10-K 1 h85002e10-k.txt FIRSTCITY LIQUIDATING TRUST - DATED 12/31/2000 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-20677 FIRSTCITY LIQUIDATING TRUST (Exact name of registrant as specified in its charter) Texas 06-6414468 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1001 Fannin, Suite 505, Houston, Texas 77002 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 651-7841 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Class B Beneficial Interests Class C Beneficial Interests (Title of Each Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of February 28, 2001 there were 2,454,310 units of Class B Beneficial Interests and 725,729 units of Class C Beneficial Interests outstanding. Documents incorporated by reference: None 2 Part I Item 1. Business. On July 3, 1995 (the "Effective Date"), the FirstCity Liquidating Trust (the "Trust") and certain other entities were established pursuant to and upon consummation of the Joint Plan of Reorganization, dated December 23, 1994, by First City Bancorporation of Texas, Inc., a Delaware corporation (the "Debtor"), Official Committee of Equity Security Holders (the "Equity Committee"), and J-Hawk Corporation ("J-Hawk"), with the participation of Cargill Financial Services Corporation, under Chapter 11 of Title 11 of the U.S. Code (the "Bankruptcy Code"), Case No. 392-39474-HCA-11 (the "Plan"). The Plan was confirmed by order of the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division (the "Bankruptcy Court") entered on May 31, 1995. The Debtor was formed as a multi-bank holding company in 1988 for the purpose of reorganizing First City Bancorporation of Texas, Inc., a Texas corporation. Beginning in the summer of 1990, the financial condition of the Debtor began to deteriorate and worsened progressively throughout 1990 and 1991. On October 30, 1992, regulatory agencies closed the Debtor's banks. On October 31, 1992, certain of the Debtor's unsecured creditors filed an involuntary Chapter 11 bankruptcy petition against the Debtor in the Bankruptcy Court. On November 23, 1992, the Debtor consented to the entry of an order for relief against it under Chapter 11 of the Bankruptcy Code. Until July 3, 1995, the Debtor operated its remaining businesses and managed its property as debtor-in-possession. The Plan was confirmed by the Bankruptcy Court by an order entered on May 31, 1995, and became effective on July 3, 1995. Pursuant to the Plan and an Agreement and Plan of Merger between the Debtor and J-Hawk, on July 3, 1995, J-Hawk was merged (the "Merger") with and into the Debtor, with the Debtor as the surviving entity. Pursuant to the Merger, (i) the former holders of common stock of J-Hawk received, in the aggregate, approximately 49.9% of the outstanding common stock of the surviving entity, in exchange for their shares of J-Hawk common stock, (ii) approximately 50.1% of the outstanding common stock of the surviving entity was distributed among former security holders of the Debtor pursuant to the Plan and (iii) the name of the corporation was changed to FirstCity Financial Corporation ("FirstCity"). The Trust has not and, pursuant to the Liquidating Trust Agreement dated as of July 3, 1995, by and between First City Bancorporation of Texas, Inc. and State Street Bank and Trust Company, successor to Fleet National Bank and Shawmut Bank Connecticut, National Association, as Trustee (the "Trust Agreement"), may not engage in the conduct of a trade or business apart from the liquidation of Trust assets and the winding up of the affairs of the Debtor and its subsidiaries. Pursuant to Article VIII of the Trust Agreement, the Trust shall terminate upon the date which is three (3) years and six (6) months after the Effective Date; provided, however, that at least six (6) months prior to such termination, the Portfolio Committee (as defined herein) may, with the approval of the Bankruptcy Court, extend the term of the Trust if necessary to the liquidating purpose thereof. Multiple extensions, if approved by the Bankruptcy Court, are permissible, although the aggregate of all such extensions shall not exceed five (5) years so that, in any event, the Trust 1 3 shall terminate no later than eight (8) years and six (6) months after the Effective Date. In June 1998, the Bankruptcy Court extended the life of the Trust from December 31, 1998 to January 3, 2000. In June 1999, the Bankruptcy Court extended the life of the Trust to January 3, 2002. Pursuant to the Plan, substantially all of the legal and beneficial interest in the assets of the Debtor, other than $20 million in cash which was contributed by the Debtor to FirstCity, were transferred to the Trust or to subsidiaries of the Trust. Such assets have been and will continue to be liquidated over the life of the Trust pursuant to the terms of the Plan and the Trust Agreement. The non-cash assets of the Trust consist principally of performing and non-performing loans, income producing real estate and interests in real estate, and miscellaneous other assets and receivables transferred to the Trust upon the consummation of the Plan. In connection with the sale of the Debtor's banks by the Federal Deposit Insurance Corporation (the "FDIC") to certain other banks (the "Loss-Sharing Banks"), the FDIC entered into certain agreements (the "Loss-Sharing Agreements") to guarantee certain recoveries on loans acquired by the Loss-Sharing Banks. On July 12, 1995, in order to reduce the uncertain effect of the Loss-Sharing Agreements on future distributions to the Trust by the FDIC, subsidiaries of the Trust purchased assets for approximately $206 million from the Loss-Sharing Banks (the "Loss-Sharing Settlement"). With the purchase of these assets, the Loss-Sharing Banks released the FDIC from its future obligations under the Loss-Sharing Agreements. The Loss-Sharing Settlement was significant to the Trust because it allowed the FDIC to eliminate the loss-sharing reserve that it had maintained to cover the FDIC's obligations under the loss-sharing guarantees, thereby eliminating the uncertainty of future reductions from the reserve and increasing the initial distribution made by the FDIC to the Trust. In 1996, the FDIC closed the Receiverships of the Debtor's banks (the "Receiverships") and distributed the surplus cash ($17.6 million on December 23, 1996) of the Receiverships to the Trust. In accordance with that certain Conveyance and Indemnification Agreement (the "Conveyance and Indemnification Agreement"), dated December 23, 1996 and extended in April 1999, the Trust will be required, among other things, to provide indemnity to the FDIC against any known or unknown liabilities, obligations or actual expenses associated with the Receiverships, in an aggregate amount up to $10 million until the termination of the Trust. Item 2. Properties. The Trust does not have any material physical properties, except for such properties that are held for sale. Item 3. Legal Proceedings. The December 31, 2000 consolidated statement of net assets in liquidation reflects a value of $45 million for a 67% interest in a partnership which owns the First City Tower, a Class A office building located in downtown Houston. UIDC Management, Inc. owns the remaining 33% of the partnership. The Trust publicly stated its intent to market its share of the partnership in the first quarter of 2000. 