-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VYbzX219nmQuOABN6meVd9LhF5xv2W7SQhtXlnKGPeXvyfQY7JFHA9J0K+o35ca9 aSSGyEdfY3Lj0E4FSCLgmg== 0000719271-96-000013.txt : 19960515 0000719271-96-000013.hdr.sgml : 19960515 ACCESSION NUMBER: 0000719271-96-000013 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960329 ITEM INFORMATION: Changes in control of registrant FILED AS OF DATE: 19960514 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANUHCO INC CENTRAL INDEX KEY: 0000719271 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 460278762 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12070 FILM NUMBER: 96564256 BUSINESS ADDRESS: STREET 1: 8245 NIEMAN ROAD STREET 2: SUITE 100 CITY: LENEXA STATE: KS ZIP: 66214 BUSINESS PHONE: 913-859-0055 MAIL ADDRESS: STREET 1: 8245 NIEMAN ROAD STREET 2: SUITE 100 CITY: LENEXA STATE: KS ZIP: 66214 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CARRIERS INC DATE OF NAME CHANGE: 19910812 8-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report - March 29, 1996* ANUHCO, INC. State of Incorporation - Delaware Commission File No. - 0-12321 IRS Employer Identification No. - 46-0278762 8245 Nieman Road, Suite 100 Lenexa, Kansas 66214 (Address of Principal Executive offices) Telephone Number - (913)-859-0055 * This Form 8-K/A amends Form 8-K filed by the registrant on April 12, 1996 to report the acquisition of Universal Premium Acceptance Corporation and UPAC of California, Inc. effective March 29, 1996. As permitted by Items 7(a)(4) and 7(b)(2) of Form 8-K, the registrant is filing herewith the audited financial statements and proforma financial information relative to the acquired businesses within 60 days of the date on which the original Form 8-K was due. BACKGROUND OF TRANSACTION On March 29, 1996, Anuhco, Inc. ("Anuhco" or "the Company") completed the acquisition of all of the issued and outstanding stock of Universal Premium Acceptance Corporation and UPAC of California, Inc. (together referred to as "UPAC"). UPAC offers short-term collateralized financing of commercial and personal insurance premiums through approved insurance agencies in over 30 states throughout the United States. At March 31, 1996, UPAC had outstanding net finance receivables of approximately $30 million. This transaction will be accounted for as a purchase. Anuhco utilized a portion of its available cash and short-term investments to consummate the purchase at a price of approximately $12 million. UPAC currently maintains certain financing arrangements with an outstanding balance of $21.3 million at March 31, 1996. The terms of the acquisition and the purchase price resulted from negotiations between Anuhco and William H. Kopman, the former sole shareholder of UPAC. In addition to the Stock Purchase Agreement by which Anuhco acquired all of the UPAC stock, Anuhco entered into a consulting agreement with Mr. Kopman. Under the consulting agreement, Anuhco is entitled to consult with Mr. Kopman on industry developments as well as UPAC operations through December 31, 1998. In addition to retaining the services of Mr. Kopman under a consulting agreement, existing executive management personnel of UPAC have been retained under multiyear employment agreements. Anuhco's acquisition of UPAC, in combination with its earlier acquisition of Agency Premium Resource, Inc. ("APR"), gives the Company a nationwide presence in this financial services industry. Item 7. FINANCIAL STATEMENTS AND EXHIBITS
INDEX TO FINANCIAL STATEMENTS Page (a) Historical Combined Financial Statements of Universal Premium Acceptance Corporation and UPAC of California, Inc. (businesses acquired) Annual Financial Statements Report of Independent Auditor 11 Combined Balance Sheets as of December 31, 1995 and 1994 12 Combined Statements of Income and Retained Earnings for the years ended December 31, 1995 and 1994 13 Combined Statements of Cash Flows for the years ended December 31, 1995 and 1994 14 Notes to Combined Financial Statements 16 (b) Condensed Pro Forma Financial Statements (Unaudited) Description of Pro Forma Financial Statements 4 Condensed Pro Forma Balance Sheet as of December 31, 1995 5 Condensed Pro Forma Statements of Income for the years ended December 31, 1995 and 1994 6 Notes to Pro Forma Financial Statements 8
