As filed with the Securities and Exchange Commission on August 1, 1997
Registration No. 333-23521
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 4</>
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
RIVERBANK FACTORS, INC.
(Exact name of Registrant as specified in its charter)
Florida 6153 65-0703758
- ---------------- -------------------------- ---------------
(State or other (Primary Standard Industrial I.R.S. Employer
jurisdiction of Classification Code Number) Identification
incorporation
or organization
RIVERBANK FACTORS, INC.
800 West Oakland Park Boulevard.
Suite 100
Ft. Lauderdale, FL 33311
(954) 564-9400
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
SHLOMO RASABI
Chairman, President, Chief Executive Officer,
Chief Financial Officer, Treasurer and Director
Riverbank Factors, Inc.
800 West Oakland Park Boulevard
Suite 100
Ft. Lauderdale, FL 33311
(954) 564-9400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
M. PETER AMARAL, ESQ.
PO Box 970771
Boca Raton, FL 33428
(561) 479-4775
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective registration statement filed pursuant
to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434 please check the following box. / /
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
OF SECURITIES TO BE REGISTERED MAXIMUM MAXIMUM REGISTRATION
REGISTERED OFFERING AGGREGATE FEE (1)
PRICE PER OFFERING
SECURITY PRICE
Subordinated,
Fixed-Rate Note 4,900 $1,000 $4,900 $1,485
</TABLE>
(1) Previously paid
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED
JULY 31, 1997
RIVERBANK FACTORS, INC.
$4,900,000 Principal Amount
Subordinated, Fixed Rate Term Notes
(ranging in term from three (3) months to ten (10) years)
($1,000 Minimum)
("Investment Notes" or "Notes")
This Prospectus relates to the offer and sale of up to $4,900,000 in
principal amount (the "Offering") of unsecured, subordinated notes (the
"Investment Notes" or the "Notes") of Riverbank Factors, Inc., a Florida
corporation ("Riverbank," the "Company" or the "Issuer" as the context may
require). The Investment Notes will be offered on an ongoing and continuous
basis by Riverbank pursuant to Rule 415. Generally, Rule 415 only applies
to those securities that are reasonably expected to be offered and sold within
two years from the initial effective date of the registration. The Company
reasonably expects to offer and sell the securities being offered herein within
two years of the effective date of the registration statement relating to this
prospectus. The Investment Notes will be subordinated to all
"Senior Debt" of the Company (defined generally as debt which would have
priority of right to payment in connection with the liquidation of the Company
and its assets). See "Summary of Terms-Subordination of Investment Notes."
The amount of the Company's Senior Debt will fluctuate from time to time.
As of the date of this Prospectus there was no Senior Debt outstanding. There
is no limitation on the amount of Senior Debt the Company can incur.
Investment Notes will be issued in the minimum amount of $1,000 and will
be issued for a specified term as follows: three (3) months, six (6) months,
one (1) year, eighteen (18) months, two (2) years, thirty (30) months,
three (3) years, four (4) years, five (5) years, seven (7) years or ten (10)
years. Purchasers of the Notes will elect a term when they subscribe for Notes.
Interest rates paid will vary with the term to maturity of the Notes and will
be fixed at issuance for the life of each Note. Interest rates on unsold Notes
will be determined on the first day of each month by a formula based upon the
arithmetic average of the yields of the last full four weeks of the month
immediately preceding the month just ended on actively traded U.S. Treasury
issues adjusted to a constant maturity of one year as published by the U.S.
Treasury in Federal Reserve Statistical Release H.15 (519) (the "Index"), plus
an amount called the Margin that has been established by the Company for each
term to maturity. Fixed interest rates being paid on newly issued Investment
Notes during the month of August, 1997 are as follows: 3 months-7.12%;
6 months-7.37%; 12 months-8.37%; 18 months-8.62%; 24 months-8.87%;
30 months-9.12%; 36 months-9.37%; 48 months-9.97%; 60 months-10.37%;
7 years-10.87%; 10 years-11.37%. See "Description of the Investment Notes
and the Deed Poll Indenture." Each Prospectus will be accompanied by a
Prospectus Supplement setting forth the interest rates then being paid by the
Company for each maturity. The term to maturity will be chosen by the purchaser
of the Notes at the time of purchase. The Notes may be extended by the holder
at its option for an identical maturity term. The Investment Notes will be
issued pursuant to a Deed Poll Indenture of Trust between the Issuer and the
Holders of the Investment Notes. For a full description of the terms and
provisions of the Investment Notes offered hereby see "Description of the
Investment Notes and the Deed Poll Indenture."
The Issuer reserves the right to reject any subscription hereunder, in
whole or in part, for any reason. Subscriptions will be irrevocable upon
receipt by Riverbank. In the event that a subscription is not accepted by
the Company, the proceeds of such subscription will be promptly refunded to
the subscriber without deduction of any costs and without interest. The
Company expects that such subscriptions will be refunded within 48 hours after
the Company has received such subscription. No minimum amount of Investment
Notes must be sold in this Offering. Riverbank reserves the right to withdraw
or cancel the Offering at any time. In the event of such withdrawal or
cancellation, the Investment Notes previously sold will remain outstanding
until maturity and pending subscriptions will be irrevocable. See "Plan of
Distribution."
Any indebtedness of the Company, other than Senior Debt, will have
rights upon liquidation or dissolution of the Company which ranks pari passu
("equally") in right of payment to the Investment Notes offered hereby. As of
the date of this Prospectus, the Company had an aggregate of approximately
$400,000 in principal amount of indebtedness, which ranks pari passu in right
of payment with the Investment Notes. Such indebtedness represents unsecured
borrowings of the Company other than the Investment Notes offered hereby. For
a full description of the terms and provisions of the Investment Notes offered
hereby, see "Description of the Notes and The Deed Poll Indenture."
Riverbank is a newly organized Florida corporation that has not
conducted any significant business other than preparing its business plan and
conducting this offering. The Company's ability to continue as a going concern
may be dependent upon the successful completion of this offering.
See "Risk Factors."
The Notes will be issued in registered form. It is anticipated that there
will be no secondary market for the Investment Notes. No such secondary market
presently exists, and if any such market were to develop, there can be no
assurance that it would provide the holders of the Investment Notes with
liquidity of investment. The Investment Notes will not be transferable without
the prior consent of the Company. Such consent will be withheld in the event
that the Company determines that such transfer might result in a violation of
any state or Federal securities or other applicable law. The Notes will be
issued pursuant to a Deed Poll Indenture between the Issuer and Holders of the
Investment Notes, See "Description of the Notes and The Deed Poll Indenture."
The Company is not subject to state or federal statutes or regulations
applicable to banks and/or savings and loan associations with regard to
insurance, the maintenance of reserves, the quality or condition of its assets
or other matters. THE INVESTMENT NOTES OFFERED HEREUNDER ARE NOT CERTIFICATES
OF DEPOSIT ("CDs"). PAYMENT OF PRINCIPAL AND INTEREST ON THE INVESTMENT NOTES
IS NOT GUARANTEED BY ANY GOVERNMENTAL OR PRIVATE INSURANCE FUND OR ANY OTHER
ENTITY. THE COMPANY'S REVENUES FROM OPERATIONS, INCLUDING THE SALE OF LOANS
FROM ITS PORTFOLIO TO THIRD PARTY INVESTORS, THE COMPANY'S WORKING CAPITAL,
AND CASH GENERATED FROM ADDITIONAL DEBT FINANCING REPRESENT THE COMPANY'S ONLY
SOURCES OF FUNDS FOR THE REPAYMENT OF PRINCIPAL, AT MATURITY, AND THE ONGOING
PAYMENT OF INTEREST ON THE INVESTMENT NOTES.
THE NOTES ARE SPECULATIVE SECURITIES AND AN INVESTMENT HEREUNDER SHOULD BE UN-
DERTAKEN ONLY AFTER CAREFUL EVALUATION OF THE RISK FACTORS AND THE OTHER
INFORMATION SET FORTH IN THE PROSPECTUS. FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BEFORE PURCHASING THE INVESTMENT NOTES. SEE "RISK
FACTORS" AT PAGE 5 HEREOF.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF INVESTMENT NOTES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT SETTING FORTH THE INTEREST RATES THEN
BEING OFFERED ON THE NOTES.
THE INVESTMENT NOTES ARE BEING OFFERED ON A BEST EFFORTS BASIS BY THE
COMPANY. NO MINIMUM AMOUNT OF INVESTMENT NOTES MUST BE SOLD IN THE
OFFERING.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
UNDERWRITING PROCEEDS TO
PRICE TO COMMISSIONS AND THE
PUBLIC (1) DISCOUNTS COMPANY(2)(3)
===================================================================
PER NOTE $ 1,000 0 0
TOTAL $4,900,000 0 $4,900,0000
(1) The Investment Notes will be issued at their face principal value of
$1,000, without discount.
(2) Riverbank is not negotiating and does not currently have any agreements
concerning the use of the services of any National Association of
Securities Dealers, Inc. ("NASD") member broker-dealer as an agent to
assist in the sales of the Investment Notes, and accordingly, is not
presently obligated to pay any commissions in connection with the sale of
the Investment Notes. See "Plan of Distribution."' If Riverbank initiates
or enters discussions leading to an agreement concerning the use of the
services of any broker-dealer, Riverbank may pay NASD member broker-
dealers, as Agents, an estimated commission ranging from .5% to 10% of the
sale price of any Investment Note sold through any such Agent, depending on
numerous factors. Riverbank may agree to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. It is also likely that any such agreement by Riverbank
would include reimbursement of any such broker-dealer for its costs and
expenses, up to a maximum, based on a percentage of the Investment Notes
sold. See "Plan of Distribution." If broker-dealers are used in connection
with this Offering, the Company will file a post-effective amendment to the
registration statement relating to this Prospectus.
Officers, directors and other associated persons of the Company will
participate in the sale of the Notes in reliance on the safe-harbor
provisions of Rule 3a4-1 of the Securities Exchange Act of 1934. Such
associated persons will not be compensated directly or indirectly on
transactions in the Notes. Participation by such associated persons will be
restricted to passive sales activities.
(3) Before deducting other expenses incurred in connection with the Offering
payable by Riverbank estimated at approximately $35,000.
No Riverbank employee, broker-dealer, salesman or other person has been
authorized to give any oral information or to make any oral representation
other than those contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been
authorized by Riverbank. This Prospectus does not constitute an offer of any
securities other than those to which it relates or to any person in any
jurisdiction where such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that the information herein is correct
as of any time subsequent to its date.
The date of this Prospectus is July 31, 1997
AVAILABLE INFORMATION
The Issuer has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (together with all
exhibits and schedules thereto, the "Registration Statement") under the
Securities Act of 1933, as amended, with respect to the registration of the
Notes offered by this Prospectus. This Prospectus does not contain all of the
information set forth in such Registration Statement and the exhibits thereto,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information pertaining to the
Issuer, the Notes offered by this Prospectus and related matters, reference is
made to such Registration Statement, including the exhibits filed as a part
thereof. Each statement in this Prospectus referring to a document filed as an
exhibit to such Registration Statement is qualified by reference to the
exhibit for a complete statement of its terms and conditions. Exhibits to the
Registration Statement will be provided without charge upon written or oral
request to Shlomo Rasabi, Riverbank Factors, Inc., 800 West Oakland Park
Boulevard, Suite 100, Ft. Lauderdale, FL 33311. (954) 564-9400.
The Issuer by reason of this Offering is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other information
filed by the Issuer can be inspected and copied at the public reference
facilities maintained by the Commission at its Public Reference Section, 450
Fifth Street, N.W, Washington, D.C. 20549, and at its regional offices located
as follows:
Chicago Regional Office, Northwestern Atrium Center, 500 W Madison Street,
Suite 1400, Chicago, IL 60661-2511; and New York Regional Office, 7 World
Trade Center, New York, NY 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W,
Washington, D.C. 20549, at prescribed rates.
Copies of the Registration Statement of which this Prospectus forms a part
and the exhibits thereto are on file at the above-referenced offices of the
Securities and Exchange Commission in Washington, D.C. Copies may be obtained
at rates prescribed by the Commission upon request to the Commission, and may
be inspected, without charge, at the above-referenced offices of the
Commission.
The Commission maintains a Web site that contains reports, proxy and
information statements, and other information regarding registrants that file
electronically with the Commission, including the Company. The address is
http://www.sec.gov.
The Issuer intends to provide holders of the Notes ("Noteholders") with
annual reports containing audited financial statements and with such other
periodic reports as the Issuer may from time to time provide to stockholders
of the Issuer or as otherwise deemed appropriate or as may be required by law.
The Issuer, by reason of this Offering, has a reporting obligation under
Section 15(d) of the Securities Exchange Act of 1934, including the filing of
audited annual and unaudited quarterly reports.
TABLE OF CONTENTS
AVAILABLE INFORMATION----------------------------------------------6
RISK FACTORS-------------------------------------------------------8
SUMMARY OF TERMS--------------------------------------------------13
SELECTED FINANCIAL DATA-------------------------------------------14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION-
AND RESULTS OF OPERATIONS-----------------------------------------15
USE OF PROCEEDS---------------------------------------------------17
DESCRIPTION OF THE NOTES AND THE DEED POLL INDENTURE--------------17
DESCRIPTION OF BUSINESS-------------------------------------------23
DESCRIPTION OF PROPERTY-------------------------------------------29
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS------29
EXECUTIVE COMPENSATION--------------------------------------------30
SUMMARY COMPENSATION TABLE----------------------------------------30
AGGREGATED OPTIONS/SAR EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTIONS/SAR VALUES----------------------------30
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR----------------------------31
INDIVIDUAL GRANTS-------------------------------------------------31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--------------------31
PRINCIPAL STOCKHOLDERS--------------------------------------------31
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS----------32
PLAN OF DISTRIBUTION----------------------------------------------32
LEGAL PROCEEDINGS-------------------------------------------------33
EXPERTS-----------------------------------------------------------33
RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Investment Notes.
Company Risks
New Business. Development Stage Company. No Operating History. The
Company was only recently organized on October 24, 1996. The Company is a
development stage company and has not begun significant operations at the date
of this Prospectus and, as such, investors do not have any history on the
operations and results of the Company or the effectiveness of management in
operating the Company in any particular line of business. See "Business"
Lack of Capital. Reliance on this Offering. The Company has been
funded by its founders with only minimal capital of $10,000. There are no
commitments or agreements from any shareholder to provide additional capital
to the Company under any circumstances. See. "Risk Factor - No Minimum Amount
to be Raised in this Offering." The Company is primarily dependent upon
obtaining sufficient proceeds from this Offering to develop its business
operations. There is no minimum amount that must be raised in this Offering.
Management anticipates that about $200,000 in proceeds from this Offering
would provide the Company with sufficient capital to begin operations
irrespective of any credit line. See Risk Factor-"No Minimum Amount to be
Raised in this Offering," "Management's Discussion and Analysis of Financial
Condition and Results of Operation," and Business." The Company intends to
apply the proceeds from this Offering to its general corporate purposes as and
when they are obtained from investors in this Offering. See "Use of Proceeds"
and also see Risk Factor-" Management Discretion Over Substantial Amount of
the Proceeds of the Offering and Possible Use for Future Unspecified
Acquisitions."
No Minimum Amount to be Raised in this Offering. The Company presently
has a $1.2 million line of credit to fund its lending operations, and at the
date of this Prospectus has drawn $400,000 from that line to make certain
loans, which at the date of this Prospectus aggregate about $410,000 to five
borrowers. See "Management's Discussion and Analysis of Financial Condition
and Results of Operation," and Business." Although management has no
practical reason to believe that this line of credit will not remain available
to the Company, its loss would have a material affect upon the Company's
ability to fund new loans. The Company's primary source of funds to pay
principal and interest on the Notes is revenue from loans that the Company
makes to borrowers. As such, the Company's ability to continue as a going
concern may be dependent upon the successful completion of this
offering. Management anticipates that about $200,000 in proceeds from this
Offering would provide the Company with sufficient capital to begin operations
irrespective of any credit line.
Reliance on Management. The success of the Company's operations depend,
to a large extent, upon the management, lending, credit analysis and business
skills of the senior level management of the Company. If Messrs. Rasabi or
Benjamin were for some reason unable to perform their duties or were, for any
reason, to leave the Company, there can be no assurance that the Company would
be able to find capable replacements. Currently, the Company does not have
employment agreements with any of its executive officers. In addition, the
Company does not hold "key-man" insurance for its executive officers. See
"Management."
No Voting Rights. The holders of the investment Notes have no vote in
the election of directors of the Company, nor can the Investment Notes be
converted into any security which would provide such voting rights.
Accordingly, ownership of the Investment Notes does not provide any rights to
holders of the Investment Notes to direct or control the management of the
Company by the election of directors, or otherwise. An Investment Note holder
will not acquire any rights or benefits which might accrue through ownership
of common stock in the Company.
Dependence Upon Debt Financing. For its ongoing operations, the
Company is dependent upon borrowings such as that represented by the
Investment Notes. The Company presently has a $1.2 million line of credit from
Lloyds Funding, Inc., a non-affiliated company. As of the date of this
Prospectus $400,000 has been drawn on this line. Notwithstanding this line of
credit, the Company is primarily dependent upon the proceeds of this Offering
to obtain the capital needed to conduct and grow its business. At the present
time, the Company intends to utilize the proceeds of the sale of the
Investment Notes offered hereunder to finance its lending activities and as
working capital. The Company's ability to continue to operate at present and
to expand its operations in the future will at least, in part, be dependent
upon the Company's success in gaining access to such other sources of debt
financing. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Contingent Risks. Although the Company may eventually sell substantially
all loans which it originates on a nonrecourse basis, the Company will retain
some degree of risk on substantially all loans that may be sold. During the
period of time that loans are held pending sale, the Company is subject to the
various business risks associated with the lending business including the risk
of borrower default, the risk of foreclosure and the risk that a rapid
increase in interest rates would result in a decline in the value of loans to
potential purchasers.
In the ordinary course of its business, the Company is subject to claims
made against it by borrowers and private investors arising from, among other
things, losses that are claimed to have been incurred as a result of alleged
breaches of fiduciary obligations, misrepresentations, errors and omissions of
employees, officers and agents of the Company (including its appraisers),
incomplete documentation and failures by the Company to comply with various
laws and regulations applicable to its business. There are currently no such
claims pending against the Company. However, any claims asserted in the
future may result in legal expenses or liabilities which could have a material
adverse effect on the Company's results of operations and financial condition.
Diversification of the Business. The Company's involvement in commercial
and consumer lending is new. The Company does not have any operating history.
Therefore, the Company is not able to predict with any certainty whether it
will be able to operate such lines of business profitability either in the
short or long term. There are also risks inherent in such lines of business.
Certain of the loans made by the Company may be made on an unsecured basis.
The Company does not at this time intend to aggressively pursue unsecured
loans but will determine making such loans on a case by case basis. As such,
the Company is not able at this time to demonstrate what percentage of its
loan portfolio, if any, will consist of unsecured loans. In cases where loans
may be secured by equipment, such equipment is subject to the risk of damage,
destruction or technological obsolescence prior to the payment of the loan. In
the case of a default and a foreclosure on the equipment, the Company may be
required to sell such equipment to third party buyers at a discount or
otherwise dispose of such equipment for less than the remaining balance on the
loan. See "Business."
Management Discretion Over Substantial Amount of the Proceeds of the
Offering and Possible Use for Future Unspecified Acquisitions. The net
proceeds from the sale of the Notes will be utilized for general corporate
purposes, including possible unspecified acquisitions of related businesses or
assets (although none are currently under consideration or contemplated). It
is currently anticipated that proceeds from the Offering will be used to fund
the origination of loans and operations. Management will have broad discretion
in allocating the proceeds of the Offering. See "Use of Proceeds."
