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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
---------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1996
Commission file number 1-12006
FINANCIAL FEDERAL CORPORATION
(Exact name of Registrant as specified in its charter)
NEVADA 88-0244792
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 Park Avenue
New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 888-3344
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Common Stock, $.50 par value
Name of exchange on which registered: American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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. [ ]
The aggregate market value of the Common Stock of the Registrant held
by non-affiliates of the Registrant on October 21, 1996 was
$86,439,053.00. The aggregate market value was computed by reference to the
closing price of the Common Stock on the American Stock Exchange on
the prior day (which was $14.50 per share). For the purposes of this
response, executive officers and directors are deemed to be the
affiliates of the Registrant and the holding by non-affiliates was
computed as 5,961,314 shares.
The number of shares of the Registrant's Common Stock outstanding as
of October 21, 1996 was 9,890,246 shares.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's proxy statement for its Annual Meeting of
Stockholders, to be held December 10, 1996, which will be filed
pursuant to Regulation 14A within 120 days of the close of
Registrant's fiscal year, is incorporated by reference in answer to
Part III of this report. In addition, page 1 and pages 6 through 20 of
Financial Federal Corporation's 1996 Annual Report to Stockholders is
incorporated by reference in answer to Items 6, 7 and 8 of Part II.
Page 1
PART I
Item 1. BUSINESS
The Company, founded in 1989, is an independent financial
services company engaged in financing industrial, commercial and
professional equipment through installment sales and leasing programs
for manufacturers, dealers and users of such equipment. The Company
also makes capital loans to its customers, primarily secured by the
same types of equipment. The Company provides its services primarily
to middle-market businesses located throughout the nation and engaged
in diverse industries, such as general construction, road and
infrastructure construction and repair, manufacturing, trucking, and
waste disposal, the majority of which businesses have annual sales of
up to $20 million. The Company finances a wide range of income-
producing and labor-saving equipment such as cranes, earth-movers,
machine tools, personnel lifts, trailers and trucks. In substantially
all cases, the Company's finance receivables are secured by a first
lien on such equipment collateral. The Company generates profits to
the extent that its finance income exceeds its interest,
administrative and other operating expenses and provision for
possible losses.
Equipment Financed
The Company finances and leases equipment of major
manufacturers. Generally, the equipment financed by the Company is
movable, has an economic life which is longer than the term of the
financing provided by the Company, is not subject to rapid
technological obsolescence, has applications in a number of different
industries and has a relatively broad resale market.
A majority of the equipment and machinery pledged as collateral
to the Company by its obligors is used late model equipment, which is
generally, at the time financed, less than five years old, except for
cranes and certain other items of equipment which have economic lives
in excess of 15 years. Management believes this type of collateral
is less subject to rapid depreciation as compared to new equipment,
and, therefore, is more stable for the purposes of determining resale
values.
Sample types of equipment that the Company finances include air
compressors, bulldozers, compactors, crawler cranes, earth-movers,
excavators, generators, hydraulic truck cranes, loaders, machine
tools, motor graders, pavers, personnel and material lifts, recycling
equipment, resurfacers, rough terrain cranes, sanitation trucks,
scrapers, trucks, truck tractors and trailers. Most of the equipment
the Company finances is used in more than one industry.
Business Strategy
The Company's business strategy is to increase profitably the
size of its portfolio of finance receivables and its share of the
equipment finance and leasing market in the United States. The
principal aspects of the Company's business strategy are summarized
below.
Commitment to Customer Service. The Company focuses on
providing prompt, responsive and customized service to its customers
and business prospects. The Company's senior management has, on
average, in excess of 15 years of specialized expertise in the
industries they serve, which generally enables them to understand and
thus be responsive to customers. The Company's customer services
include making prompt credit decisions, arranging financing
structures which meet customers' needs and the Company's underwriting
criteria, providing direct contact between customers and Company
executives with decision making authority, and providing timely and
knowledgeable responses to customer inquiries.
Maintenance of Underwriting Standards. The Company has
developed and implemented credit underwriting policies and guidelines
that are designed to achieve attractive yields while minimizing
delinquencies and losses. Unlike many of its competitors, the
Company does not use credit scoring models but instead relies upon
the experience of its credit officers to analyze the creditworthiness
of the obligors and collateral values and accordingly structure
transactions which provide an appropriate risk adjusted return to the
Company. Each credit submission, regardless of size, requires the
approval of at least two credit officers.
Focus on Specific Collateral. Virtually all finance
receivables originated or acquired are secured by a first lien on the
pledged collateral. The Company focuses on financing income
producing equipment that is movable, has an economic life which is
longer than the term of the financing, is not subject to rapid
technological obsolescence, has applications in a number of different
industries and has a relatively broad resale market. A majority of
the collateral pledged to the Company by obligors and lessees is used
late model equipment. Management believes this type of collateral is
less subject to rapid depreciation as compared to new equipment, and,
therefore, is more stable for the purposes of determining resale
values.
Expansion. All of the Companys offices are located in the
United States. Thirty-eight (38) full-time new business marketing
representatives directly report to such offices. The obligors
represented in the Company's portfolio of finance receivables are
located in all fifty states. The Company believes that its share of
the U.S. market for equipment finance and leasing receivables is less
than one percent (1%); therefore, management believes there is
substantial opportunity for growth. The Company intends to achieve
such growth by employing additional marketing personnel and opening
new full service offices from time to time.
Personnel Policy. The Company recognizes that, in order to
continue to compete profitably, it must offer to its business
prospects and customers a high level of service, which the Company
believes it can accomplish by attracting and retaining the services
of a team of dedicated and talented managerial, marketing and
administrative personnel. The present strategy used by the Company
to attract and retain such personnel is to offer competitive salary
arrangements, an equity interest in the Company through participation
in the Stock Option Plan, and enhanced career opportunities.
Approximately 74% of the Company's directors, officers and employees
who had been employed by the Company for at least one year as of July
31, 1996, are presently participants in the Stock Option Plan and/or
own stock in the Company. The Company attempts, whenever possible,
to promote personnel from within.
Improved Borrowing Spread and Diversified Funding Sources. The
Company continually seeks to improve its borrowing spread (which is
the spread the Company pays to its funding sources over the
applicable borrowing indices) and diversify its funding sources. The
Company seeks to further lengthen the maturities of its committed
unsecured credit facilities to more closely match the average
maturity of its finance receivables portfolio. As the Company's
capital base increases, the Company should be better positioned to
arrange for improved terms under its present and future committed
unsecured credit facilities. Such reduction in the Company's funding
costs, if achieved, should permit the Company to increase its
receivables portfolio by enabling the Company to offer more
competitive rates, develop additional vendor relationships and expand
its customer base. Moreover, diversification in funding sources
should provide the Company with greater flexibility to address
possible future adverse market conditions.
Marketing Strategy
The Company markets its services through marketing personnel
based in 23 domestic locations, and originates finance receivables
through its relationships with dealers and, to a lesser extent,
manufacturers (sometimes collectively called "vendors"). The Company
also directly markets its finance and leasing services to users for
the acquisition or use of equipment and for capital loans. The
Company emphasizes credit/collateral quality in all of its
originations. All of the Company's marketing personnel are salaried
rather than commission-based and the majority of such personnel
participate in the Stock Option Plan. Thus, the Company expects that
its marketing personnel should have a close community of interest
with the Company and its stockholders.
The Company's marketing activities are relationship and service
oriented. The Company has a team of dedicated and seasoned marketing
and managerial personnel, with average industry experience of more
than 15 years, who solicit new business from the vendors and users of
equipment. Management believes that the experience, knowledge and
relationships of its executives and managers and marketing personnel,
related to its customer and prospect base, equipment values, resale
markets, and local economic and industry conditions, enable the
Company to effectively compete on the basis of prompt, responsive and
customized service. The Company's customer services include making
prompt credit decisions, arranging financing structures responsive to
customer needs, providing direct contact between customers and
Company executives and managers with decision-making authority and
providing prompt and knowledgeable responses to inquiries and to
temporary business problems which customers may encounter in the
ordinary course of their business.