ANUHCO, INC., UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. Description of Condensed Pro Forma Financial Statements On March 29, 1996, Anuhco, Inc. ("Anuhco") completed the acquisition of all of the issued and outstanding stock of Universal Premium Acceptance Corporation and UPAC of California, Inc. ("UPAC"). The purchase price was approximately $12 million. This transaction will be accounted for as a purchase. The entities involved in the pro forma financial statements are Anuhco and UPAC. Anuhco's and UPAC's normal fiscal year is a calendar year ending December 31. The pro forma Balance sheet was prepared using the historical balance sheets of Anuhco and UPAC as of December 31, 1995. Anuhco previously reported its information on Form 10-K. The fiscal years ending December 31, 1995 and 1994 pro forma income statements were prepared using the historical income statements of Anuhco and UPAC for the years ended December 31, 1995 and 1994, Anuhco's historical information having been previously reported on Form 10-K. ANUHCO, INC., UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. Condensed Pro Forma Balance Sheet as of December 31, 1995 (Unaudited) (in thousands)
Historical Pro Forma Pro Forma Anuhco UPAC Combined Adjustments Combined ASSETS Current Assets - Cash & short-term investments $33,983 $ - $ 33,983 $(11,979)(5) $ 22,004 Finance receivables 8,290 27,974 36,264 509 (2) 37,053 280 (3) Freight receivables 7,952 - 7,952 - 7,952 Current deferred tax asset 177 - 177 224 (4) 401 Other current assets 1,291 - 1,291 - 1,291 AFS net assets 16,840 - 16,840 - 16,840 Total current assets 68,533 27,974 96,507 (10,966) 85,541 Net Operating Property 16,223 257 16,480 (95)(1) 16,345 (40)(3) Intangibles & other 3,670 438 4,108 6,301 (5) 10,081 Assets (328)(1) Total Assets $88,426 $28,669 $117,095 $ (5,128) $111,967 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities - Secured notes payable $ - $21,218 $ 21,218 $ 1,224 (1) $ 22,442 Accounts payable & accrued expenses 7,603 747 8,350 110 (3) 8,460 Subordinated & unse- cured debt - 1,292 1,292 (1,050)(1) 242 Total Liabilities 7,603 23,257 30,860 284 31,144 Deferred Income Taxes 543 - 543 - 543 Shareholders' Equity 80,280 5,412 85,692 (5,412)(5) 80,280 Total Liabilities & Shareholders' Equity $88,426 $28,669 $117,095 $ (5,128) $111,967
This pro forma balance sheet should be read in conjunction with the related Description and Notes to Condensed Pro Forma Financial Statements and the Registrant's financial statements contained in its Form 10-K filing with the Commission. ANUHCO, INC., UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. Condensed Pro Forma Statement of Income For the year ended December 31, 1995 (Unaudited) (in thousands, except per share amounts)
ProForma Historical Adjust- ProForma Anuhco UPAC Combined ments Combined Operating Revenue $97,444 $4,804 $102,248 $ 81 (4) $102,329 Operating Expenses - Salaries, wages & employee benefits 53,854 1,809 55,663 (609)(2) 55,054 Operating supplies (114)(2) & expenses 12,616 2,021 14,637 483 (2) 15,006 Operating taxes & licenses 2,577 - 2,577 - 2,577 Insurance & claims 1,873 - 1,873 - 1,873 Depreciation & amortization 2,821 92 2,913 420 (1) 3,333 Purchased transporta- tion & rents 20,851 - 20,851 - 20,851 Total operating expenses 94,592 3,922 98,514 180 98,694 Operating Income 2,852 882 3,734 ( 99) 3,635 Nonoperating Income (Expense) 2,078 - 2,078 (599)(3) 1,479 Income from Continuing Operations Before Income Taxes 4,930 882 5,812 (698) 5,114 Income Tax Provision 2,120 - 2,120 79 (5) 2,199 Income from Continuing Operations 2,810 882 3,692 (777) 2,915 Income from Discontinued Operations 3,576 - 3,576 - 3,576 Net Income $ 6,386 $ 882 $ 7,268 $(777) $ 6,491 Average Common Shares Outstanding 7,409 7,409 Net Income Per Share - Continuing Operations $0.38 $0.39 Discontinued Operations 0.48 0.48 Total $0.86 $0.87
This pro forma statement of income should be read in conjunction with the related Description and Notes to Condensed Pro Forma Financial Statements and the Registrant's financial statements contained in its Form 10-K filing with the Commission. ANUHCO, INC., UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. Condensed Pro Forma Statement of Income For the year ended December 31, 1994 (Unaudited) (in thousands, except per share amounts)