Business Risks
Economic Conditions, Changes in Interest Rates and Related Uncertainties.
Financial service companies are affected, directly and indirectly, by economic
conditions, and by governmental policies. Economic downturns could result in
decreased demand for credit, declining real estate values and the delinquency
of outstanding loans. Any material decline in real estate values reduces the
ability of borrowers to use home equity to support borrowing. Because of the
Company's focus on borrowers who are unable or unwilling to obtain financing
from sources such as commercial banks, the actual rates of delinquencies,
foreclosures and losses on such loans could be higher under adverse economic
conditions than those experienced in the commercial lending business
generally. The Company's operations are dependent to a large degree on
interest rate spread which is the difference between interest from loans and
costs related to debt financing. The Company's ability to generate revenues is
dependent upon its ability to make loans at rates in excess of and for amounts
at least equivalent to its outstanding indebtedness including the indebtedness
of the Notes and costs related to this Offering. The Company's profitability
will be affected by fluctuations in interest rates. For example, any future
rise in interest rates, while increasing the income yield on the Company's
assets, may adversely affect loan demand and the cost of funds. Conversely,
any future decrease in interest rates may reduce the amounts which the Company
may earn on its assets, but increase loan demand and reduce the cost of funds.
Management cannot accurately predict any one particular factor that would most
affect the Company's results of operations. However; a downtrend in one or
several critical factors could have an adverse impact on the Company's
profitability.
Competition. Certain segments of the Company's lending businesses are
highly competitive. Certain lenders against which the Company competes have
substantially greater resources, greater experience, as well as a more
established market presence than the Company The future profitability of the
Company will depend upon its ability to compete in the marketplace of which
there can be no assurance. See "Business."
Regulatory Restrictions and Licensing Requirements. Although the
Company's business is not presently subject to licensing requirements in any
state in which it presently intends to do business(Florida, New York and
New Jersey), the Company may become subject to examinations by state
regulatory authorities with respect to originating, processing, underwriting,
selling, and servicing certain loans. These rules and regulations, among other
things, may impose licensing obligations on the Company, prohibit
discrimination, regulate assessment, collection, foreclosure and claims
handling, payment features, mandate certain disclosures and notices to
borrowers and, in some cases, may fix maximum interest rates, and fees.
Failure to comply with these requirements can lead to, termination or suspension
of licenses, certain rights of rescission, class action lawsuits and
administrative enforcement actions.
Although the Company believes that it has systems and procedures to
facilitate compliance with these requirements and believes that it is in
compliance in all material respects with applicable local, state and federal
laws, rules and regulations, there can be no assurance that more restrictive
laws, rules and regulations will not be adopted in the future that could make
compliance more difficult or expensive.
Kinds of Collateral. Some of the loans made by the Company may be
collateralized by chattel, such as equipment, rather than accounts receivable
or inventory or real estate. Loans secured by this type of collateral
generally present a greater risk of non-payment in the event of default
because of the mobility of the collateral and because the collateral can
easily become damaged. In addition, with respect to consumer loans, the
installment sales lending industry is subject to a high degree of regulation
which may restrict the ability of the Company to foreclose on the collateral
securing such consumer loans in the event of a default.
Real Property Mortgage Foreclosures. The ability of a lender to avoid
losses in its loan portfolio when a particular loan becomes delinquent or in
default depends upon its ability to foreclose on the collateral it has
accepted to collateralize such loan. Although the Company does not presently
intend to lend on residential mortgages the collateral accepted with respect
to any particular loan may from time to time be commercial or residential real
estate. The Company's ability to foreclose on such real estate mortgages
securing its loans is regulated by state law. While the precedents for such
an action are extremely rare, in the past, certain jurisdictions, during
difficult economic times, have declared a moratorium on principal residence
mortgage foreclosures. To the Company's knowledge, no such moratoriums are in
effect at this time anywhere in the United States but there can be no
assurance that such moratoria will not be enacted in the future. Certain
states may grant to mortgagors of foreclosed property a statutory right of
redemption. The Company does not view any such statutory right of redemption
as a material risk in foreclosing mortgaged property in the states in which it
intends to conduct its business but there can be no assurances that such
statutory right of redemption will not become a material risk.
Environmental Concerns. In the course of its business, the Company may
acquire in the future, properties securing loans which are in default. Under
various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or chemical
releases at such property, and may be held liable to a governmental entity or
to third parties for property damage, personal injury and investigation and
cleanup costs incurred by such parties in connection with the contamination.
Such laws typically impose cleanup responsibility and liability under such
laws has been interpreted to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation of responsibility. The costs of
investigation, remediation or removal of such substances may be substantial,
and the presence of such substances, or the failure to properly remediate such
property may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic substances also may be
liable for the costs of removal or remediation of such substances at the
disposal or treatment facility; whether or not the facility is owned or
operated by such person. In addition, the owner or former owners of a
contaminated site may be subject to common law claims by third parties based
on damages and costs resulting from environmental contamination emanating from
such property.
The ability of the Company to foreclose on real estate collateralizing
its loans, if at any time such a foreclosure would be otherwise appropriate,
may be limited by the above-referenced environmental laws. While the Company
would not accept a loan collateralized by property as to which it had
knowledge of an environmental risk or problem, it is possible that such a risk
or problem could become known after the subject loan has been acquired.
Risks of Making Loans Secured by Property. The Company may from time to
time, in addition to other kinds of property, accept real estate offered to
secure its loans. It is possible that the actual resale value of the property
collateralizing such loans may decrease. There can be no assurance that the
market value of the property underlying such loans will at any time be equal
to or in excess of the outstanding principal amount of such loans. Such a
decrease could result in some or all of such loans being under-collateralized,
presenting a greater risk of non-payment in the event of a default. This
situation could be exacerbated by a concentration of similar loans in a single
geographical region. See "Business."
Lending Risks. The Company markets loans, in part, to commercial or
consumer borrowers who, for one reason or another such as lack of operating
history, are not able, or do not wish, to obtain financing from sources such
as commercial banks. To the extent that such loans may be considered to be of
a riskier nature than loans made by traditional sources of commercial
financing, holders of the Notes of the Company may be deemed to be at greater
risk than if the Company's loans were made to other types of borrowers. In
addition, although the Company will seek customers from across the
United States, the Company will likely make its loans in circumscribed
geographic areas. This practice may subject the Company to the risk that a
downturn in the economy in one area of the country would more greatly affect
the Company than if its lending business and its portfolio were more
diversified. See "Business."
Loan Prepayment Risk. In all instances, the Company will permit borrowers to
prepay loans. Presently, even where permitted by law the Company does not
intend to charge any prepayment fees. Generally, prepayment activity is
considered adverse as the Company stops receiving interest revenue when a loan
is paid. Until such time as those prepayment proceeds may be placed into other
loans the Company will experience a "negative spread," that is, the Company's
cost of funds (i.e. interest paid on Investment Notes), with respect to those
paid off loan amounts, will exceed the revenue earned by the Company for those
amounts. An additional risk associated with prepayment activity is that in a
declining interest rate environment, new loans will likely be made at lower
rates. This would be offset, in part, by a similar reduction in the Company's
cost of funds. Conversely, a higher interest rate environment will increase the
Company's cost of funds and may reduce demand for credit among the Company's
potential customers. The Company is not able to predict with any accuracy what
percentage or amount of its loans may be prepaid or what the interest rate
environment may be at the time of any such prepayment.
Investment Risks
Absence of Insurance and Regulation. The Investment Notes are not insured
by any governmental or private agency and they are not guaranteed by any
public or private entity Likewise, the Company is not regulated or subject to
examination as commercial banks and thrift institutions are. The Company is
not a commercial bank or savings/thrift institution. The Company is dependent
upon proceeds from the continuing sale of Investment Notes to conduct its
ongoing operations. The Company's revenues from operations, including the sale
of loans from its portfolio (if such sales are made in the future), the
Company's working capital and cash generated from additional debt financing
represent the only source of funds for repayment of principal at maturity and
the ongoing payment of interest on the Investment Notes. See "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Subordination of Debt Represented by Securities. The Notes will be
subordinate in claim and right to all "Senior Debt" of the Company. As of the
date of this Prospectus there was no Senior Debt outstanding. There is no
limitation on the amount of Senior Debt the Company can incur. Senior Debt is
defined for this purpose to include any indebtedness (whether outstanding on
the date hereof or thereafter created) incurred in connection with borrowings
by the Company (including its subsidiaries) from a bank, trust company
insurance company or from any other institutional lender whether such
indebtedness is or is not specifically designated by the Company as being
"Senior Debt" in its defining instruments. If the Company were to become
insolvent, such Senior Debt of the Company would have a priority of right to
payment in connection with the liquidation of the Company and its assets.
There can be no assurance that any holder of the Company's indebtedness would
be repaid upon a liquidation of the Company. See "Description of the
Investment Notes and the Indenture."
Absence of Sinking Fund. The Investment Notes are unsecured obligations of
the Company and no sinking fund (i.e., funds contributed on a regular basis to
a separate account to repay the Notes) exists for the benefit of Noteholders.
Absence of Rating. The Investment Notes will not be rated by any rating
agency.
Limited Liquidity - Lack of Trading Market. The Investment Notes are non-
negotiable and are therefor not transferable without the prior written consent
of the Company. Due to the length of the term of certain of the Investment
Notes, the non-negotiable nature of the Investment Notes, and the lack of a
market for the sale of the Investment Notes, even if the Company permitted a
transfer, investors may be unable to liquidate their investment even if
circumstances would otherwise warrant such a sale.
Arbitrary Determination of Offering Price. The amount and the price of the
Investment Notes being offered by the Company have been established
arbitrarily and bear no relationship to the Company's asset value, book value,
net worth, or any other established criteria of value or to the earnings
potential of the Company.
No Indenture Trustee. The Indenture is a Deed Poll Indenture, which
means that only one party, the Company, is a signatory. There is no provision
for an indenture trustee. As such, the holders of the Investment Notes will
have no right to direct an indenture trustee in the time, method and place
of conducting any proceeding or exercising any remedy customarily available
to an indenture trustee for the benefit of the holders of the
Investment Notes.
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
more detailed information appearing elsewhere herein.
Securities Offered
$4,900,000 in principal amount of unsecured, subordinated, term notes
(the "Investment Notes" or the "Notes.") issued by Riverbank pursuant to an
Deed Poll Indenture between the Issuer and the Holders of the Investment Notes
(the "Indenture"). The Investment Notes are unsecured, subordinated debt
obligations of Riverbank Factors, Inc. The Notes are subordinated to the
Senior Debt of the Company and are not insured, guaranteed or secured by any
lien on any assets of Riverbank. There are no sinking fund provisions
applicable to the Notes. The Company is not a commercial banking or
savings/thrift institution and is not subject to state or federal statues or
regulations applicable to such institutions with regard to insurance, the
maintenance of reserves, the quality or condition of its assets or other
matters. The Investment Notes offered hereunder are not CDs. Payment of
principal and interest on the Investment Notes are not guaranteed by any
governmental or private insurance fund or any other entity. The Notes are to
be issued in registered form and are non-negotiable. No rights of ownership in
an Investment Note may be transferred without the prior written consent of
Riverbank (which consent shall not be unreasonably withheld). See "Description
of the Notes and the Indenture."
The Issuer
Riverbank Factors, Inc. ("Riverbank", or the "Company"), a Florida
corporation, was recently formed in October, 1996. Although the founders have
experience in all phases of commercial lending, the Company has no significant
operating history. Its activities to date have been limited primarily to
formulating its business plan and preparing this offering. The principal
office of the Company is at 800 West Oakland Park Boulevard, Suite 100, Ft.
Lauderdale, FL 33311. The telephone number is (954)-564-9400.
Investment Notes
The Investment Notes are offered with fixed maturities ranging from three
(3) months to ten (10) years. Individual Notes will be issued as subscriptions
are accepted. The Investment Notes are offered in minimum denominations of
$1,000 for each Note. Purchasers will be able to choose any of the following
terms, if such terms are then being offered by the Company: three (3) months,
six (6) months, one (1) year, eighteen (18) months, two (2) years, thirty (30)
months, three (3) years, four (4) years, five (5) years, seven (7) years or
ten (10) years.
Interest rates on unsold Notes will be determined on the first day of
each month by a formula based upon the arithmetic average of the yields of the
last full four weeks of the month immediately preceding the month just ended
on actively traded U.S. Treasury issues adjusted to a constant maturity of one
year as published by the U.S. Treasury in Federal Reserve Statistical Release
H.15 (519) (the "Index"), plus an amount called the Margin that has been
established by the Company for each term to maturity. See "Description of the
Investment Notes and the Deed Poll Indenture "Each Prospectus will be
accompanied by a Prospectus Supplement setting forth the interest rates then
being paid by the Company for each maturity.
The interest rates being paid by the Company for Investment Notes issued during
August, 1997 are as follows:
TERM INTEREST RATE (%)
3 Month 7.12
6 Month 7.37
12 Month 8.37
18 Month 8.62
24 Month 8.87
30 Month 9.12
36 Month 9.37
48 Month 9.87
60 Month 10.37
7 Years 10.87
10 Years 11.37
Interest on Notes with terms twelve (12) months or less will be paid at
maturity. Persons investing in Investment Notes of longer duration will have
the option of having interest paid monthly, quarterly, semi-annually, annually
or upon maturity. All interest on the Investment Notes will be accrued daily
and paid at the end of the prescribed period. Payment of interest will be by
check mailed to the holder of the Note. Investors of Notes with terms of 12
months or greater will have the ability to change their interest payment
election once during the original term of the Note.
Investment Notes with terms of twelve (12) months or less will not be
subject to redemption or prepayment prior to maturity. All other Investment
Notes will be subject to early repayment, at the election of the original
holder only; upon the occurrence of a Total Permanent Disability of such
holder (as hereinafter defined) or by his or her estate after such holder's
death. In the case of a Note jointly held, only where the joint holders are
spouses will the election apply if one or the other spouse dies or becomes
disabled. Otherwise, holders will have no right to demand early repayment. See
"Description of the Notes and the Indenture- Redemption by the Holder upon
Death or Total Permanent Disability."
The Investment Notes are non-negotiable instruments. The Investment Notes
will be issued in fully registered form. Transfers of record ownership
regarding Notes may be made only with the prior written consent of Riverbank,
which consent will not be unreasonably withheld. Such consent will be
withheld in the event that the Company determines that such transfer might
result in a violation of any state or Federal securities or other applicable
law.
About seven (7) days prior to the expiration of the applicable term of
an Investment Note the Company will, as a courtesy, send the holder an
optional extension form. The holder may elect to extend the Note for an
identical term at the interest rate then being offered by the Company on newly
issued Investment Notes of like term. The renewal rate could be higher or
lower than the original interest rate.
SELECTED FINANCIAL DATA
The following tables summarize the selected unaudited financial data
for Riverbank Factors, Inc. for the period from inception to the month ending
April 30, 1997, with respect to the Statement of Operations data, which
statements include all adjustments that in the opinion of management of
Riverbank Factors, Inc., are considered necessary for a fair presentation of
the operating results and financial position for and at the end of such
period. Results are not necessarily indicative of results expected for the
year as a whole. This selected financial data is qualified in its entirety
by the more detailed financial statements, including the notes thereto,
included elsewhere herein. See "Index to Financial Statements."
RIVERBANK FACTORS, INC.
(a Development Stage Company)
Statement of Operations Data
Inception to April 30, 1997
(actual numbers)
Interest income from operations(1) $15,860
Expenses:
General and administrative 259
Sales and collections 162
Operating profit $15,439
Interest expense $14,666
Net profit 773
Per common share data(1)
Net income $1.55
Cash dividends declared:
Common stock 0
(1) The Company was organized in October, 1996 and began
operations in January, 1997.
(2) There are 500 shares of common stock issued representing all
authorized shares of the Company. There is no preferred
stock authorized.
Balance Sheet Data
April 30, 1997
(actual numbers)
12/31/96 4/30/97
Assets:
Cash 10,000 873
Loans 437,744
Total current assets 438,617
Organizational costs (net) 11,485
Total Assets 10,000 $450,102
Liabilities:
Accounts payable 163
Loans payable 439,166
Total current liabilities 439,329
Long term liabilities 0
Total liabilities 439,329
Stockholder's Equity(1)
Common Stock, $.01 par value,
500 shares authorized,
500 issued and
outstanding 5 5
Capital in excess of par 9,995 9,995
Current year earnings 0 773
Total Stockholder's Equity 10,000 10,773
Total Liabilities and
Stockholders' Equity $10,000 $450,102
(1) common stock, $.01 par value, 500 shares authorized,
500 shares issued and outstanding
=============================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following should be read in conjunction with " Selected Financial Data"
and the notes thereto, if any, and the Riverbank Factors, Inc. Financial
Statements and the notes thereto included elsewhere in this Prospectus.
The Company has approximately $410,000 in outstanding loans as of the
date of this Prospectus. One loan, in the amount of $400,000, is a secured,
inventory loan to a group of four clothing retailers who have joint liability.
A $10,000 unsecured, working capital loan has been made to a small manufacturer.
The loans are at 18% and come due in January, 1998. All loans are current in
payment of principal and interest.
The Company has aggregate operating income of about $15,860 since inception,
October, 1996, and a net profit for that period of about $773.
Upon the commencement of sale of the Notes, however, the Company anticipates
experiencing negative interest income and net operating losses until the sale
of Notes exceeds about $200,000. These losses would primarily be the result
of the delay between the time that subscription proceeds are received from
purchasers of the Investment Notes and the time the Company begins to receive
payments from the loans that it intends to make with the proceeds. In this
initial stage, it is anticipated that interest accrued on the Investment Notes
will exceed cash flow from the loan payments. As more proceeds are received
and become fully invested in qualified loans, the Company anticipates that its
cash flow will become adequately in excess of the interest payments on the
Investment Notes.
Liquidity and Capital Resources.
The Company had total assets of $450,102 on April 30, 1997. The
Company believes that its capital resources generated from cash flow from
operations and from offering proceeds will be adequate to fund its operations
on a short (12 months) and long term basis. The Company anticipates rent and
other fixed administration expenses amounting to less than $2,000 per month
over the next 12 months, and increasing only modestly for the longer term.
Interest expense, underwriting fees, and collection fees are transaction based
and will only rise commensurate with an increase in income producing loans made
by the Company. The Company's primary cost of doing business relates directly
to its cost of funds, i.e. the amount that the Company pays for cash that it
loans to its customers, either through borrowing on its credit lines or paying
the Holders of the Notes. For the period from inception to April 30, 1997,
this interest expense constituted about 93% of interest income received by the
Company on its loans to borrowers. This "spread" or difference between interest
income and interest expense represents the Company's primary source of
liquidity. There can be no assurance that the Company's cost of funds will not
rise to a level that adversely affects its ability to maintain profitability
with respect to the contracts it holds or that the interest rate paid to Note
investors will not rise to a level that adversely affects the Company's
ability to make loans with an economically advantageous spread. In addition,
high interest rate environments also could be expected to adversely affect the
overall financing capacity of the Company's typical non-prime customers.
The Company has a revolving credit agreement ("agreement") with
Lloyd's Funding, Inc. a nonaffiliated company in the amount of $1,200,000 of
which $400,000 has been drawn at the date of this Prospectus. Other than with
respect to the aforementioned credit line, the Company has no other agreements
or understandings relating to any source of funds other than revenue that will
be generated from payments of principal and interest on the loans that it may
make and from the continued receipt of subscription proceeds, if any. The
revolving credit agreement is payable monthly at the rate of one percent per
month on the outstanding balance. The entire unpaid balance, plus all accrued
and unpaid interest and all other obligations are due and payable on January
3, 1999. At the date of this Prospectus, the Company has timely made all
payments required under the agreement. The Company can draw upon the
agreement as needed up to the aggregate of $1.2 million in unpaid principal
amount at any time.
