As filed with the Securities and Exchange Commission on March 17, 1997
Registration No.
============================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
RIVERBANK FACTORS, INC.
Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
Florida 6153 65-0703758
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<S> <C> <C>
State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
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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. / /
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. / /
<PAGE>
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. / /
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.
RIVERBANK FACTORS, INC.
Cross-Reference Sheet
Showing Location in the Prospectus of Information
Required by Part I of Form SB-2: Items 1 through 23
Item in Form SB-2
PROSPECTUS CAPTION
1
.
Front of Registration
Statement and Outside
Front Cover Page of
Prospectus
Facing Page of
Registration
Statement: Front
Cover Page of
Prospectus
2
.
Inside Front and Outside
Back Cover Pages of
Prospectus
Inside Front Cover
Page and Outside
Back Cover Page of
Prospectus
3
.
Summary Information and
Risk Factors
Prospectus
Summary; Risk
Factors
4
.
Use of Proceeds
Prospectus
Summary; Use of
Proceeds
5
.
Determination of
Offering Price
Prospectus
Summary;
Description of
Securities
6
.
Dilution
*
7
.
Selling Security Holders
*
8
.
Plan of Distribution
Inside front
Cover; Prospectus
Summary; Plan of
Distribution
9
.
Legal Proceedings
Legal Proceedings
1
0
.
Directors, Executive
Officers, Promoters and
Control Persons
Management;
Business
1
1
.
Security Ownership of
Certain Beneficial
Owners and Management
Security Ownership
of Certain
Beneficial Owners
and Management
1
2
.
Description of
Securities
Description of
Securities
1
3
.
Interest of Named
Experts and Counsel
Experts; Legal
Matters
1
4
.
Disclosure of Commission
Position on
Indemnification for
Securities Act
Liabilities
Management
1
5
.
Organization within Last
Five Years
Prospectus
Summary; The
Company: Business
1
6
.
Description of Business
Risk Factors:
Business: Recent
Transactions
1
7
.
Management's Discussion
and Analysis
or Plan of Operation
Management's
Discussion and
Analysis
1
8
.
Description of Property
Business- -
Property
1
9
.
Certain Relationships
and Related Transactions
Certain
Relationships and
Related
Transactions
2
0
.
Market for Common Equity
and Related Stockholder
Matters
Outside Front
Cover Page of
Prospectus;
Description of
Securities; Market
for the Company's
Securities
2
1
.
Executive Compensation
Executive
Compensation
2
2
.
Financial Statements
Summary Financial
Information;
Financial
Statements
2
3
.
Changes in and
Disagreements With
Accountants on
Accounting and Financial
Disclosure
*
* Not applicable.
SUBJECT TO COMPLETION DATED MARCH 12, 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. The Investment Notes will be subordinated to all "Senior Debt" of
the Company (as hereinafter defined), which includes the debt of Riverbank and
its subsidiaries, if any. 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
issuedfor 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 depend on the term to maturity chosen by the
purchaser of the Notes. The Notes may be extended by the Company; at its
option, for an identical term unless the holder thereof requests repayment
within seven (7) days of the original maturity date. Interest rates paid will
depend upon the term to maturity of the Investment Note. 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 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."
The Company presently has no indebtedness outstanding which ranks pari passu
in right of payment to the Investment Notes offered hereby. Such indebtedness,
when it occurs, will represent 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 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 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 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 ADDITIONALDEBT 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 UNDERTAKEN 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 _ 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.
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
Price to Discounts and Proceeds to
Public Commissions(2) Company(2)(3)
Per Note.............. $1,000 0 $1,000
Total ................ $4,900,000 0 $4,900,000
(1) The Investment Notes will be issued at their face principal value of
$1,000, without discount.
(2) Riverbank 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 an agreement concerning the use of the services of any broker-dealer is
reached, 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."
(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 March 12, 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.
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 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.
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. 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 is 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 and
consultants 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. Not all maturities will be available at any given
time. 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.
The interest rate payable on the Investment Notes offered hereby will be fixed
by the Company from time to time based on market conditions and the Company's
financial requirements. Once determined, the rate of interest payable on a
Note will remain fixed for the original term of the Investment Note. The
actual rate payable on a Note will be determined at the time of issuance based
principally upon market conditions and the length of the term of each Note.
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 compounded
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.
Seven (7) days prior to the expiration of the applicable term of an Investment
Note, if the Company does not notify the holder of its intention to repay the
Investment Note it will be extended for an identical term, unless, within
seven (7) days after the relevant maturity date, the holder requests
repayment. Notices will be delivered to the holder regarding upcoming maturity
dates. As a courtesy, the Company provides a request for repayment form with
such notice. Use of such form by a holder is not a condition of repayment.
Requests for repayment may also be made to the Company by letter or telephone.
Any such Investment Notes which are so extended will be extended at the
interest rate then being offered by the Company for newly issued Investment
Notes of like term and denomination. The renewal rate could be higher or lower
than the original interest rate.
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. See
"Use of Proceeds."
Until such time as the proceeds are utilized, they will be placed in the
Company's commercial account or invested in liquid, short term investments.
There are no formal restrictions with respect to the types of such short term
investments that may be made by the Company but, in practice, the Company
typically places such funds in its commercial account pending their use. See
"Use of Proceeds."
RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Investment Notes.
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 source to provide additional capital to the
Company under any circumstances. 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.
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.
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 conduct its ongoing
operations. The Company's revenues from operations, including the sale of
loans from its portfolio, 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."
Risks of Making Loans Secured by Real Property. The Company will make
loans based on independent appraiser estimates of the fair market value of the
real estate offered to collateralize its loans. Current internal credit
guidelines of the Company for business loans to be kept in its portfolio
generally provide for a maximum overall loan to value ratio of 75% of the
appraised value of the real estate collateral. It is possible that the actual
resale value of the property collateralizing such loans may decrease below
appraised estimates of value. Notwithstanding the loan to value ratios
currently maintained by the Company, there can be no assurance that the market
value of the real estate 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 can be exacerbated by a concentration of similar oans in a single
geographical area where property values may tend to fall as a group. 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. The
Company hopes to minimize prepayment activity on its portfolio by imposing
pre-payment fees on its loans. Notwithstanding, certain agreements in
connection with home equity loans sold to unaffiliated lenders often require
that all or a portion of the fee be refunded if the loan is paid off during
the first six to twelve months after origination. See "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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."
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.
Residential 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. In the case of the Company, the that
collateral will from time to time be 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.
Reliance on Management. No Voting Rights. 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
members of senior level management 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." The holders of the Investment
Notes have no vote for the election of directors of the Company.
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 the real estate mortgages
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 make a mortgage 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
mortgage loan has been made.
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 does not have any institutional or other lines of credit
although it intends to pursue such lines in the future. The present lack of
such lines means that the Company is primarily if not entirely 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."
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 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."
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."
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 its asset value, book value, net worth
or any other established criteria of value or to the earnings potential of the
Company.
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.
Regulatory Restrictions and Licensing Requirements. The Company's planned
consumer home equity lending business is subject to extensive regulation,
supervision and licensing by federal, state and local governmental authorities
and is subject to various laws and judicial and administrative decisions
imposing requirements and restrictions on part or all of its operations. The
Company's planned consumer home equity lending activities will be subject to
the Federal Truth-in-Lending Act and Regulation Z (including the Home
Ownership and Equity Protection Act of 1994), the Federal Equal Credit
Opportunity Act and Regulation B, as amended ("ECOA'), the Federal Real Estate
Settlement Procedures Act ("RESPA') and Regulation X, the Home Mortgage
Disclosure Act and the Federal Debt Collection Practices Act, as well as other
federal and state statutes and regulations affecting the Company's activities.
The Company is also subject to examinations by state regulatory authorities
with respect to originating, processing, underwriting, selling, and servicing
loans. These rules and regulations, among other things, 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, fix maximum interest
rates, and fees. Failure to comply with these requirements can lead to,
termination or suspension of licenses, certain rights of rescission for
mortgage loans, 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 are
collateralized by chattel, such as equipment, rather than real estate as is
the case with mortgage loans. 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, 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.
No Indenture Trustee. The Investment Notes are being issued under a Deed
Poll Indenture. That means that the Investment Note Holders will not have the
benefit of an independent indenture trustee to enforce certain rights of the
Holders.