2 4 The Trust received a letter dated February 18, 2000 from UIDC Management in which UIDC alleged that in 1997 it "exercised" its contractual right of first refusal to purchase the 67% partnership interest. This alleged exercise of the right of first refusal arose in connection with an unconsummated prior transaction which was itself the subject of previously settled litigation. The letter further states that UIDC "demands that the Trust tender its partnership interest". Adjusted for refinancing costs, the alleged right of first refusal would have been on a value of approximately $25 million for the partnership interest. In response to this letter and because management of the Trust believed that UIDC's claim had no merit, the Trust filed a lawsuit on March 9, 2000 seeking a declaratory judgment that "Defendants UIDC Management, Inc. and UIDC of Texas Co. (collectively referred to as "UIDC" or the "UIDC Defendants") failed in May 1997 to properly exercise their right of first refusal under the Limited Partnership Agreement of FC Tower Property Partners, L.P. or, in the alternative, that UIDC Defendants have waived and/or are estopped from asserting such right." Additionally, the Trust filed a motion for summary judgment. On February 27, 2001, a federal district judge ruled that the Trust's motion for summary judgment be denied and that UIDC entities' motion for summary judgment be granted in part and denied in part. Specifically, the judge ruled that, as a matter of law, UIDC had properly exercised its right of first refusal to purchase the 67% interest in May of 1997. The judge further ruled that UIDC's summary judgment motion be denied as it pertains to questions of whether UIDC is prevented from enforcing that right because of alleged breaches of the resulting option agreement, or because UIDC is estopped from specific performance based upon their refusal to buy the interest when given the chance in October of 1997. These latter questions will be subject to further discovery and potentially to a trial by jury. Management of FirstCity Liquidating Trust strongly disagrees with this ruling. Issues remain to be tried concerning whether the UIDC entities are nevertheless barred from enforcing their option to acquire the 67% partnership interest (a) because of alleged breaches of that agreement, and (b) because UIDC declined to purchase the partnership interest when subsequently offered in October of 1997 at a price even more favorable than that offered in May of 1997. Finally, even if the Trust was not successful on either of these trial points, there will remain equitable questions pertaining to the precise terms upon which UIDC's acquisition of the partnership interest may be ordered by the court, given all the pertinent circumstances. No adjustment has been made to the value of the partnership interest because, in the opinion of Trust management, it is not probable that the resolution of the dispute with UIDC will have a material adverse impact on the consolidated financial position, results of operations or liquidity of the Trust. FirstCity Liquidating Trust cannot predict the outcome of any such legal matters; however, the current litigation makes it unlikely that any near-term deal to sell the interest can be accomplished. 3 5 The Trust is involved in various other legal proceedings in the ordinary course of business. In the opinion of management of the Trust, the resolution of such matters will not have a material adverse impact on the consolidated financial position, results of operations or liquidity of the Trust. Item 4. Submission of Matters to a Vote of Security Holders. As the Trust has no outstanding voting securities, no matters were submitted to a vote of security holders during the fourth quarter ended December 31, 2000. Part II Item 5. Market For Registrant's Common Equity and Related Stockholder Matters. The Class A Certificate was held by FirstCity. Through December 31, 1997, the Trust had distributed $188 million to FirstCity as the sole Class A Certificate holder, retiring the Class A Certificate in full. The Class B Beneficial Interests (traded under the symbol "FCFCL") and Class C Beneficial Interests (traded under the symbol "FCFCZ") have been traded over the counter since July 3, 1995. The number of Class B Certificate holders and Class C Certificate holders of record as of December 31, 2000, was 58 and 852, respectively. High and low bid prices (trade prices for FCFCZ), as compiled by Bloomberg Financial Markets Services, an online service, are displayed in the following tables:
Class B Beneficial Interests ---------------------------------------------------------------------------------------------- 2000 1999 --------------------------------------------------- ----------------------------------------- Market Price Cash Distributions Market Price Cash Distributions ------------ ------------ Quarter Ended High Low Paid High Low Paid ------------- ---- --- ---- ---- --- ---- March 31 ................ $20.50 $18.94 $ 1.00 $26.25 $24.00 $ 3.50 June 30 ................. 15.00 13.81 1.00 26.50 21.75 4.00 September 30 ............ 14.88 12.50 1.00 23.00 21.50 2.00 December 31 ............. 14.00 13.13 1.00 21.75 21.75 --
Class C Beneficial Interests ------------------------------------------------------------- 2000 1999 ------------------------ ------------------------ Market Price Market Price ------------------------ ------------------------ Quarter Ended High Low High Low ------------- --------- ------ --------- ----- March 31 ................ $ .08 $ .01 -- -- June 30 ................. .15 .15 -- -- September 30 ............ 1.50 .15 -- -- December 31 ............. 1.50 .33 $ .09 $.09
4 6 No distributions were made to Class B or Class C Certificate holders through December 31, 1997. In 1998, $67.5 million, or $27.50 per Class B Certificate, was distributed to Class B Certificate holders. In 1999, $23.3 million, or $9.50 per Class B Certificate, was distributed to Class B Certificate holders. In 2000, $9.8 million, or $4.00 per Class B Certificate, was distributed to Class B Certificate holders. In March 2001, $2.5 million, or $1.00 per Class B Certificate, will be distributed. The Trust is required to apply all proceeds from liquidation and disposition of its assets first to the payment of normal operating expenses. Second, Trust proceeds totaling $188 million were distributed to FirstCity to retire the Class A Certificate in December 1997. The third order of distribution of Trust proceeds is payments pursuant to employment and bonus agreements with certain former employees of the Debtor. The bonus pool and executive long-term incentive plan provides for the payment of bonuses equal to 4.76% of additional distributions to Class B Certificate holders and (if any) Class C Certificate holders. Fourth, Class B Certificate holders are entitled to distributions up to the Pour-Over Level. The Pour-Over Level (approximately $51 million at December 31, 2000) is the liquidation preference on July 3, 1995 of the Debtor's Series B and Series E preferred stock, less the nominal stated value of FirstCity special preferred stock and the book value of FirstCity common stock issued to the Series B and Series E holders, plus interest at an annual rate of 6.5% from July 3, 1995. The Pour-Over Level is reduced for distributions to Class B Certificate holders. Lastly, Class C Certificate holders receive distributions (if any) after any remaining payments to Class B Certificate holders up to the Pour-Over Level (approximately $20.77 per unit as of December 31, 2000). Item 6. Selected Financial Data.