The following events have been defined as an event of default under
the agreement: the failure to pay any installment on the due day; the
execution of an assignment for the benefit of creditors, or the appointment of
a receiver, trustee or custodian of the property of the Company; the filing of
a petition of Bankruptcy; the reorganization. merger or consolidation of the
Company or the sale of all or substantially all of its assets; or the
dissolution or liquidation of the Company. Upon the occurrence of an event of
default the lender, although not required, can demand a penalty of 5% per
month on the unpaid balance.
USE OF PROCEEDS
The net proceeds resulting from the sale of the Notes will be utilized
by the Company for its general corporate purposes, including possibly repaying
Senior Debt and other debt which ranks pari passu (i.e equally) with the
Notes. At the date of this prospectus there was no Senior Debt and about
$400,000 in debt which ranks pari passu with the Notes. Corporate general
purposes include financing of future growth of the Company's factoring
business, establishment of a business loan portfolio, other finance related
activities, and payment of the Company's operating expenses. The Company
anticipates growing its factoring business by actively seeking new borrowers
to increase the amount of such loans in its portfolio. The Company has no
present intention to expand its operations by establishing additional locations
or by making any significant changes in the number of employees.
See "Business."
Presently, fixed operating expenses are less than $2,000 per month and are
expected to remain at these levels over the next 12 months. Transactional
based expenses, such as underwriting, servicing, and collection fees, are
about 3% of the amount loaned and will vary in absolute dollar amounts with
the volume of new loans made by the Company. The greatest amount and
percentage of proceeds will be used to fund new loans made by the Company.
The precise amounts and timing of the application of such proceeds will
depend upon many factors, including, but not limited to, the amount of any
such proceeds, actual funding requirements of the Company from time to time
and the availability of other sources of financing. Within these broad
parameters, management will have full discretion with respect to the
application of the proceeds. Until such time as the proceeds are utilized,
they will be invested in liquid, short-term investments or commercial bank
accounts. There are no formal restrictions with respect to the types of short-
term investments that may be made by the Company but, in practice, the Company
typically places such funds in its commercial bank account pending their use.
DESCRIPTION OF THE NOTES AND THE DEED POLL INDENTURE
The Notes will be issued pursuant to a Deed Poll Indenture (the
"Indenture") between the Company and the Holders of the Investment Notes. This
section discusses the material provisions of the Indenture. The terms of the
Investment Notes include those stated in the Indenture. The Investment Notes
are subject to all such terms and holders of Investment Notes are referred to
the Indenture for a statement thereof. A copy of the Indenture is available
from the Company by mail request to Riverbank Factors, Inc., 800 West Oakland
Park Boulevard, Suite 100, Ft. Lauderdale, FL 33311, or by telephone to (954)
564-9400.
The Investment Notes will be general unsecured, subordinated term notes,
subordinated in respect of payment to the prior payment in full of all Senior
Debt (as herein defined) of the Company, whether outstanding on the date of
the Indenture or thereafter incurred, and are offered by the Company at
maturities ranging from three (3) months to ten (10) years. The term of each
Investment Note will be chosen by the purchaser of such Note upon
subscription.
The Investment Notes are not secured by any collateral or lien. There are
no provisions for a sinking fund applicable to the Notes. The sole source of
payment for the Investment Notes will be cash flow generated by the Company,
operational borrowings obtained from third party lenders, or additional
capital contributions or loans by the shareholders. There is no currently
agreement or understanding between the Company and any shareholder to make
additional capital contributions to the Company.
Form and Denomination: The Investment Notes will be issued in fully
registered form. The Notes are not negotiable instruments, and no rights of
record ownership therein can be transferred without the prior written consent
of the Company. Ownership of an Investment Note may be transferred on the
Company register only by written notice to the Company signed by the owner(s)
or such owner's duly authorized representative on a form to be supplied by the
Company and with the prior written consent by the Company (which consent shall
not be unreasonably withheld). The Company may also, in its discretion,
require an opinion from such Noteholder's counsel that the proposed transfer
will not violate any applicable laws. See "Summary of Terms." An Investment
Note may be purchased in the minimum amount of $1,000 or any amount in excess
thereof. Separate purchases may not be accumulated to satisfy the minimum
denomination requirement
Interest: Interest rates on unsold Notes will be determined on the
first day of each month by a formula based upon the arithmetic average of the
yields of the last full four weeks of the month immediately preceding the
month just ended on actively traded U.S. Treasury issues adjusted to a
constant maturity of one year as published by the U.S. Treasury in Federal
Reserve Statistical Release H.15 (519) (the "Index"), plus an amount called
the Margin that has been established by the Company for each term to maturity.
Interest rates on unsold Notes will be computed on the first day of each month
by adding the Margin for any particular maturity to the Index (See Table
below). The sum will be rounded down to the nearest 1/10 of 1%.
Yields on Treasury securities at "constant maturity" are interpolated
by the U.S. Treasury from the daily yield curve. This curve, which relates the
yield on a security to its time to maturity, is based on the closing market
bid yields on actively traded Treasury securities in the over-the-counter
market. These market yields are calculated from composites of quotations
obtained by the Federal Reserve Bank of New York. The constant maturity yield
values are read from the yield curve at fixed maturities, currently 3 and 6
months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield
for a one year maturity, for example, even if no outstanding security has
exactly one year remaining to maturity.
Information concerning yields at constant maturity are available in
Federal Reserve Statistical Release H.15 (519) which is published every
Monday. Current and historical H.15 data are available on the Federal Reserve
Board's web site (http://www.bog.frb.fed.us/). Current data are also
available in the Wall Street Journal and on the Department of Commerce
Bulletin Board. For information, call 202-482-1986. Information on current
rates can be obtained from the Company at 954-564-9400.
Following is a list of the Margin amount for each maturity of Note
being offered by the Company. The Margin is fixed for each maturity and will
remain constant throughout this Offering.
TERM-----------MARGIN
3 Month--------1.25
6 Month--------1.50
12 Month-------2.50
18 Month-------2.75
24 Month-------3.00
30 Month-------3.25
36 Month-------3.50
48 Month-------4.00
60 Month-------4.50
7 Years-------5.00
10 Years-------5.50
For example, the yields in per cent per annum for Treasury one year constant
maturities for the full weeks ending June 9, 16, 23 and 30 were
5.87%, 5.87%, 5.87% and 5.87%, respectively. The arithmetic average for these
four weeks, obtained by adding the yields and dividing by four, then rounding
to the nearest
1/10% is 5.87%. This is the Index that would become effective on August 1, 1997
and continue in effect until August 31, 1997. The interest rates on the Notes
are calculated by adding the Margin for each maturity from the above table to
the Index then in effect, and rounding the sum down to the nearest 1/10 of 1%.
In the example, new offering rates were calculated on August 1, 1997 for new,
unsold Notes, which rates may be higher or lower than the rates for any
previous month or any succeeding month. The interest rates on previously
issued and outstanding Notes do not change and are fixed until maturity.
INTEREST RATES FOR August, 1997 (1)
TERM MARGIN INDEX INTEREST RATE
3 Month 1.25 5.87 7.12
6 Month 1.50 5.87 7.37
12 Month 2.50 5.87 8.37
18 Month 2.75 5.87 8.62
24 Month 3.00 5.87 8.87
30 Month 3.25 5.87 9.12
36 Month 3.50 5.87 9.37
48 Month 4.00 5.87 9.87
60 Month 4.50 5.87 10.37
7 Years 5.00 5.87 10.87
10 Years 5.50 5.87 11.37
1. These rates would be in effect for all new, unissued Notes from August 1,
1997 through August 31, 1997. On September 1, 1997 new rates would be
calculated
for the month of September, 1997 based upon the previously described
computational
formula.
Interest on Investment Notes will be computed on the basis of an actual
calendar year and will accrue daily. Interest on Investment Notes with terms
of less than twelve (12) months will be paid at maturity. Purchasers of
Investment Notes with terms of one (1) year or greater may elect to have
interest paid monthly, quarterly, semiannually, annually or at maturity. This
election may be changed one time by the holder during the term of these longer
term Notes. Requests to change such election are required to be made to the
Company in writing. No specific form of change of election is required to be
submitted to the Company. Any interest not otherwise paid on an interest
payment date will be paid at maturity.
Interest Accrual Date: Interest on the Investment Notes will accrue from
the date of purchase, which is deemed to be, for accepted subscriptions, the
date the Company receives funds, if received prior to 3:00 p.m. on a business
day, or the next business day if the Company receives such funds on a non-
business day or after 3:00 p.m. on a business day. For this purpose, the
Company's business days will be deemed to be Monday through Friday, except for
Florida legal holidays.
Interest Withholding: with respect to those investors who do not provide
the Company with a fully executed Form W-8 or Form W-9, the Company will
withhold 31% of any interest paid. Otherwise, no percentage of interest will
be withheld, except on accounts held by foreign business entities. It is the
Company's policy that no sale will be made to anyone refusing to provide a
fully executed Form W-8 or Form W-9.
Optional Extension: At least seven days prior to a Note's stated
Maturity Date, the Company will notify the registered Holder (existing as of
the applicable Maturity Record Dated) by mail of such pending Maturity Date.
The notice will be accompanied by a renewal form, a Prospectus, and a
Prospectus Supplement specifying the current rates being paid by the Company
on unsold Notes. Such notice shall also state that payment of principal of a
Note shall be made upon presentation and surrender of such Note and shall
specify the place where such Note may be presented and surrendered for the
making of such payment. The Holder, at its sole option, may renew such Note by
completing the renewal form or by letter or telephone to the Company
indicating the Holder's intention to renew such Note, and by delivering such
communication to the Company within seven days after the original Maturity
Date. The extension of any Note shall constitute a new investment decision by
the Holder thereof.
Interest shall continue to accrue at then current rates from the first
day of such renewed term. Such Note, as renewed, will continue in all its
provisions, including provisions relating to payment; except that the interest
rate payable during any renewed term shall be the interest rate which is then
being offered by the Company on similar Investment Notes being offered as of
the renewal date.
If the Company does not receive proper communication of the holder's
intent to renew such Note with seven days of the original maturity date,
interest will accrue after the Maturity Date until the date of payment at the
rate being paid on such Security immediately prior to its Maturity Date.
Redemption by the Company: The Company will have no right to prepay an
Investment Note. The holder has no right to require the Company to prepay any
such Note prior to its maturity date as originally stated or as it may be
extended, except as indicated below.
Redemption by the Holder upon Death or Total Permanent Disability:
Except for Investment Notes with maturities of less than twelve (12) months,
an Investment Note may be redeemed at the election of the holder following his
subsequent Total Permanent Disability, as established to the satisfaction of
the Company, or by his estate following his death. The redemption price, in
the event of such a death or disability, will be the principal amount of the
Investment Note, plus interest accrued and not previously paid, to the date of
redemption. If spouses are joint record owners of an Investment Note, the
election to redeem will apply when either record owner dies or becomes subject
to a subsequent Total Permanent Disability. In other cases of Investment Notes
jointly held the election will not apply.
The Company may modify the foregoing policy on redemption after death or
disability. However, no such modification will affect the right of redemption
applicable to any then outstanding Investment Note. Should the Company modify
such policy at a future date, written notice of such modification will be sent
to all owners of those outstanding Investment Notes which were purchased while
the policy was in effect (but such notice will not affect the right to redeem
such outstanding Investment Notes after the owner's death or disability).
For the purpose of determining the right of a holder to demand early
repayment of an Investment Note, Total Permanent Disability shall mean a
determination by a physician chosen by the Issuer that the holder, who was
gainfully employed on a full time basis at the time of purchase, is unable to
work on a full time basis, defined as working at least forty hours per week,
during the succeeding twenty-four months.
Subordination: The indebtedness evidenced by the Investment Notes, and
any interest thereon, are subordinated to all "Senior Debt" of the Company.
Senior Debt is defined for this purpose to include any indebtedness (whether
outstanding on the date hereof or thereafter created) incurred in connection
with borrowings by the Company from a bank, trust company, insurance company,
or from any other institutional or secured lender, whether such indebtedness
is or is not specifically designated by the Company as being "Senior Debt" in
its defining instruments. As of the date of this Prospectus there was no
Senior Debt outstanding. The Company has entered into a revolving credit
agreement with a private company, which is not a secured lender. Any
indebtedness of the Company other than that described as Senior Indebtedness,
will have rights upon liquidation or dissolution equivalent to that of the
Noteholders. At the date of this Prospectus, the Company has $400,000
principal amount of indebtedness outstanding which ranks pari passu
("equally") in rights of payment to the Investment Notes offered hereby. Such
indebtedness represents borrowings of the Company other than the Investment
Notes offered hereby.
For a discussion of the lack of insurance or guarantees in support of the
Notes, see "Risk Factors."
In the event of any liquidation, dissolution or any other winding up of
the Company or of any receivership, insolvency, bankruptcy readjustment,
reorganization or similar proceeding under the Federal Bankruptcy Code or any
other applicable federal or state law relating. to bankruptcy or insolvency or
during the continuation of any Event of Default (as described below), no
payment may be made on the Investment Notes until all Senior Debt has been
paid. In any such event, holders of Senior Debt may also submit claims on
behalf of Security holders and retain the proceeds for their own benefit until
they have been fully paid, and any excess will be turned over to the
Noteholders. If any distribution is nonetheless made to Noteholders, the money
or property distributed to them must be paid over to the holders of the Senior
Debt to the extent necessary to pay Senior Debt in full.
Events of Default: The Indenture provides that each of the following
constitutes an Event of Default: (i) default for 30 days in the payment when
due of interest on the Investment Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due
of principal on the Investment Notes (whether or not prohibited by the
subordination provisions of the Indenture); (iii) failure by the Company to
observe or perform any covenant, condition or agreement with respect to the
liquidation, consolidation or merger or other change in control of the
Company; (iv) failure by the Company for 60 days after notice to comply with
certain other agreements in the Indenture or the Investment Notes; and (v)
certain events of bankruptcy or insolvency with respect to the Company.
If any Event of Default occurs and is continuing, the holders of at least
a majority in principal amount of the then outstanding Investment. Notes may,
declare all of the Investment Notes to be due and payable immediately;
provided, however, that so long as any Senior Debt is outstanding, such
declaration shall not become effective until the earlier of (i) the day which
is five (5) Business Days after the receipt by representatives of Senior Debt
of such written notice of acceleration or (ii) the date of acceleration of any
Senior Debt. In the case of an Event of Default arising from certain events
of bankruptcy or insolvency; with respect to the Company; all outstanding
Investment Notes will become due and payable without further action or notice.
Holders of the Investment Notes may not enforce the Indenture or the
Investment Notes except as provided in the Indenture.
The holders of a majority in aggregate principal amount of the Investment
Notes then outstanding may on behalf of the holders of all of the Investment
Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of the Investment Notes.
Amendment, Supplement and Waiver: Except as provided herein, the
Indenture or the Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the Investment Notes
then outstanding, and any existing default or compliance with any provision of
the Indenture or the Investment Notes may be waived with the consent of the
holders of a majority in principal amount of the then outstanding Investment
Notes.
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any Investment Notes held by a non-consenting holder of
Investment Notes) (i) reduce the principal amount of Notes whose holders must
consent to an amendment, supplement or waiver, (ii) reduce the principal of or
change the fixed maturity of any Note, (iii) reduce the rate of or change the
time for payment of interest on any Investment Note, (iv) waive a Default or
Event of Default in the payment of principal or premium, if any, or interest
on the Investment Notes (except a rescission of acceleration of the Investment
Notes by the holders of at least a majority in aggregate principal amount of
the Investment Notes and a waiver of the payment default that resulted from
such acceleration), (v) make any Investment Note payable in money other than
that stated in the Investment Notes, (vi) make any change in the provisions of
the Indenture relating to waivers of past Defaults or the rights of holders of
Investment Notes to receive payments of principal of or interest on the
Investment, Notes, (vii) make any change to the subordination provisions of
the Indenture that adversely affects holders of Investment Notes or (viii)
make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of
Investment Notes, the Company may amend or supplement the Indenture or the
Investment Notes to cure any ambiguity, defect or inconsistency; to provide
for assumption of the Company's obligations to holders of the Investment Notes
in the case of a merger or consolidation; to make any change that would
provide any additional rights or benefits to the holders of the Investment
Notes or that does not adversely affect the legal rights under the Indenture
of any such holder including an increase in the, aggregate dollar amount of
Investment Notes which may be outstanding under the Indenture, to modify the
Company's policy to permit redemption of Investment Notes upon the death or
Total Permanent Disability of any holder of Investment Notes (but such
modification shall not adversely affect any then outstanding Security); or to
comply with requirements of the SEC.
Concerning a Trustee: The Indenture is a Deed Poll Indenture, which
means, that only one party, the Company, is a signatory. There is no provision
for an indenture trustee. As such, the holders of the Investment
Notes will have no right to direct an indenture trustee concerning the time,
method and place of conducting any proceeding or exercising any remedy
customarily available to an indenture trustee for the benefit of the holders
of the Investment Notes.
Place and Method of Payment: Principal and interest on the Investment
Notes will be payable at the principal executive office of the Company, as it
may be established from time to time, or at such other place as the Company
may designate for that purpose, provided, however, that payments may be made
at the option of the Company by check or draft mailed to the person entitled
thereto at his address appearing in the register which the Company maintains
for that purpose.
No Personal Liability of Directors, Officers, Employees and Shareholders:
No director, officer, employee, incorporator, or shareholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Investment Notes, the Indenture, or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each holder of the
Investment Notes by accepting an Investment Note waives and releases all such
liability. The waiver and release are a material part of the consideration for
issuance of the Investment Notes.
Such waiver is void under the federal securities laws with respect to
securities laws violations and the liability of such persons will not be
limited for securities laws violations. It is the view of the Securities and
Exchange Commission that such a waiver is against public policy.
Reports: The Company, publishes annual reports containing audited financial
statements and quarterly reports containing unaudited financial information
for the first three quarters of each fiscal year. Copies of such reports will
be sent to Noteholders upon written request to the Company
Service Charges: The Company reserves the right to assess service
charges for replacing lost or stolen Investment Notes (for which an affidavit
from the holder will be required), changing the registration of any Investment
Note when such change is occasioned by a change in name of the holder, or a
transfer (whether by operation of law or otherwise) of the Investment Note by
the holder to another person. The first such activity with respect to any
particular Note will be performed at no charge. Subsequent activities, if
any, will be charged at $10.00 per activity.
Additional Securities: The Company may offer from time to time
additional kinds or classes of notes with terms and conditions different from
the Investment Notes offered hereby. The Company will file new registration
statements with the Securities and Exchange Commission respecting such
offerings if and when it decides to offer to the public any additional kind or
class of security.
DESCRIPTION OF BUSINESS
Riverbank Factors, Inc. ("the Company") is a corporation organized under
the laws of the State of Florida on October 24, 1996. The Company is located
at 800 West Oakland Park Boulevard, Suite 100, Ft. Lauderdale, Florida. The
telephone number there is (954) 564-9400.
General. Riverbank Factors, Inc. ("Riverbank" or the Company) was
incorporated in Florida in 1996. Riverbank's primary activity as of the date
hereof has been preparing its business plan and raising capital for use in the
Company's lending operations and otherwise. The Company presently employs two
people on a part-time basis. The number of full time and part time employees
will increase commensurate with an increase in business activity.