The Company obtains business in several ways. Dealers and, to
a lesser extent, manufacturers of equipment may refer their customers
(users of equipment) to the Company, or such customers may directly
approach the Company to finance equipment purchases. The Company
also purchases installment sales contracts, leases and personal
property security agreements from vendors who extend credit to
purchasers of their equipment. The Company also makes direct loans
to equipment users collateralized by equipment pursuant to personal
property security agreements. In addition, the Company purchases
equipment from vendors and, simultaneously, leases it to users,
generally under non-cancelable leases.
The vendors with whom the Company seeks to establish these
relationships tend to be mid-sized, since the larger vendors
typically generate a volume of business which is greater than the
Company can presently service with its existing financial resources.
The Company is not obligated to purchase any finance receivables from
vendors nor are vendors obligated to sell any finance receivables to
the Company. Most of the vendors with whom the Company has
relationships also sell finance receivables to other financial
institutions. The Company presently does business with more than 100
vendors and is not dependent on any single vendor. In all vendor
generated business, the Company independently approves the credit of
the prospective obligor or lessee.
In order to expand its customer base and broaden its marketing
coverage to other geographic areas, the Company from time to time has
purchased portfolios of finance receivables from financial
institutions, vendors and others generally in the range of $1.0
million to $5.0 million. These portfolios have included finance
receivables secured by a broader range of equipment than that
typically financed by the Company.
Originating, Structuring and Underwriting of Finance Receivables
The Company originates financings typically ranging in amount
from $30,000 to $1.0 million per transaction. During 1996, the
average finance receivable originated by the Company was
approximately $140,000. The Company typically does not provide
financings of less than $30,000, except in limited circumstances.
The Company attempts to structure financings to meet the
financial needs of its customers. Structuring includes determination
of: whether the financing will be an installment sale, lease or
secured loan; term and payment schedule; whether the financing
provided will be funded immediately or held available (possibly
subject to conditions) for future use; finance or interest rate and
other fees and charges; the primary collateral, and additional
equipment collateral, if any, to be pledged, and the necessity of
additional credit support which may include, among other things,
accounts receivable, inventory, real property, certificates of
deposit and/or commercial paper, payment guarantees and full or
partial recourse to the selling vendor, if any.
A portion of the Company's business is the making of capital
loans secured by equipment. Customers seek such capital loans for
numerous reasons, including consolidation of obligations, working
capital, reduction of monthly debt service costs, enhancement of
bonding capacity (generally in the case of road contractors), and
acquisition of additional equipment or other assets. The Company may
obtain, as additional collateral, a lien on the customer's accounts
receivable, inventory and real property. Such capital loans are
generally four to five years in term, and the documentation in
connection therewith generally contains prepayment premium
provisions.
When a vendor seeks to sell a finance receivable to the Company
or a user seeks to obtain financing from the Company, an application
for credit (including cash flow and background information) is
submitted to the Company with respect to the obligor and any
guarantors thereof along with a description of collateral to be
pledged or leased and its present or proposed use. The Company's
personnel analyze the credit application, investigate the credit of
the obligor and any guarantors thereof, and evaluate the primary
collateral to be pledged. The extent of such analysis depends upon,
among other things, the dollar amount of the proposed transaction,
the obligor's and any guarantors' financial strength, financial trade
and industry references, and the obligor's payment history. The
Company may also obtain reports from independent credit reporting
agencies and conduct lien, litigation and tax searches. Unlike many
of its competitors, the Company does not use credit scoring models.
The creditworthiness of obligors and guarantors is evaluated on a
case-by-case basis by the Company's credit personnel and management.
The primary pledged collateral and any additional collateral are
evaluated as to present and possible future resale value. If the
Company approves the credit application on terms acceptable to the
vendor and/or the obligor, and provided the intended purchaser/lessee
acquires the equipment, then the Company either purchases an
installment sales contract or lease from the vendor or enters into a
direct finance or lease transaction with the obligor, the proceeds of
which are remitted when applicable to the vendor. Funding occurs
upon the receipt by the Company of all required documentation in form
and substance satisfactory to the Company and its legal department.
Under the Company's documentation, the obligor/lessee is responsible
for all sales, use and property taxes.
The Company maintains an operating environment which permits
flexibility to its managers in structuring financing transactions
subject to the Company's credit policies and procedures manual. The
Company has established credit policies and procedures which are
periodically reviewed and updated, which set forth detailed
guidelines for credit review and approval, including maximum credit
concentrations with any one obligor which are based on the Company's
capital resources and other considerations. Each credit submission,
regardless of size, requires the approval of at least two credit
officers. The Company's credit policy provides three designations of
credit officer authority levels. A credit officer's authority level
is based, among other things, on his/her credit experience,
managerial position and tenure with the Company. The dollar amount
that a credit officer can approve for a particular transaction is
based upon the credit officer's authority level, collateral coverage
relative to the Company's potential lending exposure, and the extent
of recourse, if any, the Company may have to financially responsible
vendors. Credit officers only have authority to approve credits up
to their prescribed maximum level, and only then if certain criteria
have been met. Notwithstanding the foregoing, any single obligor
concentration in excess of $1.5 million requires the approval of two
senior credit officers, and in excess of $3.0 million, three senior
credit officers.
In addition to the obligor's/lessee's obligation to pay, on
occasion vendors provide the Company with full or partial recourse
which, among other things, obligates the vendor to pay the Company
upon an obligor's default or a breach of warranty with respect to the
assignment of the finance receivable to the Company by the vendor.
In a small percent of cases when the Company originates or acquires a
finance receivable, it may withhold an agreed upon amount from the
vendor/obligor or lessee as security or obtain cash collateral from
an obligated party as security (sometimes called a "dealer reserve").
The Company retains most of these dealer reserves until the Company
is required (pursuant to the applicable agreement), or deems it
appropriate, to release same. In most cases, the Company has the
right to charge the applicable dealer reserve for any delinquent
payments due on any finance receivable acquired from or originated
through that vendor or obligor.
In purchasing a portfolio of finance receivables, the Company
reviews and analyzes the terms of the finance receivables to be
purchased, the credit of the related obligors, the documentation
relating to such finance receivables and the value of the related
pledged collateral, the payment history of the obligors/lessees and
the implicit yield to be earned by the Company.
Collection and Servicing
The Company collects and services all of its finance
receivables. Customer payments are remitted to, and processed in,
the Houston office. Collection efforts in connection with delinquent
accounts, however, are handled by the collection personnel and
managers in the various branch offices in conjunction with senior
management and, if necessary, the Company's legal department. All
past due accounts are reviewed by senior management at least monthly,
and all accounts which are past due more than 60 days are continually
reviewed by the Company's in-house legal staff. The decision to
repossess collateral is made by the Company's senior management in
conjunction with its legal staff. The Company determines, on a
case-by-case basis, whether or not to use an outside source to
repossess an item of collateral. The sale or other disposition of
repossessed collateral is determined by the Company's senior
management and legal staff in accordance with applicable law.
Competition
The Company's business is highly competitive. The Company
competes with banks, manufacturer-owned and independent finance and
leasing companies, as well as other financial institutions. Some of
those competitors may be better positioned than the Company to market
their services and financing programs to vendors and users of equip-
ment because of their ability to offer additional services and
products, and more favorable rates and terms. Many of these
competitors have longer operating histories and possess greater
financial and other resources than the Company. In addition, some of
these competitors have sources of funds available at a lower cost
than those available to the Company, thereby enabling them to provide
financing at rates lower than the Company may be willing to provide.