Year Ended December 31, ------------------------------------------------------------------------ (Dollars in thousands) 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- Income ...................................... $ 5,952 $ 24,323 $ 38,534 $ 45,079 $ 53,014 Expenses .................................... 2,679 3,844 6,859 12,427 13,249 Net income .................................. 3,273 20,479 31,675 32,652 39,765 Distributions on Class "A" Certificate ...... -- -- -- 62,669 120,229 Distributions on Class "B" Certificate ...... 9,817 23,316 67,494 -- -- At year end: Total assets ....................... 48,028 54,421 57,489 93,963 125,229 Class "A" Certificate .............. -- -- -- -- 53,617 Class "B" Certificate .............. 46,100 52,400 55,300 91,300 67,700
5 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The operations of the Trust are summarized below:
Year Ended December 31, ------------------------------------------ (Dollars in thousands) 2000 1999 1998 -------- -------- -------- Changes in fair value of trust assets .............. $ 5,719 $ 24,036 $ 37,883 Interest income on short-term investments .......... 233 287 651 Administrative expense ............................. (2,679) (3,844) (6,859) -------- -------- -------- Net income ................................ $ 3,273 $ 20,479 $ 31,675 ======== ======== ========
2000 COMPARED TO 1999 The estimated fair value of the Trust's assets increased $5.7 million in 2000 as compared to $24.0 million in 1999. Factors which contributed to the enhancement of the net asset value of the Trust's assets in 2000 include (i) the appreciation in value of certain assets attributable to a favorable interest rate environment and the effect of such favorable interest rates on the marketability of real estate and (ii) the increase in the estimated market value of the Trust's assets that naturally occurs as the remaining life of the Trust (and concomitantly the discount factor applied in calculating net asset value) decreases. Interest income on short-term investments decreased in 2000 as compared to 1999 because less excess funds were available. Administrative expense totaled $2.7 million in 2000 as compared to $3.8 million in 1999. A $.4 million bonus, based on distributions to Class B Certificate holders, was paid to certain former employees of the Debtor in 2000 as compared to a $1.1 million bonus paid to such employees in 1999. Professional fees were flat year to year. In 2000, the Trust distributed $9.8 million, or $4.00 per Certificate, to Class B Certificate holders. This distribution was made possible principally by $10.4 million in net collections on Trust assets in 2000 and cash held at December 31, 2000. The Class B Beneficial Interests were valued at $46.1 million at December 31, 2000. In March 2001, $2.5 million, or $1.00 per Class B Certificate, will be distributed. 6 8 Non-cash trust assets at December 31, 2000 and 1999 were comprised of the following (dollars in thousands):
December 31, ------------------------- Estimated Gross Cash Flow by Type of Asset 2000 1999 ------------------------------------------ -------- ------- Borrowers' obligation on outstanding balance of: Performing loans ................................... $ 2,718 $ 5,327 Nonperforming loans ................................ 81 209 Real estate and other assets .......................... 47,142 49,557 -------- -------- Total .............................................. 49,941 55,093 -------- -------- Discount required to reflect trust assets at estimated fair value .......................... (5,469) (5,943) -------- -------- Trust assets, net ..................................... $ 44,472 $ 49,150 ======== ========
For each asset, estimates of income, expense and net cash flow on a monthly basis through the expected final disposition date are prepared by management of the Trust. The individual asset budget is developed based upon factors which include physical inspection of the asset or the collateral underlying the related loan, local market conditions, contractual payments or rents, and discussions with the relevant borrower. The Trust's management and the Portfolio Committee periodically reevaluate and revise projected monthly cash flows on an asset by asset basis. At December 31, 2000 and 1999, the projected monthly cash flows were discounted at 11% to reflect the Trust assets at estimated fair value. The Trust assets are highly concentrated in Texas. The December 31, 2000 consolidated statement of net assets in liquidation reflects a value of $45 million for a 67% interest in a partnership which owns the First City Tower, a Class A office building located in downtown Houston. UIDC Management, Inc. owns the remaining 33% of the partnership. The Trust publicly stated its intent to market its share of the partnership in the first quarter of 2000. The Trust received a letter dated February 18, 2000 from UIDC Management in which UIDC alleged that in 1997 it "exercised" its contractual right of first refusal to purchase the 67% partnership interest. This alleged exercise of the right of first refusal arose in connection with an unconsummated prior transaction which was itself the subject of previously settled litigation. The letter further states that UIDC "demands that the Trust tender its partnership interest". Adjusted for refinancing costs, the alleged right of first refusal would have been on a value of approximately $25 million for the partnership interest. In response to this letter and because management of the Trust believed that UIDC's claim had no merit, the Trust filed a lawsuit on March 9, 2000 seeking a declaratory judgment that "Defendants UIDC Management, Inc. and UIDC of Texas Co. (collectively referred to as "UIDC" or the "UIDC Defendants") failed in May 1997 to properly exercise their right of first refusal under the Limited Partnership Agreement of FC Tower Property Partners, L.P. or, in the alternative, that UIDC Defendants have waived and/or are estopped from asserting such right." Additionally, the Trust filed a motion for summary judgment. 7 9 On February 27, 2001, a federal district judge ruled that the Trust's motion for summary judgment be denied and that UIDC entities' motion for summary judgment be granted in part and denied in part. Specifically, the judge ruled that, as a matter of law, UIDC had properly exercised its right of first refusal to purchase the 67% interest in May of 1997. The judge further ruled that UIDC's summary judgment motion be denied as it pertains to questions of whether UIDC is prevented from enforcing that right because of alleged breaches of the resulting option agreement, or because UIDC is estopped from specific performance based upon their refusal to buy the interest when given the chance in October of 1997. These latter questions will be subject to further discovery and potentially to a trial by jury. Management of FirstCity Liquidating Trust strongly disagrees with this ruling. Issues remain to be tried concerning whether the UIDC entities are nevertheless barred from enforcing their option to acquire the 67% partnership interest (a) because of alleged breaches of that agreement, and (b) because UIDC declined to purchase the partnership interest when subsequently offered in October of 1997 at a price even more favorable than that offered in May of 1997. Finally, even if the Trust was not successful on either of these trial points, there will remain equitable questions pertaining to the precise terms upon which UIDC's acquisition of the partnership interest may be ordered by the court, given all the pertinent circumstances. No adjustment has been made to the value of the partnership interest because, in the opinion of Trust management, it is not probable that the resolution of the dispute with UIDC will have a material adverse impact on the consolidated financial position, results of operations or liquidity of the Trust. FirstCity Liquidating Trust cannot predict the outcome of any such legal matters; however, the current litigation makes it unlikely that any near-term deal to sell the interest can be accomplished. 