ProForma Historical Adjust- ProForma Anuhco UPAC Combined ments Combined Operating Revenue $95,772 $5,614 $101,386 $ (58)(4) $101,328 Operating Expenses - Salaries, wages & employee benefits 51,732 2,423 54,155 (1,108)(2) 53,047 Operating supplies (108)(2) & expenses 10,869 2,045 12,914 483 (2) 13,289 Operating taxes & licenses 2,597 - 2,597 - 2,597 Insurance & claims 2,209 - 2,209 - 2,209 Depreciation & amortization 2,315 249 2,564 420 (1) 2,984 Purchased transporta- tion & rents 20,829 - 20,829 - 20,829 Total operating expenses 90,551 4,717 95,268 (313) 94,955 Operating Income 5,221 897 6,118 255 6,373 Nonoperating Income (Expense) 274 - 274 (753)(3) (479) Income from Continuing Operations Before Income Taxes 5,495 897 6,392 (498) 5,894 Income Tax Provision - - - - (5) - Income from Continuing Operations 5,495 897 6,392 (498) 5,894 Income from Discontinued Operations 54,845 - 54,845 - 54,845 Net Income $60,340 $ 897 $ 61,237 $ (498) $ 60,739 Average Common Shares Outstanding 7,545 7,545 Net Income Per Share - Continuing Operations $0.73 $0.78 Discontinued Operations 7.27 7.27 Total $8.00 $8.05
This pro forma statement of income should be read in conjunction with the related Description and Notes to Condensed Pro Forma Financial Statements and the Registrant's financial statements contained in its Form 10-K filing with the Commission. ANUHCO, INC., UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. Notes to Pro Forma Financial Statements (Unaudited) 1. These Notes to Pro Forma Financial Statements are not intended to disclose all data of significance related to the historical financial statements of the entities. The Notes and the related Pro Forma Financial Statements should be read in conjunction with the historical annual financial statements of Anuhco, Inc. ("Anuhco") filed with the Commission on Form 10-K. Anuhco knows of no material non-recurring credits or charges from the acquisition of Universal Premium Acceptance Corporation and UPAC of California, Inc. ("UPAC") from Mr. William H. Kopman that will be included in Anuhco's statement of income subsequent to March 29, 1996 (the date of acquisition). 2. Pro Forma balance sheet adjustments See Description of Condensed Pro Forma Financial Statements for a description of the historical balance sheets used to prepare the Condensed Pro Forma Balance Sheet. The following descriptions correspond to the numbering of the adjustments set forth on the Condensed Pro Forma Balance Sheet. (1) In conjunction with the closing of the purchase, UPAC collected certain receivables from and paid certain obligations to the former shareholder. The funds for such settlement were provided by an advance under UPAC's credit agreement. Following is a listing of the items settled:
(in thousands) Repayment of subordinated and unsecured notes payable............................. $1,050 Collection of notes receivable.............. (328) Sale of company automobiles at net book value................................ ( 95) Dividend distributed to former stockholder.. 295 Payment of bonuses to certain UPAC employees 302 Additional advance on UPAC credit agreement. $1,224
(2) The net finance receivable balance was adjusted for the cumulative difference in unearned finance charges recorded by UPAC under the collections method from the unearned finance charges that would have been recorded under the interest method which is used by APR. (3) The historical carrying values of certain assets and liabilities have been adjusted to the estimated fair value of such assets and liabilities as follows: the allowance for credit losses recorded by UPAC was adjusted to the balance deemed by Anuhco to be adequate to cover potential credit losses; a reserve has been provided for the fair value of furniture and other equipment; and, liabilities have been established for certain benefits payable to employees of UPAC resulting from the acquisition. (4) The former stockholder of UPAC had elected "S" corporation treatment under the Internal Revenue Code. In connection with the purchase deferred tax assets were recorded for the cumulative temporary differences between financial reporting and tax basis of assets and liabilities, primarily relating to the allowance for credit losses, at the statutory income tax rates expected to be in effect when such differences reverse. (5) To record the acquisition as follows:
(in thousands) Anuhco cash payment to UPAC shareholder.. $11,979 Fair value of assets acquired and liabil- ities assumed.......................... 5,678 Intangibles acquired, including goodwill. $ 6,301
3. Pro Forma income statement adjustments. See Description of Condensed Pro Forma Financial Statements for a description of the historical income statements used to prepare the Condensed Pro Forma Income Statements. For consistency of presentation, the historical operating revenues of UPAC are shown net of interest expense on borrowings secured by finance receivables. The following descriptions correspond to the numbering of the adjustments and eliminations set forth on the Condensed Pro Forma Income Statements. (1) Amortization of intangibles, including goodwill, arising in the acquisition using the straight-line method of amortization over an estimated useful life of 15 years. (2) Adjustment to record payment of consulting fees to the former stockholder of UPAC, pursuant to a consulting agreement, in lieu of salary and certain other expenses recorded in UPAC's historical income statements. (3) Adjustment to reflect reduction of interest income on short-term investments or additional interest expense on borrowings assuming payment of the purchase price at the beginning of each period. (4) Adjustment to reflect the effect on earned finance charges of the change from the collection method used by UPAC to the interest method used by APR. (5) Adjustment to record an income tax provision for UPAC's income before income taxes and the income tax benefit from the net pro forma adjustments to income before income taxes at Anuhco's effective income tax rate, 43% and 0%, for the years ended December 31, 1995 and 1994, respectively. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. ANUHCO, INC. /s/ Timothy P. O'Neil By: Timothy P. O'Neil, President & Chief Financial Officer Date: May 14, 1996 INDEPENDENT AUDITORS' REPORT Boards of Directors Universal Premium Acceptance Corporation and UPAC of California, Inc. St. Louis, Missouri We have audited the accompanying combined balance sheets of Universal Premium Acceptance Corporation (a Missouri Corporation) and UPAC of California, Inc. (a California Company) as of December 31, 1995 and 1994, and the related combined statements of income and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Companies management. Our responsibility is to express an opinion on these financial statements based on our audits. We have 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 combined financial statements referred to above present fairly, in all material respects, the financial position of Universal Premium Acceptance Corporation and UPAC of California as of December 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ BROWN SMITH WALLACE, L.L.C. BROWN SMITH WALLACE, L.L.C. St. Louis, Missouri February 9, 1996 UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. COMBINED BALANCE SHEETS December 31, 1995 and 1994
1995 1994 ASSETS Finance Receivables: Finance receivables (note E) $30,260,501 $32,794,113 Unearned finance charges (1,600,009) (1,610,626) Allowance for credit losses (686,867) (844,527) Finance receivables, net 27,973,625 30,338,960 Property and Equipment, net (note B) 257,237 379,901 Other Assets (note D) 438,173 352,258 TOTAL ASSETS $28,669,035 $31,071,119 LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Notes payable, secured (note E) $21,218,132 $23,117,323 Accounts payable and accrued expenses 746,839 1,256,188 Subordinated and unsecured debt (note F) 1,292,077 1,270,608 Total Liabilities 23,257,048 25,644,119 Stockholder's Equity: Common Stock Universal Premium Acceptance Corporation - authorized 1,500 shares of $100 par value; issued and outstanding 400 shares 40,000 40,000 UPAC of California, Inc. - authorized 10,000 shares of $1 par value; issued and outstanding 1,000 shares 1,000 1,000 Additional paid-in capital 76,500 76,500 Retained earnings 5,294,487 5,309,500 Total Stockholder's Equity 5,411,987 5,427,000 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $28,669,035 $31,071,119