Riverbank Factors, Inc. is a development stage company. Generally,
that means that the Company has not yet conducted any significant operations
or generated any meaningful revenues from the limited operations that it has
conducted. The Company will be engaged primarily in arranging financing for
businesses and individuals with non-prime credit. The non-prime market segment
is comprised of businesses and individuals who are generally classified as C
and D credits and who are deemed to be relatively high credit risks due to
various factors, including, among other things, the manner in which they have
handled previous credit, the absence or limited extent of their prior credit
history, their limited financial resources, lack of operating history, or even
industry focus. Generally, a C credit classification applies to borrowers
with credit histories showing one or more payments more than 90 days late, or
the existence of judgments less than $10,000 in amount. The D credit
classification applies to borrowers with bankruptcies, loans that have been
written off by the lender, or judgments more than $10,000 in amount.
Management believes that the availability, or lack of availability as the case
may be, of credit among this group is as consequential as for so called prime
credit prospects. The Company sees the availability of credit to this high
need group as an attractive market niche. As such, the Company intends to
serve as an alternative source of financing to businesses and individuals
comprising this group who typically do not qualify for financing from
traditional commercial financing sources.
Riverbank intends to operate as a full service financial services
company. Initially, its operations will consist of offering commercial loans
to small or credit impaired customers whose borrowing needs are not being
serviced by commercial banks. Riverbank will operate primarily in Florida, New
York and New Jersey although its commercial lending activities will not
necessarily be restricted to any one state or region. As its business
develops, Riverbank will originate, service, purchase and sell a full spectrum
of financial services products, including business and consumer secured and
unsecured loans.
Business Strategy. The Company's objective is to grow its business in the
financial services industry. The Company believes that it can grow by its
commitment to servicing segments of the market which the Company believes are
not adequately serviced by commercial banks or other traditional financing
sources. In servicing these specialized markets, the Company stresses the
importance of customer service, including prompt response to requests for
loans and account information.
Initially, the Company will make loans to businesses that because of
their limited financial history or impaired credit are not able to borrow
successfully from commercial banks. Although these prospective borrowers may
not meet all the credit criteria of commercial banks, the Company will make a
determination, in each case, that the prospective borrower does have the
business purpose, motivation and collateral required to repay the loan. In
most cases, the collateral for the loan will be the accounts receivable of the
borrower or inventory. Most often, the Company intends to lend up to 80% of
the face value of each individual, specific invoice for a particular borrower,
a financing procedure known in the trade as `factoring.' In the event of
default by the borrower the Company will be entitled to collect the amount of
the invoice used as collateral directly from the obligor. Real estate and
other property and equipment owned by the borrower may also serve as
collateral for a loan to that borrower.
Because the Company will typically be making loans to borrowers with
non-perfect credit histories, the Company will typically require lower loan-
to-value ratios (amount of loan as compared to appraised value of collateral
securing the loan) than are typically required of borrowers with unblemished
credit histories. The Company may further collateralize its loans by obtaining
a lien on the borrower's other tangible and intangible assets by filing
appropriate Uniform Commercial Code financing statements.
The Company will make loans for various business purposes including, but
not limited to, inventory, working capital, business expansion, equipment
acquisition and debt-consolidation. The Company will not target any particular
industry or trade group but it is possible that its loan portfolio could
become concentrated in a particular industry or within a particular geographic
area, with the associated increased risk that a localized downturn in that
area or in that industry would adversely affect the ability of a substantial
number of borrowers to repay their loans.
The Company has focused its efforts in the non-prime market segment of
business and consumer lending because of the high profit potential derived
from its ability to evaluate the unique credit risks associated with this
market segment and to effectively service the resulting receivables. The
Company has developed processing systems and controls specifically designed to
support its operations in the non-prime market segment.
The non-prime market is comprised of customers who are deemed to be
relatively high credit risks due to various factors, including, among other
things, the manner in which they have handled previous credit, the absence or
limited extent of their prior credit history, or their limited financial
resources. Consequently, the loans made by the Company will bear a higher rate
of interest but also involve a higher probability of default, may involve
higher delinquency rates and will involve greater servicing costs. The
Company's profitability depends upon its ability to properly evaluate the
creditworthiness of customers and efficiently service its portfolio.
Credit extensions by the Company will conform generally to the credit
worthiness policies of the Company, including complete applications,
background credit investigations, verification of employment when appropriate,
and evaluation and decision guidelines. While the ability and intent of the
customer to repay are essential prerequisites to any loan, the collateral
underlying the loan, consisting of accounts receivables, real estate and
inventory, to name a few possibilities, is a basic and necessary
consideration. A specific loan will be made only after objective
investigation of the creditworthiness of the borrower and the underlying value
of the collateral, combined with a subjective assessment by the Company's loan
personnel.
Credit Evaluation Procedures. The Company has developed processing
systems and controls specifically designed to support its evaluation process
of non-prime credit applicants. This process consists of a comprehensive
evaluation of multiple credit bureau reports in order to eliminate prospective
borrowers whose credit quality is deteriorating, whose financial history
suggests too great a probability of default, or whose credit experience is too
limited for the Company to assess the probability of performance. The Company
also may require verification of certain applicant information prior to making
its credit decision. This verification process in many instances requires
submission of supporting documentation and is performed solely by Company
personnel.
After receiving the applicant's credit application and the information
extracted from the credit bureau reports, the application and the proposed
transaction are reviewed on the basis of the Company's credit and transaction
structure criteria and the credit decision is made. This decision may be to
(i) approve the application; (ii) approve the application with conditions; or
(iii) decline the application. The credit analyst documents his decision and
notifies the applicant.
Loss Exposure Management. The experience of the Company personnel in
consumer finance has enabled it to rely on borrower-specific credit
assessments to identify special, high margin lending opportunities. However,
because these transactions do present high risks, the Company has designed its
finance programs to limit the loss exposure on each transaction. The degree
of exposure in any transaction is a function of: (i) the extent of credit
granted compared to the value of the underlying collateral; (ii) the
possibility of physical damage to, or the loss of, the collateral; and (iii)
the potential for any legal impediment to the collection of the obligation or
the repossession of the collateral. The Company seeks to control loss
exposure by: (i) limiting the credit it is willing to extend based upon the
value of the underlying collateral determined primarily by independent
appraisals or by Company personnel; (ii) requiring physical damage insurance,
where appropriate, to be maintained at all times to protect its financial
interest; and (iii) determining whether the applicant has sufficient
disposable income to meet such applicant's existing obligations, including the
obligations resulting from the proposed transaction.
Although the Company presently does not make consumer loans it may
enter this line of business in the future. Generally, and as may be permitted
by the laws of the jurisdiction in which the loan will be originated, consumer
loans made by the Company will be fully amortizing and provide for equal
payments over the term of the contract (typically 12 to 48 months). The
portions of such payments allocable to principal and interest are, for payoff
and deficiency purposes, determined in accordance with the law of the state in
which the contract was originated. In the event that state law provides for
more than one method of allocating principal and interest, the terms of the
acquired contract are applied, which generally provide for the use of the Rule
of 78's method of interest calculation. The "Rule of 78's" is a method used
to compute the portion of the total interest reflected on a pre-computed loan
contract which has been earned (or which has not been earned) at any point
during the life of a contract by the holder of the contract. This method may
result in a financial organization recognizing as income a higher portion of
the total interest earlier in the life of a contract, which more accurately
matches the expenses associated with the acquisition and servicing of a
contract. In many states, the Rule of 78's is specifically recognized by
statute as an acceptable computational method of recognizing interest income.
It is anticipated that loans for business purposes made by the Company
will generally range from $15,000 to $200,000 in the aggregate for one
borrower. Business purpose loans will be made to corporations, limited
liability companies, partnerships, sole proprietorships and other forms of
business entities based upon the Company's determination of the
creditworthiness of the prospective borrower, in each instance, and its
estimate of the value and marketability of the collateral that will be used to
secure the loan.
The Company will market its business loan services through word of mouth,
personal contacts and through various forms of advertising. Advertising will
include direct mail campaigns sent to owners of small businesses located in a
targeted service area. Newspaper advertising will also be employed in selected
service areas. Initially, management will perform all the Company's sales and
marketing. A commissioned sales staff comprising professional sales persons
will be added as the level of paid advertising is increased and the number of
resulting leads grow. Eventually, management will play only a small role in
direct selling and the commissioned sales staff will be responsible for
converting advertising leads into loan applications.
The Company intends to keep its interest and other charges competitive
with the lending rates of other finance companies targeting the same kinds of
customers. Generally, loans will be made at fixed rates for terms ranging from
one to four years. Generally, the Company will compute interest due on its
outstanding loans using the simple interest method. Generally, simple interest
is interest computed on a fixed principal amount based upon the number of days
for which a loan remains outstanding. In all instances, the Company will
permit borrowers to prepay loans. Presently, even where permitted by law the
Company does not intend to charge any prepayment fees. Generally, prepayment
activity is considered adverse as the Company stops receiving interest revenue
when a loan is paid. Until such time as those prepayment proceeds may be placed
into other loans the Company will experience a "negative spread," that is, the
Company's cost of funds (i.e. interest paid on Investment Notes), with respect
to those paid off loan amounts, will exceed the revenue earned by the Company
for those amounts. An additional risk associated with prepayment activity is
that in a declining interest rate environment, new loans will likely be made at
lower rates. This would be offset, in part, by a similar reduction in the
Company's cost of funds. Conversely, a higher interest rate environment will
increase the Company's cost of funds and may reduce demand for credit among
the Company's potential customers. The Company is not able to predict with
any accuracy what percentage or amount of its loans may be prepaid or what the
interest rate environment may be at the time of any such prepayment.
It should be noted that the lending policies and practices of the Company
will be altered, amended and supplemented as conditions warrant. The Company
reserves the right to make changes in its day to day practices and policies in
its sole discretion. Such changes may be made by management without a vote of
the Company's shareholders or the Investment Note holders.
Underwriting Procedures. The Company's underwriting standards are
designed to evaluate prospective borrowers' credit standing and repayment
ability and the value and adequacy of the property that will be used as
collateral. Initially, the borrower will be required to fill out a detailed
application providing pertinent credit information. As part of the description
of the borrower's financial condition, the borrower is required to provide
information concerning assets, liabilities, income, credit, and in the case of
individuals, employment history and other demographic and personal
information. If the application demonstrates the borrower's ability to repay
the debt, as well as sufficient income and equity in the collateral property,
the Company will obtain and review an independent credit bureau report on the
credit history of the borrower, and a verification of the borrower's income by
obtaining and reviewing one or more of the borrower's income tax returns,
checking account statements, tax forms or verification of business or
employment standing.
Once all applicable income, credit and property information is obtained,
a determination will be made by the Company as to whether sufficient
unencumbered equity in the collateral property exists and whether the
prospective borrower has sufficient income available to meet the borrower's
obligations, including repayment of the prospective loan, as they come due.
Servicing of Loans. The Company's contract servicing and administration
activities are specifically tailored for the servicing of non-prime credit
borrowers. Through such services, the Company: (i) collects payments; (ii)
accounts for and posts all payments received; (iii) responds to obligor
inquiries; (iv) takes all necessary action to maintain the security interest
granted in the collateral; (v) investigates delinquencies and communicates
with the obligor to obtain timely payments; (vi) reports tax information to
the obligor; (vii) monitors the contract and its related collateral; (viii)
monitors continuation of insurance coverage if applicable, and (ix) when
necessary, repossesses and disposes of the collateral.
Customer service management personnel review any account that reaches 15
days of delinquency to assess the collection efforts to date and to refine, if
appropriate, the collection strategy. The Company generally will not allow
contracts to be extended or re-written or payments to be deferred. The
Company's policies therefore limit its available remedies to the collection of
monies due. The Company's customer service personnel, together with senior
management, generally will design a collection strategy that includes a
specific deadline within which the obligation must be collected. Accounts
that have not been collected during such period are again reviewed, and,
unless there are specific circumstances which warrant further collection
efforts, the account may be assigned to outside attorneys or agencies for
collection and or repossession. Regardless of the actions taken or
circumstances surrounding a specific delinquent account, any account which
reaches 180 days of delinquency is charged-off and the obligor is pursued,
subject to any legal limitations, for both the collateral and deficiency.
Generally, the Company will use an affiliated company, Riverbank
Services, Inc. for servicing the loans it maintains in its portfolio.
Riverbank Services, Inc. presently services a loan portfolio of approximately
$7,000,000 consisting primarily of Florida based loans on used automobiles.
Riverbank Services, which is equipped with specialized software and
experienced loan servicing personnel, will assist the Company in evaluating
credit reports prior to loan approval, will service the Company's loans, and
will monitor and perform all collection procedures. As compensation,
Riverbank Services, Inc. will be paid a fee of $2 for each $100 of customer
collections actually received. See "Related Parties and Certain
Transactions."
Purchasing and Sale of Existing Loans. In the normal course of business,
the Company may in the future purchase business/commercial loan portfolios
from individuals, banks, other commercial finance companies as well as other
sources of commercial loans. Any loans so purchased would be collateralized by
property acceptable to the Company. Each such individual loan would be
reviewed by management prior to acquisition to see if the loan and all related
matters conform to the Company's lending procedures and policies.
In the normal course of its business, the Company may in the future sell
loans which it has made to investors through the (i) sale of individual loans;
(ii) bulk sale of several loans; or (iii) securitization of an entire
portfolio of loans. Such sales may occur shortly after the consummation of a
loan by the Company, or after the Company has built a portfolio of loans. In
all instances, the Company intends to sell such loans for a premium, thereby
generating income for the Company.
Regulation. Numerous federal and state consumer protection laws impose
requirements upon the origination and collection of consumer loans, and
secured loans of the nature made to the Company's business borrowers. The
laws of some states impose finance charge ceilings and other restrictions on
consumer transactions and may require certain contract disclosures in addition
to those required under federal law. These requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In addition, certain of these laws make an assignee of such contract liable to
the obligor thereon for any violations by the assignor. The Company will
verify the accuracy of disclosure for each loan or receivable that it
purchases; however, the Company, as an assignee of receivables, may be unable
to enforce some of its receivables or may be subject to liability to the
obligors under some of its receivables if such receivables do not comply with
such laws.
The Company intends to obtain and maintain any and all additional
qualifications, registrations and licenses necessary for the lawful conduct of
its business and operations in those states in which it does business.
Presently, the Company is not subject to licensing in any state because it has
restricted, and intends to restrict for the near term, its lending activities
to factoring commercial accounts.
Insofar as consumer (i.e. non-commercial) lending is concerned,
numerous federal and state consumer protection laws, including the Federal
Truth-In-Lending Act, the Federal Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Federal Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Federal Reserve Board's Regulations B and Z,
retail installment sales acts and other similar laws regulate the origination
and collection of consumer receivables. If and when the Company enters this
line of business these requirements would impact the Company's operations.
The relevant laws, among other things, (A) would require the Company to (i)
obtain and maintain certain licenses and qualifications, (ii) limit the
finance charges, fees and other charges on the Contracts purchased and (iii)
provide specified disclosures to consumers; (B) limit the terms of the
Contracts; (C) regulate the credit application and evaluation process; (D)
regulate certain servicing and collection practices; and (E) regulate the
repossession and sale of collateral. These laws also impose specific
statutory liabilities upon creditors who fail to comply with their provisions
and may give rise to defense to payment of the consumer's obligation.
The Company believes it is currently in compliance in all material
respects with applicable laws, but there can be no assurance that the Company
will be able to maintain such compliance. The failure to comply with such
laws, or a determination by a court that the Company's interpretation of law
was erroneous, could have a material adverse effect upon the Company.
Furthermore, the adoption of additional laws, changes in the interpretation
and enforcement of current laws or the expansion of the Company's business
into jurisdictions that have adopted more stringent regulatory requirements
than those in which the Company currently conducts business, could have a
material adverse effect upon the Company.
If a commercial or consumer borrower defaults on a Contract, the
Company is entitled to exercise the remedies of a secured party under the
Uniform Commercial Code ("UCC"), which typically includes the right to
repossession by self-help means unless such means would constitute a breach of
peace. The UCC and other state laws regulate repossession and sales of
collateral (A) by requiring reasonable notice to the borrower of (i) the date,
time and place of any public sale of the collateral, (ii) the date after which
any private sale of the collateral may be held and (iii) the borrower's right
to redeem the financed vehicle prior to any such sale; and (B) by providing
that any such sale must be conducted in a commercially reasonable manner.
Under the UCC and other laws applicable in most states, a creditor
is entitled, subject to possible prohibitions or limitations, to obtain a
deficiency judgment from a borrower for any deficiency on repossession and
resale of the property securing the unpaid balance of the borrower's contract.
The Company could seek a deficiency judgment against the borrower for any
shortfall. In some cases it may not be economical to seek a deficiency
judgment against a borrower or, if one is obtained, it may be settled at a
significant discount.
In the event of default by an obligor on a receivable, the Company is
entitled generally to exercise the remedies of a secured party under the
Uniform Commercial Code ("UCC") as in effect under applicable state laws. A
usual remedy of a secured creditor is foreclosure, and repossession or sale of
the collateral. In most jurisdictions, the UCC and other state laws require
the secured party to provide the debtor with reasonable notice of the date,
time, and place of any public sale or the date after which any private sale of
the collateral may be held. Unless the debtor waives his rights after
default, the debtor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid installments (less any required
discount for prepayment) of the receivable plus reasonable expenses for
repossessing, holding, and preparing the collateral for disposition and
arranging for its sale, plus in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments.
Source of Revenue ("Spread"). The Company's profitability is determined
largely by the difference, or "spread," between the rate of interest on the
funds borrowed under revolving credit facilities, or paid to purchasers of its
Investment Notes, and the rate of interest (or implied interest rate in case
of bulk purchase portfolios) charged to and collected from its customers on
their contracts. The interest rate paid to investors in Investment Notes
varies with current market rates for similarly rated transactions. There can
be no assurance that the Company's cost of funds will not rise to a level that
adversely affects its ability to maintain profitability with respect to the
contracts it holds or that the interest rate paid to investors will not rise
to a level that adversely affects the Company's ability to make loans or sell
contracts with an economically advantageous spread. In addition, high
interest rate environments also could be expected to adversely affect the
overall financing capacity of the Company's typical non-prime customers.
DESCRIPTION OF PROPERTY
The Company shares office space with Riverbank, Inc., an affiliated
company, at 800 W. Oakland Park Blvd. in Ft. Lauderdale, Florida at a rental
expense of $250 per month. There is no written lease between the Company and
its affiliate. The Company considers its office space adequate for its
anticipated immediate needs. See "Certain Relationships and Related
Transactions."
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Company presently has one director, Shlomo (Steve) Rasabi, who has
been the sole director since inception. The Company intends to add other,
qualified directors and is investigating obtaining directors and officers
liability insurance ("D&O") for that purpose.
Shlomo (Steve) Rasabi, 46, is the founder, president, chief executive
officer, and sole director of the Company. Since 1975 Mr. Rasabi has been
engaged in several entrepreneurial activities. From 1975 to 1981 he owned and
operated a floor covering store chain that employed 27 people in the New
York/New Jersey area. From 1981 through 1991 he owned and managed various
retail operations and real estate ventures, including a sportswear importer, a
strip shopping plaza, residential properties, a light industrial facility, and
a Daytona Beach, Florida restaurant with as many as 120 employees. He became
involved in the automobile finance business in 1989 as manager and part-owner
of Prospect Finance of Broward, Inc. Prior to founding Riverbank, Inc., an
automobile finance company, in 1994 he was president of CBS Auto Finance,
Inc., an automobile lending operation with 10 employees. Mr. Rasabi devotes
about half of his time to the management of the Company and the remainder to
the automobile finance operations. He attended college in Israel and the USA,
receiving a BS in civil engineering in 1977 from Cooper Union Institute in New
York.