1999 COMPARED TO 1998 The estimated fair value of the Trust's assets increased $24.0 million in 1999 as compared to $37.9 million in 1998. The 1999 increase was attributable to several factors, including $18 million related to a 67% interest in a partnership which owns the First City Tower. Other factors which contributed to the enhancement of the net asset value of the Trust's assets in 1999 include (i) the appreciation in value of certain assets attributable to a favorable interest rate environment and the effect of such favorable interest rates on the marketability of real estate and (ii) the increase in the estimated market value of the Trust's assets that naturally occurs as the remaining life of the Trust (and concomitantly the discount factor applied in calculating net asset value) decreases. Interest income on short-term investments decreased in 1999 as compared to 1998 because less excess funds were available. Administrative expense totaled $3.8 million in 1999 as compared to $6.9 million in 1998. A $1.1 million bonus, based on distributions to Class B Certificate holders, was paid to certain former employees of the Debtor in 1999 as compared to a $2.6 million bonus paid to such employees in 1998. Professional fees totaled $.7 million in 1999 as compared to $1.1 million in 1998. 8 10 In 1999, the Trust distributed $23.3 million, or $9.50 per Certificate, to Class B Certificate holders. This distribution was made possible principally by $18.8 million in net collections on Trust assets in 1999 and cash held at December 31, 1998. In June 1999, the Bankruptcy Court extended the life of the Trust from January 3, 2000 to January 3, 2002. The extension allows the Trust more time to settle ongoing litigation and indemnity issues as well as to bring additional value to certain assets as a result of holding such assets for a longer period of time. In the first quarter of 1998, the Trust negotiated and received a settlement of approximately $22 million from its fidelity bond carriers. As a result of this settlement, there are no remaining claims of this nature. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The Trust does not engage in trading market risk sensitive instruments and does not purchase as investments, as hedges, or for purposes "other than trading" instruments that are likely to expose the Trust to market risk, whether it be from interest rate, foreign currency exchange, commodity price or equity price risk. The Trust has issued no debt instruments, entered into no forward or futures contracts, purchased no options and entered into no swaps. 9 11 Item 8. Financial Statements and Supplementary Data. FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION (DOLLARS IN THOUSANDS)
DECEMBER 31, ---------------------- 2000 1999 ------- ------- Assets, at estimated fair value Cash and cash equivalents ....................................... $ 3,556 $ 5,271 Trust assets, net ............................................... 44,472 49,150 ------- ------- Total assets ............................................. 48,028 54,421 ------- ------- Less liabilities at face or estimated amount Payables and accrued liabilities ................................ 1,928 2,021 ------- ------- Total liabilities ........................................ 1,928 2,021 ------- ------- Commitments and contingencies ................................... -- -- Trust net asset value attributable to: Class "B" Certificate, 2,454,310 units outstanding .............. 46,100 52,400 Class "C" Certificate, 725,729 units outstanding ................ -- -- ------- ------- Total net asset value .................................... $46,100 $52,400 ======= =======
CONSOLIDATED STATEMENTS OF INCOME AND CHANGES IN NET ASSET VALUE IN LIQUIDATION (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------------ 2000 1999 1998 -------- -------- -------- Changes in fair value of trust assets ............... $ 5,719 $ 24,036 $ 37,883 Interest income on short-term investments ........... 233 287 651 Administrative expense .............................. (2,679) (3,844) (6,859) -------- -------- -------- Net income ................................... 3,273 20,479 31,675 -------- -------- -------- Net asset value, beginning of period ................ 52,400 55,300 91,300 Distributions on Class "B" Certificate .............. (9,830) (23,379) (67,675) Eliminate liability for distributions on unsurrendered Class "B" Certificates ............. 257 -- -- -------- -------- -------- Net asset value, end of period ...................... $ 46,100 $ 52,400 $ 55,300 ======== ======== ========
See accompanying notes to consolidated financial statements. 10 12 FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------------ 2000 1999 1998 -------- -------- -------- Cash flows from operating activities: Net income .................................................. $ 3,273 $ 20,479 $ 31,675 Adjustments to reconcile net income to net cash provided by operating activities: Changes in fair value of trust assets .................... (5,719) (24,036) (37,883) Collections on trust assets, net of advances ............. 10,382 18,787 79,820 Increase (decrease) in payables and accrued liabilities .. 166 (117) (592) -------- -------- -------- Net cash provided by operating activities ............. 8,102 15,113 73,020 -------- -------- -------- Cash flows from financing activities: Distributions on Class "B" Certificate ...................... (9,817) (23,316) (67,494) -------- -------- -------- Net cash used in financing activities ................. (9,817) (23,316) (67,494) -------- -------- -------- Net increase (decrease) in cash and cash equivalents ........ $ (1,715) $ (8,203) $ 5,526 Cash and cash equivalents, beginning of period .............. 5,271 13,474 7,948 -------- -------- -------- Cash and cash equivalents, end of period .................... $ 3,556 $ 5,271 $ 13,474 ======== ======== ========
See accompanying notes to consolidated financial statements. 11 13 FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000, 1999 and 1998 (A) Summary of Significant Accounting Policies (1) Description of Business The Joint Plan of Reorganization by First City Bancorporation of Texas, Inc. (the "Debtor"), Official Committee of Equity Security Holders, and J-Hawk Corporation ("J-Hawk"), with the participation of Cargill Financial Services Corporation, under Chapter 11 of the United States Bankruptcy Code, Case No. 392-39474-HCA-11 (the "Plan of Reorganization"), was confirmed by the Bankruptcy Court for the Northern District of Texas, Dallas Division, by an order entered on May 31, 1995, and became effective on July 3, 1995. Pursuant to the Plan of Reorganization, and an Agreement and Plan of Merger between the Debtor and J-Hawk, on July 3, 1995, J-Hawk was merged (the "Merger") with and into First City Bancorporation of Texas, Inc., and the name of the corporation was changed to FirstCity Financial Corporation ("FirstCity"). Pursuant to the Plan, substantially all of the legal and beneficial interests in the assets of the Debtor, other than $20 million in cash contributed to FirstCity, were transferred to FirstCity Liquidating Trust (the "Trust"), or to subsidiaries of the Trust. Such assets will be liquidated over the life of the Trust pursuant to the terms thereof. In June 1999, the bankruptcy court extended the life of the Trust to January 3, 2002. FirstCity, as the sole holder of the Class A Certificate under the Trust, received from the Trust amounts sufficient to retire the Class A Certificate in December 1997. Additional distributions shall be paid to certain of the former security holders of the Debtor pursuant to the terms of the Class B and the Class C certificates of beneficial interests in the Trust. The Trust is administered by a four-person portfolio committee (the "Portfolio Committee"). The net assets of the Debtor transferred to the Trust on July 3, 1995, consisted of the following (dollars in thousands):
Cash and cash equivalents ........................ $ 135,360 Trust assets ..................................... 61,514 Estimated claims and accrued liabilities ......... (14,002) --------- $ 182,872 =========