The accompanying notes are an integral part of this statement. UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS Years ended December 31, 1995 and 1994
1995 1994 Revenues Interest income $5,256,780 $5,342,412 Service revenue 1,507,730 1,841,174 Other revenue 35,607 70,016 6,800,117 7,253,602 Expenses Salaries and benefits 1,893,557 2,423,215 Commission expense 380,285 390,408 Occupancy 160,187 161,056 Depreciation and amortization 92,318 249,291 Other operating expenses 1,079,285 1,223,353 Total operating expenses 3,605,632 4,447,323 Provision for credit losses 317,277 270,299 Interest expense 1,995,623 1,639,382 Other expenses 2,312,900 1,909,681 Total expenses 5,918,532 6,357,004 NET INCOME 881,585 896,598 Retained earnings, beginning of year 5,309,500 4,412,902 Less dividends (896,598) - Retained earnings, end of year $5,294,487 $5,309,500
The accompanying notes are an integral part of this statement. UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. COMBINED STATEMENTS OF CASH FLOWS Years ended December 31, 1995 and 1994
1995 1994 Cash flows from operating activities: Net income $ 881,585 $ 896,598 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 92,318 249,291 Provision for credit losses 317,277 270,299 Accounts charged off, net of recoveries (474,937) (1,292,494) (Increase) decrease in finance receivables 2,533,613 1,325,520 Increase (decrease) in unearned finance charges (10,617) ( 96,148) (Increase) decrease in other assets (34,954) ( 3,704) Increase (decrease) in accounts payable and accrued expenses (509,350) (862,555) Net cash provided by operating activities 2,794,935 486,807 Cash flows from investing activities: Payment on officer loan - 125,000 Purchases of property and equipment (20,731) (121,923) Net cash provided by (used in) investing activities (20,731) 3,077 Cash flows from financing activities: Proceeds from unsecured debt 21,469 - Net borrowings (repayment) on notes payable, secured (1,899,191) (129,093) Dividends paid (896,598) - Principal payments on subordinated and unsecured debt - (360,393) Net cash used in financing activities (2,744,320) (489,486) INCREASE IN CASH AND CASH EQUIVALENTS (116) 398 Cash and cash equivalents at beginning of year 1,936 1,538 Cash and cash equivalents at end of year $ 1,820 $ 1,936
The accompanying notes are an integral part of this statement. UNIVERSAL PREMIUM ACCEPTANCE CORPORATION AND UPAC OF CALIFORNIA, INC. NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1995 Note A - Summary of Operations and Significant Accounting Policies A summary of the Companies operations and significant accounting policies applied in the preparation of the accompanying financial statements follows: Nature of Operations Universal Premium Acceptance Corporation is a premium finance company licensed and conducting business in most of the fifty states. UPAC of California, Inc. is a premium finance Company licensed and conducting business in California. These companies have been combined because they are commonly owned and have significant interrelated activity. All intercompany transactions between these entities have been eliminated in the combination. The Companies earn substantially all their revenues from the interest charged on insurance premiums financed. The Companies have principal offices located in St. Louis, Missouri and Alto Zuma, California. As part of its normal course of business, the Companies grant credit to its customers in the form of insurance premium finance agreements. At December 31, 1995 and 1994, finance receivables had an average maturity of four to five months. The Companies have a security interest in the gross unearned premiums of the insurance policies financed. Finance Charges The Companies account for transfers to realized earnings by the collections method, whereby 15% of the unearned finance charge is recognized as earnings when the loan is made and the remainder is transferred to earnings monthly in proportion to the liquidation of the receivables. Prepayment refunds are charged to earned finance charges. Late charges are credited to income when received. Allowance for Credit Losses The allowance for credit losses is maintained through direct charges to operations at a level deemed to be adequate to cover estimated losses. It is the Companies general policy to charge off accounts when they are deemed uncollectible.