SELECTED FINANCIAL DATA
The following tables summarize the selected audited financial data for
Riverbank Factors, Inc. for the fiscal year ending December 31, 1996, which
statements include all adjustments that in the opinion of management of
Riverbank Factors, Inc., are considered necessary for a fair presentation of
the consolidated 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
Fiscal year ending December 31, 1996
<TABLE>
<CAPTION>
ITEM AMOUNT
<S> <C>
Operating Revenues $0
Operating income before income taxes, $0
& extraordinary items
Net income $0
Per common share data:
Net income -
Cash dividends declared:
Common stock $0
Preferred stock $0
</TABLE>
Balance Sheet Data
December 31, 1996
<TABLE>
<S> <C>
Total assets $10,000
Liabilities: -
Notes payable -
Accounts payable and accrued
expenses -
Stockholders' Equity $10,000
</TABLE>
USE OF PROCEEDS
The net proceeds resulting from the sale of the Notes are being, and will be,
utilized by the Company for its general corporate purposes. Proceeds from the
sale of the Notes may be used to replace some or all of the Company's Senior
Debt as such debt comes into existence. Corporate general purposes may also
include financing of future growth; establishment of real estate mortgage
portfolio; establishment of a business loan portfolio, and other finance
related activities. 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 INDENTURE
The Notes will be issued pursuant to a Deed Poll Indenture (the "Indenture")
between the Company and the Holders of the Investment Notes 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. The following includes a summary of
certain provisions of the Indenture, a copy of which is available from the
Company by mail to Riverbank Factors, Inc., 800 West Oakland Park Boulevard,
Suite 100, Ft. Lauderdale, FL 33311, or by telephone to (954) 564-9400. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Indenture, including the definitions therein of certain terms
used below.
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 agreement or
understanding between the Company and any shareholder or any other person to
extend credit or 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: The interest rates payable on the Investment Notes offered hereby
will be established by the Company from time to time based on market
conditions and the Company's financial requirements. The Company constantly
re-evaluates its interest rates based on such analysis. Once determined, the
rate of interest payable on an Investment Note will remain fixed for the
original term of the Investment Note. The interest rate payable on an
Investment Note will be determined based upon the maturity date and term
established for such Note upon subscription.
Interest on Investment Notes will be computed on the basis of an actual
calendar year and will compound 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.
The Company reserves the right to vary from time to time, in its discretion,
the interest rates it offers on the Investment Notes based on numerous factors
other than length of term to maturity. Such factors may include, but are not
limited to: the desire to attract new investors; Investment Notes in excess of
certain principal amounts; Investment Notes purchased for IRA and/or Keough
accounts; rollover investments; and Investment Notes beneficially owned by
persons residing in particular geographic localities. Presently the Company
does not vary the interest rates it offers to investors. However, the Company
may make a decision to vary interest rates in the future based on its fund
raising objectives including, but not limited to, the attraction of new
investors and the encouragement of the rollover of Investment Notes by current
holders, circumstances in the financial markets and the economy and other
factors, including, but not limited to, any additional costs incurred by the
Company in selling Investment Notes in a particular jurisdiction which may at
the time be relevant to the Company's operations.
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.
Automatic Extension: At least seven (7) days prior to an Investment
Note's stated maturity date, the Company will notify the registered holder of
such maturity date. If at such time, the Company does not notify the holder of
its intention to repay, subject to the holder's demand for repayment, the term
of such Note will be automatically extended. If, within seven (7) days after
an Investment Note's maturity date, the holder thereof has not demanded
repayment of such Note, and the Company has notified the holder of its
intention to extend such Note, such Note shall be extended for the same term
identical to the term of the original Investment Note. The Investment Notes
will continue to renew as described herein absent some action permitted under
the Indenture and the Notes by either the holder or the Company. Interest
shall continue to accrue 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 similar
Investment Notes are not then being offered, the interest rate upon renewal
will be the rate specified by the Company on or before the maturity date, or
the Note's current rate if no such rate is specified. If the Company gives
notice to a Noteholder of the Company's intention to repay an Investment Note
at maturity no interest will accrue after the date of maturity. Otherwise, if
a Noteholder requests repayment within seven (7) days after its maturity date,
the Company will pay interest during the period after its maturity date and
prior to repayment at the lower of (i) the lowest interest rate then being
paid on debt securities being offered by the Company to the general public or
(ii) the rate being paid on such Note immediately prior to its maturity. As a
courtesy, the Company provides a request for repayment form with such notice.
Use of such form by a holder is not a condition of repayment. Requests for
repayment may also be made to the Company by letter or telephone.
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 (including its subsidiaries) 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 not any Senior Debt outstanding. Any indebtedness of the
Company (including its subsidiaries), other than that described as Senior
Indebtedness, will have rights upon liquidation or dissolution equivalent to
that of the Noteholders. Prior to this Offering, the Company has a nominal
principal amount of indebtedness outstanding which ranks pari passu 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 Commission in order to effect or maintain the
qualification or the Indenture under the Trust Indenture Act.
Concerning a Trustee: The Indenture is a Deed Poll Indenture, which
means, generally that only the Company is a signatory. There is no provision
for an independent indenture trustee. As such, the holders of the Investment
Notes will have no right to direct the time, method and place of conducting
any proceeding or exercising any remedy available to an independent 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 may not be effective to waive
liabilities under the federal securities laws and 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.
Additional Securities: The Company may offer from time to time additional
classes of Notes with terms and conditions different from the Investment Notes
offered hereby. The Company will amend this Prospectus if and when it decides
to offer to the public any additional class of security hereunder.
Variations by State: The Company reserves the right to offer different
Investment Notes and to vary the terms and conditions of the offer (including,
but not limited to, additional interest payments and service charges for all
Investment Notes) depending upon the state where the purchaser resides.
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 operations or generated any
meaningful revenues from the limited operations that it may have 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. 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, consumer and home equity
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. 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. All loans that are collateralized by real estate will be by
a first or second mortgage lien on a principal residence or some other parcel
of real property; such as office and apartment buildings and mixed use
buildings, owned by the borrower, a principal of the borrower, or a guarantor
of the borrower. Generally, in these situations, 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; (ii)
requiring physical damage insurance 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, and (iv)
the purchase of an insurance policy that provides coverage up to $150,000 all
claims limit for skip, conversion and confiscation insurance, repossession
insurance, physical damage and installment loan insurance.
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 $200,00 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, the Company
will requires that title insurance be obtained in connection with its real
estate loans. In all instances, the Company will permit borrowers to prepay
such loans. Where permitted by applicable law, the Company may impose a
prepayment penalty. Whether a prepayment fee is imposed and the amount of such
fee, if any, will be negotiated between the Company and the individual
borrower prior to consummation of the loan.
Generally, the Company does not intend to make loans collateralized by
residential real estate where the overall loan to value ratio (based on
independent appraised fair market value) on the properties collateralizing the
loans is equal to or greater than seventy-five (75%) percent. Generally, the
Company does not intend to make a loan collateralized by commercial real
estate where the overall loan to value ratio (based on independent appraised
fair market value) is equal to or greater than sixty (60%) percent.
Occasionally, exceptions to these maximum levels may be made if other
collateral is available or if there are other compensating factors.
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 real or personal 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.
In the cases where real estate will be used as collateral, in determining
the adequacy of the mortgaged property as collateral, an appraisal will be
made of each property by an independent qualified appraiser and generally
includes pictures of comparable properties and pictures of the subject
property's interior.
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.
For real estate related loans, the Company will use the consulting
services of a licensed mortgage broker and also American Home Loan Mortgage
Corporation, an unaffiliated company, to evaluate real property collateral,
prepare loan closing documents, arrange for mortgage insurance, and otherwise
close the Company's real estate related loans. From time to time, the Company
will purchase from American Home Loan Mortgage Corporation all or a portion of
its portfolio of real estate loans.
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
real estate or other collateral 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 verifies
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.
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 an affiliated company at 800 W.
Oakland Park Blvd. In Ft. Lauderdale, Florida at no current rental expense.
The Company considers its office space adequate for its anticipated immediate
needs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following should be read in conjunction with " Selected Consolidated
Financial Data" and the notes thereto and the Riverbank Consolidated Financial
Statements and the notes thereto included elsewhere in this Prospectus.
The Company has no significant operations as of the date of this
Prospectus. The Company anticipates experiencing negative interest income and
net operating losses in the initial stage of its operations. 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 Financial Resources.