In connection with the sale of the Debtor's banks by the FDIC to third-party acquirers (the "Loss-Sharing Banks"), the FDIC guaranteed certain recoveries on loans acquired by the Loss-Sharing Banks. (These agreements are referred to as "Loss-Sharing Agreements".) On July 12, 1995, in order to reduce the uncertain effect of the Loss-Sharing Agreements on future distributions to the Trust by the FDIC, subsidiaries of the Trust purchased assets (the "Loss-Sharing Settlement") for approximately $206 million from the Loss-Sharing Banks. With the purchase of these assets, the Loss-Sharing Banks released the FDIC from its future obligations under the Loss-Sharing Agreements. 12 14 FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) By order of the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, unsurrendered securities of the Debtor were required to be submitted for exchange into Class B or Class C Certificates by May 31, 2000. As of that date, securities representing 2,454,310 Class B Certificates and 725,729 Class C Certificates had been exchanged. Prior to May 31, 2000, Certificates outstanding were assumed equal to an exchange of all Debtor securities. Accordingly, in the second quarter of 2000, a liability for distributions on the unsurrendered Class B Certificates was reversed. Holders of the remaining unsurrendered securities of the Debtor will have no rights to receive any distributions on Trust securities. (2) Principles of Consolidation The accompanying consolidated financial statements include the accounts of FirstCity Liquidating Trust and its subsidiaries (collectively referred to as the "Trust"). All significant intercompany transactions and balances have been eliminated in consolidation. Certain amounts in the financial statements for prior periods have been reclassified to conform with current financial statement presentation. (3) Cash Equivalents For purposes of the consolidated statements of cash flows, the Trust considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. At December 31, 2000 and 1999, substantially all cash balances were in excess of federally insured limits. In accordance with the Liquidating Trust Agreement, all cash balances are maintained at institutions with at least $100 million of capital stock and surplus and whose short-term debt obligations are rated by at least two nationally recognized rating agencies in one of the two highest categories. (4) Trust Assets The net assets of the Trust are carried at estimated fair values which are the results of discounting, at appropriate discount rates, the currently estimated cash flows projected to be realized from the collection, liquidation and disposition of the non-cash assets held by the Trust. Such assets consist principally of performing and non-performing loans, income producing real estate and interests in real estate, and miscellaneous other assets and receivables transferred to the Trust upon the consummation of the Plan of Reorganization. The estimates of the future cash flows from which the net asset values of the Trust were derived are made under the direction of the management of the Trust and the Portfolio Committee based upon information available and are believed to be reliable. There can be no assurance, however, that the estimates resulting from such reviews or the net asset values 13 15 FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) derived from such estimates will ultimately be realized due to the highly judgmental assumptions which were made in developing estimates of the amount and timing of future cash flows to be realized upon the liquidation of the types of assets such as those held by the Trust. Trust assets are revalued at least quarterly and adjustments to estimated fair values are included in operating results in the period in which they become known. Loans are considered performing if debt service payments are made in accordance with the original or restructured terms of the notes. Interest on loans is recognized as part of the proceeds from disposition of trust assets. Impairment of loans is measured based on the present value of the expected future cash flows discounted at the loan's effective interest rate, or the fair value of the collateral, less estimated selling costs, if the loan is collateral dependent and foreclosure is probable. Foreclosed assets acquired in settlement of notes are recorded at estimated fair value. Costs relating to the development and improvement of property and holding costs are considered in the development of estimated fair values. (5) Income Taxes Under current federal and state laws, the Trust shall be treated as a grantor trust owned by the beneficiaries holding beneficial interest therein. For tax purposes, any item of income or loss is allocated among the certificate holders. Therefore, no provision has been made for income taxes in the accompanying consolidated financial statements. (6) Use of Estimates Management of the Trust has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. 14 16 FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) (B) Trust Assets Trust assets are comprised of the following:
(Dollars in thousands) December 31, ------------------------- Estimated Gross Cash Flow by Type of Asset 2000 1999 ------------------------------------------ -------- -------- Borrowers' obligation on outstanding balance of: Performing loans ........................... $ 2,718 $ 5,327 Nonperforming loans ........................ 81 209 Real estate and other assets ................... 47,142 49,557 -------- -------- Total ...................................... 49,941 55,093 -------- -------- Discount required to reflect trust assets at estimated fair value .................. (5,469) (5,943) -------- -------- Trust assets, net .............................. $ 44,472 $ 49,150 ======== ========
For each asset, estimates of income, expense and net cash flow on a monthly basis through the expected final disposition date are prepared by management of the Trust. The individual asset budget is developed based upon factors which include physical inspection of the asset or the collateral underlying the related loan, local market conditions, contractual payments or rents, and discussions with the relevant borrower. The Trust's management and the Portfolio Committee periodically reevaluate and revise projected monthly cash flows on an asset by asset basis. At December 31, 2000 and 1999, the projected monthly cash flows were discounted at 11% to reflect the Trust assets at estimated fair value. The Trust assets are highly concentrated in Texas. The December 31, 2000 consolidated statement of net assets in liquidation reflects a value of $45 million for a 67% interest in a partnership which owns the First City Tower, a Class A office building located in downtown Houston. UIDC Management, Inc. owns the remaining 33% of the partnership. The Trust publicly stated its intent to market its share of the partnership in the first quarter of 2000. The Trust received a letter dated February 18, 2000 from UIDC Management in which UIDC alleged that in 1997 it "exercised" its contractual right of first refusal to purchase the 67% partnership interest. This alleged exercise of the right of first refusal arose in connection with an unconsummated prior transaction which was itself the subject of previously settled litigation. The letter further states that UIDC "demands that the Trust tender its partnership interest". Adjusted for refinancing costs, the alleged right of first refusal would have been on a value of approximately $25 million for the partnership interest. 