Daniel Benjamin, 46, vice-president and general manager, has 18 years
experience in automobile sales, leasing and finance. He has been with the
affiliated companies since 1994 and with the Company since inception. From
1980 through 1989 he worked in sales, sales management and leasing for
automobile dealers in the metropolitan New York area. In 1987 he founded
Performance Auto Leasing, Inc. and as president maintained full responsibility
for all aspects of the firm's automobile leasing and sales activities. He
took a less active role in the firm upon his relocation to Florida in 1989
where he has been engaged in sales and sales management for automobile dealers
and leasing companies such as Autoputer-Boca, Inc., Acura of Pompano, and
Delray Auto Leasing. Mr. Benjamin, as lease manager for Delray Auto Leasing,
was responsible for all aspects of the business, including business
development, advertising and promotion, as well as all forecasting and
planning. Mr. Benjamin attended Queens College and Monmouth College where he
concentrated in business administration. He was honorably discharged from the
United States Army in 1975.
Under Florida corporation law, no director of the Company shall be
personally liable for monetary damages as such for any action taken by such
director, or any failure on the part of such director to take any action,
unless (I) such director has breached or failed to perform the duties of his
office as set forth under applicable law; and (II) such breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness, except
as otherwise provided by applicable law. Riverbank's Articles of
Incorporation also provides that, if Florida law is hereafter amended to
authorize the further elimination of limitation of the liability of the
directors of Riverbank, then the liability of such directors shall be
eliminated or limited to the fullest extent permitted by applicable law.
The Articles of Incorporation and the Bylaws (the "Bylaws") of Riverbank
provide that the Company shall, to the full extent permitted by the laws of
the State of Florida, as amended from time to time, indemnify all persons whom
they may indemnify pursuant thereto. The Bylaws of Riverbank also provide that
the Company may obtain insurance on behalf of such persons.
EXECUTIVE COMPENSATION
This item provides disclosure of all cash, non-cash, plan and non-plan
compensation awarded to, earned by, or paid to the named executive officer and
director for all services rendered in all capacities to the Company and its
subsidiaries. No disclosure is provided for any executive officer, other than
the CEO, whose total annual salary and bonus does not exceed $100,000 for the
most recent year ended.
For the year ending December 31, 1996, Steve Rasabi, the CEO and sole
director, and Daniel Benjamin
received no cash or non-cash compensation in 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Name and Fiscal Year Salary Bonus Other Annual Restricted Stock
Underlying All
Other
Principal Compensation Awards
Options/SAR#
Compensation
Position
- --------------------------------------------------------------------------------
- ---------------
- ----
<S> <C> <C> <C> <C> <C> <C>
<C>
Shlomo 1996 0
Rasabi 1995 NA
Chrmn, 1994 NA
President,
CEO/CFO
Daniel 1996 0
Benjamin 1995 NA
VP, Gen 1994 NA
Mgr
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTIONS/SAR VALUES
No options or SARs were exercised in the fiscal year ending
December 31, 1996.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
No options were granted to any persons during fiscal 1996. No stock
appreciation rights (SARs) were granted in fiscal 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company does not have any formal policy concerning the direct or
indirect pecuniary interest of any of its officers, directors, security
holders or affiliates in any investment to be acquired or disposed of by the
Company or in any transaction to which the Company is a party or has an
interest.
Generally, the Company will use an affiliated company, Riverbank
Services, Inc. for servicing the loans it maintains in its portfolio.
Riverbank Services, Inc. presently services a loan portfolio of approximately
$7,000,000 consisting primarily of Florida based loans on used automobiles.
Riverbank Services, which is equipped with specialized software and
experienced loan servicing personnel, will assist the Company in evaluating
credit reports prior to loan approval, will service the Company's loans, and
will monitor and perform all collection procedures. As compensation,
Riverbank Services, Inc. will be paid a fee of $2 for each $100 of customer
collections actually received.
The Company shares office facilities with Riverbank Services, Inc., an
affiliated company, at a monthly rental cost of $250 per month beginning June
1, 1997. There is no written agreement respecting occupancy.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company common stock as of June 10, 1997 by the
directors of the Company, the Named Officers, each person known by the Company
to be the beneficial owners of five percent (5%) or more of the Common Stock
of the Company, and all directors and officers of the Company as a group. As
shown in the table below, one shareholder owns all the 500 issued,
outstanding, and authorized shares of the one class of common stock.
Name and Position Number of Shares Percentage of Class
(if applicable) Beneficially Owned (1)
- -------------------------------------------------------------------------------
Shlomo (Steve) Rasabi 500 100
Chairman, President,
CEO/CFO
800 W. Oakland Park Blvd.
Suite 100
Ft. Lauderdale, FL 33311
Daniel Benjamin 0 0
VP, General Mgr.
800 W. Oakland Park Blvd.
Suite 100
Ft. Lauderdale, FL 33311
Landmark Finance, Inc. 500 100
800 W. Oakland Park Blvd.
Suite 100
Ft. Lauderdale, FL 33311
All executive officers and 500 100
directors as a group
(2 persons)
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly they may
include securities owned by or for, among others, the wife and/or minor
children or the individual and any other relative who has the same home as the
individual, as well as other securities as to which the individual has or
shares investment power or has the right to acquire under outstanding stock
options within 60 days after the date of this table. Beneficial ownership may
be disclaimed as to certain of the securities. Steve Rasabi is the President
and CEO of Landmark Finance, Inc., the Company's sole shareholder.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Common Stock
There is no public trading market for shares of the Company's common stock,
par value $.01 per share (the "Common Stock"). As of the date hereof, there
is one beneficial holder of record of the 500 shares of authorized and issued
Common Stock. The Company has never declared a dividend on the Common Stock.
The declaration and payment of dividends on the Common Stock, if any should
occur in 9the future, would proportionately reduce the amounts of money
available from the Company to pay principal and interest on the Investment
Notes.
Ownership of the Investment Notes does not provide any rights to holders
of the Investment Notes to direct or control the management of the Company by
the election of directors, or otherwise. An Investment Note holder will not
acquire any rights or benefits which might accrue through ownership of common
stock in the Company.
PLAN OF DISTRIBUTION
It is presently anticipated that the Company will not employ the services
of a broker-dealer or dealers as an agent to assist in the sales of the
Investment Notes. The Company may choose in the future to establish a broker-
dealer subsidiary or to employ the services of a NASD member broker-dealer for
purposes of offering the Investment Notes. Such participation by any such
broker-dealer or a broker-dealer subsidiary of Riverbank, should one come into
existence, will comply with the requirements of Schedule E to the Bylaws of
the National Association of Securities Dealers, Inc. It has been estimated by
Management that, if the services of a broker-dealer are utilized to sell the
Investment Notes, the Company would pay to such broker-dealer a commission
equal to between .5% and 8% of the selling price of Investment Notes actually
sold. It is also likely that, if the services of a broker-dealer are utilized,
the Company would agree to reimburse such entity for its costs and expenses,
up to a maximum, based on the total dollar value of the Investment Notes sold.
The Company may agree to indemnify any broker or dealer utilized by the
Company in connection with the Offering to be made hereby against liabilities,
including liabilities under the Securities Act of 1933, as amended. If
broker-dealers are used in connection with this Offering, the Company will file
a post-effective amendment to the registration statement relating to this
Prospectus.
Officers, directors and other associated persons of the Company will
rely on the safe-harbor provisions of Rule 3a4-1 of the Securities Exchange
Act of 1934 with respect to their participation, if any, in the sale of the
Notes. Generally, Rule3a4-1 provides that an associated person of an issuer
will not be deemed to be a broker solely by reason of his participation in the
sale of the securities of such issuer if the associated person is not a
securities broker or associated with any broker-dealer, is not compensated on
transactions in securities, and, in the case of the associated persons of the
Company, his sales participation is restricted to passive activities such as
preparing written communications, responding to inquiries, and performing
ministerial work in effecting transactions.
The Company reserves the right to reject any subscription hereunder, in
whole or in part, for any reason. Subscriptions will be irrevocable upon
receipt by the Company. In the event a subscription is not accepted by the
Company; the proceeds of such subscription will be promptly refunded to the
subscriber, without deduction of any costs and without interest. The Company
expects that such subscriptions will be refunded within 48 hours after the
Company has received the subscription. Once a subscriber's subscription has
been accepted by the Company, the applicable subscription funds will be
promptly deposited for benefit of the Company. An Investment Note will be sent
to the subscriber as soon as practicable thereafter. No minimum number of
Investment Notes must be sold in the Offering. A subscriber will not know at
the time of subscription whether the Company will be successful in completing
the sale of any or all of the Investment Notes offered hereby. The Company
reserves the right to withdraw or cancel the Offering at anytime. In the event
of such withdrawal or cancellation, subscriptions previously received will be
irrevocable and no subscription funds will be refunded except as may be
required by the investor protection laws or regulations of the jurisdictions
in which the Company may offer the Notes.
The Notes are being offered on an ongoing and continuous basis pursuant
to Rule 415. Generally, Rule 415 only applies to those securities that are
reasonably expected to be offered and sold within two years from the initial
effective date of the registration. The Company reasonably expects to offer
and sell the securities being offered herein within two years of the effective
date of the registration statement relating to this Prospectus.
The validity of the Investment Notes being offered hereby have been passed
upon for the Company by M. Peter Amaral, Esq., 800 West Oakland Park
Boulevard, Suite 100, Ft. Lauderdale, FL.
LEGAL PROCEEDINGS
As of the date of the Prospectus, the Company is not a party to any
pending legal proceeding (or its property is the subject of a pending legal
proceeding), nor is any director, officer or affiliate of the Company, any
owner of record or beneficially of more than 5% of any class of voting
securities of the Company a party adverse to the Company in any legal
proceeding or has a material interest adverse to the Company.
The Company intends to initiate legal proceedings as a plaintiff in
connection with its routine collection activities whenever it deems such
action appropriate.
EXPERTS
The balance sheet as of December 31, 1996 of Riverbank Factors, Inc.
included in this Prospectus, has been examined by Weinberg, Pershes & Company,
P.A., independent certified public accountants, as set forth in their report
appearing herein and have been included in reliance upon such representation
of and upon the authority of such firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
RIVERBANK FACTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
REPORT
AS OF DECEMBER 31, 1996
RIVERBANK FACTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 - INDEPENDENT AUDITORS' REPORT
PAGE 2 - BALANCE SHEET AS OF DECEMBER 31, 1996
PAGE 3 - NOTES TO BALANCE SHEET AS OF DECEMBER 31, 1996
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Riverbank Factors, Inc.
We have audited the accompanying balance sheet of Riverbank Factors, Inc. (A
Development Stage Company) as of December 31, 1996. This financial statement
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly in all
material respects, the financial position of Riverbank Factors, Inc. as of
December 31, 1996, in conformity with generally accepted accounting
principles.
WEINBERG, PERSHES & COMPANY, P.A.
Boca Raton, Florida
January 24, 1997
(Except for Note 4 which
is dated May 15, 1997)
RIVERBANK FACTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF DECEMBER 31, 1996
ASSETS
Cash $ 10,000
TOTAL ASSETS $ 10,000
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities $ -
Stockholder's Equity
Common Stock, $.01 par value, 500
shares authorized, 500 issued and
outstanding 5
Capital in excess of par 9,995
Total Stockholder's Equity 10,000
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 10,000
See accompanying notes to balance sheet.
FR2
RIVERBANK FACTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO BALANCE SHEET
AS OF DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization and Business Operations
Riverbank Factors, Inc. ("the Company") was incorporated in Florida
on October 24, 1996 for the primary purpose of arranging financing for
businesses and individuals. At December 31, 1996, the Company
had not yet commenced any formal business operations, and all
activity to date relates to the Company preparing its business plan
for use in raising up to $10,000,000 of unsecured subordinated
notes for use in the Company's lending operations. The company's
fiscal year end is December 31.
B. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 2 - STOCKHOLDER'S EQUITY
The Company issued 500 shares of Common Stock at a par value of $.01
per share to the sole shareholder.
NOTE 3 - REVOLVING CREDIT NOTE
On January 3, 1997, the Company entered into a revolving credit note
to receive up to $1,200,000. The note calls for interest to be
paid monthly at an annual rate of 12%. All unpaid principal and
interest is due on January 3, 1999. As of the date of this report,
the Company has been advanced $400,000 on this revolving credit
note.
FR-3
=============================================================================
RIVERBANK FACTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 - UNAUDITED STATEMENT OF OPERATIONS FOR THE PERIOD FROM
INCEPTION TO APRIL 30, 1997
PAGE 2 - UNAUDITED BALANCE SHEET AS OF APRIL 30, 1997
PAGE 3 - STATEMENT OF CASH FLOW FOR PERIOD FROM INCEPTION TO
April 30, 1997
RIVERBANK FACTORS, INC.
(a Development Stage Company)
Statement of Operations Data
Inception to April 30, 1997
(actual numbers)
Interest income from operations(1) $15,860
Expenses:
General and administrative 259
Sales and collections 162
Operating profit $15,439
Interest expense $14,666
Net profit 773
Per common share data(1)
Net income $1.55
Cash dividends declared:
Common stock 0
(1) The Company was organized in October, 1996 and began
operations in January, 1997.
(2) There are 500 shares of common stock issued representing all
authorized shares of the Company. There is no preferred
stock authorized.
<1>
Balance Sheet Data
April 30, 1997
(actual numbers)
12/31/96 4/30/97
Assets:
Cash 10,000 873
Loans 437,744
Total current assets 438,617
Organizational costs (net) 11,485
Total Assets 10,000 $450,102
Liabilities:
Accounts payable 163
Loans payable 439,166
Total current liabilities 439,329
Long term liabilities 0
Total liabilities 439,329
Stockholder's Equity(1)
Common Stock, $.01 par value,
500 shares authorized,
500 issued and
outstanding 5 5
Capital in excess of par 9,995 9,995
Current year earnings 0 773
Total Stockholder's Equity 10,000 10,773
Total Liabilities and
Stockholders' Equity $10,000 $450,102
(1) common stock, $.01 par value, 500 shares authorized,
500 shares issued and outstanding.
<2>
Statement of Cash Flows
Inception to April 30, 1997
(actual numbers)
Net income $773
Adjustments to reconcile net income
to net cash used in operating activities:
Changes in assets and liabilities:
Increase in finance receivables (430,009)
Increase in other receivables (7,735)
Increase in other assets (11,485)
Increase in accrued expenses and
other payables 14,829
Total Adjustments (434,400)
Net cash used in operating activities (433,628)
Cash flows from financing activities:
Proceeds from notes payable 468,500
Payments on notes payable (44,000)
Net cash provided by financing 424,500
Decrease in cash (9,127)
Cash beginning 10,000
Cash ending 873
<3>
===========================================================================
BACK COVER PAGE OF PROSPECTUS
$4,900,000
Investment Notes
RIVERBANK FACTORS, INC.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this
Prospectus, and if given of made, such information or representation must
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any sale made in connection herewith shall,
under any circumstances, create any implication that there has been no
change in the facts set forth in this Prospectus or in the affairs of the
Company since the date hereof. This Prospectus, even when accompanied by an
appropriate Prospectus Supplement, does not constitute an offer to sell or
the solicitation of an offer to buy the Securities in any jurisdiction where
such sale or solicitation is not authorized, or in which the person making
such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such and offer or solicitation.
PART II. INFORMATION NOT CONTAINED IN THE PROSPECTUS
Item 24. Indemnification of Officers and Directors
ARTICLE X of the Registrant's Articles of incorporation provides that "This
Corporation may indemnify any director, officer, employee or agent of the
Corporation to the fullest extent permitted by Florida law."
The Registrant's Bylaw's in Section 6 track Florida Corporation law on the
matter of indemnification and provide as follows:
The corporation shall have power to indemnify any person who was or is a party
to any proceeding (other than an action by, or in the right to the
corporation), by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo contendere
or its equivalent shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in, or not opposed to, the best interests of the corporation or, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
The corporation shall have power to indemnify any person, who was or is a
party to any proceeding by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the proceeding
to conclusion, actually and reasonably incurred in connection with the defense
or settlement of such proceeding, including any appeal thereof Such
indemnification shall be authorized if such person acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be made
under this subsection in respect of any claim, issue, or matter as to which
such person shall have been adjudged to be liable unless, and only to the
extent that, the court in which such proceeding was brought, or any other
court of competent jurisdiction, shall determine upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
To the extent that a director, officer, employee, or agent of the corporation
has been successful on the merits or otherwise in defense of any proceeding,
or in defense of any claim, issue, or matter therein, he shall be indemnified
against expenses actually and reasonably incurred by him in connection
therewith.
Any indemnification, unless pursuant to a determination by a court, shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee, or
agent is proper in the circumstances because he has met the applicable
standard of conduct.
Item 25. Other Expenses of Issuance and Distribution
The Registrant estimates the following expenses of the offering:
Registration Fees: $ 1,485
Printing: $ 5,000
Legal: $25,000
Accounting: $5,000
Item 26. Recent Sales of Unregistered Securities
On or about October 24, 1996 the Registrant sold, for cash consideration of
$10,000, 500 shares of its one class of common stock to Landmark Finance,
Inc., an affiliated company. The Registrant received all the consideration
paid.
The Registrant claims exemption from registration primarily upon Section 4(2)
of the Securities Act.
Item 27. Exhibits and Exhibit Index
3.1 Articles of Incorporation of Riverbank Factors, Inc. *
3.2 Bylaws of Riverbank Factors, Inc. *
4.1 Deed Poll Indenture *
4.2 Form of Unsecured, Subordinated Note *
5.1 Opinion re Legality of Unsecured, Subordinated Notes *
10.1 Lloyd Funding, Inc. Revolving Credit Note, dtd January 3, 1997 *
23.1 Consent of counsel (contained in 5.1) *
23.2 Consent of Weinberg, Pershes & Co., P.A. **
27.1 Financial Data Schedule *
* Previously filed
** Filed herewith
Item 28. Undertakings
(a) Rule 415 Offering. If the small business issuer is registering securities
under Rule 415 of the Securities Act, that the small business issuer will:
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and notwithstanding the forgoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospects filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by
a director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and has
duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized
in the City of Ft. Lauderdale, State of Florida, on July 31, 1997.
Riverbank Factors, Inc. (Registrant)
/s/
Shlomo Rasabi, President and Chairman
(Signature)
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section A. Definitions 3
Section B. Other Definitions. 5
Section C. Rules of Construction. 6
ARTICLE II.
THE SECURITIES
Section A. Form and Dating. 6
Section B. Execution. 8
Section C. Registrar and Paying Agent.