The Company had total assets of $10,000 on December 31, 1996. There was
no cash flow from operations or from investments or any other source. The
Company has a revolving credit agreement with a nonaffiliated company in the
amount of $1,200,000 of which $400,000 has been drawn for inventory financing
for four related companies at the date of this Prospectus. 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 Company believes that its capital resources generated
from cash flow from operations and from offering proceeds will be adequate to
fund its operations for the foreseeable future.
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. Mr. Rasabi is an Israeli citizen who resides permanently in the United
States.
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 Auotputer-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, will be paid cash and non-cash compensation of less than $1,000.
Officers and directors of the Company, including Messrs. Rasabi and Benjamin
were paid minimal cash and non-cash compensation in 1996, amounting to less
than $1,000 in the aggregate.
AGGREGATED OPTIONS/SAR EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTIONS/SAR VALUES
No options were granted to any person since inception October 24, 1996 and no
options/SAR were available in the last fiscal year.
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.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company common stock as of November 30, 1996 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.
<TABLE>
<CAPTION>
Name and Number of Shares
Percentage of
Position Beneficially Owned Class
<S> <C>
<C>
Steve Rasabi 500(1) 100
Chairman, President,
CEO, CFO
800 W. Oakland Park Blvd.,
#100 Ft. Lauderdale, FL
Daniel Benjamin - -
VP, Gen. Mgr.
General Manager
800 W. Oakland Park Blvd.,
#100 Ft. Lauderdale, FL
Landmark Finance, Inc. 500(1) 100
800 W. Oakland Park Blvd.
#100 Ft. Lauderdale, FL
All executive officers and 500
100
directors as a group
(2 persons)
</TABLE>
___________________
(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")[MPA1]. 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 the 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 Issuer will otherwise offer the Investment Notes through its employees.
Each of such employees will meet the requirements of Rule 3a4-1 promulgated
under the Securities Exchange Act of 1934 and will not be brokers nor
associated with any broker-dealer 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.
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 validity of the Investment Notes being offered hereby have been passed
upon for the Company by M. Peter Amaral, Esq.,P.O. Box 970771, Boca Raton, FL
33428.
EXPERTS
The balance sheet as of December 31, 1996 of Riverbank Factors, Inc. included
in this Prospectus, have 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.
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.
RIVERBANK FACTORS, INC.
REPORT
AS OF DECEMBER 31, 1996
RIVERBANK FACTORS, INC.
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. 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
RIVERBANK FACTORS, INC.
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
RIVERBANK FACTORS, INC.
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 it business plan and 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 3 - STOCKHOLDER'S EQUITY
The Company issued 500 shares of Common Stock at a par value $.01 per share to
one shareholder.
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 that:
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:
<TABLE>
<S> <C>
Registration Fees: $ 1,485
Printing: $ 5,000
Legal: $20,000
Accounting: $10,000
Blue Sky Fees: $ 3,000
</TABLE>
Item 26. Recent Sales of Unregistered Securities
On or about October 24, 1996 the Registrant sold, for cash consideration
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
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 Financial Data Schedule
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
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Ft. Lauderdale, Florida, on March 14, 1997.
RIVERBANK FACTORS, INC.
By: SHLOMO RASABI, President
Signature
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
SHLOMO RASABI
Signature
Chairman, President, Chief Executive Officer, Chief Financial Officer
March 14, 1997
INDEX TO EXHIBITS
ITEM NO. DESCRIPTION
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
23.1 Consent of counsel contained in 5.1
23.2 Consent of Weinberg, Pershes & Co., P.A.
ARTICLES OF INCORPORATION
OF
RIVERBANK FACTORS. INC.
The undersigned, a natural person competent to contract does hereby make,
subscribe and file these Articles of Incorporation for the purpose of
organizing a corporation under the laws of the State of Florida.
ARTICLE I
CORPORATE NAME
The name of this Corporation shall be: RIVERBANK FACTORS, INC.
ARTICLE II
PRINCIPAL OFFICE AND MAILING ADDRESS
The principal office and mailing address Of the Corporation is 800 West
Oakland Park Boulevard, Suite 100, Fort Lauderdale, Florida 33311.
ARTICLE Ill
NATURE OF CORPORATE BUSINESS AND POWERS
The general nature of the business to be transacted by this Corporation shall
be to engage In any and all lawful business permitted under the laws of the
United States and the State of Florida.
ARTICLE IV
CAPITAL STOCK
The maximum number of shares that this Corporation shall be authorized to
Issue end have outstanding at any one time shall be five hundred (500) shares
of common stock, par value S.01 per share.
ARTICLE V
TERM OF EXISTENCE
This Corporation shall have perpetual existence.
ARTICLE VI
REGISTERED AGENT AND
INITIAL REGISTERED OFFICES IN FLORIDA
The Registered Agent and the street address Of the initial Registered Office
of this Corporation in the state of Florida shall be:
Ellis Simring
800 W. Oakland Park Boulevard, Suite 100
Fort Lauderdale, FL 33311
ARTICLE VII
BOARD OF DIRECTORS
This Corporation shall have one (1) Director initially.
ARTICLE VIII
INITIAL DIRECTOR
The name and address of the initial Directors of this Corporation are:
Ellis Simring
800 West Oakland Park Boulevard
Suite 100
Fort Lauderdale, Florida 33311
ARTICLE VII
BOARD OF DIRECTORS
The Corporation shall have one (1) Director initially.
ARTICLE VII
INITIAL DIRECTOR
The name and address if the initial Director of this Corporation is:
Ellis Simring
800 West Oakland Park Boulevard
Suite 100
Fort Lauderdale, Florida 33311
The persons named as initial Directors shall hold office for the first year of
existence of this Corporation, or until their successors are elected or
appointed and have qualified, whichever occurs first
ARTICLE lX
INCORPORATOR
The name and address of the person signing these Articles of Incorporation as
the incorporator is Ellis Simring, 800 W. Oakland Park Boulevard, Suite 100
Fort Lauderdale, Florida 33311.
ARTICLE X
INDEMNIFICATION
This Corporation may indemnify any director, officer. employee or agent of the
Corporation to the fullest extent permitted by Florida law.
ARTICLE XI
AFFILIATED TRANSACTIONS
This Corporation expressly elects not to be governed by Section 607.0901 of
the Florida Business Corporation Act, as amended from time to time, relating
to affiliated transactions.
IN WITNESS WHEREOF, the undersigned Incorporator has executed the foregoing
Articles of Incorporation on the 24th day of October, 1998.
/s/ ELLIS SIMRING/
Ellis Simring, Incorporator
ARTICLE I
Offices
Section 1.01. Principal Office.
The principal office of the corporation in the State of Florida shall be
established at such places as the board of directors from Ume to time
determine.
Section 1.02. Registered Office.
The registered office of the corporation in the State of Florida shall be at
the office of its registered agent as stated in the articles of incorporation
or as the board of directors shall from time to time determine.
Section 1.03. Other Offices.
The corporation may have additional offices at such other places, either
within or without the State of Florida, as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
Meetings of Shareholders
Section 2.01. Annual Meeting.
(1) The corporation shall hold a meeting of shareholders annually, for the
election of directors and for the transaction of any proper business, at a
time stated in or fixed in accordance with a resolution of the board of
directors.
(2) Annual shareholders' meeting may be held in or out of the State of
Florida at a place stated in or fixed in accordance with a resolution by the
board of directors or, when not inconsistent with the board of directors'
resolution stated in the notice of the annual meeting. If no place is stated
in or fixed in accordance with these bylaws, or stated in the notice of the
annual meeting, annual meetings shall be held at the corporation's principal
office.
(3) The failure to hold the annual meeting at the time stated in or fixed in
accordance with these bylaws or pursuant to the Act does not affect the
validity of any corporate action and shall not work a forfeiture of or
dissolution of the corporation.
Section 2.02. Special Meeting.
(1) The corporation shall hold a special meeting of shareholders:
(a) On call of its board of directors or the person or persons authorized to
do so by the board of directors; or
(b) If the holders of not less than 10% of all votes entitled to be cast on
any issue proposed to be considered at the proposed special meeting sign, date
and deliver to the corporation's secretary one or more written demands for the
meeting describing the purpose or purposes for which it is to be held.
