<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-4923
WESTMINSTER CAPITAL, INC.
(Exact name of the Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 95-2157201
(State or Other Jurisdiction of
Incorporation or Organization) (I.R.S. Employer Identification No.)
9665 Wilshire Boulevard, M-10, Beverly Hills, California 90212
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (310) 278-1930
Title of Each Class
Common Stock, Name of Each Exchange on which Registered
$1.00 Par Value Per Share Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
</TABLE>
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non affiliates of the
Registrant, based upon the closing sale price on the Pacific Stock Exchange of
its common stock on March 15, 1996 was approximately $6,116,000. For purposes
of the foregoing calculation, certain persons that have filed reports on
Schedule 13D with the Securities and Exchange Commission with respect to the
beneficial ownership of more than 5% of the Registrant's outstanding voting
stock and directors and executive officers of the Registrant have been excluded
from the group of stockholders deemed to be nonaffifliates of the Registrant.
The number of shares of common stock, $1.00 par value per share, of the
Registrant outstanding as of March 15, 1996, was 7,814,607.
DOCUMENTS INCORPORATED BY REFERENCE:
Proxy Statement for 1996 Annual Meeting of Stockholders is incorporated in Part
III of this Report.
<PAGE> 2
WESTMINSTER CAPITAL, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995
CONTENTS
<TABLE>
<S> <C>
PART I
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 5
ITEM 3. LEGAL PROCEEDINGS 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 6
PART II
ITEM 5. MARKET FOR THE CORPORATION'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 7
ITEM 6. SELECTED FINANCIAL DATA 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 13
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
CORPORATION 26
ITEM 11. EXECUTIVE COMPENSATION 26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 26
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 26
Index to Exhibits 29
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
Until 1991 the business of Westminster Capital, Inc. (the
"Corporation") primarily consisted of the operations of a subsidiary, FarWest
Savings and Loan Association (the "Association").
In January 1991 the Resolution Trust Corporation (hereafter RTC) took
possession of the Association as sole conservator pursuant to an order issued
by the Office of Thrift Supervision (hereafter OTS). The conservatorship did
not apply to the Corporation. Subsequently, the conservatorship was converted
to a receivership under the control of the RTC. Pursuant to that receivership,
the assets and liabilities of the Association have been liquidated, the
Association's branches have been sold or closed and the Association has been
effectively eliminated as a going concern. For this reason, operating results
of the Association have not been included with those of the Corporation and
will not be so included in the future.
Since the RTC took possession of the Association, the Corporation has
acquired an interest in a local telephone service company (see "Telephone
Company Investment", below), purchased a loan portfolio secured by automobile
leases (see "Loans Secured by Automobile Leases" below), purchased a
subordinated convertible debenture (see "Subordinated Convertible Debenture",
below), made several loans secured by real property mortgage loans (see
"Mortgage Lending", below), purchased and disposed of a controlling interest in
a furniture rental company (see "Furniture Rental Business", below) and
increased its investment in, operated and sold an apartment house complex
located in Las Vegas, Nevada (see "Apartment House Business", below).
The Corporation is a Delaware corporation formed in 1959. The
executive office of the Corporation is located at 9665 Wilshire Boulevard,
Suite M-10, Beverly Hills, California 90212 and its telephone number is (310)
278-1930.
TELEPHONE COMPANY INVESTMENT
The Corporation acquired a limited partnership interest in Global
Telecommunications Systems, LTD. ("Global Telecommunications") in October 1993
and had invested $390,000 in that partnership at December 31, 1993 to fund a
telephone accessing network on two military bases. During 1994, the Corporation
invested an additional $875,000 in Global Telecommunications, including
$185,000 in the two ongoing projects and $690,000 in a network for two
additional military bases.
Global Telecommunications has contracts with the four military bases
to install and operate telephone network systems which include long distance
telephone service. Telephone system revenue is generated through the use of
the system by the individual subscribers. This revenue is partially offset by
time charges from the long distance telephone provider. Under the Global
Telecommunications partnership agreement the Corporation is entitled to 75% of
the partnership distributions (which is proportional to its investment) until
it receives a return of its investment plus a 10% per annum return thereon.
Thereafter the Corporation is entitled to 60% of all distributions with respect
to the first two projects and 67.5% of all distributions with respect to the
last two projects. All four of the projects have been completed and were
profitable during 1994 and 1995. The consolidated financial statements include
this investment on a consolidated basis.
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LOANS SECURED BY AUTOMOBILE LEASES
During August 1995 the Corporation purchased $3,551,000 of loans, net
of discount of $742,000, from a financial institution. The loans are to
automobile leasing companies which act as the lessors' in automobile leasing
transactions with lessees and the loans are secured by the leases. The loans
have an average contractual maturity of approximately 18 months and have a
weighted average interest rate of 8%. The yield will be increased by the
discount to be accreted to income over the lives of the loans.
SUBORDINATED CONVERTIBLE DEBENTURE
On November 30, 1995, the Corporation purchased a 9% Subordinated
Convertible Debenture in the amount of $1,250,000 issued by NAL Financial
Group, Inc. ("NAL"). The Debenture is due and payable in one year with
interest payments due quarterly. The Debenture is convertible into NAL common
stock at any date prior to maturity based on a conversion formula. The
Corporation also received 87,500 detachable common stock purchase warrants at a
fixed price of $14 per share for a five-year period from the date of issuance.
At December 31, 1995, the closing bid price of NAL was quoted at $13 5/8 on
NASDAQ.
MORTGAGE LENDING
On September 3, 1993 the Corporation purchased 70 mortgage loans for a
purchase price of $375,000. The loans had an interest rate of 9% per annum and
were secured by first mortgages on single family residences. The loans were
sold to an unaffiliated party for $530,270, including accrued interest, on
October 29, 1993.
During the period from September 1993 through July 1995 the
Corporation made several loans which aggregated approximately $7,313,000 and
were secured by mortgages or deeds of trust on residential and commercial
properties as well as notes secured by mortgages and deeds of trust on
residential and commercial properties. At December 31, 1995 the entire
principal balance and accrued interest thereon had been paid in full. However,
there was also approximately $1,180,000 due in loan fees and penalties. These
fees and penalties were due at various dates during 1994 and 1995 and were all
past due at December 31, 1995, and bear interest at approximately 15%. These
fees and penalties will be recognized on a cash basis as the ultimate
collectibility is in doubt. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations-Past Due Loans, Interest and
Loan Fees."
FURNITURE RENTAL BUSINESS
In June 1992 the Corporation purchased all of the issued and
outstanding shares of Class B Common Stock of Express Rental, Inc. ("Express"),
a closely held corporation engaged in the business of renting furniture for
residential and business purposes in Southern California. In connection with
the stock purchase the Corporation also loaned Express $1,800,000 which was
subsequently paid in full. The shares of Class B Common Stock purchased by the
Corporation constituted 50% of the equity of Express represented by all
outstanding shares of common stock and gave the Corporation the right to elect
a majority of the Express directors.
In June 1993 the Corporation sold its equity investment in Express for
an amount equal to its cost ($200,000), payable $125,000 in cash and the
balance pursuant to a promissory note payable in two years and secured by a
pledge of all of the outstanding shares of Common Stock of Express. The note
was paid in full on January 2, 1996. The Consolidated Statement of Operations
for 1993 reflects the income for that period in loss from discontinued
operations, net of tax.
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APARTMENT HOUSE BUSINESS
In 1988 the Corporation invested in a real estate partnership which
developed, owned and operated a 432 unit apartment project in a suburb of Las
Vegas, Nevada. The investment was made through two wholly-owned subsidiaries.
To stay foreclosure proceedings initiated by the construction lender, the
partnership filed for protection under the Federal Bankruptcy Law in May 1991.
A plan of reorganization was subsequently confirmed which required the
Corporation to advance to the partnership approximately $1 million to enable
the partnership to pay various fees and satisfy miscellaneous claims. As part
of the plan, the construction lender extended the maturity of the existing
financing to October 31, 1993. The additional $1 million investment brought
the Corporation's total equity investment in the partnership to $3.25 million.
As a result of the default by certain of the partners on obligations
owed to a subsidiary of the Corporation, that subsidiary exercised its rights
on default and acquired the interest of those partners. In October 1993 the
apartment house project was sold for an aggregate sales price of $18,050,000,
which resulted in a pre-tax loss of $1,245,000 to the Corporation, which is
included in loss from discontinued operations, net of tax.
EMPLOYEES
As of December 31, 1995, the Corporation had thirteen salaried
employees (including nine Global Telecommunications employees), two of whom are
executive officers.
ITEM 2. PROPERTIES
The executive office of the Corporation is located at 9665 Wilshire
Boulevard, Suite M-10, Beverly Hills, California 90212, telephone (310)
278-1930. The Corporation's executive office is leased for a five year term
ending in 1997.
ITEM 3. LEGAL PROCEEDINGS
During 1995, the Corporation received approximately $1.2 million in
net proceeds from a settlement of claims asserted on behalf of the Corporation
against Drexel Burnham Lambert Inc. ("Drexel"), Michael Milken ("Milken") and
other related parties in an action filed in the Los Angeles County Superior
Court in 1989. The action involved claims of various violations of federal and
state securities laws by Drexel, Milken and the other parties. The $1.2
million represents an award of approximately $1.9 million, less court directed
attorneys' fees of approximately $.7 million. During 1994, the Corporation
received approximately $3.5 million in net proceeds which represents an award
of approximately $5.4 million, less court directed attorneys' fees of
approximately $1.9 million. During 1993, the Corporation received
approximately $16.8 million in net proceeds which represents an award of
approximately $25.9 million, less court directed attorneys' fees of
approximately $9.1 million.
Although the Corporation expects to receive additional settlement
payments in the future, the timing and amounts of such revenues are not
determinable. The Corporation did receive an additional payment of
approximately $696,000, net of court directed attorneys' fees, in the first
quarter of 1996 which will be reflected in the Corporations' first quarter 1996
consolidated financial statements.
On April 15, 1994 the Corporation received notice from the RTC that
the RTC had decided to commence an action against the Corporation and three of
its present and former directors relating to transactions involving the
association. On February 14, 1995 a Settlement Agreement and Release was
entered into by and between the RTC and the Corporation and three of its
present and
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former directors ("Directors"). The Settlement Agreement provides for payment
of $4 million by the Corporation to the RTC, requires the RTC to cooperate with
the Corporation in connection with the pending proceedings to recover tax
payments made by the Corporation to the State of California, and releases all
claims among the parties. The Settlement Agreement, which specifically
acknowledges that the Corporation and Directors have consistently denied any
liability to the RTC, was entered into for purposes of compromising the claims
and avoiding the cost of a time consuming and potentially lengthy legal battle
that would take management time, effort and resources. The $4 million
settlement was provided for in the 1994 consolidated financial statements and
paid in the first quarter of 1995.
A wholly-owned subsidiary of the Corporation is a party to litigation
entitled BURES V. SILVER RIDGE APARTMENTS, LTD. filed in March 1993 and pending
in the Eighth Judicial District Court of Clark County, Nevada. The case
relates to the apartment house project described above under "Business -
Apartment House Business," which was sold in October 1993. The plaintiff, who
is a creditor of a former general partner of the partnership that owned the
apartment house project, alleges that he acquired a 69% interest in the
partnership prior to the sale of the project as a result of judgment
enforcement proceedings against the prior general partner. The prior general
partner had given the Corporation's wholly-owned subsidiary a security interest
in its partnership interest, that security interest was foreclosed and, as a
result, the partnership interest was acquired by the Corporation's wholly-owned
subsidiary. The Corporation believes that the judicial enforcement proceedings
brought by the plaintiff were improper and had no legal effect on the ownership
of the general partnership interest and that the security interest held by the
Corporation's wholly-owned subsidiary was senior in priority to the interest
claimed by the plaintiff, which means that the Corporation's wholly-owned
subsidiary would own the general partnership interest in any event. The
plaintiff is seeking an order declaring that he is the general partner of the
partnership and entitled to possession of its property, and a judgment quieting
title to general and limited partnership interests representing a 69% interest
in the partnership and other relief determined by the court to be appropriate.