Section D. Paying Agent to Hold Money in Trust. 8
Section E. Securityholder Lists 8
Section F. Transfer and Exchange. 8
Section 2.7 Payment of Principal and Interest:
Principal and Interest Rights Preserved. 9
Section 2.8 Replacement Securities. 10
Section 2.9 Outstanding Securities. 10
Section 2.10 Treasury Securities. 10
Section 2.11 Temporary Securities. 11
Section 2.12 Cancellation. 11
Section 2.13 Defaulted Interest. 11
ARTICLE 3
REDEMPTION 11
ARTICLE 4
COVENANTS
Section 4.1 Payment of Securities. 12
Section 4.2 Maintenance of Office or Agency. 12
Section 4.3 SEC Reports. 12
Section 4.4 Stay, Extension and Usury Laws. 13
Section 4.5 Liquidation. 13
ARTICLE 5
SUCCESSORS
Section 5.1 When the Company May Merge, etc. 13
Section 5.2 Successor Corporation Substituted. 13
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1 Events of Default. 13
Section 6.2 Acceleration. 14
Section 6.3 Other Remedies. 15
Section 6.4 Waiver of Past Defaults. 15
Section 6.5 Control by Majority. 15
Section 6.6 Limitation on Suits 15
Section 6.7 Rights of Holders to Receive Payment. 15
Section 6.8 Collection Suit by Holders. 15
Section 6.9 Holders by Committee or Association
May File Proofs of Claim. 16
Section 6.10 Priorities. 16
ARTICLE 7
TRUSTEE (not applicable)
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.1 Company's Obligations. 16
Section 8.2 Application of Trust Money. 17
Section 8.3 Repayment to Company. 17
Section 8.4 Reinstatement. 18
ARTICLE 9
AMENDMENTS
Section 9.1 Without Consent of Holders. 18
Section 9.2 With Consent of Holders. 18
Section 9.3 Revocation and Effect of Consents. 19
Section 9.4 Notation on or Exchange of Securities. 19
ARTICLE 10
SUBORDINATION
Section 10.1 Agreement to Subordinate. 20
Section 10.2 Liquidation: Dissolution: Bankruptcy. 20
Section 10.3 Default on Designated Senior Debt. 21
Section 10.4 When Distribution Must Be Paid Over 21
Section 10.5 Notice by Company. 21
Section 10.6 Subrogation. 21
Section 10.7 Relative Rights. 22
Section 10.8 Subordination May Not Be Impaired by
the Company or Holders of Senior Debt. 22
Section 10.9 Distribution Or Notice to Representative. 23
Section 10.10 Rights of Paying Agent. 23
Section 10.11 Authorization to Effect Subordination. 23
Section 10.12 Article Applicable to Paying Agent. 23
Section l0.l3 Miscellaneous. 24
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices. 24
Section 11.3 Communication by Holders with
Other Holders. 24
Section 11.4 Rules by Majority Securityholders or
Committee or Association or Agents. 25
Section 11.5 Legal Holidays. 25
Section 11.6 No Recourse Against Others. 25
Section 11.7 Duplicate Originals. 25
Section 11.8 Governing Law. 25
Section 11.9 No Adverse Interpretation of
Other Agreements. 25
Section 11.10 Successors. 25
Section 11.11 Severability. 25
Section 11.12 Counterpart Originals. 25
Section 11.13 Table of Contents, Headings, etc. 26
DEED POLL INDENTURE
DEED POLL INDENTURE dated as of ________, 1997, by Riverbank Factors,
Inc., a Florida Corporation (the "Company"), as Obligor.
The Company agrees and obligates itself as follows for the equal and
ratable benefit of the Holders of the Unsecured, Subordinated Investment Notes
of the Company issued pursuant to the Company's registration statement on Form
SB-2 declared effective by the Securities and Exchange Commission on or about
_______, 1997 (the "Notes"):
ARTICLE I.
DEFINITIONS AND RULES OF CONSTRUCTION
Section A. Definitions
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Agent" means any Registrar Paying Agent or co-registrar of the Notes.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.
"Business Day" means any day other than a legal Holiday.
"Company" means Riverbank Factors, Inc. unless and until replaced by a
successor in accordance with Article 5 hereof and thereafter means such
successor.
"Corporate Office" means the office of the Company at which the business
of the Company shall, at any particular time be principally administered,
which office is, at the date as of which this Deed Poll Indenture is
originally dated, located at 800 West Oakland Park Boulevard, Suite 100, Ft.
Lauderdale, FL 33311, Attention: Mr. Shlomo Rasabi, President
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means, as of any date, generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as approved by a significant segment of
the accounting profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Holder" or "Securityholder" means a Person in whose name a Security is
registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or representing the
balance deferred and unpaid of the purchase price of any property (including
capital lease obligations) or representing any hedging obligations, except any
such balance that constitutes an accrued expense or a trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
hedging obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and also includes, to the extent not
otherwise included, (a) the Guarantee of items that would be included within
this definition, and (b) liability for items that would arise by operation of
a Person's status as a general partner of a partnership.
"Deed Poll Indenture" or "Indenture" means, this Indenture as amended or
supplemented from time to time.
"Indenture Securities" means the Securities;
"Indenture Security Holder" means a Securityholder;
"Issue Date" means, with respect to any Security, the date on which such
Security is first executed, authenticated and delivered.
"Interest Accrual Date" means with respect to any Security, the date the
Company accepts funds for the purchase of the Security if such funds are
received by 3:00 p.m. (EDT) on a Business Day, or if such funds are not so
received, on the next Business Day.
"Interest Accrual Period" means, as to each Security, the period from the
later of the Issue Accrual Date of such Security or the day after the last
Payment Date upon which an interest payment was made until the following
Payment Date during which interest accrues on each Security with respect to
any Payment Date.
"Maturity Date" means, with respect to any Security, the date on which
the principal of such Security becomes due and payable as therein provided.
"Maturity Record Date" means, with respect to any Security, as of 11:59
p.m. of the date fifteen days prior to the Maturity Date or Redemption Date
applicable to such Security.
"Notes" means the Company's Unsecured, Subordinated Investment Notes
issued under this Indenture.
"Obligations" means any principal, interest (including Post-Petition
Interest), penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any Indebtedness.
"Obligor" on the Securities means the Company or any successor obligor
upon the Securities.
"Officer" means the Chairman of the Board or principal executive officer
of the Company, the President or operating officer of the Company, the Chief
Financial Officer or principal financial officer of me Company, the Treasurer,
any Assistant Treasurer, Controller or principal officer of The Company,
Secretary or any Vice-President of the Company.
"Officers' Certificate" means a certificate signed by two Officers, one
of whom must be the principal executive officer, principal operating officer,
principal financial officer or principal accounting officer of the Company
"Opinion of Counsel" means an opinion from legal counsel. The counsel may
be an employee of or of counsel to the Company.
"Payment Date" means the fifteenth day of each calendar month, or if such
fifteenth day is not a Business Day, the Business Day immediately following
such fifteenth day and, with respect to a specific Security, the Maturity Date
or Redemption Date of such Security.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Post-Petition Interest" means interest accruing after the commencement
of any bankruptcy or insolvency case or proceeding with repeat to the Company
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, at the rate applicable to such
Indebtedness, whether or not such interest is an allowable claim in any such
proceeding.
"Redemption Date" has the meaning given in Article 3 hereof.
"Redemption Price" means, with respect to any Security to be redeemed,
the principal amount of such Security plus the interest accrued but unpaid
during the Interest Accrual Period up to the Redemption Date for such
security.
"Regular Record Date" means, with respect to a particular Payment Date,
as of 11:59 p.m. of the dale [fifteen] days prior to such Payment Date.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes issued pursuant to this Indenture.
"Senior Debt" means any Indebtedness (whether outstanding on the date
hereof or thereafter created) incurred by the Company in connection with
borrowings by the Company (including its subsidiaries, if any) from a bank,
trust company, insurance company, or from any other institutional lender
whether such Indebtedness is or is not specifically designated by the Company
as being "Senior Debt" in its defining instruments securing such debt.
"Total Permanent Disability" means a determination by a physician chosen
by the Company that the Holder of a Security, who was gainfully employed on a
full time basis at the Issue Date of such security, is unable to work on a
full time basis during the succeeding twenty-four mouths. For purposes of this
definition, "working on a full time basis" shall mean working at least forty
hours per week.
"U.S. Government Obligations" means direct Obligations of the United
States of America, or any agency or instrumentality thereof for the payment of
which the full faith and credit of the United States of America is pledged.
Section B. Other Definitions.
Term Defined in
Section
"Bankruptcy Law" 6.1
"Custodian" 6.1
"Event of Default" 6.1
"Legal Holiday" 11.7
"Paying Agent" 2.3
"Payment Blockage Period" 10.3
"Payment Notice" 10.3
"Registrar" 2.3
Section C. Rules of Construction.
Unless the context otherwise requires:
1. GAAP has the meaning assigned to it.
2. an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
3. references to GAAP on any date shall mean GAAP in effect in the
United States as of such date;
4. "or" is not exclusive;
5. words in the singular include the plural and in the plural include
the singular; and
6. provisions apply to successive events and transactions.
ARTICLE II.
THE SECURITIES
Section A. Form and Dating.
The Notes shall be substantially in the form of Exhibit A hereto the
terms of which are incorporated in and made a part of this Indenture. The
outstanding aggregate principal amount of Notes outstanding at any time is
limited to $4.9 million, provided, however, that the Company may, without the
consent of any Holder, increase such aggregate principal amount of securities
other than the Notes which may be outstanding at any time. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject or usage. Each Security shall be
dated the date of its authentication. Each Security shall be in such
denomination as may be designated from time to time by the Company but in no
event in a denomination less than $1,000. Each Security shall have a term of
not less than three months and not greater than ten years as shall be
designated by the Company from time to time.
Each Security shall bear interest from and commencing on its Interest
Accrual Date at such rate of interest as may be computed from the following
formula; provided, however, that the interest rate will be fixed for the term
of the Security upon issuance, subject to change upon extension.
Interest rates on unissued Notes will be determined on the first day of
each month by a formula based upon the arithmetic average of the yields of the
last full four weeks of the month immediately preceding the month just ended
on actively traded U.S. Treasury issues adjusted to a constant maturity of one
year as published by the U.S. Treasury in Federal Reserve Statistical Release
H.15 (519) (the "Index"), plus an amount called the Margin that has been
established by the Company for each term to maturity. Interest rates on unsold
Notes will be computed on the first day of each month by adding the Margin for
any particular maturity (See Margin Table below) to the Index The sum will be
rounded down to the nearest 1/10 of 1%.
Yields on Treasury securities at "constant maturity" are interpolated by
the U.S. Treasury from the daily yield curve. This curve, which relates the
yield on a security to its time to maturity, is based on the closing market
bid yields on actively traded Treasury securities in the over-the-counter
market. These market yields are calculated from composites of quotations
obtained by the Federal Reserve Bank of New York. The constant maturity yield
values are read from the yield curve at fixed maturities, currently 3 and 6
months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield
for a one year maturity, for example, even if no outstanding security has
exactly one year remaining to maturity.
Information concerning yields at constant maturity are available in
Federal Reserve Statistical Release H.15 (519) which is published every
Monday. Current and historical H.15 data are available on the Federal Reserve
Board's web site (http://www.bog.frb.fed.us/). Current data are also
available in the Wall Street Journal and on the Department of Commerce
Bulletin Board. For information, call 202-482-1986.
MARGIN TABLE
Following is a list of the Margin amount for each maturity of Note. The
Margin is fixed for each maturity as provided herein:.
TERM MARGIN
3 Month 1.25
6 Month 1.50
12 Month 2.50
18 Month 2.75
24 Month 3.00
30 Month 3.25
36 Month 3.50
48 Month 4.00
60 Month 4.50
7 Years 5.00
10 Years 5.50
Interest on a Security with a term of six (6) months or less will accrue
daily and be payable at maturity. Interest on a Security of longer duration
will accrue daily and the holder thereof may elect to have interest paid
monthly, on the fifteenth day of each calendar month, quarterly, on January
15, April 15, July 15 and October 15, maturity-annually, on January 15 and
July 15, annually, on January 15, or upon maturity. A Holder may change this
election once during the term of the Security.
At least seven days prior to a Security's stated Maturity Date, the
Company will notify the registered Holder (existing as of the applicable
Maturity Record Dated) by mail of such pending Maturity Date. The notice will
be accompanied by a renewal form, a Prospectus, and a Prospectus Supplement
specifying the current rates being paid by the Company on unsold Securities.
Such notice shall also state that payment of principal of a Security shall be
made upon presentation and surrender of such Security and shall specify the
place where such Security may be presented and surrendered for the making of
such payment. The Holder, at its sole option, may renew such Security by
completing the renewal form or by letter or telephone to the Company
indicating the Holder's intention to renew such Note, and by delivering such
communication to the Company within seven days after the original Maturity
Date. The extension of any Security shall constitute a new investment decision
by the Holder thereof.
Interest shall continue to accrue at then current rates from the first
day of such renewed term. Such Security, as renewed, will continue in all its
provisions, including provisions relating to payment; except that the interest
rate payable during any renewed term shall be the interest rate which is then
being offered by the Company on similar Investment Notes being offered as of
the renewal date.
If the Company does not receive proper communication of the holder's
intent to renew such Note with seven days of the original maturity date,
interest will accrue after the Maturity Date until the date of payment at the
rate being paid on such Security immediately prior to its Maturity Date.
Subordinated Notes with a duration of greater than six (6) months are
subject to early repayment at the election (a) of the Holder only upon the
occurrence of a Total Permanent Disability of such Holder (or if such Security
is held jointly by a husband and wife, upon the Total Permanent Disability of
one of such spouses), (b) of a Holder's estate after a Holder's death or (c)
If such Security Is held jointly by a husband and wife, of a Holder upon the
death of such Holder's spouse. Otherwise, Holders will have no right to demand
early repayment.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this indenture and to the extent
applicable, The Company, by its execution and delivery of this Indenture, and
the Holders by accepting the Securities, expressly agree to such terms and
provisions and to be bound thereby. In case of a conflict, the provisions of
this Indenture shall control.
Section B. Execution.
Two Officers of the Company shall sign the Securities for the Company by
manual or facsimile signature.
The Company's seal shall be reproduced on the Securities.
The aggregate principal amount of Securities outstanding at any time may
not exceed the amount set forth in Section 2.1 hereof.
Section C. Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where Securities may
be presented for registration of transfer or for exchange ("Registrar") and
(ii) an office or agency where securities may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company may appoint one or more co-registrars
and one or more additional paying agents. The term "Registrar" includes any
co-registrar, and the term "Paying Agent" includes any additional paying
agent. The Company may change any Paying agent or Registrar without prior
notice to any Securityholder; provided that the Company shall promptly notify
the Securityholders of the name and address of any Agent not a party to this
Indenture. The Company may act as Paying Agent and/or Registrar. In the event
the Company utilizes any Agent other than the Company or the Trustee, the
Company shall enter into an appropriate agency agreement with such Agent. The
agreement shall implement the provisions of this Indenture that relate to such
Agent.
The Company shall be the initial Registrar and Paying Agent. The Company
shall provide notices and demands in connection with the Securities.
Section D. Paying Agent to Hold Money in Trust.
Prior to each due date of the principal or interest on any Security, the
Company shall deposit with the Paying Agent sufficient fluids to pay
principal, premium, if any, and interest then so becoming due. The Company
shall require each Paying Agent other than the Company to agree in writing
that the Paying Agent will hold in trust for the benefit of Securityholders
all money held by the Paying Agent for the payment of principal or interest on
the Securities, and will notify the Securityholders promptly in writing of any
default by the Company in making any such payment. If the Company acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Securityholders all money held by it as Paying Agent.
Section E. Securityholder Lists
The Company shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. In the event of a default, as defined herein, the Company
shall provide to any Securityholder, upon written request, a list of
Securityholders.
Section F. Transfer and Exchange.
(a) Transfer and Exchange of Securities The Securities are not
negotiable instruments and cannot be transferred by mere endorsement and
delivery. No rights of record ownership to a Security may be transferred
without the prior written consent of the Company (which consent shall not be
unreasonably witheld). When securities are presented to the Registrar with the
request:
(x) to register the transfer of the Securities, or
(y) to exchange such Securities for an equal principal amount of
Securities of other authorized denominations,
The Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met; provided,
however, that the Securities presented or surrendered for register of transfer
or exchange:
(i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by the Holder
thereof or by his attorney, duly authorized in writing;
(ii) shall be accompanied by the written consent of the Company to such
transfer or exchange; and
(iii) if requested by the Company, an opinion of Holder's counsel
(which counsel shall be reasonably acceptable to the Company) that the
transfer does not violate any applicable securities laws.
(b) Obligations with respect to Transfers and Exchanges of Securities.
(i) To permit registrations of transfers and exchanges the Company shall
execute Securities at the Registrar's written request.
(ii) The Company may assess service charges to a Holder for any
registration or transfer or exchange, and the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange pursuant to Section 9.5 hereof).
(iii) All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under the
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
(iv) Prior to due presentment for registration of transfer of any
Security, any Agent and the Company may deem and treat the person in whose
name any Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest on such Security and
for all other purposes whatsoever, whether such Security is overdue, and
neither any Agent nor the Company shall be affected by notice to the contrary.
Section 2.7 Payment of Principal and Interest: Principal and Interest
Rights Preserved.
(a) Each Security shall accrue interest at the rate specified for such
Security and such interest shall be payable on each Payment Date following the
Issue Date for such Security, until the principal thereof becomes due and
payable. Any installment of interest payable on a Security that is caused to
be punctually paid or duly provided for by the Company on the applicable
Payment Date shall be paid to the Holder in whose name such Security is
registered in the Security Register on the applicable Regular Record Date, by
check mailed to such Holder's address as it appears in the Security Register
on such Regular Record Date. The payment of any interest payable in connection
with the payment of any principal payable with respect to such Security on a
Maturity Date or Redemption Date shall be payable as provided below. Any Funds
with respect to which such checks were issued which remain uncollected shall
be held in accordance with Section 8.3 hereof. Any installment of interest not
punctually paid or duly provided for shall be payable in the manner and to the
Holders specified in Section 2.13 hereof.
(b) Each of the Securities shall have stated maturity of principal as
shall be indicated in each such Security. The principal of each Security shall
be paid in full no later than the Maturity Date thereof unless the term of
such Security is extended pursuant to Section 2.1 hereof or such Security
becomes due and payable at an earlier date by acceleration, redemption or
otherwise.
Interest on such Security shall be due and payable on each Payment Date
at the interest rate applicable to such Security for the Interest Accrual
Period related to such Security and such Payment Date.
Notwithstanding any of the foregoing provisions with respect to payments
of principal of and interest on like Securities, if the Securities have become
or been declared due and payable following an Event of Default, then payments
of principal of and interest on the Securities shall he made in accordance
with Article 6 hereof.
The principal payment made on any Security on any Maturity date (or the
Redemption Price of any Security required to be redeemed), and any accrued
interest thereon, shall be payable only upon presentation and surrender of
such Security on or after the Maturity Date or Redemption Date therefor at the
office or agency of the Company maintained by it for such purpose pursuant to
Section 2.3 hereof or at the office of any Paying Agent for such Security.
(c) All computations of interest due with respect to any Security shall
be made, unless otherwise specified in the Security, based upon the actual
number of days (e.g., 365 or 366) in the applicable year.
Section 2.8 Replacement Securities.
If any mutilated Security is surrendered to the Company, or the Company
receives evidence to its satisfaction of the destruction, loss, or theft of
any Security the Company shall issue a replacement Security if the
requirements for replacements of Securities are met. If required by the
Company, an unsecured indemnity agreement must be supplied by the Holder that
is sufficient in the judgment of the Company to protect the Company, any Agent
or any authenticating agent from any loss which any of them may suffer if a
Security is replaced. The Company may charge for its expenses in replacing a
Security.
Every replacement Security is an additional obligation of the Company and
shall be entitled to all benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
Section 2.9 Outstanding Securities.
The Securities outstanding at any time are all the Securities issued by
the Company except for those canceled by it, those delivered to it for
cancellation, and those described in this Section as not outstanding.
If a Security is replaced pursuant to Section 2.8 hereof, it ceases to be
outstanding unless the Company receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.10 hereof, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
Section 2.10 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or any Affiliate of the Company shall be considered as
though not outstanding.
Section 2.11 Temporary Securities.
Until Securities are ready for delivery, the Company may prepare
Temporary Securities. Temporary Securities shall be substantially in the form
of Securities but may have variations that the Company may consider
appropriate for temporary Securities. Until such exchange, Temporary
Securities shall be entitled to the same rights, benefits and privileges as
Securities.
Section 2.12 Cancellation.
The Registrar and Paying Agent shall forward to the Company any
Securities surrendered to them for registration of transfer, exchange or
payment. The Company shall cancel all Securities surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Securities (subject to the record retention requirement of the
Exchange Act) unless the Company directs them to be returned to it.
Section 2.13 Defaulted Interest.