1995 1994 Balance, beginning of year $ 844,527 $1,866,722 Provision for credit losses 317,277 270,299 Total 1,161,804 2,137,021 Less: Accounts charged off, net of recoveries 474,937 1,292,494 Balance, end of year $ 686,867 $ 844,527
Property and Equipment Property and equipment are carried at cost. Depreciation is charged to operations on the straight-line and accelerated methods over the estimated useful lives of the assets. Leasehold improvements are amortized over the estimated useful lives of the assets. In computing its taxable income, the Companies utilize the methods and lives as prescribed by the current Internal Revenue Code. Income Taxes and Cash Dividends Paid or Accrued Effective January 1, 1988, the stockholder of the Companies have elected the Companies to be treated as "S" Corporations under provisions of the Internal Revenue Code which provides that, in lieu of corporation income taxes, the stockholder is taxed on his share of the Companies taxable income. Therefore, no provision or liability for federal and state income taxes is reflected in these financial statements. As a result of this election, the Companies distribute, as they deem necessary, cash dividends in amounts approximating the individual income tax liabilities incurred by the stockholder. Dividends of $896,598 were paid in 1995 with respect to the prior years' taxable income. No dividends were paid or accrued during 1994. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. Actual results could differ from those estimates. Note B - Property and Equipment The following is a summary of property and equipment:
1995 1994 Automobiles $105,333 $ 158,456 Furniture and equipment 832,965 826,677 Leasehold improvements 19,922 19,922 958,220 1,005,055 Less accumulated depreciation and amortization 700,893 625,154 Total $257,327 $379,901
Depreciation and amortization expense charged to operations in the years ended December 31, 1995 and 1994 amounted to $92,318 and $124,558, respectively. Note C - Note Receivable - Officer On August 17, 1992, the Universal Premium Acceptance Corporation loaned to its sole stockholder the sum of $330,000, with interest at the rate of 7% per annum. Principal is due on demand and interest is to be paid annually, due on December 31 each year. The stockholder paid $125,000 on this note in June 1994. In 1995, a company car with a net book value of $51,077 was transferred to the stockholder and the note receivable was increased by this amount. The note balance, including accrued interest, of $328,098 and $258,345 at December 31, 1995 and 1994, respectively is included in other assets. Accrued interest recognized as income in the years ended December 31, 1995 and 1994 amounted to $18,676 and $21,038, respectively. Note D - Notes Payable, Secured Notes payable, secured consist of borrowings under a credit agreement ("Agreement") dated as of August 1, 1990 with three banks, secured by the Companies receivables, whereby, as amended on August 14, 1995 and July 29, 1994, the aggregate maximum principal amount outstanding shall not exceed the lesser of $37,500,000 or 85% of the qualified notes assigned to the banks and the sum of the outstanding principal of and the accrued interest on, the additional obligations to insurance agents with whom the Companies do business evidenced by promissory notes. Borrowings under the Agreement not subject to the LIBOR (London Inter-Bank EuroDollar Market) Pricing Option, are at an annual effect rate of the bank's base rate (prime rate). Borrowings under the LIBOR Pricing Option, are at an annual effective rate of the LIBOR rate plus 2.00% for each applicable interest period. In addition, the Agreement provides for an agent's fee of 0.25% per annum of the aggregate outstanding amount of the Bank Obligations and a commitment fee at a rate of 0.125% per annum on the average daily unused amount of the Revolving Loan Commitment as defined in the Agreement. The Agreement