The matter presently has no trial date in State District Court but may be
recalendared in the near future. The Corporation believes that the claims
asserted are without merit and intends to vigorously contest the case.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
EXECUTIVE OFFICERS OF REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following
information is included as an unnumbered item in part I of the Report in lieu
of being included in the Proxy Statement for the Annual Meeting of Stockholders
to be held on May 30, 1996.
The follwing table sets forth certain information with respect to the
executive officers of the Corporation:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
William Belzberg 63 Chairman of the Board and
Chief Executive Officer
Philip J. Gitzinger 54 Executive Vice President and
Chief Financial Officer
</TABLE>
The term of office of the officers may be terminated at any time by
the Board of Directors.
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Mr. William Belzberg has served as chairman of the Board of Directors
of the Corporation since 1977, and from 1977 to January 1991 he served as
Chairman of the Board of Directors of FarWest Savings and Loan Association, a
savings and loan association owned by the Corporation during that period. Mr.
Belzberg was also President and Chief Executive Officer of the Corporation in
1987 and 1988 and has served as Chief Executive Officer since September 1990.
Mr. Philip J. Gitzinger has served as Executive Vice President and
Chief Financial Officer of the Corporation since 1994. From 1991 to 1994, Mr.
Gitzinger was Executive Vice President and Chief Financial Officer of GBC
Bancorp, a bank holding company located in Los Angeles. Prior thereto, he was
a partner with the certified public accounting firm of KPMG Peat Marwick LLP in
Los Angeles.
PART II
ITEM 5. MARKET FOR THE CORPORATION'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Corporation's Common Stock is traded on the Pacific Stock Exchange
under the symbol "WI." The following table sets forth the range of high and low
sales prices for the Common Stock of the Corporation for the periods indicated,
as reported by the Pacific Stock Exchange.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1995
----
First Quarter $ 1 15/16 $ 1 1/8
Second Quarter 1 15/16 1 5/8
Third Quarter 2 1/4 1 1/2
Fourth Quarter 2 5/16 2
1994
----
First Quarter $ 1 7/16 $ 1 1/8
Second Quarter 1 1/4 7/8
Third Quarter 1 1/8 7/8
Fourth Quarter 1 3/8 1 1/4
</TABLE>
The Corporation had approximately 1,085 holders of record of its
Common Stock as of March 15, 1996.
The Corporation has not paid cash dividends since 1989 and intends to
retain all cash resulting from its business operations for future acquisitions
and investments.
ITEM 6. SELECTED FINANCIAL DATA
Because the Corporation does not have access to audited financial data
with respect to the Association for any period subsequent to December 31, 1990,
the financial data for the Association is omitted for 1991 and subsequent
years. The RTC took possession of the Association on January 11, 1991.
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SELECTED FINANCIAL DATA
(excluding the Association)
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Total assets $28,199 $29,473 $27,311 $29,058 $15,034
Cash and cash
equivalents 1,715 845 23,257 6,166 8,267
Loans receivable, net 2,513 716 1,410 92 496
Securities available
for sale 20,247 25,402 - 1 1
Subordinated convertible
debenture, available for sale 1,250 - - - -
Telephone systems, net 1,333 1,579 546 - -
Investment in real estate - - - 18,757 2,250
Total liabilities 5,099 7,990 4,015 18,196 1,147
Shareholders' equity 23,100 21,483 23,296 10,862 13,887
========================================================================
EARNINGS DATA:
Interest income $ 1,467 $ 1,139 $ 219 $ 277 $ 858
Loan fees 320 75 - - -
Lawsuit settlement, net 1,209 3,528 16,819 - -
Telephone system revenue 1,522 1,102 14 - -
Gain on sale of
investments - - - - 890
Gain on sale of loans - - 150 - -
Refund of litigation costs - 757 - - -
Income (loss) from
continuing operations 1,308 (1,608) 12,844 (2,874) (716)
(Loss) from discontinued
operations - - (410) (151) -
Net income (loss) 1,308 (1,608) 12,434 (3,025) (716)
========================================================================
PER SHARE DATA:
Net income (loss) per share
from continuing operations $.17 $(.21) $1.64 $(.37) $(.09)
Net (loss) per share from
discontinued operations - - $(.05) $(.02) -
Net income (loss) per
share $.17 $(.21) $1.59 $(.39) $(.09)
Book value per share
(end of period) $2.96 $2.75 $2.98 $1.39 $1.78
Weighted average shares
outstanding 7,815 7,815 7,815 7,815 7,815
Cash dividends per share - - - - -
========================================================================
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Corporation's financial statements for the years 1991 through 1995
do not include the operations or assets and liabilities of the Association
because the Association was seized by the RTC on January 11, 1991. See
"Business - General".
At December 31, 1995 the Corporation's principal assets consisted of
cash and cash equivalents, securities available for sale, a subordinated
convertible debenture, available for sale, an investment in Global
Telecommunications, a limited partnership engaged in constructing and operating
local telephone services for military residential quarters (See "Business -
Telephone Company Investment"), and loans secured by automobile leases (See
"Business - Loans Secured by Automobile Leases").
The Corporation's major source of on-going income is limited to the
interest earned on its cash and cash equivalent positions, interest on
securities, interest on its loan portfolio and income from Global
Telecommunications.
RESULTS OF OPERATIONS
Revenues for 1995 were $4,596,000 compared to $6,706,000 for 1994.
The decrease primarily resulted from a significant reduction in the amounts
received from the Drexel, Milken litigation. See "Legal Proceedings". In
1995, the Corporation received $1,209,000 net of attorneys' fees as compared to
$3,528,000, net of attorneys' fees in 1994. Although the Corporation expects
to receive additional settlement payments in the future, the timing and amounts
of such revenues are not determinable. The Corporation did receive an
additional payment of approximately $696,000, net of court directed attorneys'
fees, in the first quarter of 1996 which will be reflected in the Corporations'
first quarter 1996 consolidated financial statements. The decrease in 1995
also resulted from a refund of litigation costs incurred in prior years which
was recognized in 1994. There was no such refund in 1995.
The decrease in revenues in 1995 was partially offset by increases in
interest on loans of $196,000, loan fees of $245,000, interest on securities of
$132,000 and telephone system revenue of $420,000. Interest on loans and
securities increased because of higher interest rates during 1995 which were
only partially offset by lower average principal balances outstanding. Loan
fees increased because they are recognized on the cash basis as received due to
the uncertainty of collectibility. Telephone system revenue, which consists
entirely of billings for telephone charges, increased due to the fact that 1995
was the first full year of operations for all four bases.
Revenues for 1994 were $6,706,000 compared to $17,250,000 for 1993.
The decrease primarily resulted from a reduction in the amounts received from
the Drexel, Milken litigation. See "Legal Proceedings". In 1994, the
Corporation received $3,528,000 net of attorneys' fees as compared to
$16,819,000, net of attorneys' fees in 1993.
The decrease in revenues was partially offset by increases in interest
on loans of $362,000, interest on securities of $558,000, telephone system
revenue of $1,088,000 and a $757,000 refund of litigation costs incurred in
prior years. Interest income increased because of the investment of funds
received in late 1993 from the lawsuit settlement. Telephone system revenue
increased due to the expanded operations of Global Telecommunications.
Total expenses for 1995 were $2,819,000 compared to $6,422,000 for
1994. The decrease was due to a $4,000,000 regulatory settlement in 1994 (See
"Legal Proceedings"). There was no such settlement in 1995. General and
administrative expenses also decreased $162,000 in 1995. The decreases were
partially offset by increases of $204,000 in telephone time charges and
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$355,000 of telephone system expenses in 1995. Telephone time charges and
telephone system expenses increased because 1995 was the first full year of
operations for all four bases.
Total expenses for 1994 were $6,422,000 compared to $720,000 for 1993.
The increase was due to a $4,000,000 regulatory settlement in 1994 and
increases in telephone time charges of $508,000, telephone system expenses of
$275,000 and general and administrative expenses of $919,000. Telephone time
charges and telephone system expenses increased because of the expansion of
Global Telecommunications in 1994.
General and administrative expenses for the years 1993 through 1995
consisted principally of legal fees incurred in defending litigation pending
against the Corporation and its officers and directors (see "Legal
Proceedings") as well as salaries, occupancy expense and other costs.
The decrease in general and administrative expenses for 1995 compared
to 1994 primarily resulted from a reduction of legal expenses of approximately
$400,000 during 1995. This decrease was partially offset by an increase in
most other expense categories due to the continued increase in the
Corporation's activities during 1995. The increase in general and
administrative expenses for 1994 as compared to 1993 resulted from an increase
in legal expenses of approximately $423,000 and increases in most expense
categories. Legal expenses increased because of the RTC potential litigation
which was settled in 1995. All other expense categories increased due to the
increase in the Corporation's activities during 1994.
The 1995 provision for income taxes primarily reflects a deferred
provision for income before taxes less non taxable interest for Federal income
tax purposes and a deferred provision for income before taxes for State income
tax purposes. The 1994 provision for income taxes primarily reflects a
provision for unresolved tax issues. The 1993 provision primarily reflects a
deferred provision for the settlement of the Drexel and Milken claims, offset
by net operating loss carryforwards of the Corporation.
The loss from discontinued operations, net of tax, of $410,000 for
1993 reflects the loss from the Las Vegas apartment house complex and the
Corporation's portion of Express's income for 1993 before they were sold.
In the fourth quarter of 1994, the Corporation received the
preliminary results provided by the Franchise Tax Board with respect to its
refund claim for approximately $3.9 million (including accrued interest of $1.2
million). Those audit findings propose to deny the refund claim. The
Corporation has filed a protest with the California Franchise Tax Board which
sets forth its position with respect to the refund claims. While the
Corporation remains convinced that it will eventually recover all or a
substantial portion of its refund claim, in 1992 the Corporation established a
valuation allowance of 50%, adjusting the carrying value of this asset to
$1,954,000 at December 31, 1992, to reflect the uncertainties attributable to
the California Franchise Tax Board's position. Due to continuing uncertainties
and the length of time it will take to resolve this matter, management recorded
an additional provision for unresolved tax issues of $1,954,000 during 1994.
The provision is included in the provision for income taxes in the 1994
Consolidated Statement of Operations.
PAST DUE LOANS, INTEREST AND LOAN FEES
During the period from September 1993 through July, 1995 the
Corporation made several loans which aggregated approximately $7,313,000 and
were secured by mortgages or deeds of trust on residential and commercial
properties as well as notes secured by mortgages and deeds of trust on
residential and commercial properties. At December 31, 1995 the entire
principal balance and accrued interest thereon had been paid in full. However,
there was also approximately $1,500,000 in loan fees and penalties which were
due at various dates during 1995 and 1994 and bear interest at approximately
15%.
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During 1995, the Corporation received approximately $320,000 of the
fees and penalties due. The balance of $1,180,000 plus accrued interest of
$70,000 is all past due at December 31, 1995. Due to the past due nature of
these fees, penalties and interest and the questionable value of the remaining
collateral, none of these amounts have been recognized in the consolidated
financial statements. Income will only be recognized as cash payments are
received.
LIQUIDITY
The principal changes in the Corporation's financial condition at
December 31, 1995 as compared to December 31, 1994 are the decrease in the
accumulated deficit of $1,308,000 resulting from the net income for the year
ended December 31, 1995, and the significant decrease in securities available
for sale which was accompanied by increases in cash and cash equivalents
subordinated convertible debenture and loans receivable resulting from the
purchase of an automobile leasing portfolio. Since these securities available
for sale have a weighted average maturity of approximately 16 months, the
Corporation continues to maintain a very strong liquidity position.