If the Company defaults in a payment of Interest on any Security, it
shall Pay the defaulted interest plus, to the extent lawful, any interest
payable on the defaulted interest, to the Holder of such Security on a
subsequent special record date, which date shall be at the earliest
practicable date but in all events at least 5 Business Days prior to the
payment date, in each case at the rate provided in the Security. The Company
shall fix or cause to be fixed each such special record date and payment date.
At least 15 days before any such special record date, the Company shall mail
to Securityholder(s) a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION
The Company may not redeem, in whole or in part, any Security prior to
the scheduled Maturity Date of the Security. In addition, except as provided
in this Article 3, the Company shall have no mandatory redemption or sinking
find obligations with respect to any of the Securities.
Upon the death or Total Permanent Disability of a holder of a Security,
the estate of such Holder (in the event of death) or such Holder (in the event
of Total Permanent Disability may require the Company to redeem, in whole and
not in part, the Security held by such Holder by delivering to the Company an
irrevocable election (a "Redemption Election") requiring the Company to make
such redemption. In the event a Security is held jointly by two or more
Persons, the Company shall not be required to redeem such Security until each
joint holder of such Security has either died or suffered a Total Permanent
Disability. Notwithstanding the foregoing sentence, if a Security is held
jointly by a husband and wife, such Security shall he subject to the elective
redemption provisions of this Article 3 Upon the death or Total Permanent
Disability of either spouse. Upon receipt of a Redemption Election, the
Company shall designate the Redemption Date for such Security, which
Redemption Date shall be no more than fifteen days after the Company's receipt
of the Redemption Election, and shall pay the Redemption Price to the estate
of the Holder or the Holder, as the case may be, in accordance with the
provisions set forth in Section 2.7 hereof. No interest shall accrue on a
Security to be redeemed under this Article 3 for any period of time after the
Redemption Date for such Security and after the Company has tendered the
Redemption price to the Estate of the Holder or to the Holder, as the case may
be.
ARTICLE 4
COVENANTS
Section 4.1 Payment of Securities.
The Company shall duly pay the principal of and interest on each Security
on the dates and in the manner provided in the Security. Principal and
interest shall be considered paid on the date due if the Paying Agent, if
other than the Company, holds at least one Business Day before that date money
deposited by the Company in immediately available funds and designated for and
sufficient to pay all principal and interest then due; provided, however, that
principal and interest shall not be considered paid within the meaning of this
Section 4.1 if money is held by the Paying Agent for the benefit of holders of
Senior Debt pursuant to the provisions of Article 10 hereof. Such Paying Agent
shall return to the Company, no later than 5 days following the date of
payment, any money (including accrued interest) that exceeds such amount of
principal and interest paid on the Securities in accordance with this Section
4.1.
To the extent lawful, the Company shall pay interest (including Post-
Petition Interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate borne by the Securities, compounded semi-annually; it
shall pay interest (including Post-Petition Interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate, compounded semi-annually.
Section 4.2 Maintenance of Office or Agency.
The Company will maintain an office or agency (which may he an office of
the Registrar or co-registrar) where Securities may be surrendered for
registration of transfer exchange and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Securityholders of the
location, and any change in the location, of such office or agency.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company will give prompt written notice to the Securityholders of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates its office at 800 West Oakland Park
Boulevard, Suite 100, Ft. Lauderdale, Florida as one such office or agency of
the Company in accordance with Section 2.3.
Section 4.3 SEC Reports.
(a) So long as any of the Securities remain outstanding, the Company
shall cause an annual report to stockholders and each quarterly or other
financial report furnished by it generally to stockholders to be sent to
Security holders at the time of such filing or furnishing to stockholders. If
the Company is not required to furnish annual or quarterly reports to its
stockholders pursuant to the Exchange Act, the Company shall cause its
financial statements, including any notes thereto (and, with respect to annual
reports, an auditors' report by the Company's certified independent
accountants) and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations," comparable to that which would have been
required to appear in annual or quarterly reports filed under Section 13 or
15(d) of the Exchange Act to be so sent to Securityholders within 120 days
after the end of each of the Company's fiscal years and within 60 days after
the end of each of the first three quarters of each such fiscal year.
(b) Whether or not required by the rules and regulations of the SEC, the
Company shall file a copy of all such information with the SEC for public
availability and make such information available to Securityholders and
prospective investors who request it in writing.
Section 4.4 Stay, Extension and Usury Laws.
The Company covenants (to the extent that It may lawfully do so) that it
will not at any lime insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now, or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all beneficial advantage
of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Holders, but will suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.5 Liquidation.
The Board of Directors or the stockholders of the Company may not adopt a
plan of liquidation that provides for, contemplates or the effectuation of
which is preceded by (a) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company otherwise than
substantially as an entirety (Section 5.1 of this Indenture being the Section
hereof which governs any such sale, lease, conveyance or other disposition
substantially as an entirety) and (b) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and
of the remaining assets of the Company to the holders or capital stock of the
Company, unless the Company, prior to making any liquidating distribution
pursuant to such plan, makes provision for the satisfaction of the Company's
Obligations hereunder and under the Securities as to the payment of principal
and interest.
ARTICLE 5
SUCCESSORS
Section 5.1 When the Company May Merge, etc.
The Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to another corporation, Person or
entity unless (a) the Company is the surviving corporation or the entity or
the Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof,
or the District of Columbia; (b) the entity or Person formed by or surviving
any such consolidation or merger (if other than the Company) or the entity or
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made assumes all the obligations of the Company
pursuant to a supplemental Indenture, under the Securities and this Indenture;
and (c) immediately after such transaction no Default or Event of Default
exists.
Section 5.2 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1, the successor corporation formed by such
consolidation or into or with which the Company, is merged or to which such
sale, lease, conveyance or other disposition is made shall succeed to and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person has been named
as the Company herein; provided however, that the Company shall not be
released or discharged from the obligation to pay the principal of or interest
on the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in payment of interest on a Security when the
same becomes due and payable and the Default continues for a period of 30
days, whether or not such payment is prohibited by the provisions of Article
10 hereof;
(2) the Company defaults in the payment of the principal of any Security
when the same becomes due and payable at maturity, upon a required redemption
or otherwise. and the Default continues for a period of 30 days, whether or
not prohibited by the provisions of Article 10 hereof;
(3) the Company fails to observe or perform any covenant, condition or
agreement on the part of the Company to be observed or performed pursuant to
Section 4.6 or 5.1 hereof;
(4) the Company falls to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture and the
Default continues for the period and after the notice specified below;
(5) the Company pursuant to or within the meaning of any Bankruptcy Law
(a) commences a voluntary case; (b) consents to the entry of an order for
relief against it in an involuntary case; (c) consents to the appointment of a
custodian of it or for all or substantially all of its property; (d) makes a
general assignment for the benefit of its creditors; or (e) admits in writing
its inability to pay debts as the same become due; or
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (a) is for relief against the Company in an
involuntary case: (b) appoints a Custodian of the Company or for all or
substantially all of Its property; (c) orders the liquidation or the Company,
and the order or decree remains unstayed and in effect for 120 consecutive
days; and
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, Liquidator or similar official under any
Bankruptcy law.
A Default under clause (3) or (4) of Section 6.1 is not an Event of
Default until the Holders of at least a majority in principal amount of the
then outstanding Securities notify the Company of the Default and the Company
does not cure the Default or such Default is not waived within 60 days after
receipt of the notice. The notice must specify the Default and demand that it
be remedied and state that the notice is a "Notice of Default."
Section 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (5) or (6) of Section 6.1) occurs and is continuing, the Holders of at
least a majority in principal amount of the then outstanding Securities by
written notice to the Company, may declare the unpaid principal of and any
accrued interest on all the Securities to be due and payable. Upon such
declaration the principal and interest shall be due and payable immediately;
provided, however, that if any Indebtedness or Obligation is outstanding
pursuant to the Senior Debt, upon a declaration of acceleration by the
Holders, all principal and interest under this Indenture shall be due and
payable upon the earlier of (I) the day which is 5 Business Days after the
receipt by each of the Company and the holders of Senior Debt of such written
notice of acceleration or (ii) the date of acceleration of any indebtedness
under any Senior Debt. If an Event of Default specified in clause (5) or (6)
of Section 6.1 occurs, such an amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of any Holder. The Holders of a majority in principal amount of the then
outstanding Securities by written notice to the Company may rescind an
acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default (except
nonpayment of principal or interest that has become due solely because of the
acceleration) have been cured or waived.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Holders may pursue
any available remedy to collect the payment of principal or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
A delay or omission by any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.4 Waiver of Past Defaults.
Holders of a majority in principal amount of the then outstanding
Securities by notice to the Company may waive an existing Default or Event of
Default and its consequences except a continuing Default or Event of Default
in the payment of the principal of or interest on any Security held by a non
consenting Holder. Upon actual receipt of any such notice of waiver by an
Officer of the Company, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.5 Control by Majority.
The Holder of a majority in principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Holders or exercising any power held by them.
Section 6.6 Limitation on Suits
A Securityholder may pursue a remedy with respect to this Indenture or
the Securities only if:
(1) the Holder gives to the Company written notice of a continuing Event
of Default;
(2) the Company does not cure the Default within the time limits
specified in this Indenture.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
Section 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, but subject to
Article 10 hereof, the right of any Holder of a Security to receive payment of
principal and interest on the security, on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of the Holder.
Section 6.8 Collection Suit by Holders.
If an Event of Default specified in Section 6.1(1) or (2) occurs and is
continuing, the Holders of a majority in principal amount of the then
outstanding Securities, a committee or association organized by them, is
authorized to recover judgment in its own name and as trustee of an express
trust against the Company for the whole amount of principal and interest
remaining unpaid on the Securities and interest on overdue principal and to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the majority of Holders,
its agents and counsel.
Section 6.9 Holders by Committee or Association May File Proofs of Claim.
A Committee or Association of Holders of a majority in principal amount
of the then outstanding Securities is authorized to file such proofs of claim
and other papers or documents as may be necessary or advisable in order to
have the claims of the Securityholders allowed in any judicial proceedings
relative to the Company (or any other obligor upon the Securities), its
creditors or its property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on
any such claims and any custodian in any such judicial proceeding is hereby
authorized by each Securityholder to make such payments to such Committee or
Association. Nothing herein contained shall be deemed to authorize such
Committee or Association to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Committee or Association to vote in respect of
the claim of any Securityholder in any such proceeding.
If the Securityholders or their Committee or Association does not file a
proper claim or proof of debt in the form required in any such proceeding
prior to 30 days before the expiration of the time to file such Claims or
proofs, then any holder of Senior Debt shall have the right to demand for, sue
for, collect and receive the payments and distributions in respect of the
Securities which are required to be paid or delivered to the holders of Senior
Debt as provided in Article 10 hereof and to file and prove all claims
therefor and to take all such other action in the name of the Holders or
otherwise, as such holder of Senior Debt may determine to be necessary or
appropriate for the enforcement of the provisions of Article 10.
Section 6.10 Priorities.
If such Committee or Association collects any money pursuant to this
Article, it shall, subject to the provisions of Article 10 hereof, pay out the
money in the following order:
First: to its agents and attorneys for amounts due under Section 7.7,
including payment of all compensation, expenses and liabilities incurred, and
all advances made, if any, by the Committee or Association and the costs and
expenses of collection;
Second: to holders of Senior Debt to the extent required by Article 10
hereof;
Third: to Securityholders for amounts due and unpaid on the Securities
for principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for principal
and interest, respectively; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Committee or Association may fix a record date and payment date for
any payment to Securityholders.
ARTICLE 7
TRUSTEE (not applicable)
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.1 Company's Obligations.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.7 and 8.4 and the Company's and Paying
Agent's obligations under Section 8.3 shall survive) when all outstanding
Securities theretofore authenticated and issued have been delivered (other
than destroyed, lost or stolen Securities which have been replaced or paid) to
the Company for cancellation and the Company has paid all sums payable by the
Company hereunder. In addition, the Company may terminate all of their
obligations under this Indenture if:
(1) the Company irrevocably deposits in trust, under the terms of an
irrevocable trust agreement, money or U.S. Government Obligations sufficient
(as certified by an independent public accountant designated by the Company)
to pay principal and interest on the Securities to maturity or redemption, as
the case may be, and to pay all other sums payable by it hereunder, provided
that (i) the trustee of the irrevocable trust shall have been irrevocably
instructed to pay such money or the proceeds of such U.S. Government
Obligations to the Securityholders and (ii) the trustee shall have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of said principal and interest with
respect to the Securities;
(2) the Company delivers to the trustee an Officers' Certificate stating
that all conditions precedent to satisfaction and discharge of this Indenture
have been complied with; and
(3) no Event of Default or event (including such deposit) which, with
notice or lapse of time, or both, would become an Event of Default with
respect to the Securities shall have occurred and be continuing on the date of
such deposit.
After such irrevocable deposit made pursuant to this Section 8.1 and
satisfaction of the other conditions set forth herein, the Company shall be
discharged from its obligation under this Indenture except for those
obligations surviving such discharge as specified from time to time herein.
In order to have money available on a payment date to pay principal or
interest on the Securities, the U.S. Government Obligations shall be payable
as to principal or interest at least one Business Day before such payment date
in such amounts as will provide the necessary money. U.S. Government
Obligations shall not be callable at the issuer's option.
Section 8.2 Application of Trust Money.
The trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.1. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal and interest on the
Securities.
Section 8.3 Repayment to Company.
The trustee and the Paying Agent shall promptly pay to the Company upon
written request any excess money or securities held by them at any time.
The trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for 2 years after the date upon which such payment shall
have become due; provided, however, that the Company shall have either caused
notice of such payment to be mailed to each Securityholder entitled thereto no
less than 30 days prior to such repayment or within such period shall have
published such notice in a newspaper of widespread circulation published in
the City of Ft. Lauderdale, Florida. After payment to the Company,
Securityholder entitled to the money must took to the Company for payment as
general creditors unless an applicable abandoned property law designates
another Person, and all liability of the trustee and such Paying Agent with
respect to such money shall cease.
Section 8.4 Reinstatement.
If the trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.2 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
the Company's obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.1 until such time as the trustee or Paying Agent is permitted to apply all
such money or U.S. Government Obligations in accordance with Section 8.2;
provided, however, that if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such
Securities to receive such payment, as long as no money is owed to the trustee
by the Company, from the money or U.S. Government Obligations held by the
trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
Section 9.1 Without Consent of Holders.
The Company may amend this Indenture or the Securities without the
consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply wish Section 5.1;
(3) to provide for uncertificated Securities in addition to certificated
Securities;
(4) to make any change that does not adversely affect the legal rights
hereunder of any Securityholder.
(5) make any change in the second paragraph of Article 3; provided,
however, that no such change shall adversely affect the rights of any
outstanding Security; or
(6) to comply with any requirements of the SEC.
Section 9.2 With Consent of Holders.
The Company may amend this Indenture or the Securities with the written
consent of the Holders of at least a majority in principal amount of the then
outstanding Securities. The Holders of a majority in principal of the then
outstanding Securities may also waive any existing default or compliance with
any provision of this Indenture or the Securities. However, without the
consent of each Securityholder affected, an amendment or waiver under this
Section may not (with respect to any Security held by a nonconsenting Holder):
(1) Reduce the principal amount of a Security whose Holder must consent
to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of Interest,
including default interest, on any Security;
(3) reduce the principal of or change the fixed maturity of any Security
or alter the redemption provisions or the price at which the Company shall
offer to purchase such Securities pursuant to Article 3 hereof:
(4) make any Security payable in money other than that stated in the
Security:
(5) Modify or eliminate the right of the estate of a Holder to cause the
Company to redeem a Security upon the death or Total Permanent Disability of a
Holder pursuant to Article 3; provided, however, that the Company may not
modify or eliminate such right, as it may be in effect on the Issue Date of
any Security which was issued with such right. After an amendment under this
subsection 9.1(5) becomes effective, the Company shall mail to the Holders of
each Security then outstanding a notice briefly describing the amendment;
(6) make any change in Section 6.4 or 6.7 hereof or in this sentence of
this Section 9.2;
(7) make any change in Article 10 that adversely affects the rights of
any Securityholder; or
(8) waive a Default or Event of Default in the payment of principal of,
or premium, if any, or interest on, or redemption payment with respect to, any
Security (except a rescission of acceleration of the Securities by the Holders
of at least a majority in aggregate principal amount of the Securities and a
waiver of the payment default that resulted from such acceleration).
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to the Holders of each Security affected thereby a notice
briefly describing the amendment or waiver. Any failure of the Company to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture or waiver. Subject to
Sections 6.4 and 6.7 of the Holders of a majority in principal amount of the
Securities then outstanding may waive compliance in a particular instance by
the Company with any provision of this Indenture or the Securities.
Section 9.3 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a security that evidences the
same debt an the consenting Holder's Security, even if notation of the consent
is not made on any Security. An amendment or waiver becomes effective in
accordance with its terms and thereafter binds every Securityholder.
The Company may fix a record data for determining which Holders must
consent to such amendment or waivers. If the Company fixes a record date. the
record date shall be fixed at (i) the later of 30 days prior to the first
solicitation of such consent or the date of the most recent list of Holders
furnished to the Trustee prior to such solicitation pursuant to section 2.5,
or (ii) such other date as the Company shall designate.
Section 9.4 Notation on or Exchange of Securities.
The Company may place an appropriate notation about an amendment or
waiver on any Security thereafter authenticated. The Company in exchange for
all Securities may issue new Securities that reflect the amendment or waiver.
Failure to make the appropriate notation or issue a new Security shall
not affect the validity and effect of such amendment or waiver
ARTICLE 10
SUBORDINATION
Section 10.1 Agreement to Subordinate.
The Company agrees, and each Securityholder by accepting a Security
consents and agrees, that the Indebtedness evidenced by the Securities and the
payment of the principal of and interest on the Securities is subordinated in
right of payment, to the extent and in the manner provided in this Article, to
the prior payment in full, in cash, cash equivalents or otherwise in a manner
satisfactory to the holder of Senior Debt, of all Obligations due in respect
of Senior Debt of the Company whether outstanding on the date hereof or
hereafter incurred, and that the subordination is for the benefit of the
holders of Senior Debt.
For purposes of the Article 10, a payment or distribution on account of
the Securities may consist of cash, property or securities, by set-off or
otherwise, and a payment or distribution on account of any of the Securities
shall include, without limitation, any redemption, purchase or other
acquisition of the Securities.
Section 10.2 Liquidation: Dissolution: Bankruptcy.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
(i) any dissolution or winding-up or total or partial liquidation or
reorganization of the Company whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy or (ii) any bankruptcy or insolvency
case or proceeding or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company or
to its assets, (iii) any assignment for the benefit of creditors or any other
marshaling of assets of the Company, all obligations due, or to become due, in
respect of Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt) shall first
indefeasibly be paid in full, or provision shall have been made for such
payment, in cash, cash equivalents or otherwise in a manner satisfactory to
the holders of Senior Debt. before any payment is made on account of the
principal of, premium, if any. or interest on the Securities, except that
Securityholders may receive securities that are subordinated to at least the
same extent as the Securities are to (x) Senior Debt and (y) any securities
issued in exchange for Senior Debt. Upon any such dissolution winding-up,
liquidation or reorganization, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Securities under this Indenture would be entitled,
except for the provisions hereof, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the Holders of the Securities under
this indenture If received by them, directly to the holders of Senior Debt
(pro rata to such holders on the basis of the amounts of Senior Debt held by
such holders) or their Representative or Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Debt may
have been issued, as their interests may appear, for application to the
payment of Senior Debt remaining unpaid until all such Senior Debt has been
indefeasibly paid in full, or provisions shall have been made for such
payment, in cash, cash equivalents or otherwise in a manner satisfactory to
the holder of Senior Debt, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior Debt,
(b) For purposes of this Article 10, the words "cash, property or
securities" shall not be deemed to include securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment
which are subordinated, to at least the same extent as the Securities, to the
payment of all Senior Debt then outstanding or to the payment of all
securities issued in exchange therefor to the holders of Senior Debt at the
time outstanding. The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of its property, as an
entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided in Article 5 shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purpose of this Section if
such other corporation shall, as part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article 5.