(2) Special shareholders' meetings may be held in or out of the State of
Florida at a place stated in or fixed in accordance with a resolution of the
board of directors, or, when not inconsistent with the board of directors'
resolution, in the notice of the special meeting. If no place is stated in or
fixed in accordance with these bylaws or in the notice of the special meeting,
special meetings shall be held at the corporation's principal office.
(3) Only business within the purpose or purposes described in the special
meeting notice may be conducted at a special shareholders' meeting.
Section 2.03. Shareholders' List for Meeting.
(1) After fixing a record date for a meeting, a corporation shall prepare a
list of the names of all its shareholders who are entitled to notice of a
shareholders' meeting, in accordance with the Florida Business Corporation Act
(the "Act"), or arranged by voting group, with the address of and the number
and class and series, if any, of shares held by, each.
(2) The shareholders' list must be available for inspection by any
shareholder for a period of ten days prior to the meeting or such shorter time
as exists between the record date and the meeting and continuing through the
meeting at the corporation's principal office, at a place identified in the
meeting notice in the city where the meeting will be held, or at the office of
the corporation's transfer agent or registrar. A shareholder or his agent or
attorney is entitled on written demand to inspect the list (subject to the
requirements of Section 607.1602(3) of the Act), during regular business hours
and at his expense, during the period it is available for inspection.
(3) The corporation shall make the shareholders' list available at the
meeting, and any shareholder or his agent or attorney is entitled to inspect
the list at any time during the meeting or any adjournment.
Section 2.04. Record Date.
(1) The board of directors may set a record date for purposes of determining
the shareholders entitled to notice of and to vote at a shareholders' meeting;
however, in no event may a record date fixed by the board of directors be a
date preceding the date upon which the resolution fixing the record date is
adopted.
(2) Unless otherwise fixed by the board of directors, the record date for
determining shareholders entitled to demand a special meeting is the date the
first shareholder delivers his demand to the corporation. In the event that
the board of directors sets the record date for a special meeting of
shareholders, it shall not be a date preceding the date upon which the
corporation receives the first demand from a shareholder requesting a special
meeting.
(3) If no prior action is required by the board of directors pursuant to the
Act, and, unless otherwise fixed by the board of directors, the record date
for determining shareholders entitled to take action without a meeting is the
date the first signed written consent is delivered to the corporation under
Section 607.0704 of the Act. If prior action is required by the board of
directors pursuant to the Act, the record date for determining shareholders
entitled to take action without a meeting is at the close of business on the
day on which the board of directors adopts the resolution taking such prior
action
(4) Unless otherwise fixed by the board of directors, the record date for
determining shareholders entitled to notice of and to vote at an annual or
special shareholders' meeting is the close of business on the day before the
first notice is delivered to shareholders.
(5) A record date may not be more than 70 days before the meeting or action
requiring a determination of shareholders.
(6) A determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless
the board of directors fixes a new record date, which it must do if the
meeting is adjourned to a date more than one 120 days after the date fixed for
the original meeting.
Section 2.05. Notice of Meetings and Adjournment.
(1) The corporation shall notify shareholders of the date, time and place of
each annual and special shareholders' meeting no fewer than 10 or more than 60
days before the meeting date. Unless the Act requires otherwise, the
corporation is required to give notice only to shareholders entitled to vote
at the meeting. Notice shall be given in the manner provided in Section
607.0141 of the Act, by or at the direction of the president, the secretary,
of the officer or persons calling the meeting.
ARTICLE Ill
Shareholder Voting
Section 3.01. Voting Group Defined.
A "voting group" means all shares of one or more classes or series that under
the articles of incorporation or the Act are entitled to vote and be counted
together collectively on a mailer at a meeting of shareholders. All shares
entitled by the articles of incorporation or the Act to vote generally on the
mailer are for that purpose a single voting group.
Section 3.02. Quorum and Voting Requirements for Voting Groups.
(1) Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the articles of incorporation or the Act provides
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
(2) Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting.
(3) If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless
the articles of incorporation or the Act requires a greater number of
affirmative votes.
Section 3.03. Action by Single and Multiple Voting Groups.
(1) If the articles of incorporation or the Act provides for voting by a
single voting group on a matter, action on that matter is taken when voted
upon by that voting group as provided in Section 3.02 of these bylaws.
(2) If the articles of incorporation or the Act provides for voting by two or
more voting groups on a matter, action on that matter is taken only when voted
upon by each of those voting groups counted separately as provided in Section
3.02 of these bylaws. Action may be taken by one voting group on a matter even
though no action is taken by another voting group entitled to vote on the
matter.
Section 3.04. Shareholder Quorum and Voting: Greater or Lesser Voting
Requirements.
(1) A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders, but in no event
shall a quorum consist of less than one-third of the shares entitled to vote.
when a specified item of business is required to be voted on by a class or
series of stock, a majority of the shares of such class or series shall
constitute a quorum for the transaction of such item of business by that class
or series.
(2) An amendment to the articles of incorporation that adds, changes or
deletes a greater or lesser quorum or voting requirement must meet the same
quorum requirement and be adopted by the same vote and voting groups required
to take action under the quorum and voting requirements then in effect or
proposed to be adopted, whichever is greater.
(3) If a quorum exists, action on a mailer, other than the election of
directors, is approved if the votes cast by the holders of the shares
represented at the meeting and entitled to vote on the subject matter favoring
the action exceed the votes cast opposing the action, unless a greater number
of affirmative votes or voting by classes is required by the Act or the
articles of incorporation.
(4) After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof
(5) The articles of incorporation may provide for a greater voting
requirement or a greater or lesser quorum requirement for shareholders (or
voting groups of shareholders) than is provided by the Act, but in no event
shall a quorum consist of less than one third of the shares entitled to vote.
Section 3.05. Voting for Directors: Cumulative Voting.
(1) Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
(2) Each shareholder who is entitled to vote at an election of directors has
the right to vote the number of shares owned by him for as many persons as
there are directors to be elected and for whose election he has a right to
vote. Shareholders do not have a right to cumulate their votes for directors
unless the articles of incorporation so provide.
Section 3.06. Voting Entitlement of Shares.
(1) Unless the articles of incorporation or the Act provides otherwise, each
outstanding share, regardless of class, is entitled to one vote on each mailer
submitted to a vote at a meeting of shareholders. Only shares are entitled to
vote.
(2) The shares of the corporation are not entitled to vote if they are owned,
directly or indirectly, by a second corporation, domestic or foreign, and the
first corporation owns, directly or indirectly, a majority of shares entitled
to vote for directors of the second corporation.
(3) This section does not limit the power of the corporation to vote any
shares, including its own shares, held by it in a fiduciary capacity.
(4) Redeemable shares are not entitled to vote on any matter, and shall not
be deemed to be outstanding, after notice of redemption is mailed to the
holders thereof and a sum sufficient to redeem such shares has been deposited
with a bank, trust company, or other financial institution upon an irrevocable
obligation to pay the holders the redemption price upon surrender of the
shares.
(5) Shares standing in the name of another corporation, domestic or foreign,
may be voted by such officer, agent, or proxy as the bylaws of the corporate
shareholder may prescribe or, in the absence of any applicable provision, by
such person as the board of directors of the corporate shareholder may
designate. In the absence of any such designation or in case of conflicting
designation by the corporate shareholder, the chairman of the board, the
president, any vice president, the secretary, and the treasurer of the
corporate shareholder, in that order, shall be presumed to be fully authorized
to vote such shares.
(6) Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of
such shares into his name or the name of his nominee.
(7) Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be
voted by him without the transfer thereof into his name.
(8) If a share or shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in
common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the
secretary of the corporation is given notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, then acts with respect to voting have
the following effect:
(a) If only one votes, in person or in proxy, his act binds all:
(b) If more than one vote, in person or by proxy, the act of the majority so
voting binds all;
(c) If more than one vote, in person or by proxy, but the vote is evenly
split on any particular matter, each faction is entitled to vote the share or
shares in question proportionally;
(d) If the instrument or order so filed shows that any such tenancy is held
in unequal interest, a majority or a vote evenly split for purposes of this
subsection shall be a majority or a vote evenly split in interest;
(e) The principles of this subsection shall apply, insofar as possible, to
execution of proxies, waivers, consents, or objections and for the purpose of
ascertaining the presence of a quorum;
(0 Subject to Section 3.08 of these bylaws, nothing herein contained shall
prevent trustees or other fiduciaries holding shares registered in the name of
a nominee from causing such shares to be voted by such nominee as the trustee
or other fiduciary may direct. Such nominee may vote shares as directed by a
trustee or their fiduciary without the necessity of transferring the shares to
the name of the trustee or other fiduciary.