The Corporation's financial position at December 31, 1995 remained
strong. Shareholders' equity was $23,100,000 (as compared to $21,483,000 at
December 31, 1994), and the Company had no debt, although it did have
$4,349,000 in income tax liabilities, $181,000 in accounts payable and $104,000
in accrued expenses. The income tax liabilities primarily consist of tax
provisions for the settlements received in connection with the Drexel and
related litigation (partially offset by net operating loss carryfowards).
Accrued expenses decreased due to the $4,000,000 payment to the RTC in 1995
relating to the Settlement Agreement and Release entered into by and between
the RTC, the Corporation and three of its present and former directors.
The Corporation continues to seek an investment in or an acqusition of
one or more businesses, although no assurances can be given that any such
acquisitions or investments will be made or, if made, that they will be
successful.
RECENT ACCOUNTING DEVELOPMENTS
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). This Statement establishes accounting standards for the
recognition of impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and for
long-lived assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of.
Under SFAS 121, an entity shall review for impairment its long-lived
assets and certain identifiable intangibles to be held and used whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. In performing this review, the entity shall estimate the
future cash flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized, measured as the amount by which the carrying
amount of the asset exceeds the fair value of the asset, as a component of
income from continuing operations before income taxes.
SFAS 121 requires that all long-lived assets and certain identifiable
intangibles to be disposed of that are not covered by APB Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions", shall be reported at the lower of carrying amount or
fair value less cost to sell. Any loss resulting from this measurement, along
with gains and losses resulting from subsequent revisions in estimates of fair
value less cost to sell, shall be reported as a component of income from
continuing operations before income taxes.
11
<PAGE> 12
SFAS 121 is effective for financial statements issued for fiscal years
beginning after December 15, 1995 and is required to be adopted prospectively.
Long-lived assets and identifiable intangibles held by the Corporation consist
of telephone systems and office furniture and equipment. The Corporation has
not yet adopted SFAS 121; however, given the Corporation's current accounting
policies for recording and measuring its long-lived assets and identifiable
intangibles, the Corporation does not anticipate a material impact on its
operations or financial position from the implementation of SFAS 121.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
SFAS 123 established financial accounting and reporting standards for
stock-based employee compensation plans. Those plans include all arrangements
by which employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts based on
the price of the employer's stock. Examples are stock purchase plans, stock
options, restricted stock, and stock appreciation rights. This Statement also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from nonemployees. Those transactions must be
accounted for, or at least disclosed in the case of stock options, based on the
fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measurable. Under SFAS 123,
companies that do not follow the fair value based method of accounting in the
financial statements are required to provide pro forma disclosure of net income
and earnings per share in the footnotes to the financial statements as if they
had adopted the fair value method of accounting for stock based compensation.
The accounting requirements of SFAS 123 are effective for transactions
entered into in fiscal years that begin after December 15, 1995. The
disclosure requirements of SFAS 123, are effective for financial statements for
fiscal years beginning after December 15, 1995, or for an earlier fiscal year
for which SFAS 123 is initially adopted for recognizing compensation cost. The
Corporation has not yet implemented SFAS 123 and does not believe that it will
have a material adverse effect on its financial position or results of
operations. Upon implementation, the Corporation intends to elect the pro
forma method of disclosure to comply with the requirements of SFAS 123.
12
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Westminster Capital, Inc.
Beverly Hills, California:
We have audited the accompanying consolidated statements of financial condition
of Westminster Capital, Inc. and subsidiaries (the "Corporation") as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Westminster
Capital, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in note 2 of the notes to the consolidated financial statements,
the Corporation adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," on January 1, 1994.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
March 1, 1996
13
<PAGE> 14
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 1,715,000 $ 845,000
Securities available for sale, at market 20,247,000 25,402,000
Subordinated convertible debenture, available for sale 1,250,000 -
Loans receivable, net 2,513,000 716,000
Accounts receivable 321,000 257,000
Income tax refunds receivable 1,954,000 1,954,000
Less: allowance for doubtful receivable (1,954,000) (1,954,000)
------------------------------------
Income tax refunds receivable, net - -
Accrued interest receivable 522,000 611,000
Telephone systems, net 1,333,000 1,579,000
Office furniture and equipment, net 45,000 58,000
Other assets 253,000 5,000
------------------------------------
TOTAL ASSETS $28,199,000 $29,473,000
====================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------
LIABILITIES:
Accounts payable $ 181,000 $ 65,000
Accrued expenses 104,000 4,223,000
Income taxes 4,349,000 3,207,000
Minority interest in limited partnership 465,000 495,000
------------------------------------
TOTAL LIABILITIES 5,099,000 7,990,000
------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value: 30,000,000 shares
authorized: 7,815,000 shares issued and
outstanding in 1995 and 1994 7,815,000 7,815,000
Capital in excess of par value 55,946,000 55,946,000
Accumulated deficit (40,765,000) (42,073,000)
Unrealized holding gains (losses) on
securities available for sale, net of taxes 104,000 (205,000)
------------------------------------
TOTAL SHAREHOLDERS' EQUITY 23,100,000 21,483,000
------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $28,199,000 $29,473,000
====================================
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 15
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INCOME: 1995 1994 1993
------- ---- ---- ----
<S> <C> <C> <C>
Interest on loans $ 618,000 $ 422,000 $ 60,000
Loans fees 320,000 75,000 -
Interest on securities available
for sale and money market funds 849,000 717,000 159,000
Gain on sale of securities available for sale 15,000 - -
Lawsuit settlement, net 1,209,000 3,528,000 16,819,000
Telephone system revenue 1,522,000 1,102,000 14,000
Refund of litigation costs - 757,000 -
Gain on sale of loans held for sale - - 150,000
Other 63,000 105,000 48,000
------------------------------------------------------
Total Income 4,596,000 6,706,000 17,250,000
------------------------------------------------------
EXPENSES:
---------
Regulatory settlement - 4,000,000 -
Telephone time charges 723,000 519,000 11,000
Other telephone system charges 636,000 281,000 6,000
General and administrative 1,460,000 1,622,000 703,000
------------------------------------------------------
Total Expenses 2,819,000 6,422,000 720,000
------------------------------------------------------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES AND MINORITY INTEREST 1,777,000 284,000 16,530,000
INCOME TAX PROVISION (420,000) (1,778,000) (3,687,000)
MINORITY INTEREST IN (INCOME) LOSS
OF CONSOLIDATED PARTNERSHIP (49,000) (114,000) 1,000
------------------------------------------------------
INCOME (LOSS) FROM
CONTINUING OPERATIONS 1,308,000 (1,608,000) 12,844,000
LOSS FROM DISCONTINUED
OPERATIONS, NET OF TAX - - (410,000)
------------------------------------------------------
NET INCOME (LOSS) $1,308,000 $ (1,608,000) $ 12,434,000
======================================================
Per Share Data:
Continuing operations $ 0.17 $(0.21) $1.64
Discontinued operations - - (0.05)
------------------------------------------------------
Net income (loss) $ 0.17 $(0.21) $1.59
======================================================
</TABLE>
See accompanying notes to consolidated financial statements
15
<PAGE> 16
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
UNREALIZED HOLDING
GAINS (LOSSES)
CAPITAL IN ON SECURITIES
COMMON EXCESS OF ACCUMULATED AVAILABLE FOR SALE,
STOCK PAR VALUE DEFICIT NET OF TAXES
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $7,815,000 $55,946,000 $(52,899,000) $ -
Net income - - 12,434,000 -
------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 7,815,000 55,946,000 (40,465,000) -
Net loss - - (1,608,000) -
Unrealized holding losses on securities
available for sale, net of taxes - - - (205,000)
------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 $7,815,000 $55,946,000 $(42,073,000) $(205,000)
Net income - - 1,308,000 -
Change in unrealized holding gains (losses)
on securities available for sale,
net of taxes - - - 309,000
------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $ 7,815,000 $55,946,000 $(40,765,000) $ 104,000
==============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 17
WESTMINSTER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS/OPERATING ACTIVITIES:
Net income (loss) $ 1,308,000 $ (1,608,000) $ 12,434,000
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Provision for loan losses 30,000 31,000 -
Depreciation, amortization and accretion, net 264,000 354,000 18,000
Increase in accounts receivable (64,000) (245,000) -
Decrease (Increase) in accrued interest receivable 89,000 (572,000) -
Gain on sale of loans - - (150,000)
Gain on sales of securities available for sale (15,000) - -
Loss from discontinued operations, net of
minority interest - - 410,000
Net change in income taxes 935,000 (176,000) 3,687,000
Net change in other assets (248,000) 32,000 (166,000)
Net change in accounts payable 116,000 65,000 -
Net change in accrued expenses (4,119,000) 5,811,000 (2,238,000)
Net change in minority interest (30,000) 366,000 129,000
--------------------------------------------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (1,734,000) 4,058,000 14,124,000
--------------------------------------------------------
CASH FLOWS/INVESTING ACTIVITIES
Purchase of investment securities (14,499,000) (58,958,000) -
Proceeds from maturities of investment
securities 5,519,000 11,795,000 -
Proceeds from sales of investment securities 14,456,000 21,247,000 -
Purchase of subordinated convertible note (1,250,000) - -
Purchase of loans held for sale - - (375,000)
Proceeds from sale of loans held for sale - - 525,000
Loan originations and purchases (4,687,000) (5,247,000) (1,350,000)
Principal collected on loans receivable 3,065,000 5,910,000 32,000
Purchase of telephone systems and office
equipment - (1,217,000) (571,000)
Net proceeds from disposition of
discontinued operations. - - 4,706,000
--------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 2,604,000 (26,470,000) 2,967,000
--------------------------------------------------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS 870,000 (22,412,000) 17,091,000
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 845,000 23,257,000 6,166,000
--------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,715,000 $ 845,000 $ 23,257,000
========================================================
Supplemental schedule of non cash investing
and financing activities:
Tax effect of unrealized gains (losses) on
securities available for sale $ 207,000 $ (137,000) $ -
=======================================================
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE> 18
WESTMINSTER CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
(See Independent Auditors' Report)
1. BASIS OF PRESENTATION
On January 11, 1991, the Resolution Trust Corporation (the "RTC") took
possession of FarWest Savings and Loan Association (the "Association") as sole
conservator. Substantially all of the operations of the Corporation were
discontinued in 1991. On February 15, 1991, the RTC was appointed receiver for
the Association. The Corporation's consolidated financial statements for the
years 1991 through 1995 do not include the operations or assets and liabilities
of the Association since the Corporation has not had access to financial or
other information regarding the Association's operations.
On February 14, 1995 a Settlement Agreement and Release was entered into by and
between the RTC , the Corporation, and three of its present and former
directors ("Directors"). The Settlement Agreement provides for payment of $4
million by the Corporation to the RTC, requires the RTC to cooperate with the
Corporation in connection with the pending proceedings to recover tax payments
made by the Corporation to the State of California, and releases all claims
among the parties. The $4 million settlement was provided for in the 1994
consolidated financial statements.
On June 5, 1992, the Corporation acquired 50% of the outstanding common stock
of Express Rental, Inc. ("Express"), a company that rents office and
residential furniture to individuals and businesses in Southern California. In
February 1993, the Corporation announced its intent to dispose of Express.
Accordingly, the consolidated statement of operations for 1993 reflects the
income for the period in loss from discontinued operations. In 1993, through
the date of sale, the Corporation recorded pre-tax earnings from discontinued
operations of $54,000.
In June 1993, the Corporation sold its equity investment in Express for an
amount equal to its cost, $200,000. The Corporation received $125,000 in cash
and the balance was payable pursuant to a note for $75,000. The note was paid
in full on January 2, 1996.