Section 10.3 Default on Designated Senior Debt.
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior Debt,
or any amount owing from time to time under or in respect of Senior Debt or in
the event that any nonpayment event of default with respect to any Senior Debt
shall have occurred and be continuing and shall have resulted in such Senior
Debt becoming or being declared due and payable prior to the date on which it
would otherwise have become due and payable, or (b) in the event that any
other non payment event of default with respect to any Senior Debt shall have
occurred and be continuing permitting the holders of such Senior Debt (or a
trustee on behalf of the holders thereof) to declare such Senior Debt due and
payable prior to the date on which it would otherwise have become due and
payable, then the Company shall make no payment, direct or indirect (including
any payment which may be payable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the
Securities) (other than securities that are subordinated to at least the same
extent as the Securities are to (x) Senior Debt and (y) any securities issued
in exchange for Senior Debt) unless and until (i) such event of default shall
have been cured or waived or shall have ceased to exist or such acceleration
shall have been rescinded or annulled, or (ii) in case of any nonpayment event
of default specified in (b, during the period (a "Payment Blockage Period")
commencing on the date the Company receives written notice (a "Payment
Notice") of such event of default (which notice shall be binding on the
Securityholders as to the occurrence of such an event of default) from a
holder of the Senior Debt to which such default relates and ending on the
earliest of (A) 179 days after such date, (B) the date, if any, on which such
Senior Debt to which such default relates is discharged or such default is
waived by the holders of such Senior Debt or otherwise cured and (C) the date
on which the Company receives written notice from the holder of such Senior
Debt to which such default relates terminating the Payment Blockage Period. No
new Payment Blockage Period may be commenced within 360 days after the receipt
by the Company of any prior Payment Blockage Notice For all purposes of this
Section 10.3, no Event of Default which existed or was commencing with respect
to the Senior Debt to which a Payment Blockage Period relates on the date such
Payment Blockage Period commenced shall be or be made the basis for the
commencement or any subsequent Payment Blockage Period unless such event of
default is cured or waived for a period of not less than 180 consecutive days.
Section 10.4 When Distribution Must Be Paid Over
If any Securityholder receives any payment with respect to the
Securities, whether in cash property or securities (other than securities that
are subordinated to at least the same extent of the Securities are to (x)
Senior Debt and (y) any securities issued in exchange for Senior Debt at a
time when such payment is prohibited by Article 10 hereof), such payment shall
he held by such Securityholder, in trust for the benefit of, and shall be paid
forthwith over and delivered to, the holders of Senior Debt (pro rata to such
holders on the basis of the amount of Senior Debt held by such holders) for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full, in
cash, cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Debt, in accordance with the terms of such Senior Debt, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Debt.
Section 10.5 Notice by Company.
The Company shall promptly notify the Securityholders and the Paying
Agent in writing of any facts known to the Company that would cause a payment
of any Obligations with respect to the Company to violate this Article, but
failure to give such notice shall not affect the subordination of the
Securities to the Senior Debt provided in this Article.
Section 10.6 Subrogation.
After all Senior Debt is paid in full, in cash, cash equivalents or
otherwise in a manner satisfactory to the holders of such Senior Debt, and
until the Securities are paid in full Securityholders shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the
Securities) to the rights of holder of Senior Debt to receive distributions
applicable to Senior Debt to the extent that distributions otherwise payable
to the Securityholders have been applied to the payment of Senior Debt. A
distribution made under this Article to holders of Senior Debt which otherwise
would have been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on the Senior Debt.
Section 10.7 Relative Rights.
This Article defines the relative rights of Securityholders and holders
of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the obligation
of the Company, which an absolute and unconditional, to pay principal of and
interest on the Securities in accordance with their terms;
(2) affect the relative rights of Securityholders and creditors of the
Company other than their rights in relation to holders of Senior Debt; or
(3) prevent any Securityholder from exercising its available remedies
upon a Default or Event of Default, subject to the rights of holders and
owners of Senior Debt to receive distributions and payments otherwise payable
to Securityholders.
If the Company fails because of this Article to pay principal of or
interest on a Security on the due date, the failure is still a Default or
Event of Default.
Section 10.8 Subordination May Not Be Impaired by the Company or Holders
of Senior Debt.
No right of any present or future holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Securities and the
Obligations related thereto shall be prejudiced or impaired by any act or
failure to act by any such holder or by the Company, or any Agent or by the
failure of the Company to comply with this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged
with.
Without limiting the effect of the preceding paragraph, any holder of
Senior Debt may at any time and from time to time without the consent of or
notice to any other holder or to the Company, without impairing or releasing
any of the rights of any holder of Senior Debt under this Indenture, upon or
without any terms or conditions and in whole or in part:
(a) change the manner, place or term of payment, or change or extend the
time of payment of, renew or alter any Senior Debt or any other liability of
the Company to such holder, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the provisions of this Article
10 shall apply to the Securities as so changed, extended, renewed or altered;
(b) notwithstanding the provisions of Section 5.1 hereof, sell,
exchange, release, surrender, realize upon or otherwise deal with in any
manner and in any order any property by whomsoever at any time pledged or
mortgaged to secure, or howsoever securing, any Senior Debt or any other
liability of the Company to such holder or any other liabilities incurred
directly or indirectly in respect thereof or hereof or any offset there
against;
(c) exercise or refrain from exercising any rights or remedies against
the Company or others or otherwise act or refrain from acting or, for any
reason, fail to file, record or otherwise perfect any security interest in or
lien on any property of the Company or any other Person; and
(d) settle or compromise any Senior Debt or any other liability of the
Company to such holder, or any security therefor, or any liability incurred
directly or indirectly in respect thereof.
All rights and interests under this Indenture of any holder of Senior
Debt and all agreements and obligations of the Holders, and the Company under
Article 6 and under this Article 10 shall remain in full force and effect
irrespective of (i) any lack of validity or enforceability of any agreement or
instrument relating to any Senior Debt or (ii) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, any
Holder or the Company.
Any holder of Senior Debt is hereby authorized to demand specific
performance of the provisions of this Article 10, whether or not the Company
shall have complied with any of the provisions of this Article 10 applicable
to it, at any time when any Holder shall have failed to comply with any of
these provisions. The Holders irrevocably waive any defense based on the
adequacy of a remedy at law that might be asserted as a bar to such remedy of
specific performance.
Section 10.9 Distribution Or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Securityholders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending
or upon any certificate of any representative of any holder of Senior Debt and
of the liquidating trustee or agent or other Person making any distribution,
delivered to the Securityholders, for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 10.
Section 10.10 Rights of Paying Agent.
Notwithstanding the Provisions of this Article 10 or any other provision
of this Indenture, the Paying Agent (other than the Company) shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment or distribution by the Paying Agent, or the taking of
any action. The Paying Agent may continue to make payments on the Securities
unless it shall have received at least 5 Business Days prior to the date of
such payment written notice of facts that would cause the payment of any
Obligations with respect to the Securities to violate this Article, which
notice, unless specified by a holder or Senior Debt as such, shall not be
deemed to be a Payment Notice. The Paying Agent may conclusively rely on such
notice. Only the Company or a holder of Senior Debt may give the notice.
Section 10.11 Authorization to Effect Subordination.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Company on his behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Senior Debt and the
Securityholders, the subordination as provided in this Article 10.
Section 10.12 Article Applicable to Paying Agent.
In case at any time any Paying Agent (other than the Company) shall have
been appointed by the Company and be then acting hereunder, the term "trustee"
as used in this Article 10 shall in such case (unless the context otherwise
requires) be construed as extending to and including each Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article 10 in addition to or in place of the trustee.
Section l0.l3 Miscellaneous.
(a) The agreements contained in this Article 10 shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Senior Debt is rescinded or must otherwise be returned by any
holder of Senior Debt upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, all as though such payment had not been made.
(b) The Company shall notify all holders of Senior Debt of the existence
of any Default or Event of Default under section 6.1
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices.
Any notice, instruction, direction, request or other communication by the
Company, the Paying Agent or any holder of Senior Debt to the others is duly
given if in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
RIVERBANK FACTORS, INC.
800 West Oakland Park Blvd., Suite 100
Ft. Lauderdale, Florida 33421
If to a holder of Senior Debt, such address as such holder of Senior Debt
shall have provided in writing to the Company.
The holder of Senior Debt by notice to the Company may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Securityholders)
shall be deemed to have been duly given at the time delivered by hand, if
personally delivered; 5 Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery
to the courier, if sent by overnight air courier guaranteeing next day
delivery.
Any notice or communication to a Securityholder shall be mailed by first
class mail, certified or registered, return receipt requested, to his address
shown on the register kept by the Registrar. Failure to mail a notice or
communication to a Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to each Paying Agent at the same time.
Section 11.3 Communication by Holders with Other Holders.
Securityholders may communicate with other Securityholders with respect
to their rights under this Indenture or the Securities.
Section 11.4 Rules by Majority Securityholders or Committee or
Association or Agents.
The holders of a majority of then outstanding Securities or their
committee or association or agent may make reasonable rules for action by or
at a meeting of Securityholders and make reasonable rules and set reasonable
requirements for its functions.
Section 11.5 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the City of Ft. Lauderdale or at a place of payment are
authorized or obligated by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a legal
Holiday, and no interest shall accrue for the intervening period.
Section 11.6 No Recourse Against Others.
No director, officer, employee, agent, manager or stockholder of the
Company as such shall have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each Securityholder by
accepting a Security waives and releases all such liability.
Section 11.7 Duplicate Originals.
The parties may sign any number of copies of this Indenture. One signed
copy is enough to prove this Indenture.
Section 11.8 Governing Law.
THE INTERNAL LAW OF THE STATE OF FLORIDA SHALL GOVERN THIS INDENTURE AND
THE SECURITIES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
Section 11.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company. Any such indenture, loan or debt agreement may
not be used to interpret this Indenture.
Section 11.10 Successors.
All agreements of the Company in this Indenture and the Securities shall
bind its successors.
Section 11.11 Severability.
In case any Provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 11.12 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
SIGNATURES
Dated as of _________________ 1997
RIVERBANK FACTORS, INC.
By:_______________________________________
Name: Shlomo Rasabi
Title: Chairman
Attest:
_____________________(Seal)
(Face of Security)
__% SUBORDINATED INVESTMENT NOTE
No.______ $ _________
RIVERBANK FACTORS, INC.
promises to pay to
or registered, permitted assigns,
the principal sum of________________________________________________ Dollars
on___________
Payment Dates : commencing
Regular Dates
Dated:
RIVERBANK FACTORS, INC.
By:____________________________
_______________________________
_______________________________
_______________________________
Officer of the Company
Attest ___________________
Officer of the Company
(SEAL)
RIVERBANK FACTORS, INC.
UNSECURED, SUBORDINATED INVESTMENT NOTE
Due__________________
$___________ Ft Lauderdale, Fl.
[issue date]
RIVERBANK FACTORS, INC., a Florida corporation, herein called the Company, for
value received, hereby promises to pay to ___________ , or registered
permitted assigns ("Holder"), the sum of $______ on __________ and to pay
interest on such principal sum at the rate at_______ % per annum computed from
the Interest Accrual Date, payable [monthly, quarterly, semi-annually,
annually, at maturity]. Payment of the principal of and interest on this Note
will be made in accordance with the terms of the Deed Poll Indenture (as
herein defined):
Interest payments shall be made by check delivered by mail to the address of
the Holder appearing on the Note register maintained by the Registrar (which
address may be changed from time to time by notice given by holder in writing
to the Registrar) on the Regular Record Date preceding the subject Payment
Date; principal and interest payment at the end of the term hereof shall be
made in person to Holder at the offices or agency of the Paying Agent in
exchange for this Note. Holder shall be notified prior to such payment or the
address at which such payment shall occur. Initially, the Company will act as
Paying Agent and Registrar. The Company may change any Registrar or Paying
Agent without prior notice to Holder.
All payments hereunder shall be made in such coin or currency of the United
States of America as at the time of payment is legal tender for payment or
public and private debts. All computations of interest due with respect to
this Note shall be made based upon the actual number of days (e.g., 365 or
366) in the applicable year.
This Note is being issued pursuant to a Deed Poll Indenture ("Indenture")
dated as of ____________ between the Company and the Holders of the Notes in
connection with an offering by the Company of an aggregate of $4,900,000 U.S.
principal amount Unsecured, Subordinated Investment Notes as described in the
Company's Registration Statement on Form SB-2, dated _______ and a current
interest rate supplement thereto (the "Offering"), The term's of the Notes
include those stated in the Indenture. The notes are subject to all such
terms, and Holder is referred to the Indenture for a statement of such terms.
All capitalized terms not otherwise defined herein shall have the meaning
given to such term's in the Indenture.
1. Subordination. The indebtedness evidenced by this Note shall be postponed
and subordinated - is subject in right of payment, to the extent and in the
manner set forth In the Indenture, to the prior payment in full of all "Senior
Debt" of the Company. "Senior Debt" means any indebtedness (whether
outstanding on the date of issuance of this note or thereafter created)
incurred by the Company in connection with borrowings by the Company
(including its subsidiaries, if any) from a bank, trust company, insurance
company, or from any other institutional lender whether such Indebtedness is
or is not specifically designated by the Company as being "Senior Debt" in its
defining instruments. The Company agrees, and Holder by accepting this Note
consents and agrees to the subordination provided for in the Indenture.
2. Subrogation. As more fully set forth in the Indenture. subject to the
payment in full of all Senior Debt of the Company, Holder shall be subrogated
to the rights of the holders of Senior Debt of the Company to receive payments
or distributions of assets of the Company made on the Senior Debt of the
Company until the principal of and interest on this Note shall be paid in
full, and for purposes of such subrogation, no such payments or distributions
to the holders of Senior Debt of the Company of cash, property or securities,
which otherwise would be payable or distributable to Holder, shall as between
the Company, its creditors other than the holders of Senior Debt of the
Company, and Holder, be deemed to be a payment by the Company to or on
account of this Note, it being understood that the provisions of this
paragraph are intended solely for the purpose of defining the relative rights
of Holder, on the one hand, and the holders of Senior Debt of the Company, on
the other hand.
3. Nonimpairment. Nothing contained in this Note in intended to or shall
impair, as between the Company, the Company's creditors other than the holders
of Senior Debt of the Company, and Holder, the obligation of the Company,
which is absolute and unconditional, to pay to Holder the principal of and
interest on this Note, as and when the same shall become due and payable in
accordance with its terms, and which, subject to the rights under Article 10
of the Indenture of the holders of Senior Debt of the Company, is intended to
rank equally with all other general obligations of the Company. In addition,
nothing contained in this Note is intended to or shall affect the relative
rights of Holder and creditors of the Company other than the holders of Senior
Debt of the Company, nor shall anything herein or therein prevent the Holder
of this Note from exercising all remedies otherwise permitted by the Indenture
and applicable law upon the occurrence of an Event of Default, subject to the
rights if any, under Article 10 of the Indenture of the holders of Senior Debt
of the Company in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
4. Mandatory Redemption. Except as provided in Article 3 of the Indenture
with respect to the Company's obligation to redeem Notes at the request of a
Holder in the event of Holder's Total Permanent Disability, the estate of a
Holder (in the event of Holder's death) or a jointholder (in the event this
Note is held jointly by a husband and wife and one spouse suffers a Total
Permanent Disability or dies), the Company has no mandatory redemption or
sinking fund obligations with respect to this Note.
5. Events of Default. An Event of Default is:
(a) Default in the payment of any interest upon this Note when it becomes due
and payable and continuance of such default for a period of 30 days; or
(b) Default in the payment of principal of this Note when it becomes due and
payable at maturity, upon redemption or otherwise; or
(c) Failure by the Company to comply with any of its agreements upon a
liquidation, consolidation, merger or transfer of substantially all of the
Company's assets; or
(d) Failure by the Company for 60 days after notice to comply with any of its
other agreements in the Indenture or this Note; or
(e) Certain events of bankruptcy or insolvency.
If an Event of Default occurs and is continuing, the holders of at least
twenty five percent [25%] in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes become due and payable immediately without
further action or notice. Holders of Notes may not enforce the Indenture or
the Notes except as provided in the Indenture.
6. Transfer and Exchange. The transfer of Notes may be registered and
Notes may be exchanged as provided in the Indenture. This Note may not be
assigned, transferred or otherwise alienated without prior written consent of
the Company (which consent shall not be unreasonably withheld), subject to the
Company's right to demand and receive an opinion of Holder's legal counsel
(which counsel shall be reasonably acceptable to the Company) that the
transfer does not violate any applicable securities laws.
7. Optional Extension. At least seven days prior to a Note's stated
Maturity Date, the Company will notify the registered Holder (existing as of
the applicable Maturity Record Dated) by mail of such pending Maturity Date.
The notice will be accompanied by a renewal form, a Prospectus, and a
Prospectus Supplement specifying the current rates being paid by the Company
on unsold Notes. Such notice shall also state that payment of principal of a
Note shall be made upon presentation and surrender of such Note and shall
specify the place where such Note may be presented and surrendered for the
making of such payment. The Holder, at its sole option, may renew such Note by
completing the renewal form or by letter or telephone to the Company
indicating the Holder's intention to renew such Note, and by delivering such
communication to the Company within seven days after the original Maturity
Date. The extension of any Note shall constitute a new investment decision by
the Holder thereof.
Interest shall continue to accrue at then current rates from the first day of
such renewed term. Such Note, as renewed, will continue in all its
provisions, including provisions relating to payment; except that the interest
rate payable during any renewed term shall be the interest rate which is then
being offered by the Company on similar Investment Notes being offered as of
the renewal date. If the Company does not receive proper communication of the
holder's intent to renew such Note with seven days of the original maturity
date, interest will accrue after the Maturity Date until the date of payment
at the rate being paid on such Security immediately prior to its Maturity
Date.
8. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
9. Amendments and Waivers. Subject to certain exceptions, the Indenture or
the Notes may be amended or supplemented and any existing default under, or
compliance with any provision of, the Indenture may be waived with the written
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding. Without the consent of any Holder, the Company may amend or
supplement the Indenture or the Notes to cure any ambiguity, defect or
inconsistency; to provide for uncertificated Securities in addition to or in
place of certificated Securities; to comply with Section 5.01 of the
Indenture; to change the elective redemption provisions applicable upon the
death or Total Permanent Disability of a Holder (but only to the extent such
change does not alter such rights with respect to any outstanding Note); to
make any change that would provide any additional rights or benefits to the
Holder; or to comply with requirements of the SEC.
10. No Trustee. The Deed Poll Indenture does not contain any provision for
the appointment of a trustee for the equal and ratable benefit of the Holders.
11. No Recourse Against Others. A director, officer, employee, incorporator
or stockholder, of the Company, as such, shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Notes.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
RIVERBANK FACTORS, INC.
800 West Oakland Park Blvd.
Suite 100
Ft. Lauderdale, Florida 33311
Telephone: 954-564-9400
Attention: President
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form SB-2 Registration Statement
Amendment No. 4 of Riverbank Factors, Inc. our report dated January 24, 1997,
except for Note 4 which is dated May 15, 1997, relating to the balance sheet of
Riverbank Factors, Inc. and to the reference to our firm under the caption
Experts as of December 31, 1996, which appear in such Form SB-2 Registration
Statement Amendment No. 4.
/WEINBERG, PERSHES & COMPANY, P.A./
Certified Public Accountants
Boca Raton, FL
August 1, 1997
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