15 17 FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) In response to this letter and because management of the Trust believed that UIDC's claim had no merit, the Trust filed a lawsuit on March 9, 2000 seeking a declaratory judgment that "Defendants UIDC Management, Inc. and UIDC of Texas Co. (collectively referred to as "UIDC" or the "UIDC Defendants") failed in May 1997 to properly exercise their right of first refusal under the Limited Partnership Agreement of FC Tower Property Partners, L.P. or, in the alternative, that UIDC Defendants have waived and/or are estopped from asserting such right." Additionally, the Trust filed a motion for summary judgment. On February 27, 2001, a federal district judge ruled that the Trust's motion for summary judgment be denied and that UIDC entities' motion for summary judgment be granted in part and denied in part. Specifically, the judge ruled that, as a matter of law, UIDC had properly exercised its right of first refusal to purchase the 67% interest in May of 1997. The judge further ruled that UIDC's summary judgment motion be denied as it pertains to questions of whether UIDC is prevented from enforcing that right because of alleged breaches of the resulting option agreement, or because UIDC is estopped from specific performance based upon their refusal to buy the interest when given the chance in October of 1997. These latter questions will be subject to further discovery and potentially to a trial by jury. Management of FirstCity Liquidating Trust strongly disagrees with this ruling. Issues remain to be tried concerning whether the UIDC entities are nevertheless barred from enforcing their option to acquire the 67% partnership interest (a) because of alleged breaches of that agreement, and (b) because UIDC declined to purchase the partnership interest when subsequently offered in October of 1997 at a price even more favorable than that offered in May of 1997. Finally, even if the Trust was not successful on either of these trial points, there will remain equitable questions pertaining to the precise terms upon which UIDC's acquisition of the partnership interest may be ordered by the court, given all the pertinent circumstances. No adjustment has been made to the value of the partnership interest because, in the opinion of Trust management, it is not probable that the resolution of the dispute with UIDC will have a material adverse impact on the consolidated financial position, results of operations or liquidity of the Trust. FirstCity Liquidating Trust cannot predict the outcome of any such legal matters; however, the current litigation makes it unlikely that any near-term deal to sell the interest can be accomplished. In the first quarter of 1998, the Trust negotiated and received a settlement of approximately $22 million from its fidelity bond carriers. As a result of this settlement, there are no remaining claims of this nature. 16 18 FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) (C) Distribution Priorities The Trust is required to apply all proceeds from liquidation and disposition of its assets first to payment of normal operating expenses. Second, Trust proceeds totaling $188 million were distributed to FirstCity to retire the Class A Certificate in December 1997. The third order of distribution of Trust proceeds is payments pursuant to employment and bonus agreements with certain former employees of the Debtor. The bonus pool and executive long-term incentive plan provides for the payment of bonuses equal to 4.76% of additional distributions to Class B Certificate holders and (if any) Class C Certificate holders. Fourth, Class B Certificate holders are entitled to distributions up to the Pour-Over Level. The Pour-Over Level (approximately $51 million at December 31, 2000) is the liquidation preference on July 3, 1995 of the Debtor's Series B and Series E preferred stock, less the nominal stated value of FirstCity special preferred stock and the book value of FirstCity common stock issued to the Series B and Series E holders, plus interest at an annual rate of 6.5% from July 3, 1995. The Pour-Over Level is reduced for distributions to Class B Certificate holders. In 2000, $9.8 million, or $4.00 per Certificate, was distributed to Class B Certificate holders and a $.4 million bonus was paid to certain former employees of the Debtor. In 1999, $23.3 million, or $9.50 per Certificate, was distributed to Class B Certificate holders and a $1.1 million bonus was paid to certain former employees of the Debtor. In 1998, $67.5 million, or $27.50 per Certificate, was distributed to Class B Certificate holders and a $2.6 million bonus was paid to certain former employees of the Debtor. Lastly, Class C Certificate holders receive distributions (if any) after any remaining payments to Class B Certificate holders up to the Pour-Over Level (approximately $20.77 per unit as of December 31, 2000). The ultimate amounts to be distributed to the holders of the B and C Certificates will result from the cash flow actually realized from the liquidation of the non-cash Trust assets (principally the partnership interest discussed in Note B). The determination of the net asset value of the Trust in the accompanying consolidated statements of net assets in liquidation is based upon estimates of future cash flows. The actual cash flows and the timing of such cash flows may vary significantly from those estimates, thus affecting the final distributions to the Certificate holders. 17 19 FIRSTCITY LIQUIDATING TRUST AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) (D) Commitments and Contingencies The Trust is involved in various other legal proceedings in the ordinary course of business. In the opinion of management of the Trust, the resolution of such matters will not have a material adverse impact on the consolidated financial position, results of operations or liquidity of the Trust. In 1996, the FDIC closed the receiverships of the Debtor's banks and distributed the remaining surplus of those receiverships to the Trust. In accordance with a conveyance and indemnification agreement, the Trust will be required, among other things, to provide indemnity to the FDIC against any known or unknown liabilities, obligations or actual expenses associated with the receiverships, in an aggregate amount up to $10 million until the termination of the Trust. Management of the Trust does not believe that, to the extent the Trust is obligated to pay certain claims or expenses associated with the past obligations of the Debtor's banks, such payments will have a material adverse impact on the consolidated financial position, results of operations, or liquidity of the Trust. 18 20 INDEPENDENT AUDITORS' REPORT The Portfolio Committee and Certificate Holders FirstCity Liquidating Trust: We have audited the accompanying consolidated statements of net assets in liquidation of FirstCity Liquidating Trust and subsidiaries (the "Trust") as of December 31, 2000 and 1999, and the related consolidated statements of income and changes in net asset value in liquidation, and cash flows for each of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FirstCity Liquidating Trust and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and changes in net asset value in liquidation and cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Houston, Texas February 10, 2001, except as to Note B, which is as of February 27, 2001 19 21 FIRSTCITY LIQUIDATING TRUST SELECTED UNAUDITED QUARTERLY FINANCIAL DATA (DOLLARS IN THOUSANDS)
2000 1999 ---------------------------------------------- -------------------------------------------- First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter -------- -------- -------- -------- -------- -------- -------- -------- Changes in fair value of trust assets(1) ......... $ 1,715 $ 1,436 $ 1,290 $ 1,278 $ 2,113 $ 1,660 $ 1,137 $ 19,126 Interest income on short-term investments ..... 45 72 65 51 97 86 46 58 Administrative expense ......... (599) (647) (658) (775) (1,397) (1,102) (661) (684) -------- -------- -------- -------- -------- -------- -------- -------- Net income ................. $ 1,161 $ 861 $ 697 $ 554 $ 813 $ 644 $ 522 $ 18,500 ======== ======== ======== ======== ======== ======== ======== ========