The Company acquired a limited partnership interest in Global
Telecommunications in October 1993 and had invested $390,000 in that
partnership at December 31, 1993 to fund a telephone accessing network on two
military bases. During 1994, the Company invested an additional $875,000 in
Global Telecommunications, including $185,000 in the two ongoing projects and
$690,000 in a network for two additional military bases. Under the Global
Telecommunications partnership agreement, the Company is entitled to 75% of the
partnership distributions (which is proportional to its investment) until it
receives a return of its investment plus a 10% per annum return thereon.
Thereafter the Company is entitled to 60% of all distributions with respect to
the first two projects and 67.5% of all distributions with respect to the last
two projects. The consolidated financial statements include this investment on
a consolidated basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF ACCOUNTING AND CONSOLIDATION - The consolidated financial
statements include the accounts of the Corporation and its wholly owned
subsidiaries, FarWest Financial Insurance Agency, Silver Ridge Apartments,
G.P., Inc. and Silver Ridge Apartments, L.P., Inc. FarWest Financial Insurance
Agency has been inactive since 1991 and Silver Ridge Apartments G.P., Inc., and
Silver Ridge Apartments L.P., Inc., have been inactive since 1993. The
consolidated financial statements also include the accounts of Global
Telecommunications, a
18
<PAGE> 19
limited partnership in which the Corporation has a 75% limited partnership
interest. All material intercompany accounts and transactions have been
eliminated. References to the Corporation may include one or more of its
wholly owned subsidiaries.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents are short-term, highly
liquid investments with original maturities of three months or less. They are
readily convertible to known amounts of cash and are so near maturity that no
significant risk of changes in value exists because of changes in interest
rates.
SECURITIES AVAILABLE FOR SALE AND SUBORDINATED CONVERTIBLE DEBENTURE AVAILABLE
FOR SALE - The Corporation adopted Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS
115) at January 1, 1994. In accordance with SFAS 115, the Corporation
classified its securities as held to maturity securities, trading securities
and available for sale securities, as applicable. The Corporation did not hold
any held to maturity securities or trading securities at December 31, 1995 or
1994.
Securities available for sale and Subordinated Convertible Debenture available
for sale are carried at market value. The Corporation classifies investments
as available for sale when it determines that such securities may be sold at a
future date or if there are foreseeable circumstances under which the
Corporation would sell such securities.
Changes in the market value of investments available for sale are included in
shareholders' equity as unrealized holding gains or losses, net of the related
tax effect. Unrealized losses on available for sale securities and
Subordinated Convertible Debenture available for sale reflecting a decline in
value judged to be other than temporary are charged to income in the
Consolidated Statement of Operations. Realized gains or losses on available
for sale securities and Subordinated Convertible Debenture available for sale
are computed on a specific identification basis. Amortized premiums and
accreted discounts are included in interest on securities available for sale
and money market funds.
PURCHASE DISCOUNT ON AUTOMOBILE LEASING PORTFOLIO - The discount received on
the purchase of the automobile leasing portfolio is recognized in income over
the lives of the loans using a method which approximates the interest method.
TELEPHONE SYSTEMS - Telephone systems are stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets which is seven years. Telephone system
revenue is recognized on the accrual basis for charges incurred on a monthly
basis.
LOAN FEES - Loan fees associated with loans secured by trust deeds or mortgages
are recognized on the cash basis. Interest earned on these fees is also
recognized on the cash basis. The cash basis is used because the loan fees and
interest are severely delinquent and ultimate collectibility is in doubt.
EARNINGS (LOSS) PER SHARE - The Company has outstanding certain employee stock
options which have been determined to be common stock equivalents for purposes
of computing earnings per share. During the year ended December 31, 1995, the
market price of the Company's common stock exceeded the exercise price of
certain of these common stock equivalents. Under the treasury stock method of
computing earnings per share, the weighted average number of shares of common
stock and common stock equivalents outstanding were 7,850,000 for primary
earnings per share for the year ended December 31, 1995 and 7,880,000 shares
for fully diluted earnings per share for the year ended December 31, 1995. The
weighted average number of shares for both
19
<PAGE> 20
1994 and 1993 was 7,815,000 as there were no dilutive common stock equivalents
during either year.
INCOME TAX MATTERS - The Corporation joins with its subsidiaries in filing
consolidated federal income and state franchise tax returns. In the tax
returns, taxable income or loss is consolidated with the taxable income or loss
of the subsidiaries.
The Corporation adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("SFAS 109") as of January 1, 1993 and applied it
retroactively to 1991. There was no impact on the Corporation's financial
statements as a result of adoption. Under the asset and liability method of
SFAS 109, income tax expense (benefit) is recognized by establishing deferred
tax assets and liabilities for the estimated future tax consequences
attributable to the differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. The Corporation's evaluation of the realizability
of deferred tax assets includes consideration of the amount and timing of
future reversals of existing temporary differences.
USE OF ESTIMATES - Management of the Corporation has made certain estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principals. Actual results could differ from these estimates.
RECLASSIFICATION - Certain reclassifications have been made to the prior years
financial statements to conform with the 1995 presentation.
3. SECURITIES AVAILABLE FOR SALE
Securities available for sale consist almost entirely of State and Municipal
obligations which are tax exempt for Federal income tax purposes. At December
31, 1995 and 1994 these securities are carried at market. There were no
securities owned at December 31, 1993. The weighted average maturity of these
securities at December 31, 1995 is approximately sixteen months. The
amortized cost and market value of securities available for sale at December
31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Cost Gains Losses Market Value
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995:
State & Municipal Obligations $19,373,000 $ 55,000 $ 13,000 $19,415,000
Equity Securities 700,000 173,000 41,000 832,000
-------------------------------------------------------------------
Total $20,073,000 $228,000 $ 54,000 $20,247,000
===================================================================
1994:
State & Municipal Obligations $25,744,000 $ - $342,000 $25,402,000
-------------------------------------------------------------------
Total $25,744,000 $ - $342,000 $25,402,000
===================================================================
</TABLE>
Proceeds from sales of available for sale securities during 1995 and 1994 were
approximately $14,456,000 and $21,247,000. Gross gains (losses) of $16,000 and
($1,000) were realized on these sales in 1995, and no gains or losses were
realized in 1994.
20
<PAGE> 21
4. SUBORDINATED CONVERTIBLE DEBENTURE AVAILABLE FOR SALE
On November 30, 1995, the Corporation purchased a 9% Subordinated Convertible
Debenture in the amount of $1,250,000 issued by NAL Financial Group, Inc.
("NAL"). The Debenture is due and payable in one year with interest payments
due quarterly. The Debenture is convertible into NAL common stock at any date
prior to maturity based on a conversion formula. The Corporation also received
87,500 detachable common stock purchase warrants at a fixed price of $14 per
share for a five-year period from the date of issuance. At December 31, 1995,
the closing bid price of NAL common stock was quoted at $13 5/8 on NASDAQ.
5. LOANS RECEIVABLE
The composition of the Corporation's loans receivable at December 31, 1995 and
1994 is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Loans secured by automobile
leases, net of discount $ 2,448 $ -
Loans secured by trust
deeds or mortgages - 613
Express Rental 50 50
Other 15 53
--------------------------
Total $ 2,513 $ 716
==========================
</TABLE>
The loans secured by automobile leases represent a portfolio of loans purchased
by the Corporation in 1995. The purchase price was $3,551,000 net of discount
of $742,000. The remaining average maturity of the portfolio is approximately
twelve months at December 31, 1995. At December 31, 1995 all loans were
performing in accordance with their contractual terms.
The loans secured by trust deeds or mortgages made by the Corporation were
collateralized by residential and commercial properties. The Corporation's
loans and loan fees bear interest rates which approximate 15% and all matured
during 1994 and 1995. All of the principal balances were paid off in 1995 and
a loan fee of $320,000 was received in 1995.
At December 31, 1995 there were unrecognized loan fees and penalties of
approximately $1,180,00 and accrued interest of $70,000. The unpaid accrued
interest and unrecognized loan fees and penalties will only be recognized in
the consolidated financial statements on a cash basis due to severe delinquency
problems and doubt as to ultimate collectibility.
As discussed in Note 1, the Corporation had a loan outstanding to the
purchasers of Express. This loan was secured by all of the common stock of
Express. Interest payments were based on a rate of one percent over the
Reference Rate of Bank of America, and were payable quarterly. The loan was
paid in full on January 2, 1996.
During the third quarter of 1993, the Corporation purchased $375,000 of loans
and recorded them as held for sale. The loans were subsequently sold during
the fourth quarter of 1993. The Corporation recorded a gain on sale of loans
of $150,000.
21
<PAGE> 22
6. TELEPHONE SYSTEMS, NET
The following is a summary of telephone systems, net at December 31, 1995 and
1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Telephone systems $1,746 $1,746
Less accumulated depreciation (413) (167)
-----------------------
Telephone systems, net $1,333 $1,579
=======================
</TABLE>
Depreciation expense of telephone systems was approximately $246,000, $164,000
and $3,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
7. INVESTMENT IN REAL ESTATE
The Corporation's investment in Silver Ridge Apartments Ltd. ("Silver Ridge"),
a real estate partnership (the "Partnership") was acquired in 1988. The
Partnership owned a 432 unit apartment project in a suburb of Las Vegas,
Nevada. The Corporation's investment was sold in October of 1993, resulting in
a pre-tax loss on sale of $1,245,000, which is included in loss from
discontinued operations. Additionally, during 1993, the Corporation recorded
pre-tax earnings from discontinued operations of $506,000.
8. INCOME TAXES
The Corporation made no income tax payments during 1995, 1994 or 1993, except
for the minimum state franchise tax.
The provision (benefit) for income taxes for the years ended December 31, 1995,
1994, and 1993 includes the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current tax provision $ - $ - $ -
Deferred tax provision (benefit)
Federal 255 (171) 2,518
State 165 (5) 1,169
----------------------------------------
Total 420 (176) 3,687
Provision for unresolved tax issues - 1,954 -
---------------------------------------
Total provision for income taxes $420 $1,778 $3,687
========================================
Total allocated to continuing operations $420 $1,778 $3,687
Total allocated to equity 207 (137) -
Total allocated to discontinued operations - - (275)
---------------------------------------
Total income taxes $627 $1,641 $3,412
=======================================
</TABLE>
The income tax provision for 1995 primarily reflects a deferred provision for
income before income taxes less non taxable municipal interest income for
Federal purposes and a deferred provision for income before income taxes for
State purposes. The income tax provision for 1994 consists primarily of a
provision for unresolved tax issues. The 1993 income tax provision is
primarily composed of a deferred tax liability, related to a lawsuit settlement
of $16,819,000. The
22
<PAGE> 23
1993 income tax provision was reduced through the utilization of the
Corporation's net operating loss carryforwards which consisted of $7,957,000
for federal income tax purposes and $3,970,000 for California Franchise Tax
purposes. The Corporation's deferred tax receivables resulting from the
utilization of net operating loss carryforwards are offset in future years by
deferred tax payables. The Corporation's tax net operating loss carryforwards
of $11,303,000 and $3,247,000 for Federal and State purposes, respectively,
expire at various dates through 2011 for Federal income tax purposes and
through 2001 for state income tax purposes.