Section 3.07. Proxies.
(1) A shareholder, other person entitled to vote on behalf of a shareholder
pursuant to Section 3.06 of these bylaws, or attorney in fact may vote the
shareholders shares in person or by proxy.
(2) A shareholder may appoint a proxy to vote or otherwise act for him by
signing an appointment form, either personally or by his attorney in fact. An
executed telegram or cablegram appearing to have been transmitted by such
person, or a photographic, photostatic, or equivalent reproduction of an
appointment form, is a sufficient appointment form.
(3) An appointment of a proxy is effective when received by the secretary or
other officer or agent authorized to tabulate votes. An appointment is valid
for up to ii months unless a longer period is expressly provided in the
appointment form.
(4) The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
authority under the appointment.
(5) An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest. Appointments coupled with an interest
include the appointment of: (a) a pledgee; (b) a person who purchased or
agreed to purchase the shares; (c) a creditor of the corporation who extended
credit to the corporation under terms requiring the appointment; (d) an
employee of the corporation whose employment contract requires the
appointment; or (e) a party to a voting agreement created in accordance with
the Act.
(6) An appointment made irrevocable under this section becomes revocable when
the interest with which it is coupled is extinguished and, in a case provided
for in Subsection 5(c) or 5(d), the proxy becomes revocable three years after
the date of the proxy or at the end of the period, if any, specified herein,
whichever is less, unless the period of irrevocability is renewed from time to
time by the execution of a new irrevocable proxy as provided in this section.
This does not affect the duration of a proxy under subsection (3).
(7) A transferee for value of shares subject to an irrevocable appointment
may revoke the appointment if he did not know of its existence when he
acquired the shares and the existence of the irrevocable appointment was not
noted conspicuously on the certificate representing the shares or on the
information statement for shares without certificates.
(8) Subject to Section 3.09 of these bylaws and to any express limitation on
the proxy's authority appearing on the face of the appointment form, a
corporation is entitled to accept the proxy's vote or other action as that of
the shareholder making the appointment.
(9) If an appointment form expressly provides, any proxy holder may appoint,
in writing, a substitute to act in his place.
Section 3.08. Shares Held by Nominees.
(1) The corporation may establish a procedure by which the beneficial owner
of shares that are registered in the name of a nominee is recognized by the
corporation as the shareholder. The extent of this recognition may be
determined in the procedure.
(2) The procedure may set forth (a) the types of nominees to which it
applies; (b) the rights or privileges that the corporation recognizes in a
beneficial owner; (c) the manner in which the procedure is selected by the
nominee; (d) the information that must be provided when the procedure is
selected; (e) the period for which selection of the procedure is effective;
and (1) other aspects of the rights and duties created.
Section 3.09. Corporation's Acceptance of Votes.
(1) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation if acting in good
faith is entitled to accept the vote, consent waiver, or proxy appointment and
give it effect as the act of the shareholder.
(2) If the name signed on a vote, consent, waiver, or proxy appointment does
not correspond to the name of its shareholder, the corporation if acting in
good faith is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder it (a) the
shareholder is an entity and the name signed purports to be that of an officer
or agent of the entity; (b) the name signed purports to be that of an
administrator, executor, guardian, personal representative, or conservator
representing the shareholder and, if the corporation requests, evidence of
fiduciary status acceptable to the corporation has been presented with respect
to the vote, consent, waiver, or proxy appointment; (c) the name signed
purports to be that of a receiver, trustee in bankruptcy, or assignee for the
benefit of creditors of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, or proxy appointment; (d) the name
signed purports to be that of a pledgee, beneficial owner, or attorney in fact
of the shareholder and, if the corporation requests, evidence acceptable to
the corporation of the signatory's authority to sign for the shareholder has
been presented with respect to the vote, consent, waiver, or proxy
appointment; or (e) two or more persons are the shareholder as covenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all the co-
owners.
(3) The corporation is entitled to reject a vote, consent, waiver, or proxy
appointment if the secretary or other officer or agent authorized to tabulate
votes, acting in good faith, has reasonable basis for doubt about the validity
of the signature on it or about the signatory's authority to sign for the
shareholder.
(4) The corporation and its officer or agent who accepts or rejects a vote,
consent, waiver, or proxy appointment in good faith and in accordance with the
standards of this section are not liable in damages to the shareholder for the
consequences of the acceptance or rejection.
(5) Corporate action based on the acceptance or rejection of a vote, consent,
waiver, or proxy appointment under this section is valid unless a court of
competent jurisdiction determines otherwise.
Section 3.10. Action by Shareholders Without Meeting.
(1) Any action required or permitted by the Act to be taken at any annual or
special meeting of shareholders of the corporation may be taken without a
meeting, without prior notice and without a vote, if the action is taken by
the holders of outstanding stock of each voting group entitled to vote thereon
having not less than the minimum number of votes with respect to each voting
group that would be necessary to authorize or take such action at a meeting at
which all voting groups and shares entitled to vote thereon were present and
voted. In order to be effective, the action must by evidenced by one or more
written consents describing the action taken, dated and signed by approving
shareholders having the requisite number of votes of each voting group
entitled to vote thereon, and delivered to the corporation by delivery to its
principal office in this state, its principal place of business, the corporate
secretary, or another office or agent of the corporation having custody of the
book in which proceedings of meetings of shareholders are recorded. No written
consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the date of the earliest dated consent is delivered
in the manner required by this section, written consent signed by the number
of holders required to take action is delivered to the corporation by delivery
as set forth in this section
(2) within 10 days after obtaining such authorization by written consent,
notice in accordance with Section 607.0704(3) of the Act must be given to
those shareholders who have not consented in writing.
ARTICLE IV
Board of Directors and Officers
Section 4.01. Qualifications of Directors.
Directors must be natural persons who are 18 years of age or older but need
not be residents of the State of Florida or shareholders of the corporation.
Section 4.02. Number of Directors.
(1) The board of directors shall consist of not less than one nor more than
nine individuals.
(2) The number of directors may be increased or decreased from time to time
by amendment to these bylaws.
(3) Directors are elected at the first annual shareholders' meeting and at
each annual meeting thereafter unless their terms are staggered under Section
4.04 of these bylaws.
Section 4.03 Terms of Directors Generally.
(1) The terms of the initial directors of the corporation expire at the first
shareholders' meeting at which directors are elected.
(2) The terms of all other directors expire at the next annual shareholders'
meeting following their election unless their terms are staggered under
Section 4.04 of these bylaws.
(3) A decrease in the number of directors does not shorten an incumbent
director's term.
(4) The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected.
(5) Despite the expiration of a director's term, he continues to serve until
his successor is elected and qualifies or until there is a decrease in the
number of directors.
Section 4.04. Staggered Terms for Directors.
The directors of any corporation organized under the Act may, by the articles
of incorporation, or by amendment to these bylaws adopted by a vote of the
shareholders, be divided into one, two or three classes with the number of
directors in each class being as nearly equal as possible: the term of office
of those of the first class to expire at the annual meeting next ensuing; of
the second class one year thereafter; at the third class two years thereafter;
and at each annual election held after such classification and election,
directors shall be chosen for a full term, as the case may be, to succeed
those whose terms expire. If the directors have staggered terms, then any
increase or decrease in the number of directors shall be so apportioned among
the classes as to make all classes as nearly equal in number as possible.
Section 4.05. Vacancy on Board.
(1) whenever a vacancy occurs on a board of directors, including a vacancy
resulting from an increase in the number of directors, it may be filled by the
affirmative vote of a majority of the remaining directors.
(2) A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date may be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
Section 4.06. Compensation of Directors.
The board of directors may fix the compensation of directors.
Section 4.07. Meetings.
(1) The board of directors may hold regular or special meetings in or out of
the State of Florida.
(2) A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the board of directors to another time and place.
Notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of
the adjourned meeting are announced at the time of the adjournment, to the
other directors.
(3) Meetings of the board of directors may be called by the chairman of the
board or by the president.
(4) The board of directors may permit any or all directors to participate in
a regular or special meeting by, or conduct the meeting through the use of,
any means of communication by which all directors participating may
simultaneously hear each other during the meeting. A director participating in
a meeting by this means is deemed to be present in person at the meeting.