The Company typically does not compete primarily on the basis of
rate. The Company competes by emphasizing a high level of equipment
and financial expertise, customer service, flexibility in structuring
financing transactions and significant management involvement in
customer relationships.
Although there is no comprehensive data that quantifies the
size of the domestic market for equipment financing and leasing, the
Company believes that annual sales of the principal types of new and
used equipment it finances or leases is in excess of $50 billion and
its share of this market is less than 1%.
Employees
At July 31, 1996, the Company had 124 employees. All of the
Company's employees and officers are salaried. The Company provides
its employees with group health and life insurance benefits and a
qualified 401(k) plan. The Company does not match employee
contributions to the 401(k) plan. The Company does not have any
collective bargaining, employment, pension, incentive compensation
arrangements or non-solicitation agreements with any of its employees
other than its stock option plan (which contains a non-solicitation
provision) and deferred compensation agreements. Employees who have
participated in the Company's stock option plan have, among other
things, agreed not to solicit customers of the Company for 90 days
following termination of their employment. The Company considers its
relations with its employees to be satisfactory.
Regulation
The Company's commercial finance activities are generally not
subject to regulation, except that certain states may regulate motor
vehicle transactions, impose licensing requirements, and/or restrict
the amount of interest or finance rates and other amounts that the
Company may charge its customers. Failure to comply with such
regulations can result in loss of principal and interest or finance
charges, penalties and imposition of restrictions on future business
activities.
Executive Officers
Clarence Y. Palitz, Jr., 65, has served as Chairman of the Board
of the Company since July 1996 and as Chief Executive Officer and
President of the Company since its inception in 1989. From 1963 to
1988, Mr. Palitz served as President and a Director of Commercial
Alliance Corporation ("CAC"), which he founded with his brother,
Bernard G. Palitz, in 1963. Since October 1988, he has been a director
of City and Suburban Financial Corp., a privately owned savings and loan
holding company located in Westchester County, New York.
Michael C. Palitz, 38, has served as Executive Vice President of
the Company since July 1995, as Senior Vice President of the Company
from February 1992 to July 1995 and as a Vice President of the Company
from its inception in 1989 to February 1992. He has also served as
Chief Financial Officer, Treasurer and Assistant Secretary of the
Company since its inception in 1989. From 1985 to 1989, Mr. Palitz was
an Assistant Vice President of Bankers Trust Company and, from 1980 to
1983, he was an Assistant Secretary of Chemical Bank.
Paul Sinsheimer, 49, has served as Executive Vice President and a
Director of the Company since its inception in 1989. From 1970 to 1989,
Mr. Sinsheimer was employed by CAC, where he served successively as
Credit Manager, Collections Manager, Operations Manager, Houston Branch
Manager, Division Manager and, from 1988, Executive Vice President.
William M. Gallagher, 47, has served as Senior Vice President of
the Company since 1990 and served as a Vice President of the Company
from its inception in 1989 to 1990. From 1973 to 1989, Mr. Gallagher
was employed by CAC, where he served successively as Collections
Manager, Accounting Manager, Operations Manager of the Chicago and
Houston regions and, from 1988, Vice President and Houston Branch
Manager.
Troy H. Geisser, 34, has served as Senior Vice President and
Secretary of the Company since February 1996. From 1990 to 1996, Mr.
Geisser held several positions, including Vice President and Branch
Manager. From 1986 to 1990, Mr. Geisser held several positions
including Division Counsel for the Northern Division of Orix Credit
Alliance, Inc. (the successor to CAC).
Richard W. Radom, 48, has served as Senior Vice President of the
Company since 1990 and served as a Vice President of the Company from
1989 to 1990. From 1973 to 1989, Mr. Radom was employed by CAC, where
he served, from 1986, as Senior Vice President.
Item 2. PROPERTIES
The Company's executive offices are located at 400 Park Avenue,
New York, New York and consist of approximately 6,400 rentable square
feet of space. As of July 31, 1996, the Company has full service
offices (where credit analysis and approval, collection and marketing
functions are performed) in Houston, Texas; Westmont, Illinois;
Teaneck, New Jersey; Hilton Head, South Carolina; and Charlotte,
North Carolina, which generally consist of between approximately
2,000 and 4,500 square feet of space (except for the Houston office,
the operating headquarters, which consists of approximately 12,500
square feet) and are occupied pursuant to leases which expire on
various dates through 2004. Management believes that the Company's
existing facilities are suitable and adequate for their present and
proposed uses and that suitable and adequate facilities will be
available on reasonable terms for any additional offices which the
Company may open.
Item 3. LEGAL PROCEEDINGS
There are no pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company is a
party or to which any of its property is subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year ended July 31, 1996.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company is listed on the American Stock
Exchange under the symbol "FIF." The table below sets forth the high
and low reported closing sales prices of the Common Stock as reported by
the American Stock Exchange during the periods indicated, adjusted for
the January 1996 stock split.
Price Range
Low High
Fiscal year 1996
First Quarter ended October 31, 1995 $11.75 $14.59
Second Quarter ended January 31, 1996 $13.92 $16.50
Third Quarter ended April 30, 1996 $15.13 $16.88
Fourth Quarter ended July 31, 1996 $12.63 $17.13
Fiscal year 1995
First Quarter ended October 31, 1994 $10.17 $12.08
Second Quarter ended January 31, 1995 $11.59 $12.92
Third Quarter ended April 30, 1995 $11.33 $13.33
Fourth Quarter ended July 31, 1995 $11.00 $12.00
The Company presently has no intention of paying cash dividends
on the Common Stock in the foreseeable future. The payment of cash
dividends, if any, will depend upon the Company's earnings, financial
condition, capital requirements, cash flow and long range plans and such
other factors as the Board of Directors of the Company may deem
relevant.
Number of Record Holders
The number of record holders of the Company's Common Stock as of
October 21, 1996 was 69. Included in this number are several nominees
which hold the Company's common stock on behalf of numerous other
persons and institutions; these other persons and institutions are not
included in the above number as their shares are held in "Street Name."
Item 6. SELECTED FINANCIAL DATA
Reference is made to information under the heading "Financial
Highlights" contained in the Company's Annual Report to Stockholders for
the fiscal year ended July 31, 1996, which information is incorporated
herein by reference. The Company has not paid any cash dividends on its
Common Stock.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Reference is made to information under the heading "Management's
Discussion and Analysis of Operations and Financial Condition" contained
in the Company's Annual Report to Stockholders for the fiscal year ended
July 31, 1996, which information is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to information under the headings "Consolidated
Balance Sheet," "Consolidated Statement of Stockholders' Equity,"
"Consolidated Statement of Operations," "Consolidated Statement of Cash
Flows," "Notes to Consolidated Financial Statements" and "Independent
Auditors' Report" contained in the Company's Annual Report to
Stockholders for the fiscal year ended July 31, 1996, which information
is incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference
from the information in Registrant's proxy statement (filed or to be
filed pursuant to Regulation 14A) for its Annual Meeting of Stockholders
to be held December 10, 1996, except as to biographical information on
Executive Officers which is contained in Item I of this Annual Report on
Form 10-K.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference
from the information in Registrant's proxy statement (filed or to be
filed pursuant to Regulation 14A) for its Annual Meeting of Stockholders
to be held December 10, 1996.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated by reference
from the information in Registrant's proxy statement (filed or to be
filed pursuant to Regulation 14A) for its Annual Meeting of Stockholders
to be held December 10, 1996.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference
from the information in Registrant's proxy statement (filed or to be
filed pursuant to Regulation 14A) for its Annual Meeting of Stockholders
to be held December 10, 1996.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements Page
The following financial statements are filed herewith and
incorporated herein by reference from pages 11 through 20 of the
Registrant's Annual Report to Stockholders for the fiscal year
ended July 31, 1996, as provided in Item 8 hereof:
- Consolidated Balance Sheet as at July 31, 1996 and 1995.