The income tax provision from continuing operations reflected effective rates
of 24%, 626%, and 22% for the years ended December 31, 1995, 1994, and 1993 on
the income before income taxes, respectively. The income tax provision
differed from the amounts computed by applying the statutory Federal income tax
rate of 34% to the income before income taxes for the following reasons (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at statutory Federal income tax rate $ 588 $ 97 $ 5,621
California franchise tax, net of Federal benefit 109 9 727
State and municipal securities interest (289) (243) -
Minority interest (17) (39) -
Utilization of net operating loss carryforward - - (2,705)
Provision for unresolved tax issues - 1,954 -
Other, net 29 - 44
- ---------------------------------------------------------------------------------------------------------
$ 420 $ 1,778 $ 3,687
- ---------------------------------------------------------------------------------------------------------
</TABLE>
In the fourth quarter of 1994, the Corporation received preliminary results
provided by the Franchise Tax Board with respect to its refund claim for
approximately $3.9 million (including accrued interest of $1.2 million). Those
audit findings propose to deny the refund claim. The Corporation has filed a
protest with the California Franchise Tax Board which sets forth its position
with respect to the refund claims. While the Corporation remains convinced
that it will eventually recover all or a substantial portion of its refund
claim, in 1992 the Corporation established a valuation allowance of 50%,
adjusting the carrying value of this asset to $1,954,000 at December 31, 1992,
to reflect the uncertainties attributable to the California Franchise Tax
Board's position. Due to continuing uncertainties and the length of time it
will take to resolve this matter, management established an additional provision
for unresolved tax issues of $1,954,000 during 1994.
At December 31, 1995 and 1994 the Corporation had cumulative deferred taxes
payable of $3,974,000 and $3,347,000, respectively. The Corporation also had
current taxes payable (receivable) of $375,000 and ($248,000) at December 31,
1995 and 1994, respectively. Tabulated below are the significant components of
the net deferred tax liability at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
----------------------------
<S> <C> <C>
Components of the deferred tax asset:
Settlement with the RTC $ - $ (1,732)
Net operating loss carryforward (4,204) (2,576)
State taxes (533) (414)
Loan fee income (277) (415)
Unrealized holding gain (loss) on investment
securities available for sale 70 (137)
Other (416) (189)
----------------------------
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C> <C>
------------------------
Deferred tax asset (5,360) (5,463)
Components of the deferred tax liability:
Legal settlements 9,334 8,810
------------------------
Deferred tax liability 9,334 8,810
------------------------
Net deferred tax liability $ 3,974 $ 3,347
========================
Net state deferred tax liability $ 1,426 $ 1,214
Net federal deferred tax liability 2,548 2,133
------------------------
$ 3,974 $ 3,347
========================
</TABLE>
In evaluating the realizability of its deferred tax assets, management has
considered the turnaround of deferred tax liabilities during the periods in
which those temporary differences become deductible. Additionally, the
Corporation has not considered income from future operations in evaluating
realizability of its deferred tax assets.
9. LAWSUIT SETTLEMENT
During 1995, the Corporation received approximately $1.2 million in net
proceeds from the settlement of claims asserted on behalf of the Corporation
against Drexel Burnham Lambert, Inc. and Michael Milken and other related
parties. In 1994 and 1993, the Corporation received approximately $3.5 million
and $16.8 million, respectively in net proceeds from the same settlement.
10. COMMITMENTS AND CONTINGENCIES
The Corporation maintains two stock option plans: the 1986 Incentive Stock
Option Plan and the 1986 Non-statutory Stock Option Plan (the "Plans"). An
aggregate of one million shares of the Corporation's common stock may be issued
under both Plans, provided that no more than 750,000 shares may be issued to
directors.
During 1994, options were granted for 50,000 shares of common stock at $.875
per share, which was equal to the market price on the date of grant. The
options are execisable in five equal annual installments commencing with the
first anniversary of the grant date. At December 31, 1995, 10,000 of these
options were exercisable.
During 1995, the Chairman of the Board and Chief Executive Officer was granted
an option to purchase up to 250,000 shares of Common Stock under the Company's
Incentive Stock Option Plan at $1.99 per share, which is equal to 110% of the
market price on the date of grant as specified in the Plan. The option is
exercisable in four equal annual installments commencing with the first
anniversary of the grant date. The option expires five years from the date of
grant. None of these options were exercisable at December 31, 1995.
During 1995, five outside Directors of the Company were granted options to
purchase up to 10,000 shares each under the Company's Non-Statutory Stock
Option Plan at $1.8125 per share, which is equal to the market price on the
date of grant as specified in the Plan. The options are exercisable in four
equal annual installments commencing with the first anniversary of the grant
date. The options expire five years from the date of grant. None of these
options were exercisable at December 31, 1995.
24
<PAGE> 25
No options were exercised during the three year period ended December 31, 1995
and no options were granted during the year ended December 31, 1993.
The Corporation is a defendant in various lawsuits arising from the normal
course of business. Management believes, based upon the opinion of legal
counsel, that the ultimate resolution of the pending litigation will not have a
material effect upon the financial condition or results of operations of the
Corporation.
11. LEASE COMMITMENTS
The Corporation leases office space for its corporate offices under a non-
cancelable operating lease which expires in 1997. Minimum rental commitments
under this lease are $67,720 for the year ending December 31, 1996 and $56,434
for the year ending December 31, 1997. The Corporation recorded $67,784,
$73,364 and $67,720 in rent expense for the years ended December 31, 1995, 1994
and 1993, respectively.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107 requires disclosures of
fair value information about financial instruments, whether or not recognized
in the balance sheet, for which it is practicable to estimate that value. Fair
value amounts represent estimates of value at a point in time. Significant
estimates regarding economic conditions, loss experience, risk characteristics,
and other factors are used in estimating fair value. These estimates can be
subjective in nature and involve matters of judgment. Changes in the
assumptions could have a material impact on the amounts disclosed. The methods
and assumptions for determining fair value of the Company's financial
instruments are as follows:
Cash and Cash Equivalents
The carrying amount is a reasonable estimate of fair value.
Securities and Subordinated Convertible Debenture, Available for Sale
Fair value has been determined based on quoted market prices, when available.
If a quoted market price is not available, recent market trading prices are
used to estimate fair value.
Loans receivable, net
Loans held by the Company are homogeneous in nature and are performing in
accordance with their contractual terms. Based on the type of loans, interest
rate characteristics, credit risk, and maturity, the carrying value of the
loans has been determined to be a reasonable estimate of fair value.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
NONE
25
<PAGE> 26
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
CORPORATION.
Incorporated by reference to the Corporation's definitive Proxy
Statement for its 1996 Annual Meeting of Stockholders pursuant to
instruction G(3) to Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the Corporation's definitive Proxy
Statement for its 1996 Annual Meeting of Stockholders pursuant to
instruction G(3) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Incorporated by reference to the Corporation's definitive Proxy
Statement for its 1996 Annual Meeting of Stockholders pursuant to instruction
G(3) to Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the Corporation's definitive Proxy
Statement for its 1996 Annual Meeting of Stockholders pursuant to
instruction G(3) to Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a)(1) The following financial statements are included in Item 8:
Consolidated Statements of Financial
Condition as of December 31, 1995 and 1994
Consolidated Statements of Operations
for the Three Years Ended December 31, 1995
Consolidated Statements of Shareholders'
Equity for the Three Years Ended December 31, 1995
Consolidated Statements of Cash Flows
for the Three Years Ended December 31, 1995
Notes to Consolidated Financial Statements
for the Three Years Ended December 31, 1995
(a)(2) Financial Statement Schedules
All schedules are omitted as the required information is inapplicable
or is presented in the consolidated financial statements or related notes.
(b) Reports of Form 8-K
No reports were filed on Form 8-K during the fourth quarter of 1995.
(c) Exhibits
See "Index to Exhibits."
26
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WESTMINSTER CAPITAL, INC.
March 22, 1996 By: /s/ William Belzberg
-----------------------------
William Belzberg,
Chairman of the Board and
Chief Executive Officer
By: /s/ Philip J. Gitzinger
-----------------------------
Philip J. Gitzinger,
Executive Vice President,
Chief Financial Officer, and
Principal Accounting Officer
27
<PAGE> 28
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
<S> <C> <C>
/s/William Belzberg Chairman of the Board March 22, 1996
- -------------------------- of Directors and
William Belzberg Chief Executive officer
/s/Dwight C. Baum Director March 22, 1996
- --------------------------
Dwight C. Baum
/s/Keenan Behrle Director March 22, 1996
- --------------------------
Keenan Behrle
/s/Hyman Belzberg Director March 22, 1996
- --------------------------
Hyman Belzberg
/s/Samuel Belzberg Director March 22, 1996
- --------------------------
Samuel Belzberg
/s/Barbara C. George Director March 22, 1996
- --------------------------
Barbara C. George
/s/Monty Hall Director March 22, 1996
- --------------------------
Monty Hall
/s/Lester Ziffren Director March 22, 1996
- --------------------------
Lester Ziffren
</TABLE>
28
<PAGE> 29
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. SEQUENTIALLY NUMBERED DESCRIPTION
<S> <C>
3.1 Certificate of Incorporation of the Registrant as amended through July 12, 1992 (filed as Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by this reference).
Certificate of amendment of Certificate of Incorporation of the Registrant dated July 13, 1992 (filed as Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by this reference).
3.2 By-Laws of the Registrant as amended in their entirety effective April 4, 1995 (filed as Exhibit 4.4 to the Registrant's
Post Effective Amendment No. 1 to Form S-8 filed on June 23, 1995 as Registration No. 33-21177 and incorporated herein by
this reference).
10.1 Sales Agreement between The Sumitomo Bank of California and Purchasers dated August 17, 1995.
10.2 1986 Incentive Stock Option Plan and 1986 Nonstatutory Stock Option Plan (filed as Exhibit 4.1 to the Registrants' Post
Effective Amendment No.1 to Form S-8 filed on June 23, 1995 as Registration No. 33-21177 and incorporated herein by this
reference).
10.3 Form of Stock Option Agreement (filed as Exhibit 4.2 to the Registrants' Post Effective Amendment No.1 to Form S-8 filed on
June 23, 1995 as Registration No. 33-21177 and incorporated herein by this reference).
10.4 Restated and Amended Limited Partnership Agreement for Global Telecommunications Systems, Ltd. dated December 31, 1993
(filed as Exhibit 10.4 to the Registrant's Annual Report on 10-K for the year ended December 31, 1993 and incorporated
herein by this reference).