Section 4.08. Action by Directors Without a Meeting.
(1) Action required or permitted by the Act to be taken at a board of
directors' meeting or committee meeting may be taken without a meeting if the
action is taken by all members of the board or of the committee. The action
must be evidenced by one or more written consents describing the action taken
and signed by each director or committee member.
(2) Action taken under this section is effective when the last director signs
the consent, unless the consent specifies a different effective date.
(3) A consent signed under this section has the effect of a meeting vote and
may be described as such in any document.
Section 4.09. Notice of Meetings.
Regular and special meetings of the board of directors may be held without
notice of the date, time, place, or purpose of the meeting.
Section 4.10. Waiver of Notice.
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a Waiver of any and all objections to the place of the
meeting, the time of the meeting, or the manner in which it has been called or
convened, except when a director states, at the beginning of the meeting or
promptly upon arrival at the meeting, any objection to the transaction of
business because the meeting is not lawfully called or convened.
Section 4.11. Quorum and Voting,
(1) A quorum of a board of directors consists of a majority of the number of
directors prescribed by the articles of incorporation or these bylaws.
(2) If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present is the act of the board of directors.
(3) A director of a corporation who is present at a meeting of the board of
directors or a committee of the board of directors when corporate action is
taken is deemed to have assented to the action taken unless:
(a) He objects at the beginning of the meeting (or promptly upon his arrival)
to holding it or transacting specified business at the meeting; or
(b) He votes against or abstains from the action taken.
Section 4.12. Committees.
(1) The board of directors, by resolution adopted by a majority of the full
board of directors, may designate from among its members an executive
committee and one or more other committees each of which, to the extent
provided in such resolution, shall have and may exercise all the authority of
the board of directors, except that no such committee shall have the authority
to:
(a) Approve or recommend to shareholders actions or proposals required by the
Act to be approved by shareholders.
(b) Fill vacancies on the board of directors or any committee thereof.
(c) Adopt, amend, or repeal these bylaws.
(d) Authorize or approve the reacquisition of shares unless pursuant to a
general formula or method specified by the board of directors.
(e) Authorize or approve the issuance or sale or contract for the sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a voting group except that the board of directors may authorize
a committee (or a senior executive officer of the corporation) to do so within
limits specifically prescribed by the board of directors.
(2) The sections of these bylaws which govern meetings, notice and waiver of
notice, and quorum and voting requirements of the board of directors apply to
committees and their members as well.
(3) Each committee must have two or more members who serve at the pleasure of
the board of directors. The board, by resolution adopted in accordance
herewith, may designate one or more directors as alternate members of any such
committee who may act in the place and stead of any absent member or members
at any meeting of such committee.
(4) Neither the designation of any such committee, the delegation thereto of
authority, nor action by such committee pursuant to such authority shall alone
constitute compliance by any member of the board of directors not a member of
the committee in question with his responsibility to act in good faith, in a
manner he reasonably believes to be in the best interests of the corporation,
and with such care as an ordinarily prudent person in a like position would
use under similar circumstances.
Section 4.13. Loans to Officers. Directors. and Employees: Guaranty of
Obligations.
The corporation may lend money to, guaranty any obligation to or otherwise
assist any officer, director, or employee of the corporation or of a
subsidiary, whenever, in the judgment of the board of directors, such loan,
guaranty, or assistance may reasonably be expected to benefit the corporation.
The loan, guaranty, or other assistance may be with or without interest and
may be unsecured or secured in such manner as the board of directors shall
approve, including, without limitation, a pledge of shares of stock of the
corporation. Nothing in this section shall be deemed to deny, limit, or
restrict the powers of guaranty or warranty of any corporation at common law
or under any statute. Loans, guaranties, or other types of assistance are
subject to section 4.19.
Section 4.14. Required Officers.
(1) The corporation shall have such officers as the board of directors may
appoint from time to time.
(2) A duly appointed officer may appoint one or more assistant officers.
(3) The board of directors shall delegate to one of the officers
responsibility for preparing minutes of the directors' and shareholders'
meetings and for authenticating records of the corporation.
(4) The same individual may simultaneously hold more than one office in the
corporation.
Section 4.15. Duties of Officers.
Each officer has the authority and shall perform the duties set forth in a
resolution or resolutions of the board of directors or by direction of any
officer authorized by the board of directors to prescribe the duties of other
officers.
Section 4.16. Resignation and Removal of Officers.
(1) An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered unless
the notice specifies a later effective date. If a resignation is made
effective at a later date and the corporation accepts the future effective
date, the board of directors may fill the pending vacancy before the effective
date if the board of directors provides that the successor does not take
office until the effective date.
(2) The board of directors may remove any officer at any time with or without
cause. Any assistant officer, if appointed by another officer, may likewise be
removed by the board of directors or by the officer which appointed him in
accordance with these bylaws.
Section 4.i7. Contract Rights of Officers.
The appointment of an officer does not itself create contract rights.
Section 4.18. General Standards for Directors.
(1) A director shall discharge his duties as a director, including his duties
as a member of a committee:
(a) In good faith;
(b) with the care an ordinarily prudent person in a like position would
exercise under similar circumstances; and
(c) In a manner he reasonably believes to be in the best interests of the
corporation.
(2) In discharging his duties, a director is entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom the. director
reasonably believes to be reliable and competent in the matters presented;
(b) Legal Counsel, public accountants, or other persons as to matters the
director reasonably believes are within the persons' professional or expert
competence; or
(c) A committee of the board of directors of which he is not a member if the
director reasonably believes the committee merits confidence.
(3) In discharging his duties, a director may consider such factors as the
director deems relevant, including the long-term prospects and interests of
the corporation and its shareholders, and the social, economic, legal, or
other effects of any action on the employees, suppliers, customers of the
corporation or its subsidiaries, the communities and society in which the
corporation or its subsidiaries operate, and the economy of the state and the
nation.
(4) A director is not acting in good faith if he has knowledge concerning the
matter in question that makes reliance otherwise permitted by subsection (2)
unwarranted.
(5) A director is not liable for any action taken as a director, or any
failure to take any action, if he performed the duties of his office in
compliance with this section.
Section 4.19. Director Conflicts of Interest
No contract or other transaction between a corporation and one or more
interested directors shall be either void or voidable because of such
relationship or interest, because such director or directors are present at
the meeting of the board of directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction, or because his or their
votes are counted for such purpose, it
(1) The fact of such relationship or interest is disclosed or known to the
board of directors or committee which authorizes, approves or ratifies the
contract or transactions by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors;
(2) The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent: or
(3) The contract or transaction is fair and reasonable as to the corporation
at the time it is authorized by the board, a committee or the shareholders.
Common or interested directors may be Counted in determining the presence of a
quorum at the meeting of the board of directors or a committee thereof which
authorizes, approves or ratifies such contract or transaction.
For the purpose of Paragraph (2) above, a Conflict of interest transaction is
authorized, approved or ratified if it receives the vote of a majority of the
shares entitled to be counted under this subsection. Shares owned by or voted
under the Control of a director who has a relationship or interest in the
conflict of interest transaction may not be Counted in a vote of shareholders
to determine whether to authorize, approve or ratify a conflict of interest
transaction under Paragraph (2). The vote of those shares, however, is
counted in determining whether the transaction is approved under other
Sections of the Act. A majority of the shares, whether or not present, that
are entitled to be counted in a vote on the transaction under this subsection
Constitutes a quorum for the purpose of taking action under this section.
Section 4.20. Resignation of Directors.
A director may resign at any time by delivering written notice to the board of
directors or its chairman or to the corporation.
A resignation is effective when the notice is delivered unless the notice
specifies a later effective date. If a resignation is made effective at a
later date, the board of directors may fill the pending vacancy before the
effective date if the board of directors provides that the successor does not
take office until the effective date.
ARTICLE V
Indemnification of Directors, Officers,
Employees and Agents
Section 6.01. Directors. Officers. Employees and Agents.
(1) 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 ot 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.
(2) 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.
(3) 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 referred to in subsections (1) or (2), 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.