- Consolidated Statement of Stockholders' Equity for the fiscal
years ended July 31, 1996, 1995 and 1994.
- Consolidated Statement of Operations for the fiscal years ended
July 31, 1996, 1995 and 1994.
- Consolidated Statement of Cash Flows for the fiscal years ended
July 31, 1996, 1995 and 1994.
- Notes to Consolidated Financial Statements.
- Independent Auditors' Report.
2. Financial Statement Schedules
The following financial statement schedules are filed herewith:
- Independent Auditors' Report on Financial Statement Schedules. 13
- Schedule I - Condensed Financial Information of Registrant 14
All other schedules are omitted as the required information is
inapplicable or the information is presented in the consolidated
financial statements or related notes.
3. Exhibits 18
Exhibit No. Description of Exhibit
3.1* Articles of Incorporation of the Registrant
3.2* By-laws of the Registrant
3.3* Form of Restated and Amended By-laws of the Registrant
4.1* Form of Variable Rate Subordinated Debentures Due September
1, 2000 (a "Debenture") issued by Registrant
4.6****** Form of Note Agreement dated as of April 15, 1996 issued by
Financial Federal Credit Inc.("Credit") to certain
institutional note holders
10.2* Form of Warrant to purchase Common Stock, as amended,
issued by the Registrant to stockholders in
connection with its initial capitalization
10.3* Form of Warrant to purchase Common Stock issued by the
Registrant to certain of its officers
10.8* Form of Commercial Paper Note issued by the Registrant
10.9* Form of Commercial Paper Note issued by Credit
10.10* Stock Option Plan of the Registrant and forms of related
stock option agreements
10.11** Deferred Compensation Agreement dated June 1, 1992
between Credit and Clarence Y. Palitz, Jr.
10.12** deferred Compensation Agreement dated June 1, 1992
between Credit and Bernard G. Palitz
10.13*** Deferred Compensation Agreement dated January 1, 1993
between Credit and Clarence Y. Palitz, Jr.
10.14*** Deferred Compensation Agreement dated January 1, 1993
between Credit and Bernard G. Palitz.
10.15**** Deferred Compensation Agreement dated January 1, 1994
between Credit and Clarence Y. Palitz, Jr.
10.16**** Deferred Compensation Agreement dated January 1, 1994
between Credit and Bernard G. Palitz.
10.17***** Deferred Compensation Agreement dated January 1, 1995
between Credit and Bernard G. Palitz.
10.18***** Deferred Compensation Agreement dated January 1, 1995
between Credit and Clarence Y. Palitz, Jr.
10.19***** Deferred Compensation Agreement dated February 1, 1995
between Credit and Paul Sinsheimer
10.20******* Deferred Compensation Agreement dated January 1, 1996
between Credit and Clarence Y. Palitz, Jr.
10.21 Form of Commercial Paper Dealer Agreement of Credit
10.22 Form of Deferred Compensation Agreement with certain
officers as filed under the Top Hat Plan with the
Department of Labor
11.1 Computation of Earnings Per Share
13.1 1996 Annual Report to Stockholders (except for the
pages and information thereof expressly
incorporated by reference in this Form 10-K, the Annual
Report to Stockholders is provided solely for the
information of the Securities and Exchange Commission and is
not deemed "filed" as part of this Form 10-K)
22.1 Subsidiaries of the Registrant
23.1 Consent of Independent Auditors
27 Financial Data Schedule (EDGAR version only)
____________
*Previously filed with the Securities and Exchange Commission as an
exhibit to the Company's Registration Statement on Form S-1 (Registration
No. 33-46662).
**Previously filed with the Securities and Exchange Commission as an
exhibit to the Company's Form 10-K for the fiscal year ended July 31,
1992.
***Previously filed with the Securities and Exchange Commission as an
exhibit to one of the Company's Forms 10-Q for the fiscal year ended July
31, 1993.
****Previously filed with the Securities and Exchange Commission as an
exhibit to one of the Company's Forms 10-Q for the fiscal year ended July
31, 1994.
*****Previously filed with the Securities and Exchange Commission as an
exhibit to one of the Company's Forms 10-Q for the fiscal year ended July
31, 1995.
******Previously filed with the Securities and Exchange Commission as an
exhibit to the Company's Registration Statement on Form S-2 (Registration
No. 333-3320).
*******Previously filed with the Securities and Exchange Commission as an
exhibit to one of the Company's Forms 10-Q for the fiscal year ended July
31, 1996.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the last quarter of the
fiscal year ended July 31, 1996.
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.
FINANCIAL FEDERAL CORPORATION
(Registrant)
By:
Clarence Y. Palitz, Jr.,
Chairman of the Board and President
October 28, 1996
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.
Clarence Y. Palitz, Jr., Chairman of the Board, President and Chief
Executive Officer October 28, 1996
Lawrence B. Fisher, Director October 28, 1996
William C. MacMillen, Jr., Director October 28, 1996
Bernard G. Palitz, Director October 28, 1996
Paul Sinsheimer, Executive Vice President and Director October 28, 1996
Michael C. Palitz, Executive Vice President, Treasurer, Chief Financial
Officer and Director October 28, 1996
David H. Hamm, Controller, Assistant Treasurer and Principal Accounting
Officer October 25, 1996
INDEX TO FORM 10-K SCHEDULES
Independent Auditors' Report
Schedule I - Condensed Financial Information of Registrant
Schedules other than the schedule referred to above have been omitted as
the conditions requiring their filing are not present or the information
has been presented elsewhere in the consolidated financial statements.
Independent Auditors Report
Financial Federal Corporation
In connection with our audits of the consolidated financial
statements included in Financial Federal Corporation's annual report
to stockholders and incorporated by reference in this Form 10-K, we
have also audited the schedule listed in the accompanying index. Our
audits of the consolidated financial statements were made for the
purpose of forming an opinion on those statements taken as a whole.
The schedule is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements
/s/ Eisner & Lubin LLP
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
August 30, 1996
Schedule I
FINANCIAL FEDERAL CORPORATION
CONDENSED BALANCE SHEET
July 31,
1996 1995
ASSETS
Cash $ 256,000 $ 361,000
Due from subsidiaries:
Advances 27,626,000 19,325,000
Subordinated notes receivable 45,000,000 25,000,000
Investment in subsidiaries - at equity 34,749,000 26,399,000
Other assets 814,000 692,000
----------- ----------
TOTAL $108,445,000 $71,777,00
============ ==========
LIABILITIES
Senior debt $ 4,966,000 $ 5,106,000
Accrued interest, taxes and other liabilities 2,331,000 1,639,000
Subordinated debt 6,957,000 6,957,000
----------- -----------
Total liabilities 14,254,000 13,702,000
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 4,980,000 2,790,000
Additional paid-in capital 58,289,000 33,201,000
Warrants 29,000 29,000
Retained earnings 30,893,000 23,495,000
Treasury stock, at cost - 96,000 shares (1,440,000)
---------- ----------
Total stockholders' equity 94,191,000 58,075,000
----------- ----------
TOTAL $108,445,000 $71,777,000
============ ===========
The note hereto, the consolidated financial statements and the notes
thereto are made a part hereof.
FINANCIAL FEDERAL CORPORATION
CONDENSED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Year Ended July 31,
1996 1995 1994
Equity in earnings of subsidiaries before income taxes $14,205,000 $10,891,000 $ 9,368,000
Interest charges to subsidiaries 4,007,000 3,266,000 2,779,000
----------- ----------- ------------
Total 18,212,000 14,157,000 12,147,000
----------- ----------- ------------
Expenses:
Interest expense 972,000 1,004,000 1,063,000
Other expenses (net) 1,811,000 1,581,000 1,600,000
----------- ----------- -----------
Total 2,783,000 2,585,000 2,663,000
----------- ----------- -----------
Earnings before income taxes 15,429,000 11,572,000 9,484,000
Provision for income taxes 5,819,000 4,363,000 3,540,000
---------- ---------- -----------
NET EARNINGS 9,610,000 7,209,000 5,944,000
Retirement of treasury stock (840,000)
Three-for-two stock split (1,372,000)
Retained earnings - August 1 23,495,000 16,286,000 10,342,000
------------ ----------- ----------
RETAINED EARNINGS - JULY 31 $30,893,000 $23,495,000 $16,286,000
============ =========== ==========
The consolidated financial statements and the notes
thereto are made a part hereof.