21 Subsidiaries of Registrant.
23 Independent Auditors' Consent
27 Financial Data Schedule.
</TABLE>
29
<PAGE> 1
EXHIBIT 10.1
SALES AGREEMENT
BETWEEN
THE SUMITOMO BANK OF CALIFORNIA
AND
PURCHASERS
AUGUST 17, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
-------
<S> <C>
ARTICLE 1 - DEFINITIONS 1
1.01 Defined Terms. 1
1.02 Certain Terms. 3
ARTICLE 2 - CLOSING 3
2.01 Closing 3
2.02 Failure to Close 3
ARTICLE 3 - TRANSFER OF TITLE 3
3.01 Conveyance of Dealer Loans 3
3.02 Delivery of Dealer Loan Documents 3
3.03 Conveyance of Collateral Security 3
3.04 Conveyance of Foreclosed Portfolio 3
3.05 Transfer as Sale 3
3.06 Deliver of Lease Documents 4
3.07 Transfer of Title 4
ARTICLE 4 - CONSIDERATION AND PAYMENT 4
4.01 Purchase Price 4
4.02 Interest on Purchase Price 4
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES 4
5.01 Representations and Warranties of the Seller 4
5.02 Representations and Warranties of the Purchaser 6
5.03 Limitation on Representation 6
5.04 Survival of Representations and Warranties 6
5.05 Remedies 6
ARTICLE 6 - COVENANTS 7
6.01 Covenants of the Seller 7
6.02 Covenants of the Purchaser 7
6.03 Survival of Covenants 8
ARTICLE 7 - CONDITIONS PRECEDENT 8
7.01 Conditions to the Purchaser's Obligations 8
7.02 Conditions to Seller's Obligations 9
ARTICLE 8 - ADMINISTRATION AND REPURCHASES 9
8.01 Repurchase Obligations 9
8.02 Legal Actions 9
ARTICLE 9 - SERVICING 9
9.01 Conveyance of Servicing. 9
9.02 Interim Servicing 9
9.03 Receipt of Payments 9
9.04 Interim Servicing Fees 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 10 - PRESERVATION OF ASSETS 9
10.01 Rights of Purchaser 9
10.02 Rights Cumulative 9
ARTICLE 11 DEFAULT 10
11.01 Purchaser' Default 10
11.02 Seller's Default 10
ARTICLE 12 - MISCELLANEOUS 10
12.01 Notice 10
12.02 Successors and Assigns 11
12.03 Amendments 11
12.04 Survival of Representations, Warranties, and Covenants 11
12.05 Integration 11
12.06 Governing Law 11
12.07 No Third Party Beneficiaries 12
12.08 Waiver of Jury Trial 12
12.09 Arbitration 12
12.10 Attorney's Fees 14
12.11 Time is of the Essence 14
EXHIBIT A ZERO BALANCE LOANS
EXHIBIT B OUTSTANDING LOAN BALANCES
EXHIBIT C EXCLUDED ASSETS
EXHIBIT D FORECLOSED PORTFOLIO
EXHIBIT E PERFORMING LOANS
EXHIBIT F FORM OF BILL OF SALE FOR LOANS AND VEHICLES
EXHIBIT G LIST OF SERVICERS
EXHIBIT H FORM OF ASSIGNMENT OF ASSETS
EXHIBIT I FORM OF PURCHASER'S OPINION LETTER
EXHIBIT J NOTIFICATION LETTER FROM PURCHASER TO LESSORS
EXHIBIT K NOTIFICATION LETTER FROM PURCHASER TO LESSEES
EXHIBIT L BORROWER'S WAIVERS
</TABLE>
<PAGE> 4
THIS SALES AGREEMENT is made as of this 17th day of August, 1995 between The
Sumitomo Bank of California, a state bank organized under the laws of
California ("Seller"), and Westminster Capital, Inc., a Delaware corporation,
and Executive Car Leasing, Inc., a Delaware corporation (together their
successors and assigns, the "Purchasers").
WITNESSETH:
WHEREAS, the Purchasers desire to purchase and the Seller desires to
sell the Assets (defined below) upon the terms and conditions hereinafter set
forth; and
WHEREAS, Seller will convey to the Purchasers all its right, title and
interest in the Assets.
Purchasers are sophisticated and experienced purchasers of auto loans
and auto leases who has access to expert technical and legal advice and has
conducted their own extensive due diligence with respect to the Assets defined
below.
NOW, THEREFORE, it is hereby agreed by and between the parties hereto
as follows:
ARTICLE 1 - DEFINITIONS
1.01 Defined Terms. For purposes of this Agreement the following
terms shall have the meanings specified herein:
"Assets" shall mean the Seller's rights and interests in: (i) the
Loans, (ii) the Foreclosed Portfolio, (iii) Loan Payments, Lease Payments and
Lease Proceeds received after the Closing Date, and (iv) Zero Balance Loans.
The Assets do not include loans and leases identified as Excluded Assets.
"Assignment" shall mean the Assignment of Leases, as of the Closing
date, from the Seller to the Purchaser.
"Customer Balance" shall mean the Seller's outstanding loan balance as
reflected on Exhibit B.
"Borrowers" shall mean the leasing companies to whom the seller
provided loans secured by vehicles and assignment of individual leases.
"Closing Date" shall mean August 17, 1995.
"Cut Off Date" shall mean June 30, 1995.
"Excluded Assets" shall mean certain loans and leases identified as
per attached Exhibit C.
"Foreclosed Portfolio" shall mean Owned Vehicles and Owned Leases for
which the Seller acquired ownership interest in the assigned vehicles and
leases through foreclosure of Loans identified on Exhibit D.
Page 1
<PAGE> 5
"Insurance Policies" shall mean each casualty insurance policy, and
each renewal or replacement therefore, maintained by or on behalf of a Lessee,
(including, without limitation, policies purchased or maintained by the Seller
or its agent) which insures against the loss of, or damage to, a Vehicle.
"Insurance Proceeds" shall mean the proceeds of the Insurance
Policies.
"Interim Servicer" shall mean The Sumitomo Bank of California in its
capacity as servicer of the Assets from the Closing Date through the Servicing
Transfer Date pursuant to Article 9 hereof.
"Leases" shall mean the leases of the Vehicles partly securing the
Loans, as set forth on Exhibits D and E hereto.
"Lease Documents" shall mean with respect to the Foreclosed Portfolio
the lease agreements and all related documents held by the Servicer except for
the original titles held by Seller.
"Lease Payments" shall mean with respect to each Lease, any payments
received from a Lessee pursuant to the terms of a Lease.
"Lease Proceeds" shall mean collectively the Lease Payments under a
Lease.
"Lessees" shall mean the lessees under the Leases.
"Loan Documents" shall mean the loan agreement, UCC financing
statements and all related documents which constitute the agreements between
the Seller and the obligor or guarantor of the Loan together with any known
judgments, court orders or documents relating to actual or threatened
litigation with respect to any of the Performing Loans.
"Loan File" shall mean the promissory note, security agreement, and
other such documents which constitute part of the agreements between Seller and
Obligor(s) delivered to the Purchasers on the Closing Date.
"Loans" shall mean loans provided to the Borrower secured by vehicles
and assignments of individual leases.
"Owned Leases" shall mean the leases of the Foreclosed Portfolio, as
set forth on Exhibit D hereto.
"Owned Vehicles" shall mean the Vehicles of the Foreclosed Portfolio.
"Performing Loans" means the loans identified on Exhibit E hereto,
together with the Loan Documents and all interests of the Seller in any and all
collateral security for such loans, including, without limitation, the
Vehicles, Leases.
"Purchase Price" shall mean 82% of the Customer Balance, as shown on
Exhibit B, as of the Cut Off Date, less 100% of the Lease Payments, Lease
Proceeds, payments and prepayments on the Loan, received by Seller after the
Cutoff Date and before the Closing Date, less any DMV fees, repo fees,
servicing fees, sales tax, lien fees or similar fees paid by Seller.
"Security Deposit" shall mean with respect to each Lease, the
aggregate amount of funds held by the Borrowers. For the Foreclosed Portfolio
the Seller holds no security deposit.
Page 2
<PAGE> 6
"Seller's Prime Rate" shall mean the rate of interest set from time to
time by Seller at its Head Office in San Francisco, California as its Prime
Rate.
"Servicer" shall mean the Servicer of the Foreclosed Portfolio as
identified on Exhibit G.
"Vehicles" shall mean the vehicles partly securing the Loans as set
forth on Exhibits D and E hereto and the Owned Vehicles.
"Zero Balance Loans" shall mean the foreclosed portfolio with no loan
balances as set forth on Exhibit A.
1.02 Certain Terms. Terms defined herein shall include the plural
as well as the singular.
ARTICLE 2 - CLOSING
2.01 Closing. Subject to and upon the terms and conditions
hereinafter set forth, the Purchasers agrees to purchase from the Seller and
the Seller agrees to sell to the Purchaser, on the Closing Date, the Assets.
ARTICLE 3 - TRANSFER OF TITLE
3.01 Conveyance of Assets. Seller hereby assigns, transfers, sets
over and conveys to the Purchasers all its rights, title, and interest in and
to all of the Assets.
3.02 Delivery of Loan Documents. On the Closing Date, Seller shall
deliver the Loan Files to the Purchasers at the Seller's place of business
located at 320 California Street, San Francisco, California. Conveyance of the
Loan Documents shall be accomplished by the Seller executing a Bill of Sale in
the form attached hereto as Exhibit F and an assignment on the terms of Exhibit
H and the endorsement of each promissory note in blank without recourse. In
the event that Seller retains or comes into possession of any Loan File after
the Closing Date, Seller shall hold such documents as custodian for the
Purchasers and will forward such documents to the Purchasers as soon as
possible.
3.03 Conveyance of Collateral Security. Seller will deliver a
power of attorney in a form substantially similar to Exhibit M. Seller shall
assign its interests in the Leases and any related Insurance Policies and
Insurance Proceeds by executing an assignment in favor of the Purchasers in the
form attached hereto as Exhibit H. Seller will execute and deliver to the
Purchasers assignments of all UCC financing statements filed with respect to
any Loan.
3.04 Conveyance of Vehicles. On the Closing Date, seller shall
sell, set over, assign, transfer and convey to the Purchasers all right, title
and interest of the Seller in the Foreclosed Portfolio and the Zero Balance
Loans, including all interest of the Seller in the Insurance Policies and
Insurance Proceeds. Seller shall assign its interests in the Owned Leases by
executing an assignment in favor of the Purchasers in the form attached hereto
as Exhibit H.
3.05 Transfer as Sale. It is the express intent of the parties
hereto that the conveyance of the Assets by the Seller to the Purchasers as
contemplated by this Agreement be construed as a sale and absolute conveyance
of the Assets by the Seller to the Purchasers.
Page 3
<PAGE> 7
3.06 Delivery of Lease Documents. On the Closing Date Seller is
deemed to have delivered the Lease Documents actually held on the Closing Date
by a Servicer on Exhibit G to the Purchasers at the respective Servicer's
location.
3.07 Transfer of Title. After the Closing Date the Purchasers are
responsible for all title transfers of the vehicles and all associated fees.
Purchasers warrants that they will be responsible for all subsequent fees and
title transfers.
ARTICLE 4 - CONSIDERATION AND PAYMENT
4.01 Purchase Price. The Purchasers shall pay an amount equal to
the Purchase Price, plus the Interest Component, plus the Interim Servicing
fee, with immediately available funds by wire transfer to be received by Seller
by 10:00 a.m. Pacific Daylight Time on the Closing Date, at Route No.
121002042, attention Automotive Finance Department.
4.02 Interest Component. The Interest Component shall be interest
on the Purchase Price at the Seller's Prime Rate from the Cut Off date to the
Closing Date. Interest shall be calculated by the actual number of days
elapsed over three hundred and sixty-five days.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
5.01 Representations and Warranties of the Seller Seller hereby
represents and warrants to the Purchasers as of the Closing Date, except as
known to the Purchaser as of the Closing Date that:
(a) Seller is a state bank duly organized and validly existing
under the laws of the State of California.
(b) This Agreement has been duly authorized, executed and
delivered by the Seller and is the legal, valid and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms.
(c) Seller is the sole holder of all right, title and interest in
and to the Assets with full right to transfer ownership thereof to the
Purchasers.
(d) Seller has provided the Purchasers or their agents with access
to the original certificates of title relating to each Vehicle, which are true
and complete originals of the certificates of title.
(e) No Vehicle which is securing a Performing Loan has been
released by the Seller from the lien granted under the terms of the related Loan
by the Seller in whole or in part;
(f) The Seller has required that it be named as loss payee or an
additional insured in each Insurance Policy, free from any lien, security
interest, charge, encumbrance or other right, title or interest of any person.
(g) Seller is the owner of each Owned Vehicle, free from any lien,
security interest, charge encumbrance or other right, title or interest of any
person, (subject however, to the rights of the Lessees under the Owned Leases,
any garageman lien, any DMV transfer or
Page 4
<PAGE> 8
registration fee, any rights in any Owned Vehicle created by the Lessee without
Seller's written consent).
(h) Seller will deliver to Purchasers all original Leases that it
has in its possession or under its control, which may be counterpart originals,
and, to the best of its knowledge, are true and complete copies of the Leases,
and have not been otherwise amended or modified.
(i) Borrower is indebted to Seller on The Performing Loans in
accordance with their respective Loan Documents except as modified or waived as
provided in Exhibit L. Notwithstanding this representation and any other
representation by Seller in this Agreement, Seller makes no representation as
to enforceability of any late charge, default interest rate or prepayment fee
in any of the Loan Documents.