(4) Any indemnification under subsections (1) or (2), 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 set forth in subsections (1) or
(2). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by majority
vote of a committee duly designated by the board of directors (in which
directors who are parties may participate) consisting solely of two or more
directors not at the time parties to the proceeding;
(c) By independent legal counsel:
(i) Selected by the board of directors prescribed in paragraph (a) or the
committee prescribed in paragraph (b); or
(ii) If a quorum of the directors cannot be obtained for paragraph (a) and the
committee cannot be designed under paragraph (b), selected by majority vote of
the full board of directors (in which directors who are parties may
participate); or
(d) By the shareholders by a majority vote of a quorum consisting of
shareholders who were not parties to such proceeding or, if no such quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of
permissibility is made by independent legal counsel, persons specified by
paragraph (4)(c) shall evaluate the reasonableness of expenses and may
authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if he is ultimately found not
to be entitled to indemnification by the corporation pursuant to this section.
Expenses incurred by other employees and agents may be paid in advance upon
such terms or conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided pursuant to this
section are not exclusive, and the corporation may make any other or further
indemnification or advancement of expenses of any of its directors, officers,
employees, or agents, under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
However, indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or other
final adjudication establishes that his actions, or omissions to act were
material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer, employee,
or agent had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee, or agent
derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the liability
provisions of Section 607.0834 under the Act are applicable; or (d) willful
misconduct or a conscious disregard for the best interests of the corporation
in a proceeding by or in the right of the corporation to procure a judgment in
its favor or in a proceeding by or in the right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this section
shall continue as, unless otherwise provided when authorized or ratified, to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such a
person, unless otherwise provided when authorized or ratified.
(9) Notwithstanding the failure of the corporation to provide
indemnification, and despite any contrary determination of the board or of the
shareholders in the specific case, a director, officer, employee, or agent of
the corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court conducting
the proceeding, to the circuit court, or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any
notice that it considers necessary, may order indemnification and advancement
of expenses, including expenses incurred in seeking court-ordered
indemnification or advancement of expenses, if it determines that:
(a) The director, officer, employee, or agent if entitled to mandatory
indemnification under subsection (3), in which case the court shall also order
the corporation to pay the director reasonable expenses incurred in obtaining
court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to indemnification
or advancement of expenses, or both, by virtue of the exercise by the
corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and reasonably
entitled to indemnification or advancement of expenses, or both, in view of
all the relevant circumstances, regardless of whether such person met the
standard of conduct set forth in subsection (1), subsection (2) or subsection
(7).
(10) For purposes of this section, the term "corporation" includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so
that any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, is in the same position
under this section with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its separate
existence had continued.
(11) For purposes of this section:
(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those for appeal;
(c) The term "liability" includes obligations to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to any employee
benefit plan), and expenses actually and reasonably incurred with respect to a
proceeding;
(d) The term "proceeding" includes any threatened, pending, or completed
action, suit or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent' includes a volunteer;
(f) The term "serving at the request of the corporation" includes any service
as a director, officer, employee, or agent of the corporation that imposes
duties on such persons, including duties relating to an employee benefit plan
and its participants or beneficiaries; and
(g) The term not opposed to the best interest of the corporation" describes
the actions of a person who acts in good faith and in a manner he reasonably
believes to be in the best interests of the participants and beneficiaries of
an employee benefit plan.
(12) The corporation shall have power to purchase and maintain insurance on
behalf of any person who 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 any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
ARTICLE VI
Office and Agent
Section 6.01. Registered Office and Registered Agent.
(1) The corporation shall have and continuously maintain in the State of
Florida:
(a) A registered office which may be the same as its place of business;
and
(b) A registered agent, who, may be either:
(i) An individual who resides in the State of Florida whose business office
is identical with such registered office; or
(ii) Another corporation or not for profit corporation as defined in Chapter
617 of the Act, authorized to transact business or conduct its affairs in the
State of Florida, having a business office identical with the registered
office; or
(iii) A foreign corporation or not-for-profit foreign corporation authorized
pursuant to chapter 607 or chapter 617 of the Act to transact business or
conduct its affairs in the State of Florida, having a business office
identical with the registered office.
Section 6.02. Chance of Registered Office or Registered Agent: Resignation of
Registered Agent.
(1) The corporation may change its registered office or its registered agent
upon filing with the Department of State of the State of Florida a statement
of change setting forth:
(a) The name of the corporation;
(b) The street address of its current registered office
(c) If the current registered office is to be changed, the street address of
the new registered office;
(d) The name of its current registered agent;
(e) If its current registered agent is to be changed, the name of the new
registered agent and the new agent's written consent (either on the statement
or attached to it) to the appointment;
(f) That the street address of its registered office and the street address
of the business office of its registered agent, as changed, will be identical;
(g) That such change was authorized by resolution duly adopted by its board
of directors or by an officer of the corporation so authorized by the board of
directors.
Shares. Options, Dividends and Distributions
Section 7.01. Authorized Shares.
(1) The articles of incorporation prescribe the classes of shares and the
number of shares of each class that the corporation is authorized to issue, as
well as a distinguishing designation for each class, and prior to the issuance
of shares of a class the preferences, limitations, and relative rights of that
class must be described in the articles of incorporation.
(2) The articles of incorporation must authorize:
(a) One or more classes of shares that together have unlimited voting rights,
and
(b) One or more classes of shares (which may be the same class or classes as
those with voting rights) that together are entitled to receive the net assets
of the corporation upon dissolution.
(3) The articles of incorporation may authorize one or more classes of shares
that have special, conditional, or limited voting rights, or no rights, or no
right to vote, except to the extent prohibited by the Act;
(a) Are redeemable or convertible as specified in the articles of
incorporation;
(b) Entitle the holders to distributions calculated in any manner, including
dividends that may be cumulative, non-cumulative, or partially cumulative;
(c) Have preference over any other class of shares with respect to
distributions, including dividends and distributions upon the dissolution of
the corporation.
(4) Shares which are entitled to preference in the distribution of dividends
or assets shall not be designated as common shares. Shares which are not
entitled to preference in the distribution of dividends or assets shall be
common shares and shall not be designated as preferred shares.
Section 7.02. Terms of Class or Series Determined bv Board of flirectom.
(1) If the articles of incorporation so provide, the board of directors may
determine, in whole or part, the preferences, limitations, and relative rights
(within the limits set forth in Section 7.01) of:
(a) Any class of shares before the issuance of any shares of that class,or
(b) One or more series within a class before the issuance of any shares of
that series.
(2) Each series of a class must be given a distinguishing designation
(3) All shares of a series must have preferences, limitations, and relative
rights identical with those of other shares of the same series and, except to
the extent otherwise provided in the description of the series, of those of
other series of the same class.
(4) Before issuing any shares of a class or series created under this
section, the corporation must deliver to the Department of State of the State
of Florida. for filing articles of amendment, which are effective without
shareholder action, in accordance with Section 607.0502 of the Act.
Section 7.03. Issued and Outstanding Shares.
(1) A corporation may issue the number of shares of each class or series
authorized by the articles of incorporation. Shares that are issued are
outstanding shares until they are reacquired, redeemed, converted, or
canceled.
(2) The reacquisition, redemption, or conversion of outstanding shares is
subject to the limitations of subsection (3) and to Section 607.06401 of the
Act.
(3) At all times that shares of the corporation are outstanding, one or more
shares that together have unlimited voting rights and one or more shares that
together are entitled to receive the net assets of the corporation upon
dissolution must be outstanding
Section 7.04. Issuance of Shares.
(1) The board of directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed,
promises to perform services evidenced by a written contract, or other
securities of the corporation.
(2) Before the corporation issues shares, the board of directors must
determine that the consideration received or to be received for shares to be
issued is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid, and non-assessable When it
cannot be determined that outstanding shares are fully paid and non-
assessable, there shall be a conclusive presumption that such shares are fully
paid and non-assessable if the board of directors makes a good faith
determination that there is no substantial evidence that the full
consideration for such shares has not been paid.
(3) When the corporation receives the consideration for which the board of
directors authorized the issuance of shares, the shares issued therefor are
fully paid and non-assessable. Consideration in the form of a promise to pay
money or a promise to perform services is received by the corporation at the
time of the making of the promise, unless the agreement specifically provides
otherwise.
(4) The corporation may place in escrow shares issued for a contract for
future services or benefits or a promissory note, or make other arrangements
to restrict the transfer of the shares, and may credit distributions in
respect of the shares against their purchase price, until the services are
performed, the note is paid, or the benefits received. If the services are not
performed, the shares escrowed or restricted and the distributions credited
may be canceled in whole or part.
Section 7.05. Form and Content of Certificates.