FINANCIAL FEDERAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
Year Ended July 31,
1996 1995 1994
Net cash provided by operating activities $ 1,330,000 $ 381,000 $ 128,000
------------ ----------- ----------
Cash flows from investing activities:
Collections from(advances to) subsidiaries-net (8,301,000) 2,853,000 4,026,000
Subordinated notes receivable - subsidiary:
Advanced (20,000,000) (25,000,000) (2,000,000)
Collected 20,000,000
Dividends received from subsidiary 500,000 2,000,000 3,000,000
------------ ----------- ----------
Net cash provided by(used in)investing
activities (27,801,000) (147,000) 5,026,000
------------ ----------- ----------
Cash flows from financing activities:
Commercial paper:
Proceeds 76,869,000 71,393,000 25,357,000
Repayments (76,509,000) (71,770,000) (31,860,000)
Note payable - bank (500,000) 500,000
Repurchase of subordinated debt (595,000)
Proceeds from sale of common stock, net 26,340,000
Proceeds from exercise of stock options and
warrants 166,000 306,000 2,409,000
Acquisition of treasury stock (1,440,000)
Tax benefit relating to stock options 37,000 376,000
------------ ----------- ----------
Net cash provided by(used in)financing
activities 26,366,000 (129,000) (5,158,000)
NET INCREASE (DECREASE) IN CASH (105,000) 105,000 (4,000)
Cash - August 1 361,000 256,000 260,000
------------ ----------- ----------
CASH - JULY 31 $ 256,000 $ 361,000 $ 256,000
============ ============ ===========
Non-cash financing activities:
In 1996, the Company retired 96,000 common shares held as treasury
stock resulting in a decrease of common stock, additional paid-in
capital and retained earnings of $48,000, $552,000 and $840,000,
respectively. Additionally, the Company authorized a three-for-two
stock split effected in the form of a stock dividend.
In 1994, $1,507,000 of subordinated debentures were exchanged in
connection with the exercise of 274,000 stock warrants.
The consolidated financial statements and the notes
thereto are made a part hereof.
FINANCIAL FEDERAL CORPORATION
NOTE TO CONDENSED BALANCE SHEET
Due from Subsidiaries:
Advances to subsidiaries generally bore interest at 5.66% and 6.25% at July 31,
1996 and 1995, respectively.
Subordinated notes receivable are due $25,000,000 on July 31, 2002,
$10,000,000 on September 1, 2002 and $10,000,000 on July 31, 2004 and
provide for interest, receivable quarterly, at the annual rates of
8.35%, 7.85% and 7.50%, respectively. The notes and interest thereon
are subordinated to the subsidiary's borrowings from banks,
institutional investors, commercial paper investors and other debt
designated by the subsidiary's Board of Directors.
Other assets include $744,000 and $592,000 of accrued interest
receivable from subsidiaries at July 31, 1996 and 1995, respectively.
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
3.1 Articles of Incorporation of the Registrant *
3.2 By-laws of the Registrant *
3.3 Form of Restated and Amended By-laws of the Registrant *
4.1 Form of Variable Rate Subordinated Debentures Due
September 1, 2000 (a "Debenture") issued by Registrant *
4.6 Form of Note Agreement, dated as of April 15, 1996,
issued by Financial Federal Credit Inc.
(Credit) to certain institutional note holders *
10.2 Form of Warrant to purchase Common Stock, as amended,
issued by the Registrant to stockholders in
connection with its initial capitalization *
10.3 Form of Warrant to purchase Common Stock issued by the
Registrant to certain of its officers *
10.8 Form of Commercial Paper Note issued by the Registrant *
10.9 Form of Commercial Paper Note issued by Credit *
10.10 Stock Option Plan of the Registrant and forms of related
stock option agreements *
10.11 Deferred Compensation Agreement dated June 1, 1992
between Credit and Clarence Y. Palitz, Jr. *
10.12 Deferred Compensation Agreement dated June 1, 1992
between Credit and Bernard G. Palitz *
10.13 Deferred Compensation Agreement dated January 1, 1993
between Credit and Clarence Y. Palitz, Jr. *
10.14 Deferred Compensation Agreement dated January 1, 1993
between Credit and Bernard G. Palitz. *
10.15 Deferred Compensation Agreement dated January 1, 1994
between Credit and Clarence Y. Palitz, Jr. *
10.16 Deferred Compensation Agreement dated January 1, 1994
between Credit and Bernard G. Palitz. *
10.17 Deferred Compensation Agreement dated January 1, 1995
between Credit and Bernard G. Palitz. *
10.18 Deferred Compensation Agreement dated January 1, 1995
between Credit and Clarence Y. Palitz, Jr. *
10.19 Deferred Compensation Agreement dated February 1, 1995
between Credit and Paul Sinsheimer *
10.20 Deferred Compensation Agreement dated January 1, 1996
between Credit and Clarence Y. Palitz, Jr. *
10.21 Commercial Paper Dealer Agreement, dated April 23, 1996,
between Credit and BA Securities, Inc. 19
10.22 Form of Deferred Compensation Agreement with certain
officers as filed under the Top Hat Plan with the
Department of Labor 24
11.1 Computation of Earnings Per Share 27
13.1 1996 Annual Report to Stockholders (except for the pages
and information thereof expressly incorporated
by reference in this Form 10-K, the Annual Report to
Stockholders is provided solely for the information of
the Securities and Exchange Commission and is not deemed
"filed" as part of this Form 10K)
22.1 Subsidiaries of the Registrant 28
23.1 Consent of Independent Auditors 29
27 Financial Data Schedule (EDGAR version only)
____________
*Previously filed with the Securities and Exchange Commission as an exhibit.
Exhibit 10.21
COMMERCIAL PAPER DEALER AGREEMENT
THIS COMMERCIAL PAPER DEALER AGREEMENT, dated as of [insert date], between
[insert dealer name] (the "Dealer"), and FINANCIAL FEDERAL CREDIT INC. (the
"Company").
WHEREAS, the Company desires to issue its short-term promissory notes in the
United States commercial paper market,
WHEREAS, the Company has requested the Dealer to act as dealer therefor and
the Dealer has indicated its willingness to do so on the terms and
conditions contained herein,
NOW THEREFORE, the Dealer and the Company hereby agree as follow:
1. The Notes. The term "Notes" means short-term promissory notes of the
Company, each such note (a) having a maturity at the time of issuance
of not more than 270 days (exclusive of days of grace) and (b) not
containing any provision for automatic "rollover". The proceeds from
the sale of the Notes will be used by the Company for "current
transactions" within the meaning of Section 3(a)(3) of the Securities
Act of 1933, as amended (the "1933 Act"). The Notes will be issued in
such face or principal amounts (but not less than $100,000 each) and
will bear such interest rates (if interest-bearing) or be sold at such
discounts, if any, from their face amounts, as shall be approved in
writing in advance by the Company in its sole discretion.
2. Appointment of Dealer. The Company hereby appoints the Dealer to be a
dealer in respect of the Notes and the Dealer accepts such appointment
subject to the terms and conditions set forth herein. Although (a)
the Company has and shall have no obligation to permit the Dealer to
purchase any Notes or arrange any sale of Notes for the account of the
Company, and (b) the Dealer has and shall have no obligation to
purchase any Notes or arrange any sale of Notes for the account of the
Company, the parties hereto agree that any purchase of Notes by the
Dealer and any sale of Notes arranged by the Dealer will be effected
in reliance on, among other things, the representations, warranties,
covenants and agreements of the Company contained herein or made
pursuant hereto and on the terms and conditions and in the manner
herein set forth.