(j) The amount shown as the Current Balance of the Loans on
Exhibit E hereto is the current outstanding balance of such Loan as of the Cut
Off Date.
(k) At the time a Performing Loan was made, it was a valid,
binding and enforceable obligation against the respective Borrower.
(l) The Seller has not waived or altered the terms of the Loan
Documents in any manner, and has not waived, canceled, satisfied subordinated
or rescinded any of the Loan Documents, other than as specified in the Loan
Files or specified in Exhibit L.
(m) Seller has no outstanding funding commitments under any of the
Loan Documents for the Performing Loans.
(n) The sale of the Assets, the execution and delivery of the
Assignment, the performance of the Seller's obligations under this Agreement
and the consummation of the transactions herein contemplated, will not conflict
with or result in a breach of any of the term or provisions of, or constitute a
default under, or result in the creation or imposition of lien, security
interest, charge or encumbrance (except in favor of the Purchasers) upon any of
the Assets pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement or other agreement (including the Loans) or instruments to which
it is a party or by which it is bound or to which any of Assets is subject, nor
will such action result in the violation of any order of any court or
governmental agency or body having jurisdiction over it or the Assets; and no
consent, approval, authorization, order, registration or qualification of or
with any court or any such regulatory authority or other governmental agency or
body, is required for the sale of the Assets, the performance of Seller's
obligations under this Agreement or the consummation of any of the other
transactions herein contemplated.
(o) Except for the financing statements contemplated by Section
3.03 hereof and certificates of title, the Seller will neither execute nor
authorize there to be on file in any public office any financing statement or
similar statement or instrument of registration under the laws of any
jurisdiction relating to the Assets.
(p) The Seller does not have actual knowledge of any litigation or
other proceeding threatened or pending with respect to any Asset except as
disclosed in Exhibit L.
(q) To the best of Seller's knowledge, each Lease complies with
applicable state and federal law and regulation, including consumer credit
laws, in all material respects.
Page 5
<PAGE> 9
5.02 Representations and Warranties of the Purchasers. Subject to
Section 5.03 hereof, the Purchasers hereby represents and warrants to the
Seller that:
(a) The Purchasers have been duly organized and are validly
existing and in good standing as a corporations under the laws of their state
of incorporation with corporate power and authority to own their properties and
to transact the business in which they are now engaged or in which they
proposes to engage.
(b) The purchase by the Purchasers of the Assets pursuant to this
Agreement and the consummation of the transactions herein contemplated will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the property or assets of
the Purchasers (except the Assets purchased hereunder) pursuant to the terms of
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Purchasers are a party or by which they are bound or to
which any of the property or assets of the Purchasers is subject, nor will such
action result in the violation of any provision of the Certificates of
Incorporation or By-Laws of the Purchasers or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Purchasers and any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any court or any
such regulatory authority or other governmental agency or body, is required for
the purchase of the Assets hereunder.
(c) There are no judgments, orders, or decrees of any kind against
the Purchasers that are unpaid or unsatisfied of record, nor is there any legal
action, suit or other legal or administrative proceeding pending and served on,
or, or to the Purchasers' actual knowledge, threatened or reasonably
anticipated that could be filed against the Purchasers, that would, taken in
the aggregate materially adversely affect the ability of the Purchasers to
carry out the transaction contemplated in this Agreement.
(d) The Purchasers are not in the hands of a receiver and have not
committed an act of bankruptcy or insolvency. The Purchasers now have and will
have as of the Closing Date sufficient capital, net worth and/or commitments to
meet their obligations, including payment of the Purchase Price under this
Agreement.
(e) This Agreement has been authorized, executed and delivered by
the Purchasers and constitutes the valid and legally binding obligation of the
Purchasers enforceable against the Purchasers in accordance with its terms.
5.03 Limitation on Representations. The representations and
warranties of the Seller contained in Section 5.01(d), (e), and (f) are not
made with respect to the Zero Balance Loans.
5.04 Survival of Representations and Warranties. The
representations and warranties contained in this Article 5 shall survive, for a
period of twenty four (24) months, the sale and delivery of the Assets to the
Purchasers and the performance of this agreement.
5.05 Remedies. In the event of any breach of warranty or
representation by Seller under this Agreement, Purchaser shall have no remedy
in tort or equity and shall be limited to damages in an action for breach of
contract. In the event of any breach of warranty or representation under this
Article 5 as to any Asset by Seller, Purchaser shall give prompt notice thereof
to Seller and Seller, at Seller's sole and exclusive option, may repurchase the
Asset to which the warranty or representation was allegedly breached in
consideration for that portion of the Purchase Price attributable to the Asset
less all sums received by Purchasers on account of the Asset.
Page 6
<PAGE> 10
ARTICLE 6 - COVENANTS
6.01 Covenants of the Seller. Seller hereby covenants and agrees
with the Purchasers as follows:
(a) The Seller's originals of all titles to Vehicles will be
delivered to the Purchasers or Purchasers' designee on the Closing Date;
(b) The Seller shall take no action which would result in the
cancellation or modification of any of the Insurance Policies, without the
prior written consent of the Purchasers;
(c) The Seller will do nothing to impair the rights of the
Purchasers in the Assets;
(d) The Seller may make, execute or endorse, acknowledge to the
Purchasers from time to time such confirmatory assignments, conveyances,
transfer endorsements, powers of attorney, and certificates relating to the
Assets as the Purchasers may request and reasonably require;
(e) The Seller shall forward to the Purchasers within five (5)
business days of receipt any Lease Payments, Lease Proceeds and any payments it
hereafter receives pursuant to the Insurance Policies;
(f) The Seller will cooperate with the Purchasers and any servicer
or other agent of the Purchasers in transferring all documents, files and other
information necessary for servicing the Assets.
(g) The Seller shall execute such instruments, deliver such
documents, and take such actions necessary to substitute the Purchasers as a
party, and the Purchasers' attorneys as attorneys of record, in any ongoing
litigation and for the Purchasers to proceed with such litigation relating to
an Asset and to assign any rights of the Seller therein.
(h) The Seller shall indemnify, defend, and hold Purchasers
harmless from any and all claims, demands, causes of actions, liabilities (and
attorneys fees and costs in defense thereof), arising after the Closing Date in
favor of a Borrower or Lessee arising out of or related to, any of the Assets
or Leases (each a "Claim"), except to the extent that the Claim arises out of a
breach by Purchaser of any alleged representation under Article 5 of this
Agreement or any action of the Purchasers after the Closing Date. Seller shall
defend Purchasers under this subsection (c) with counsel approved by Purchasers
at Seller's expense.
6.02 Covenants of the Purchasers
(a) The Purchasers hereby covenant and agree with the Seller that
as long as no default in payment on the part of any Lessee exists under any
Lease, the Purchasers will do nothing to disturb or impair such Lessee's use
and quiet enjoyment of the Vehicle for the Foreclosed Portfolio.
(b) The Purchasers hereby covenants and agrees that the Purchaser
will take the Foreclosed Portfolio subject to any and all existing servicing
arrangements which may be terminated by Purchaser according to their terms
after the Cut Off Date. Purchaser shall assume all of Seller's obligations for
servicing fees on the Foreclosed Portfolio from the Cut Off Date.
Page 7
<PAGE> 11
(c) The Purchasers shall indemnify, defend, and hold Seller
harmless from any all claims, demands, causes of actions, liabilities (and
attorneys fees and costs in defense thereof), including claims for security
deposits, arising after the Closing Date in favor of a Borrower or Lessee
arising out of or related to, any of the Assets or Leases (each a "Claim"),
except to the extent that the Claim arises out of a breach by Seller of any
alleged representation under Article 5 of this Agreement. Purchasers shall
defend Seller under this subsection (c) with counsel approved by Seller at
Purchaser's expense.
(d) Purchasers shall perform each written obligation contained in
the Loan Documents, except as Modified in Exhibit L and Owned Leases except to
the extent that the existence of the obligation is a breach of any
representation by Seller under Article 5 or is a liability which will be
indemnified by Seller under Article 6.
(e) Purchaser shall maintain all records concerning the Assets in
California and shall make the records available upon reasonable Seller's
request during normal business hour, at a reasonable cost to Seller, up to a
period of five years from the Closing Date.
(f) Purchasers shall notify Seller of its intention to destroy any
records concerning the Assets for a period of five years from the Closing Date.
6.03 Survival of Covenants. With the exception of 6.02(e) and (f)
the covenants contained in this Article 6 shall survive the sale and delivery
of the Assets to the Purchasers and the performance of this Agreement for a
period of twenty-four (24) months from the Closing Date.
ARTICLE 7 - CONDITIONS PRECEDENT
7.01 Conditions to the Purchaser's Obligations. The obligations of
the Purchasers to make any purchase pursuant to this Agreement shall be subject
to the satisfaction of the following conditions:
(a) All representations and warranties of the Seller contained in
this Agreement and shall be true and correct as of the Closing Date;
(b) Seller shall have given the Purchasers and their respective
designees full access to its books and records concerning the Assets, and all
other information theretofore required or reasonably requested by the
Purchasers to be delivered by the Seller hereunder, duly certified by an
officer of the Seller, and shall have performed all other obligations required
to be performed by the provisions of this Agreement to the satisfaction of the
Purchasers;
(c) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Purchasers.
(d) Seller shall have delivered or provided for the delivery of
the originals which may be counterpart originals of the Leases and the related
title documents to the Purchasers.
(e) Seller shall have complied with all the terms of this
Agreement.
Page 8
<PAGE> 12
7.02 Conditions to the Seller's Obligation's. The obligations of
the Seller to perform pursuant to the Agreement shall be subject to the
satisfaction of the following conditions:
(a) Receipt of the Purchase Price on the Closing Date.
(b) All representations and warranties of the Purchasers contained
in this Agreement and all information provided by Purchasers shall be true and
correct on the Closing Date;
(c) Receipt of an opinion letter by Purchasers' counsel in the
form provided in Exhibit I.
ARTICLE 8 - ADMINISTRATION AND REPURCHASES
8.01 Repurchase Obligations. The Assets are sold by the Seller to
the Purchasers on non-recourse basis. The Seller has no obligation to
repurchase any of the Assets.
8.02 Legal Actions. In addition to the foregoing, if the
Purchasers shall so request, the Seller shall, within reason, cooperate with
the Purchasers in any legal proceedings instituted by or on behalf of, or in
the name of, the Purchasers, or otherwise as appropriate, against any Borrower
or Lessee in default under any Loan or owned Lease.
ARTICLE 9 - SERVICING
9.01 Conveyance of Servicing. On the Closing Date, the Seller
shall transfer all rights to servicing with respect to the Assets to the
Purchasers or to the Purchasers' designee.
Within five (5) business days the Seller shall remit to the Purchasers
all payments with respect to any Asset, including Insurance Proceeds, Lease
Payment, and loan proceeds received by the Seller on or after the Closing Date.
9.02 Interim Servicing. The Seller has no obligations to provide
interim servicing beyond the Closing Date.
9.03 Interim Servicing Fees. The Purchasers shall pay to Seller
$25,000.00 as an Interim Serving Fee.
ARTICLE 10 - PRESERVATION OF ASSETS
10.01 Rights of Purchasers. In addition to any rights and remedies
now or hereafter granted under applicable law and not by way of limitation of
any such rights and remedies, the Purchasers shall have the right to notify all
obligors and guarantors under the Loans, Lessees of the Foreclosed Portfolio
and insurance carriers under the Insurance Policies to make payments to the
Purchasers at the address specified in the notice. Purchasers will provide
samples of these notices as Exhibits J and K.