---------- (1) Includes increase of $17.5 million related to 67% partnership interest in First City Tower in fourth quarter 1999. 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. Role of the Portfolio Committee Pursuant to Article IV of the Trust Agreement, except where expressly limited by the terms of the Trust Agreement, all of the management and executive authority over the Trust resides in the four-member Portfolio Committee (subject to increase and reduction). The Trust Agreement provides that such four members are initially Rick R. Hagelstein (the "Chief Credit Officer Member Position"), Robert W. Brown (the "Robert W. Brown Member Position"), and Richard E. Bean and R. David Palmer, as the two members designated by the Equity Committee (the "Equity Committee Member Positions"). All have been members of the Portfolio Committee since the Effective Date. Mr. Hagelstein resigned in the second quarter of 1998 and Joe S. Greak was appointed to replace Mr. Hagelstein. Background information and the employment histories of Messrs. Bean, Brown, Greak and Palmer are set forth below. Richard E. Bean, 57, has been Executive Vice President and Chief Financial Officer of Pearce Industries, Inc. since 1976, which company, through its subsidiaries, markets a variety of oilfield equipment and machinery. Prior to the Effective Date, Mr. Bean was Chairman of the Equity Committee. Mr. Bean is currently a director of FirstCity. 20 22 Robert W. Brown, 52, has been President of FCLT Loans Asset Corp. since the Effective Date. As of the Effective Date, Mr. Brown served as Executive Vice President and Secretary of FirstCity. After the Effective Date he resigned from FirstCity to devote substantially all of his time to the Trust. Mr. Brown was Chief Financial Officer of the Debtor beginning in 1991. He served as Executive Vice President of the Debtor from 1990 to 1992, became a member of the Debtor's Board of Directors in 1992 and served as President of the Debtor from 1993 through the Effective Date. Mr. Brown was a director and officer of the Debtor when the Debtor filed a plan of reorganization under the Federal bankruptcy laws in December 1994. Joe S. Greak, 52, has been Senior Vice President, Tax Director and Secretary of FirstCity since the Effective Date. Mr. Greak was the Tax Manager of the Debtor from 1993 to the Effective Date. R. David Palmer, 58, has been a private investor for the past 25 years. Prior to the Effective Date, Mr. Palmer was a member of the Equity Committee. From 1970 to 1995, Mr. Palmer was a Professor of Philosophy at the State University of New York, Fredonia, New York. Mr. Palmer is currently a director of Sensatex, Inc. Officers and Others Jerry D. Thompson, 45, has been Vice President of FCLT Loans Asset Corp. since February 1997. Prior thereto, Mr. Thompson was Vice President of FCB Real Estate Services, Inc., a subsidiary of the Trust and the Debtor. C. Ivan Wilson, 73, was Chairman of the Board and Chief Executive Officer of the Debtor from 1991 until the Effective Date and has been Vice Chairman of the Board of FirstCity since that date. Role of the Trustee Although all of the management and executive authority over the Trust resides in the Trustee, the Trustee functions as a directed Trustee under the sole and absolute discretion of the Portfolio Committee and may not exercise discretion in the management and conduct of the liquidation of the Trust assets. The Trustee has no authority or right to refuse to act when so ordered or directed to do so by the Portfolio Committee. The Trustee is State Street Bank and Trust Company, formerly Fleet National Bank and Shawmut Bank Connecticut, N.A. There have been no changes in the Trustee through the date of this Form 10-K. Item 11. Executive Compensation. Compensation of the Trustee The compensation paid by the Trust to the Trustee consisted of administrative fees aggregating $20,500 in each of 2000, 1999 and 1998. Unless renegotiated, annual administrative fees to be paid to the Trustee shall remain constant. 21 23 Compensation of the Portfolio Committee Pursuant to the terms of Article X of the Trust Agreement, the Portfolio Committee consists of the following four members: Joe S. Greak in the Chief Credit Officer Member Position, Robert W. Brown in the Robert W. Brown Member Position, and two members as designated by the Equity Committee, who at present are Richard E. Bean and R. David Palmer. Pursuant to Section 10.1.1 of the Trust Agreement, Messrs. Bean and Palmer, or their respective successors, each receives compensation for his services as a member of the Portfolio Committee in an amount equal to $12,000 per annum, payable in $3,000 increments on the first day of each calendar quarter. In addition, pursuant to a resolution of the Board of Directors of Loans Asset Corp., Messrs. Bean and Palmer each receive $1,000 for each Portfolio Committee meeting which they attend. The other two members are not separately compensated for their services as members of the Portfolio Committee. Compensation of Executive Officers and Others Executive officers and others of the Trust received compensation during the last three years as set forth in the following table:
ANNUAL COMPENSATION(1) NAME AND ---------------------------- PRINCIPAL POSITION YEAR SALARY BONUS ------------------ ---- ---------- ---------- Robert W. Brown 2000 $ 250,000 $ 155,040 -- President of FCLT 1999 250,000 385,460 Loans Asset Corp. 1998 250,000 897,522 C. Ivan Wilson 2000 $ -- $ 155,040 -- Vice Chairman of 1999 -- 385,460 FirstCity 1998 -- 872,522 Joe S. Greak 2000 $ -- $ 77,055 -- Senior Vice President of 1999 -- 191,577 FirstCity 1998 -- 435,145 Jerry D. Thompson 2000 $ 100,000 $ 10,770 -- Vice President of FCLT 1999 100,000 36,774 Loans Asset Corp. 1998 100,000 103,376
---------- (1) Amounts reported for Mr. Wilson and Mr. Greak relate only to Exhibit O of the Plan. Mr. Brown's compensation is determined as set forth in that certain employment agreement (the "Brown Employment Agreement"), effective as of July 3, 1995, as amended May 1, 1996, by and between FCLT Loans Asset Corp. and Mr. Brown. The Brown Employment Agreement provides for Mr. Brown's employment with FCLT Loans Asset Corp. and his duties to the Trust for a term commencing on July 3, 1995 and terminating on dissolution of the Trust. Mr. Brown's duties include his membership on the Portfolio Committee of the Trust, the management and payment of creditor claims and the liquidation of the assets of the Trust pursuant to the terms of the Trust Agreement. In compensation for such services, Mr. Brown is paid an annual salary of $250,000. Through December 31, 2000, Mr. Brown was paid $1.4 million in performance-oriented bonuses pursuant to Exhibit O to the Plan. The Brown Employment Agreement provides for a conditional bonus in an amount equal to 1.67% of all additional aggregate payments to the holders 22 24 of the Class B Certificates and the Class C Certificates. The payment of such conditional bonus to Mr. Brown is to be determined by the Portfolio Committee. In the event that the Brown Employment Agreement is terminated by the Portfolio Committee prior to the termination date of the Trust, or upon the death or disability of Mr. Brown, Mr. Brown or his estate is entitled to continue to receive certain bonuses pursuant to the terms set forth in the Brown Employment Agreement. Mr. Brown's unpaid bonuses will be forfeited in the event that he terminates the Brown Employment Agreement or is terminated for cause by FCLT Loans Asset Corp. prior to the date of the expiration of the Brown Employment Agreement. Pursuant to Section 9.8 of the Plan, Mr. Brown (as described in the previous paragraph), along with C. Ivan Wilson, Joe S. Greak, former employees of the Debtor and certain employees of the Trust, share in a bonus pool and executive long-term incentive plan, the provisions of which are set forth in Exhibit O to the Plan. In 2000, bonuses totaling $.4 million ($.1 million to Mr. Brown) were paid pursuant to Exhibit O. In 1999, bonuses totaling $1.1 million ($.4 million to Mr. Brown) were paid pursuant to Exhibit O. In 1998, bonuses totaling $2.6 million ($.9 million to Mr. Brown) were paid pursuant to Exhibit O. Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) Since the Trust has no outstanding "voting securities" within the meaning of the Exchange Act and the regulations thereunder, the disclosure requirements of Form 10-K pertaining to 5% holders of voting securities are not applicable. (b) The following table sets forth certain information with respect to the beneficial ownership of the Class B and Class C Beneficial Interests, as of January 31, 2001, by the members of the Portfolio Committee. The Trustee is not the beneficial owner of any Class B or Class C Beneficial Interests.