3. Issuance of Notes. (a) Prior to or on the date of a proposed issuance
of Notes, the Dealer and the Company shall confer as to the face or
principal amounts, maturities and denominations thereof, the
applicable interest rates or the discounts from the face amounts, at
which the Notes are to be issued. When the Company has approved such
issuance in writing, the Dealer will instruct the Issuing and Paying
Agent to deliver executed and countersigned Notes to the persons
specified by the Dealer on the date of issuance.
(b) The authentication and delivery of Notes pursuant hereto by The
First National Bank of Chicago, as issuing and paying agent (the
"Issuing and Paying Agent") shall constitute the issuance of such
Notes by the Company. The Company agrees that (i) signed Notes in
bearer form shall be delivered to the Issuing and Paying Agent and
(ii) instructions to the Issuing and Paying Agent to complete,
authenticate and deliver such Notes shall be made in the manner
prescribed in the agreement between the Company and the Issuing and
Paying Agent (as amended from time to time, the "Issuing and Paying
Agency Agreement"). The Company shall promptly give the Dealer prior
written notice of any change in the entity serving as the Issuing and
Paying Agent.
4. Representations and Warranties. The Company represents and warrants:
(a) the Company is a duly organized and validly existing corporation
in good standing under the laws of the state of its incorporation and
has the corporate power and authority to own its property and to carry
on its business as presently being conducted, to execute and deliver
this Agreement, the Issuing and Paying Agency Agreement and the Notes,
and to perform and observe the conditions hereof and thereof;
(b) the execution and delivery and performance of this Agreement and
the Issuing and Paying Agency Agreement and the issuance and sale of
the Notes have been duly authorized by the Company, and this Agreement
and the Issuing and Paying Agency Agreement constitute, and when the
Notes have been duly executed by the Company and countersigned and
delivered by the Issuing and Paying Agent against payment therefor,
such Notes will constitute, legal, valid and binding obligations of
the Company, enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws relating to or affecting generally the enforcement of
creditors' rights or by general equitable principles, or by applicable
federal or state securities laws;
(c) no consent or action of, or filing or registration with, any
governmental or public regulatory body or authority (other than as may
be required under state securities laws) is required to authorize, or
is otherwise required in connection with, the execution, delivery or
performance of this Agreement, the Issuing and Paying Agency Agreement
or the Notes, except such as have already been obtained;
(d) neither the execution and delivery by the Company of this
Agreement, the Issuing and Paying Agency Agreement or the Notes, nor
the fulfillment of or compliance with the terms and provisions hereof
or thereof by the Company, will (i) result in the creation or
imposition of any mortgage, lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company; (ii)
violate any of the terms of the Company's charter documents or By-
laws, any contract or instrument to which the Company is a party or to
which it or its property is bound, or any law or regulation or any
order, writ, injunction or decree of any court or governmental
instrumentality, to which the Company is subject or by which it or its
property is bound;
(e) each Note issued by the Company pursuant to the terms hereof and
of the Issuing and Paying Agency Agreement is exempt from the
registration requirements of the 1933 Act by reason of Section 3(a)(3)
thereof, and neither registration of the Notes under the 1933 Act nor
qualification of an indenture under the Trust Indenture Act of 1939,
as amended, with respect to the Notes will be required in connection
with the offer, issuance, sale or delivery of the Notes in accordance
with the terms hereof and of the Issuing and Paying Agency Agreement;
(f) the Company is neither an "investment company" nor a "company
controlled by an investment company" within the meaning of the
Investment Company Act of 1940, as amended; and
(g) there are no actions, suits, proceedings, or investigations
pending or, to the Company's knowledge, threatened against the Company
or any of its officers, directors or persons who controls the Company
(within the meaning of Section 15 of the 1933 Act or Section 20 of the
Securities Exchange Act of 1934, as amended) or to which any property
of the Company is subject, which could reasonably be expected to
materially prevent or interfere with or materially and adversely
affect the Company's execution, delivery or performance of this
Agreement, the Issuing and Paying Agency Agreement or the Notes.
5. Offering Materials. (a) The Company understands that, in connection
with the sale of the Notes, certain materials relating to the Company
and its affiliates may be prepared (collectively referred to herein as
the "Offering Materials"). To provide a basis for the preparation of
the Offering Materials and to assist the Dealer's normal credit review
procedures, the Company shall provide the Dealer with copies of (i) if
the Company becomes a reporting company under the Securities Exchange
Act of 1934, as amended, its most recent reports of the Company on
Forms 10-Q and 10-K filed with the Securities and Exchange Commission
("SEC") and each report on Form 8-K filed by the Company with the SEC
during the current fiscal year, and (ii) its most recent annual
audited financial statements and each interim financial statements or
report prepared subsequent thereto. In addition, the Company will
provide the Dealer with such other information generally supplied in
writing to security analysts. In addition, the Company will provide
the Dealer with such other information as the Dealer may reasonably
request for the purpose of its on-going credit review of the Company,
which information, to the extent not required to be included in the
Offering Materials, may be subject to a confidentiality agreement
between the Company and the Dealer. The Company authorizes the Dealer
to distribute the Offering Materials as the Dealer sees fit.
(b) The Dealer agrees to furnish all Offering Materials to the
Company for its written approval prior to the use thereof in offering
the Notes. The Dealer shall not use any Offering Materials until it
has received written approval from the Company of such Offering
Materials. No materials other than the Offering Materials submitted to
the Company for approval will be used to offer the Notes. The
Company's approval shall not apply to information provided by the
Dealer for inclusion in the Offering Materials, and the Dealer's use
of Offering Materials containing information not approved by the
Company shall constitute the Dealer's approval of such information. A
written approval by the Company shall constitute a representation that
the Offering Materials, as to that portion specifically approved, do
not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
If, at any time during the term of this Agreement, any event occurs
or circumstances exist as a result of which any then current Offering
Materials would include such untrue statement of a material fact or
omission to state a material fact related to those portions of the
Offering Materials previously approved by the Company, then the
Company will promptly notify the Dealer and provide the Dealer with
revised information that corrects such untrue statement or omission.
6. Repetition of Representations and Warranties. Each sale of Notes by
the Company hereunder shall be deemed to be a representation and
warranty by it that, as of the date of such sale, (a) the
representations, warranties and covenants of the Company contained in
Sections 4 are true and correct, and (b) the Issuing and Paying Agent
has not resigned, or been terminated or replaced.
7. Conditions Precedent to Dealer's Obligations. As conditions precedent
to any obligations of the Dealer hereunder, the Company shall furnish
to the Dealer the following documents, in form and substance
reasonably satisfactory to the Dealer: (a) a true and complete copy of
the Issuing and Paying Agency Agreement; (b)(i) a certified copy of
resolutions, duly adopted by the Board of Directors of the Company
authorizing the issuance and sale of the Notes and (ii) a certificate
as to the incumbency and signatures of certain officers authorized to
act on behalf of the Company; and the acceptance by the Company of
proceeds from each sale of Notes hereunder shall be deemed to
constitute a representation and warranty by the Company that such
certificates are accurate and complete and that such resolutions are
in full force and effect, in each case, as of the date of such
acceptance of proceeds; and (c) an opinion of counsel to the Company,
with respect to the matters set forth in Section 4(a) through 4(g) and
in form and substance acceptable to the Dealer.