10.02 Rights Cumulative. All rights and remedies conferred upon or
reserved to the Purchasers under this Agreement are cumulative, and none is
intended to be exclusive of another. No delay or omission in insisting upon
the strict observance or performance of any provision of this Agreement, or in
exercising any right or remedy, will be construed as a
Page 9
<PAGE> 13
waiver or relinquishment of that provision or will impair that right or remedy.
Every right and remedy may be exercised from time to time and as often as
deemed expedient.
ARTICLE 11 - DEFAULT
11.01 Purchasers' Default. In the event that the Purchaser defaults
in its obligations to purchase the Assets, or breaches a material
representation or material warranty or covenant contained in this Agreement, or
otherwise fails to perform any of its obligations to purchase the Assets, the
Seller shall be entitled to assert all claims and to exercise all remedies
available to it at law or in equity with respect to any default by the
Purchasers in performing any obligations required to be performed by the
Purchaser under this Agreement after the Closing Date; provided, however, that
the Seller shall have no right to consequential damages.
11.02 Seller's Default. In the event the Seller defaults in any
material respect in its obligations hereunder, then, if such default occurs
subsequent to the Closing, the Purchasers may avail themselves of any legal or
equitable rights and remedies that the Purchasers may have under this Agreement
with respect to the Seller. The Purchasers shall have no right to
consequential damages. With respect to a default by the Seller or the breach
of any representation or warranty, in either case that does not have a material
adverse effect on the Purchasers, the Purchasers shall have no remedy. In no
event shall the Purchasers have the right to offset amounts due to the Seller
under any contract or agreement between the Seller and the Purchasers or any
Affiliate of the Purchasers on account of default by the Seller hereunder.
Notwithstanding anything herein contained to the contrary, in no event shall
the Seller have any liability hereunder or at law or in equity for the payment
of money damages nor shall the Seller be required to make any payment to cure
defects or pursuant to any indemnity hereunder, if the amount of such payment,
when added to the amount of all other payments made by the Seller, for such
purposes would exceed the Purchase Price.
ARTICLE 12 - MISCELLANEOUS
12.01 Notice. Except as otherwise specified herein, wherever this
Agreement provides for notice to any party (except as expressly provided to the
contrary), it shall be given by messenger, facsimile, electronic transmission,
telegram or mail, effective when received by the party to whom addressed, and
shall be addressed as follows or to such other address as the party affected
may hereinafter designate:
If to the Seller: If to the Purchasers:
The Sumitomo Bank of California -----------------------------------
Chief Credit Officer -----------------------------------
320 California Street -----------------------------------
San Francisco, CA 94104
-----------------------------------
-----------------------------------
-----------------------------------
Page 10
<PAGE> 14
12.02 Successors and Assigns. This Agreement shall be binding upon
the parties hereto and their successors and assigns.
12.03 Amendments. This Agreement and the rights and obligations of
the parties hereunder may not be changed orally but only by an instrument in
writing signed by the party against which enforcement is sought.
12.04 Survival of Representations, Warranties, and Covenants. All
representations, warranties and covenants made herein shall be continuing
representations, warranties and covenants and shall survive the execution and
delivery of this Agreement for a period of twenty four (24) months from the
Closing Date.
12.05 Integration. Except for the Confidentiality Agreements, this
Agreement supersedes any and all agreements and oral or written communications,
including, without limitation, discussions, correspondence and statements of
interpretation or assumption, between the Seller and the Purchasers with
respect to this Agreement, the purchase of the Assets or any of the other
matters contained herein, and this Agreement, the Confidentiality Agreements
and the documents contemplated herein contain the sole, final and complete
expression and understanding between the Seller and the Purchasers with respect
to the transactions contemplated herein and therein. This Agreement shall not
be altered or modified except by a subsequent writing, signed by the Purchasers
and the Seller. Anything to the contrary contained herein or in the
Confidentiality Agreements notwithstanding prior to the closing, the Purchasers
may disclose confidential information (including, without limitation, the
Schedule Prices for the respective Assets) to actual or potential lenders in
connection with their loans in connection with the transactions contemplated by
this Agreement; provided, however, that each such actual or potential lender to
which the Purchasers proposes to provide such information shall first have (i)
agreed in writing for the benefit of the Seller to be bound by the terms of the
Confidentiality Agreements, (ii) delivered a copy of such agreements to the
Seller, and (iii) certified in writing to the Seller that copies of the
Confidentiality Agreements and such written agreements to be bound thereby have
been delivered to each person to whom such confidential information is to be
disclosed.
12.06 Governing Law; Jurisdiction; Venue.
(a) THIS AGREEMENT SHALL BE CONSTRUED, AND THE RIGHTS AND OBLIGATIONS
OF THE SELLER AND THE PURCHASERS HEREUNDER DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA AS APPLIED TO DOMICILIARIES THEREOF.
(b) Subject to the arbitration provisions set forth in Section 12,
for the purposes of any Legal Proceeding arising out of or relating to this
Agreement, the Purchasers hereby expressly acknowledges and agrees that it is
subject to, and hereby submits to, the jurisdiction of all federal and state
courts sitting in the City and County of San Francisco, State of California and
consents that any order, process, notice of notion or other application to or
by any such court or a judge thereof may be served within or without such
court's jurisdiction by registered mail or by personal service provided that a
reasonable time for appearance is allowed, and the Purchasers agree that such
courts shall have exclusive jurisdiction over any Legal Proceeding commenced by
either or both of said parties. In furtherance of this Section, the Purchasers
Page 11
<PAGE> 15
agree, immediately upon the request of the Seller, to discontinue (or to cause
the discontinuance of) any Legal Proceeding pending in any other jurisdiction.
(c) The Purchasers hereby irrevocably waive any objection that
they may have now or hereafter to the laying of venue of any Legal Proceeding
arising out of or relating to this Agreement brought in any federal or state
court sitting in the City and County of San Francisco, State of California and
hereby further irrevocably waives any claim that any Legal Proceeding brought
in any such Court has been brought in an inconvenient forum.
12.07 No Third-Party Beneficiaries. No person, firm or other entity
other than the parties hereto, which, for purposes of this section, shall be
the Seller and the Purchasers, shall have any rights or claims under this
Agreement. No brokerage commission shall be payable to any party, other than
Communication Systems., Inc., who is not a third party beneficiary to the
contract, in connection with the sale of the Assets. Any commission owed to
Communication Systems., Inc., is the sole responsibility of Purchasers.
12.08 Waiver of Trial by Jury. IF, FOR ANY REASON, ANY DISPUTE
BETWEEN THE PARTIES IS NOT SUBMITTED TO ARBITRATION AS PROVIDED IN THIS
AGREEMENT, BUT RATHER IS SUBMITTED TO A COURT OF COMPETENT JURISDICTION, THEN
IN SUCH EVENT EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
(TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT
ANY SUCH DISPUTE, AT THE ELECTION OF ANY OTHER PARTY, SHALL BE TRIED BEFORE A
JUDGE SITTING WITHOUT A JURY.
SELLER'S INITIALS: PURCHASERS' INITIALS: &
------- ------- -------
12.09 Arbitration
(a) Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof or any tort allegedly pertaining thereto,
shall at the request of any party be determined by arbitration. The
arbitration shall be conducted in accordance with the United States Arbitration
Act (Title 9, United States Code), notwithstanding any choice of law provision
in this contract, and under the Commercial Rules and Guidelines for Expediting
Larger, Complex Commercial Arbitrations of the American Arbitration
Association.
(b) The exclusive venue for both the administration of and the
hearing in any arbitration under this Section 12 shall be San Francisco,
California. The Purchasers hereby irrevocably waives any objection that they
may now or hereafter have to the laying of venue of any arbitration arising out
of or relation to this Agreement in San Francisco and hereby covenants that
they will not bring or maintain any such arbitration proceeding in any other
locale. Judgment upon the arbitration award shall be entered in any court
venued in San Francisco, California as provided in Section 12.
Page 12
<PAGE> 16
(c) If the amount in controversy, as determined by reference to
the statement of claim or any cross-claim filed in connection therewith filed
by either party, is less than $500,000, then the dispute shall be submitted to
a single arbitrator. All other disputes shall be submitted to a panel of three
(3) arbitrators.
(d) The arbitrator(s) shall give effect to applicable statutes of
limitations. Any controversy concerning whether an issue is arbitrable shall
be determined by the arbitrator(s). The arbitrator(s) shall have the power to
consider, rule upon and include in any award claims for equitable relief. The
arbitrator(s) shall not be authorized to award consequential, punitive or
exemplary damages, and each party hereby expressly waives its right to seek to
recover consequential, punitive or exemplary damages with respect to any claim
arising out of or relating to this Agreement, or the breach thereof or any tort
allegedly pertaining thereto.
(e) The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff in any such action to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief. Further no provision of this Section 12 shall
limit the right of any party to this Agreement to exercise self-help remedies
such as setoff, foreclosure against or sale of any real or personal property
collateral or security.
(f) In the event any party fails or refuses to post timely all
fees and costs imposed or assessed by the American Arbitration Association,
including, without limitation the fees and costs of the arbitrator(s), or
otherwise fails or refuses without just cause to appear and participate in the
arbitration proceedings at the time and in the manner prescribed by the
American Arbitration Association and/or the arbitrator(s), then the
arbitrator(s) are authorized and directed by this Agreement to proceed without
undue delay to take the default of such party and to enter an award based on
such default.
(g) The administrative fees of the American Arbitration
Association and the arbitrator(s) fees and costs shall be paid one-half by the
Purchasers and one-half by the Seller. The prevailing party shall recover as
part of the arbitrator(s) award its one-half of such fees and costs.
Page 13
<PAGE> 17
12.10 Attorney's Fees. If any Legal Proceeding is instituted to
enforce any of the provisions of this Agreement, unless otherwise set forth
herein, the prevailing party shall be entitled to its reasonable attorney's
fees and costs, including expert witness fees, and the allocated cost of
in-house counsel.
12.11 Time is of the Essence. The Purchasers acknowledges that it
has been informed by the Seller that its failure to close the purchase and sale
of the Assets on the Closing Date will prevent the Seller from realizing
certain material accounting and other benefits associated with the closing of
said purchase and sale, that potential fluctuations in market conditions could
adversely affect the sale of assets such as the Assets, and that a delay in the
closing will otherwise cause severe prejudice to the Seller. Accordingly, the
Purchasers and the Seller each acknowledge and agree that time is of the
essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
hereof.
THE SUMITOMO BANK OF CALIFORNIA PURCHASERS
By: /s/ By: /s/
---------------------------- ----------------------------------
Title: Chief Credit Officer Title: EVP & CFO
------------------------- -------------------------------
By: /s/
----------------------------------
Title: Senior VP
-------------------------------
Page 14
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
FarWest Financial Insurance Agency
Silver Ridge Apartments G.P., Inc.
Silver Ridge Apartments L.P., Inc.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Westminster Capital, Inc.:
We consent to incorporation by reference in the registration statement No.
33-21177 on Form S-8 of Westminster Capital, Inc. of our report dated March 1,
1996, relating to the consolidated statements of financial condition of
Westminster Capital, Inc. and subsidiary as of December 31, 1995, and 1994, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1995, which report appears in the December 31, 1995, annual report on Form 10-K
of Westminster Capital, Inc.
/s/ KPMG Peat Marwick LLP
---------------------
Los Angeles, California
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE REGISTRANT AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,715,000
<SECURITIES> 20,247,000
<RECEIVABLES> 2,834,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,791,000
<DEPRECIATION> 413,000
<TOTAL-ASSETS> 28,199,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 7,815,000
<OTHER-SE> 15,285,000
<TOTAL-LIABILITY-AND-EQUITY> 28,199,000
<SALES> 0
<TOTAL-REVENUES> 4,596,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,777,000
<INCOME-TAX> 420,000
<INCOME-CONTINUING> 1,308,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,308,000
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
