under any
agreement between the undersigned and the Bank or available at law or in equity,
including, but not limited to, the rights and remedies of a secured party under
the New York Uniform Commercial Code. The failure by the Bank at any time to
exercise any such right shall not be deemed a waiver thereof, nor shall it bar
the exercise of any such right at a later date. Each and every right and remedy
granted to the Bank hereunder or under any agreement between the undersigned and
the Bank or available at law or in equity shall be cumulative and not exclusive
of any other right, powers, privileges or remedies, and may be exercised by the
Bank from time to time as often as may be necessary in the sole and absolute
discretion of the bank.
The undersigned agrees to pay, on demand, all of the Bank's costs and
expenses, including reasonable counsel fees (whether in-house or outside
counsel), in connection with the collection of any amounts due to the Bank
hereunder or in connection with the enforcement of the Bank's right under this
Note.
<PAGE>
This Note shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to principles of conflict or choice
of laws.
The undersigned covenants and represents that any reprogramming or other
corrective modifications require to permit, on or after January 1, 2000, the
proper functioning of and receipt, transmission, processing, storage,
manipulation or other utilization of date by (a) the undersigned's and it's
subsidiaries' computer systems and (ii) equipment containing embedded microchips
has been or will be timely completed such that no material adverse effect will
occur with respect to the undersigned's business or operations stemming from the
failure of the undersigned's or its subsidiaries' computer hardware or software
to function at least as effectively following December 31, 1999 as it did at all
time periods prior thereto.
THE UNDERSIGNED HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
FEDERAL OR STATE COURT IN THE STATE OF NEW YORK IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS NOTE OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND CONSENTS TO THE PLACING OF VENUE
IN THE COUNTY OF NASSAU OR OTHER COUNTY PERMITTED BY LAW. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE UNDERSIGNED HEREBY WAIVES AND AGREES NOT TO
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT
THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, TAT THE
VENUE OF THE SUIT, ACTION OR PROCEEDING IN IMPROPER, OR THAT THIS NOTE OR ANY
OTHER DOCUMENT OR INSTRUMENT REFERRED TO HEREIN MAY NOT BE LITIGATED IN OR BY
SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE UNDERSIGNED AGREES
NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY
SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION WHICH MAY BE CALLED
UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT. THE UNDERSIGNED AGREES THAT
SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO ITS
ADDRESS SET FORTH BELOW OR SUCH OTHER ADDRESS THAT THE UNDERSIGNED SHALL HAVE
NOTIFIED THE BANK IN WRITING OR ANY METHOD AUTHORIZED BY THE LAWS AND THE STATE
OF NEW YORK. EXCEPT AS PROHIBITED BY LAW, THE UNDERSIGNED HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE.
Neither the undersigned nor any affiliate of the undersigned shall use any
portion of the proceeds of to Loans, nor have any Letter of Credit issued,
either directly or indirectly, for the purpose of purchasing securities
underwritten by ABN AMRO Inc., an affiliate of the Bank.
The undersigned and the Bank hereby agree and acknowledge that any and all
information relating to the undersigned which is furnished by the undersigned to
the Bank (or to any affiliate of the Bank), and which is non-public,
confidential or proprietary in nature, shall be kept confidential by the Bank or
such affiliate in accordance with applicable law; provided, however, that such
information and other credit information relating to the undersigned may be
distributed by the Bank or such affiliate (a) to the Bank's or such affiliate's
directors, officers, employees, attorneys, affiliates, attorneys, auditors and
regulators, and (b) upon the order of a court or other governmental agency
having jurisdiction over the Bank or such affiliate, to any other party. The
undersigned and the Bank further agree that this provision shall survive the
termination of this Note.
<PAGE>
The bank shall not, by any act, delay, omission or otherwise, be deemed to
have waived any of its rights or remedies hereunder. No change, amendment,
modification, termination, wavier, or discharge, in whole or in part, of any
provision of this Note shall be effective unless in writing and signed by the
Bank, and if so given by the Bank, shall be effective only in the specific
instance in which given. The undersigned acknowledges that this Note and the
undersigned's obligations under this Note are, and shall at all times continue
to be, absolute and unconditional in all respects, and shall at all times be
valid and enforceable irrespective of any other agreements or circumstances or
any nature whatsoever which might otherwise constitute a defense to this Note
and the obligation of the undersigned under this Note. The undersigned
absolutely, unconditionally and irrevocably waives any and all right to assert
any set-off, counterclaim or crossclaim of any nature whatsoever with respect to
this Note or the undersigned's obligations hereunder.
In the event any one or more of the provisions contained in this Note
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
The undersigned hereby waives presentment, demand for payment, protest,
notice of dishonor, and any and all other notices or demands in connection with
the delivery, acceptance, performance, default or enforcement of this Note.
As used herein the following terms shall have the following meanings:
"Bank" shall be deemed to include the Bank, its successors and assigns and
any holder thereof.
"Business Day" means (a) a day other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close and (b) relative tot he date of (i) continuing an Advance as, or
converting an Advance to, a Eurodollar Advance, (ii) making any payment or
prepayment of principal of or payment of interest on a Eurodollar Advance, or
(iii) the undersigned giving any notice (or the number of Business Days to
elapse prior tot he effectiveness thereof) in connection with any matter
referred to in (b)(i) or (b)(ii), any day on which dealings in U.S. dollars are
carried on in the London interbank eurodollar market.