NUMBER OF CLASS B BENEFICIAL INTERESTS AND PERCENTAGE OF OUTSTANDING CLASS B BENEFICIAL INTERESTS AS OF JANUARY 31, 2001 -------------------------------------- BENEFICIAL PERCENT NAME OF OWNER OR IDENTITY OF GROUP OWNERSHIP OF CLASS ---------------------------------- ---------------- ----------------- Robert W. Brown ............................................ -- -- Richard E. Bean ............................................ 98,100 4.0 Joe S. Greak ............................................... -- -- R. David Palmer ............................................ -- -- All Portfolio Committee members as a group (4 persons) ..... 98,100 4.0
23 25
NUMBER OF CLASS C BENEFICIAL INTERESTS AND PERCENTAGE OF OUTSTANDING CLASS C BENEFICIAL INTERESTS AS OF JANUARY 31, 2001 -------------------------------------- BENEFICIAL PERCENT NAME OF OWNER OR IDENTITY OF GROUP OWNERSHIP OF CLASS ---------------------------------- ---------------- ----------------- Robert W. Brown ............................................ 197 * Richard E. Bean ............................................ -- -- Joe S. Greak ............................................... -- -- R. David Palmer ............................................ -- -- All Portfolio Committee members as a group (4 persons) ..... 197 *
---------- * Less than 1% (c) Because the Trust does not have any "voting securities" within the meaning of the Exchange Act and the regulations thereunder, changes in ownership of voting securities will not result in a change of control of the Trust. Pursuant to the terms of the Trust Agreement, all of the management and executive authority over the Trust resides in the four-member Portfolio Committee. The Trust has no knowledge of any arrangements which may result in a change of control of the Trust. However, in the event that the position on the Portfolio Committee held by Robert W. Brown is vacated for any reason, the number of Portfolio Committee members will be permanently reduced to three. In such instance, two of the three current remaining members of the Portfolio Committee will be affiliated with FirstCity and, as a result, FirstCity may be deemed to have some control over Portfolio Committee decisions. Item 13. Certain Relationships and Related Transactions. None. Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) 1. Financial Statements The consolidated financial statements of the Trust are incorporated by reference to Item 8 "Financial Statements and Supplementary Data" of this report. 2. Financial Statement Schedules Financial statement schedules have been omitted because the information is either not required, not applicable, or is included in Item 8 - "Financial Statements and Supplementary Data." 24 26 3. Exhibits Exhibit No. Description 2.1(1) Joint Plan of Reorganization for First City Bancorporation of Texas, Inc., as modified, under Chapter 11 of the United States Bankruptcy Code, as confirmed by the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, on May 31, 1995. 2.2(5) Order Extending Term of FirstCity Liquidating Trust, dated June 18, 1999. 3.1(1) The Liquidating Trust Agreement, dated as of July 3, 1995, by and between First City Bancorporation of Texas, Inc. and Shawmut Bank Connecticut, National Association (subsequently Fleet National Bank, now State Street Bank and Trust Company), as Trustee. 10.1(3) Employment Agreement, effective as of July 3, 1995, by and between FCLT Loans Asset Corp. and Robert W. Brown, as amended May 1, 1996. 10.2(2) Settlement Agreement, dated as of June 22, 1994, as amended as of January 30, 1995, by and among FDIC-Corporate, the FDIC-Receivers and the First City Parties. 10.3(3) Conveyance and Indemnification Agreement, dated December 23, 1996, between FDIC-Corporate, the FDIC-Receivers, FCLT Loans, L.P. and the Trust. 10.4(4) Extension of Conveyance and Indemnification Agreement, dated in April 1999, between FDIC-Corporate, the FDIC-Receivers, FCLT Loans, L.P. and the Trust. ---------- (1) Filed as the exhibit indicated to the Registration Statement on Form 10 filed with the Securities and Exchange Commission on May 1, 1996 and incorporated herein by reference. (2) Filed as the exhibit indicated to the Registration Statement on Form 10/A filed with the Securities and Exchange Commission on July 10, 1996 and incorporated herein by reference. (3) Filed as the exhibit indicated to the Form 10-K for the fiscal year ended December 31, 1996 filed with the Securities and Exchange Commission and incorporated herein by reference. (4) Filed as the exhibit indicated to the Form 10-Q for the quarter ended March 31, 1999 filed with the Securities and Exchange Commission and incorporated herein by reference. (5) Filed as the exhibit indicated to the Form 10-Q for the quarter ended June 30, 1999 filed with the Securities and Exchange Commission and incorporated herein by reference. (b) Reports on Form 8-K. No report on Form 8-K was filed by the Registrant with the Commission during the quarterly period ended December 31, 2000. 25 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STATE STREET BANK AND TRUST COMPANY, as Trustee Date: March 15, 2001 /s/ Susan T. Keller --------------------- Name: Susan T. Keller ---------------- Title: Vice President ---------------