contains various warranties and covenants that must be complied with on a continuing basis, including, but not limited to, restrictions on investments, indebtedness, allowance for credit losses on finance receivables, capital maintenance, financial ratios and dividends. The maturity date of the Agreement is August 31, 1996, however, if the Companies do not receive notice at least 120 days before such date from any bank of the occurrence of such maturity date, then the maturity date shall thereafter extend from year to year. Should terms of this agreement be changed, the Companies operations could be affected adversely. The Companies domestic banking system provides for the daily replenishment of major bank accounts for check clearing requirements. Accordingly, outstanding checks of $1,708,844 and $521,926 at December 31, 1995 and 1994, respectively, are reflected in notes payable, secured. Note E - Subordinated and Unsecured Debt At December 31, 1995 and 1994 subordinated and unsecured debt consisted of the following:
1995 1994 Subordinated capital debentures - subordinated to all other debts of the Company: 17.94% originally due in 1988 $ 98,391 $ 100,000 8.5% originally due in 1990 - 50,000 Unsecured promissory demand notes, 3.62% - 11.00% in 1995 and 1994 1,193,686 1,120,608 $1,292,077 $1,270,608
Subordinated capital debentures and unsecured promissory demand notes due to the Companies sole stockholder amounted to $1,050,000 at December 31, 1995 and 1994. Note F - Benefit Plans During the year ended July 31, 1985, Universal Premium Acceptance Corporation established a profit sharing plan. All employees who meet certain age and length of service requirements are eligible to participate in the Company's profit sharing plan. An amount determined at the sole discretion by the Company will be contributed annually. No contributions were charged to operations in the years ended December 31, 1995 and 1994. In 1993, the Company added a 401(k) provision to the profit sharing plan. The plan requires a Company matching contribution in an amount equal to fifty percent of a plan participant's contribution, which is not in excess of five percent of that participant's compensation. The Company may also make an additional matching contribution at the discretion of its Board of Directors. In 1995 and 1994, the Company's required matching contribution was $11,971 and $16,933, respectively. No discretionary matching contribution was made for either year. Note G - Commitments and Contingencies Rent Expense The Companies lease property under operating leases expiring through the year 2000. Rent expense for the years ended December 31, 1995 and 1994 amounted to $105,251 and $99,430, respectively. Minimum future rental payments under the lease agreements for the next five years and in aggregate are as follows:
Year ending December 31 Amount 1996 $ 91,320 1997 91,320 1998 103,112 1999 104,184 2000 17,364 Total minimum future rental payments $407,300
UPAC of California, Inc. subleases a portion of its office to another company on a month-to-month basis for $335 per month and received $3,015 in rental income for the year ended December 31, 1995. The Company offset its rent expense by this amount. Litigation The Companies are a defendant in certain lawsuits arising in the ordinary course of business. In management's opinion, the Companies have adequate legal defenses respecting these lawsuits and do not believe these lawsuits will materially affect the Companies operations or financial position. Stock Sale On December 18, 1995, the sole stockholder entered into an agreement to sell all of his stock in Universal Premium Acceptance Corporation and UPAC of California, Inc. The closing date is expected to occur by March 31, 1996. Note H - Supplemental Disclosures of Cash Flow Information
1995 1994 Cash paid for interest expense amounted to: $2,016,085 $1,596,641
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