"Eurocurrency Reserve Requirement" means for any day as applied to a
Eurodollar Advance, the aggregate (without duplication) of the rates (expressed
as a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
governmental authority having jurisdiction with respect thereto), as from time
to time hereafter in effect, dealing with reserve requirements prescribed for
eruocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of such Board) maintained by a member bank of such system.
"Interest Period" with respect to any Eurodollar Advance means:
(a) Initially, the period commencing on the date such Eurodollar Advance is
made and ending one, two or three months thereafter; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such eurodollar Advance and ending one,
two or three months thereafter, as selected by the undersigned by irrevocable
written notice to the bank not less than three (3) Business Days prior to the
last day of the then current Interest Period with respect to such Eurodollar
Advance; provided, however, that all of the foregoing provisions relating to
Interest Periods are subject to the following:
<PAGE>
(i) if any Interest Period pertaining to a Eurodollar Advance would
otherwise end on a day which is not a Business Day, the Interest Period
shall be extended to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) if the undersigned shall fail to give notice as provided in
clause (b) above, the undersigned shall be deemed to have requested
conversion of the affected Eurodollar Advance to a Prime Rate Advance of
the last day of the then current Interest Period with respect thereto;
(iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of a calendar month; and
(iv) no Interest Period may be selected which ends later than the
Maturity Date.
"Prime Rate" shall mean a fluctuating rate per annum equal to the rate of
interest publicly announced by the Bank at its principal office from time to
time as its Prime Rate. Any change int he Prime Rate shall be effective on the
date such change is announced by the Bank.
"Reserve Adjusted Libor" shall mean with respect to the Interest Period
pertaining to a Eurodollar Advance, the rate per annum equal to the quotient
(rounded upwards to the next highest 1/16 of one percent) of (a) the annual rate
of interest at which dollar deposits of an amount comparable to the amount of
such Loan and for a period equal to the Interest Period applicable thereto are
offered to the ban in the London interbank market at approximately 11:00 a.m.
(London time) on the second Business Day prior to the beginning of such Interest
Period, divided by (b) a number equal to 1.00 minus the Eurocurrency Reserve
Requirement.
"Undersigned" shall mean, if this Note is signed by more than one party,
unless otherwise stated herein, shall mean the "undersigned and each of them"
and each undertaking herein contained shall be their joint and several
undertaking. The Bank may proceed against one or more of the undersigned at one
time or from time to time as it elects in its sole and absolute discretion.
In the event that the Bank shall have determined (which determination shall
be conclusive and binding upon the undersigned) that, by reason of circumstances
affecting the London interbank market, adequate and reasonable means do not
exist for ascertaining the Reserve Adjusted Libor for any requested Interest
Period or with respect to the continuation of a Eurodollar Advance beyond the
expiration of the then current Interest Period with respect thereto, the Bank
shall forthwith give notice of such determination, confirmed in writing, to the
undersigned. If such notice is given, any outstanding Eurodollar Advance shall
be converted, on the last day of the then current Interest Period with respect
thereto, to a Prime Rate Advance. Such notice shall be withdrawn by the Bank
when the Bank shall determine that adequate and reasonable means exist for
ascertaining Reserve Adjusted Libor.
Notwithstanding anything to the contrary contained elsewhere in this Note,
if any change after the date hereof in law, rule, regulation, guideline or order
or in the interpretation thereof by any governmental authority charged with the
administration thereof, shall make it unlawful for the Bank to make or maintain
any Advance as a Eurodollar Advance, then, by written notice to the undersigned,
the Bank may require that the Eurodollar Advance be converted to a Prime Rate
Advance, whereupon the
<PAGE>
Eurodollar Advance shall be automatically converted to a Prime Rate Advance as
of the date of such notice to the undersigned.
In the event that any change in applicable law or regulation, or in the
interpretation thereof by any governmental authority charged with the
administration thereof, shall impose on or deem applicable to the Bank any
reserve requirements against this Note or the Line or impose upon the Bank any
other costs or assessments, the undersigned shall pay to the Bank on demand an
amount sufficient to compensate the Bank for the additional cost resulting from
the maintenance or imposition of such reserves, costs or assessments.
Any consents, agreements, instructions or requests pertaining to any matter
in connection with this Note, signed by any one of the undersigned, shall be
binding upon all of the undersigned. This Note shall bind the respective
successors, heirs or representatives of the undersigned. This Note and the Line
shall not be assigned by the undersigned without the Bank's prior written
consent.
IN WITNESS WHEREOF, the undersigned has duly executed this Note the day and
year first above written.
Witness:________________ Elk Associates Funding Corp.
By:__________________________
Name: Gary C. Granoff
Title: President
Borrower's Address:
747 Third Avenue
New York, NY 10017
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> (380,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 417,888
<DEPRECIATION> 291,220
<TOTAL-ASSETS> 61,891,295
<CURRENT-LIABILITIES> 48,488,341
<BONDS> 0
0
0
<COMMON> 13,402,954
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 61,891,295
<SALES> 0
<TOTAL-REVENUES> 3,274,408
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,059,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,546,047
<INCOME-PRETAX> 668,532
<INCOME-TAX> 11,983
<INCOME-CONTINUING> 656,549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 656,549
<EPS-BASIC> .376
<EPS-DILUTED> .376
</TABLE>