8. Covenants of the Company. The Company covenants and agrees that: (a)
for the benefit of the Dealer and the holders from time to time of the
Notes, the Company will not permit to become effective any amendment,
supplement, rider, waiver or consent to or under any Note, the Issuing
and Paying Agency Agreement or any document prepared in connection
with any thereof which might adversely affect the interests of the
holder of any Note then outstanding. The Company will give the Dealer
written notice of any such proposed amendment, supplement, rider,
waiver or consent at least ten days prior to the effective date
thereof; (b) the Company agrees to furnish prior notice to the Dealer
of any proposed resignation, termination or replacement of the Issuing
and Paying Agent.
9. Indemnification. (a) The Company will indemnify and hold harmless the
Dealer and any affiliate, director, officer, employee or agent of the
Dealer and any party who "controls" the Dealer within the meaning of
Section 15 of the 1933 Act (each, an "indemnified party") against any
and all liabilities, losses, damages, claims, costs and expenses
(including, without limitation, reasonable fees and disbursements of
counsel) (i) arising out of or based upon any allegation that any
portions of any Offering Material approved in writing by the Company
or any information provided to the Dealer in writing hereunder by the
Company specifically for inclusion in the Offering Materials includes
an untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (ii)
arising out of the material breach by the Company of any agreement or
representation or warranty made or deemed made pursuant to this
Agreement.
The above indemnification shall not apply to the extent that the
liability, loss, damages, claims, costs and expenses arise from the
inclusion by any indemnified party in any Offering Material of
statements that have not been approved by the other party pursuant to
Section 5 of this Agreement, of an untrue statement of a material fact
or an omission to state any material fact necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The Dealer shall promptly notify the Company in writing of any
action or claim asserted against any indemnified party as to which
indemnification may be required. The Company shall thereupon assume
the defense thereof, including the employment of counsel and the
payment of all expenses. The Company shall have no obligation to
indemnify against any settlement, costs or expenses incurred prior to
the delivery of written notice of a claim to the Company. The Dealer
(but not other indemnified parties) shall have the right to employ
separate counsel and to participate in the defense thereof, but such
participation shall be at the Dealer's expense, unless (i) the Company
has specifically authorized in writing the retention of such counsel,
(ii) the Company has failed to assume the defense and employ counsel
after the delivery by the Dealer of written notice as provided above,
or (iii) the named parties include the Dealer and the Company, and
counsel shall have advised that representation of both parties by the
same counsel would be prohibited under applicable standards of
professional conduct due to actual or potential differing interests
between them (in which case the Company shall not assume the defense,
provided that Company shall not be responsible for the fees of more
than one separate firm of attorneys for all actions arising out of the
same general allegations or circumstances in any one jurisdiction).
The Company shall not be liable for any settlement of any such action
or claim effected without its prior written consent, but if settled
with written consent or if there is a final judgment, the Company
agrees to indemnify and hold harmless the Dealer against any loss or
liability by reason of such approved settlement or judgment.
(c) If the indemnification provided for in this section is
unavailable, or insufficient, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company
on one hand and the Dealer on the other from the offering of the
Notes, or (ii) if the allocation provided in (i) above is not
permitted pursuant to applicable law (or to the extent that the
contribution allocated is unobtainable from one or more contributing
parties), in such proportion as is appropriate to reflect not only the
relative benefits referred to in (i) above, but also the relative
fault of the Company on the one hand and the Dealer on the other in
connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as other
relevant equitable considerations. The relative benefits received by
the Dealer on the one hand and the Company on the other shall be
deemed to be in the same proportion as the total net proceeds from the
Note offering (before deducting expenses) received by the Company bear
to the total fees received by the Dealer. The relative fault of the
Company on the one hand and of the Dealer on the other shall be
determined by reference to, among other things, whether the claim
relates to information in the Offering Materials approved by the
Dealer or the Company and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the
statement or action that is the basis for the claim.
10. Compensation. The Dealer shall be entitled to compensation in the
amounts mutually agreed upon in writing between the Company and the
Dealer from time to time.
11. Notices. All notices required or permitted under the terms and
provisions hereof shall be in writing (which shall include facsimile
transmission with receipt confirmed) and shall, unless otherwise
provided herein, be effective when received at the address specified
below or at such other address as shall be specified in a notice
furnished hereunder.
If to the Company:
Financial Federal Credit Inc.
400 Park Avenue
New York, NY 10022
Attention: Michael C. Palitz, CFO and Treasurer
Tel. No.: (212) 888-3344
Facsimile No.: (212) 888-0695
If to the Dealer:
12. Miscellaneous. This Agreement is to be delivered and performed, and
shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the internal laws of the State of
[insert state].
(a) The Company agrees that any suit, action or proceeding brought
by the company against the Dealer in connection with or arising
out of this Agreement or the offer and sale of Notes shall be
brought solely in federal or state court, located in [insert
jurisdiction].
(b) With the prior written consent of the Company, the Dealer may
share with any affiliate of the Dealer, including but not
limited to [insert name of specific affiliates] (the Dealer and
such affiliates, each an "Affiliated party" and collectively,
the "Affiliated parties") any and all financial information in
the possession of any of the Affiliated parties (including,
without limitation, documents in possession of any of the
Affiliated parties and any credit or other analyses prepared by
a Affiliated party) concerning the Company, except to the
extent that the Affiliated party is prohibited from sharing such
information pursuant to a written confidentiality agreement or
by law.
(c) This Agreement may be terminated, at any time, by the Company,
upon notice to such effect to the Dealer, or by the Dealer, upon
notice to such effect to the Company. Any such termination,
however, shall not affect the obligations of the Company and the
Dealer under Sections 9 and 10 hereof or the rights or
responsibilities of the parties arising prior to the termination
of this Agreement.
(d) This Agreement may not be assigned by the Company without the
prior consent of the Dealer and any such assignment without such
consent shall be null and void. This Agreement may be assigned
or transferred by the Dealer to any affiliate of the Dealer upon
at least 30 days prior written notice to the Company.
(e) This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same
instrument and any party hereto may execute this Agreement by
signing one or more counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
[DEALER]
By: _____________________
Title:
FINANCIAL FEDERAL CREDIT INC.
By: ____________________
Title:
By: ____________________
Title:
Exhibit 10.22
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made as of the _______ day of _________,
19_____, by and between Financial Federal Credit Inc. (the "Company") and
____________________ (the "Employee");
W I T N E S S E T H :
WHEREAS, Employee is an employee of the Company; and
WHEREAS, the Employee and the Company desire to set forth in
writing herein the terms and conditions of their agreement with respect to
the payment to Employee, on a deferred basis, of some of the Employee's
salary for his services to the Company for the months of ____________, 19___
through December, 19_____.
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain amounts of salary earned by the Employee for each
of the months of ____________ 19_____ through December 19_____, shall be
deferred and, in lieu of current payment thereof, the Company shall pay to
the Employee the sum of $___________on ________________,______[DATE]. The
amounts so deferred are shown on Exhibit 1 to this Agreement. In the event
the Employee's employment is terminated for any reason whatsoever during
this period, the amount payable to the Employee pursuant to this paragraph
shall be proportionately reduced (in the same proportion as the number of
days or portions thereof from the date of such termination of employment to
the end of this period bears to the entire period), and any payment provided
for in paragraphs "2", "3", "5" or "7" of this Agreement shall be further
discounted as described in paragraph "4" of this Agreement.
2. In the event of i). Employee's death, ii). Employee's
retirement from the Company and its affiliates (and employment is not
obtained with another company in substantially the same types of business as
the Company is engaged) or iii). Employee's leave of absence owing to a bona
fide disability (which shall be defined as the incapacity to perform any
employment which would be appropriate given the prior physical status,
intellectual ability and experience of the Employee, due to a mental or
physical disability which shall have been certified by an independent
physician and which has lasted or can be expected to last for a continuous
period of not less than twelve months), then, in the Company's sole
discretion, either a). the Company shall pay the amount specified in
paragraph "1" on the date there specified or b). all amounts payable
pursuant to paragraph "1" of this Agreement shall be re-computed as
described in paragraph "4" of this Agreement and shall be paid in total on
the first day of the first month 30 days after the date of the death,
retirement or disability. Payments of amounts due pursuant to the terms of
this paragraph shall be made first to the Employee, if living, then to the
Employee's Beneficiary, _____________________, the Employee's ________, or
if he/she is not then alive, to the Employee's Estate.
3. Except for the events specified in paragraph "2" of this
Agreement, in the event of termination of Employee's employment by the
Company for any other reason whatsoever (other than a transfer to employment
with an affiliate of the Company), or in the event the Employee terminates
his employment with the Company and its affiliates, then, in either such
event, the amount payable pursuant to paragraph "1" of this Agreement shall
be paid to Employee on the first day of the first month following such
termination of employment in an amount calculated as set forth in paragraph
"4" of this Agreement.
4. If, pursuant to paragraphs "2", "3", "5" or "7" of this
Agreement, payment of any amount provided for in paragraph "1" of this
Agreement is to be made earlier than the due date set forth in such
paragraph "1", the amount to be paid is the amount as provided in paragraph
"1" of this Agreement, discounted at the rate of [Applicable Federal MidTerm
Rate, monthly compounding, for prior month] per annum, compounded monthly,
from the date any such payments would have been due (as set forth in
paragraph "1" of the Agreement) to the actual date of payment. For purposes
of illustration, a payment of $500.00 would be due with respect to a
$[xxx.xx] payment which would have been due and payable forty-eight (48)
months later.
5. If any federal, state or other tax law or regulation or
any determination by any taxing authority with respect to the Employee would
cause any amounts due pursuant to this Agreement to become taxable to the
Employee before payment thereof, except for taxes owing due to FICA, FUTA,
or other employment taxes, then the Employee, irrespective and
notwithstanding any other provisions of this Agreement, shall have the
right, upon written notice to the Company, to require payment of any of the
installments or portions thereof specified in paragraph "1" of this
Agreement. The notice shall specify a date within ninety (90) days of such
notice when payment is to be made. The payment shall be made in an amount
calculated as set forth in paragraph "4" of this Agreement.
6. Employee shall have no right to pledge, hypothecate,
assign or otherwise dispose of any amounts due or to become due hereunder.
Employee's right to receive payments under this Agreement shall be no
greater than those of any other unsecured creditor of the Company.
7. Should, at any time, more than 50 percent of the combined
voting power of the Company's then outstanding voting securities be held by
any person, entity or group of persons, directly or indirectly, within the
meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended ("Act"), other than those persons, entities or groups of persons
owning over 14 percent of the combined voting power as of the date hereof,
or a liquidation or dissolution of the Company or of the sale of all or
substantially all of the Company's assets, then a). the Company may, upon 30
days notice, pay to Employee the amount payable pursuant to paragraph "1" of
this Agreement on the first day of the first month following such notice in
an amount calculated as set forth in paragraph "4" of this Agreement, OR b).
Employee may, upon 30 days notice, require that the Company pay to Employee
the amount payable pursuant to paragraph "1" of this Agreement on the first
day of the first month following such notice in an amount calculated as set
forth in paragraph "4" of this Agreement.
8. During the term of this Agreement, the Company shall
furnish to Employee, no later than the 30th day of each fiscal year, a
schedule setting forth in reasonable detail the changes occurring during the
preceding year and the balance as at the end of the preceding year with
respect to the amount accrued by the Company on account of all sums payable
hereunder to Employee.
9. Employee shall have the right at any time, by written
notice to the Company, to change the Beneficiary named in paragraph "2"
hereof, with such notice acknowledged in writing by the Company.
10. This Agreement contains the entire understanding of the
parties hereto relating to the payments described herein; however, this
Agreement shall not affect any other salary nor any other benefit that
Employee may be or may become entitled to, except as required by law. This
written agreement represents the entire final agreement between the parties
relating to the payments described herein and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the parties. This
agreement cannot be amended, modified or changed except by a writing signed
by both parties. Only an officer of the Company with the title of Senior
Vice President or a more senior officer may accept this agreement or agree
to any amendments, modifications or changes.
11. This Agreement shall be governed and construed in
accordance with the laws of the State of New York. If any provision of this
Agreement is rendered or declared invalid, illegal or ineffective by any
existing or subsequently enacted legislation or decision of a court of
competent jurisdiction, such legislation or decision shall only invalidate
such provision to the extent so rendered or declared invalid, illegal or
ineffective in such jurisdiction only and shall not impair, invalidate or
nullify the remainder of this Agreement which shall remain in full force and
effect.
12. Any controversy or claim arising out of or relating to
this Agreement or any alleged breach thereof shall be settled by
arbitration in New York City in accordance with the rules of the American
Arbitration Association governing contract disputes and judgment upon the
award rendered by any arbitrator(s) may be entered in any court of
appropriate jurisdiction.
IN WITNESS WHEREOF, Company has caused this Agreement to be
executed by its duly authorized officers and Employee has hereunto set his
hand on the day and year first above written.
FINANCIAL FEDERAL CREDIT INC.
BY:
(Title)
EMPLOYEE:
_____________________
Exhibit 11.1
FINANCIAL FEDERAL CORPORATION & SUBSIDIARIES
CHEDULE OF COMPUTATION OF EARNINGS PER SHARE
Year Ended July 31,
1996 1995 1994
Primary
- -------------------------
Net earnings for primary per share amounts $9,610,000 $7,209,000 $5,944,000
========== ========== ==========
Weighted average number of common
shares outstanding 8,617,558 8,199,686 7,366,763
Add - common equivalent shares
(determined using the
"treasury stock" method) 865,770 756,436 1,282,221
------- ------- ---------
Weighted average number of shares
used in calculation of primary net
earnings per common share 9,483,328 8,956,122 8,648,984
========= ========= =========
Primary net earnings per common share $1.01 $0.80 $0.69
========= ===== =====
Fully Diluted
- --------------------------
Net earnings for fully diluted per share
amounts $9,610,000 $7,209,000 $5,944,000
========= ========= =========
Weighted average number of shares
used in calculation of fully diluted
net earnings per common share 9,508,538 8,970,057 8,649,339
========= ========= =========
Fully diluted net earnings per common
share $1.01 $0.80 $0.69
========= ========= =========
Exhibit 22.1
SUBSIDIARIES OF REGISTRANT
Name State of incorporation
Financial Federal Credit Inc. Texas
Names of particular subsidiaries have been omitted since in the
aggregate they do not constitute a significant subsidiary as of July 31,
1996 as defined by Rule 1-02(w) of Regulation S-X.
Exhibit 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the Registration Statement on Form S-8 (No. 33-73320) of
Financial Federal Corporation of our report dated August 30, 1996, included
in this Annual Report on Form 10-K. We also consent to the incorporation by
reference in such Registration Statement of our report on the Financial
Statement Schedules, which appears on Page 13 of this Form 10-K.
/s/ Eisner & Lubin LLP
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
October 23, 1996
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.
FINANCIAL FEDERAL
CORPORATION
(Registrant)
By: /s/ Clarence Y. Palitz, Jr.
Chairman of the Board and President
October 28, 1996
(Date)
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.
/s/ Clarence Y. Palitz, Jr. October 28, 1996
Chairman of the Board, President and Chief Executive Officer
/s/ Lawrence B. Fisher October 28, 1996
Director
/s/ William C. MacMillen, Jr. October 28, 1996
Director
/s/ Bernard G. Palitz October 28, 1996
Director
/s/ Paul Sinsheimer October 28, 1996
Executive Vice President and Director
/s/ Michael C. Palitz October 28, 1996
Executive Vice President, Treasurer, Chief Financial Officer and Director
/s/ David H. Hamm October 25, 1996
Controller, Assistant Treasurer and Principal Accounting Officer