(1) Shares may but need not be represented by certificates. Unless the Act or
another statute expressly provides otherwise, the rights and obligations of
shareholders are identical whether or not their shares are represented by
certificates.
(2) At a minimum, each share certificate must state on its face:
(a) The name of the issuing corporation and that the corporation is organized
under the laws of the State of Florida;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of the series, if any,
the certificate represents.
(3) If the shares being issued are of different classes of shares or
different series within a class, the designations, relative rights,
preferences, and limitations applicable to each class and the variations in
rights, preferences, and limitations determined for each series (and the
authority of the board of directors to determine variations for future series)
must be summarized on the front or back of each certificate. Alternatively,
each certificate may state conspicuously on its front or back that the
corporation will furnish the shareholder a full statement of this information
on request and without charge.
(4) Each share certificate:
(a) Must be signed (either manually or in facsimile) by an officer or
officers designated by the board of directors, and
(b) May bear the corporate seal or its facsimile.
(5) If the person who signed (either manually or in facsimile) a share
certificate no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
(6) Nothing in this section may be construed to invalidate any share
certificate validly issued and outstanding under the Act on July 1, 1990.
Section 7.06. Shams Without Certificates.
(1) The board of directors of the corporation may authorize the issue of some
or all of the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the corporation.
(2) within a reasonable time after the issue or transfer of shares without
certificates, the corporation shall send the shareholder a written statement
of the information required on certificates by the Act.
Section 7.07. Restriction on Transfer of Shares and Other Securities.
(1) The articles of incorporation, these bylaws, an agreement among
shareholders, or an agreement between shareholders and the corporation may
impose restrictions on the transfer or registration of transfer of shares of
the corporation. A restriction does not affect shares issued before the
restriction was adopted unless the holders of such shares are parties to the
restriction agreement or voted in favor of the restriction.
(2) A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this section, and effected in compliance with the
provisions of the Act, including having a proper purpose as referred to in the
Act.
Section 7.08. Shareholder's Preemptive Rights.
The shareholders of the corporation do not have a preemptive right to acquire
the corporation's unissued shares.
Section 7.09. Corporation's Acquisition of its Own Shares.
(1) The corporation may acquire its own shares, and, unless otherwise
provided in the articles of incorporation or except as provided in subsection
(4), shares so acquired constitute authorized but unissued shares of the same
class but undesignated as to series.
(2) If the articles of incorporation prohibit the reissue of acquired shares,
the number of authorized shares is reduced by the number of shares acquired,
effective upon amendment of the articles of incorporation.
(3) Articles of amendment may be adopted by the board of directors without
shareholder action, shall be delivered to the Department of State of the State
of Florida for filing, and shall set forth the information required by Section
607.0631 of the Act.
(4) Shares of the corporation in existence on June 30, 1990, which are
treasury shares under Section 607.004(18), Florida Statutes (1987), shall be
issued, but not outstanding, until canceled or disposed of by the corporation.
Section 7.10. Share Options.
(1) Unless the articles of incorporation provide otherwise, the corporation
may issue rights, options, or warrants for the purchase of shares of the
corporation. The board of directors shall determine the terms upon which the
rights, options, or warrants are issued, their form and content, and the
consideration for which the shares are to be issued.
(2) The terms and conditions of stock rights and options which are created
and issued by the corporation, or its successor, and which entitle the holders
thereof to purchase from the corporation shares of any class or classes,
whether authorized by unissued shares, treasury shares, or shares to be
purchased or acquired by the corporation, may include, without limitation,
restrictions, or conditions that preclude or limit the exercise, transfer,
receipt, or holding of such rights or options by any person or persons,
including any person or persons owning or offering to acquire a specified
number or percentage of the outstanding common shares or other securities of
the corporation, or any transferee or transferees of any such person or
persons, or that invalidate or void such rights or options held by any such
person or persons or any such transferee or transferees.
Section 7.11. Terms and Conditions of Stock Rights and Options.
The terms and conditions of the stock rights and options which are created and
issued by the corporation [or its successor], and which entitle the holders
thereof to purchase from the corporation shares of any class or classes,
whether authorized but unissued shares, treasury shares, or shares to be
purchased or acquired by the corporation, may include, without limitation,
restrictions or conditions that preclude or limit the exercise, transfer,
receipt or holding of such rights or options by any person or persons,
including any person or persons owning or offering to acquire a specified
number or percentage of the outstanding common shares or other securities of
the corporation, or any transferee or transferees of any such person or
persons, or that invalidate or void such rights or options held by any such
person or persons or any such transferee or transferees.
Section 7.i2. Share Dividends.
(1) Shares may be issued pro rata and without consideration to the
corporation's shareholders or to the shareholders of one or more classes or
series. An issuance of shares under this subsection is a share dividend.
(2) Shares of one class or series may not be issued as a share dividend in
respect of shares of another class or series unless:
(a) The articles of incorporation so authorize,
(b) A majority of the votes entitled to be cast by the class or series to be
issued approves the issue, or
(c) There are no outstanding shares of the class or series to be issued.
(3) If the board of directors does not fix the record date for determining
shareholders entitled to a share dividend, it is the date of the board of
directors authorizes the share dividend.
Section 7.13. Distributions to Shareholders.
(1) The board of directors may authorize and the corporation may make
distributions to its shareholders subject to restriction by the articles of
incorporation and the limitations in subsection (3).
(2) If the board of directors does not fix the record date for determining
shareholders entitled to a distribution (other than one involving a purchase,
redemption, or other acquisition of the corporation's shares), it is the date
the board of directors authorizes the distribution.
(3) No distribution may be made if, after giving it effect:
(a) The corporation would not be able to pay its debts as they become due in
the usual course of business; or
(b) The corporation's total assets would be less than the sum of its total
liabilities plus (unless the articles of incorporation permit otherwise) the
amount that would be needed if the corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon dissolution
of shareholders whose preferential rights are superior to those receiving the
distribution.
(4) The board of directors may base a determination that a distribution is
not prohibited under subsection (3) either on financial statements prepared on
the basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in the
circumstances. In the case of any distribution based upon such a valuation,
each such distribution shall be identified as a distribution based upon a
current valuation of assets, and the amount per share paid on the basis of
such valuation shall be disclosed to the shareholders concurrent with their
receipt of the distribution.
(5) Except as provided in subsection (7), the effect of a distribution under
subsection (3) is measured;
(a) In the case of distribution by purchase, redemption, or other acquisition
of the corporation's shares, as of the earlier of:
(i) The date money or other property is transferred or debt incurred by the
corporation, or
(ii) The date the shareholder ceases to be a shareholder with respect to the
acquired shares;
(b) In the case of any other distribution of indebtedness, as of the date the
indebtedness is distributed;
(c) In all other cases, as of
(i) The date the distribution is authorized if the payment occurs within i20
days after the date of authorization, or
(ii) The date the payment is made if it occurs more than 120 days after the
date of authorization.
(6) A corporation's indebtedness to a shareholder incurred by reason of a
distribution made in accordance with this section is at parity with the
corporation's indebtedness to its general, unsecured creditors except to the
extent subordinated by agreement.
(7) Indebtedness of the corporation, including indebtedness issued as a
distribution, is not considered a liability for purposes of determinations
under subsection (3) if its terms provide that payment of principal and
interest are made only if and to the extent that payment of a distribution to
shareholders could then be made under this section. If the indebtedness is
issued as a distribution, each payment of principal or interest is treated as
a distribution, the effect of which is measured on the date the payment is
actually made.
ARTICLE VIII
Amendment of Articles and Bylaws
Section 8.01. Authority to Amend the Articles of Incorporation.
(1) The corporation may amend its articles of incorporation at any time to
add or change a provision that is required or permitted in the articles of
incorporation or to delete a provision not required in the articles of
incorporation. Whether a provision is required or permitted in the articles of
incorporation is determined as of the effective date of the amendment.
(2) A shareholder of the corporation does not have a vested property right
resulting from any provision in the articles of incorporation, including
provisions relating to management, control, capital structure, dividend
entitlement, or purpose or duration of the corporation.
Section 8.02. Amendment by Board of Directors.
The corporation's board of directors may adopt one or more amendments to the
corporation's articles of incorporation without shareholder action:
(1) To extend the duration of the corporation if it was incorporated at a
time when limited duration was required by law;
(2) To delete the names and addresses of the initial directors:
(3) To delete the name and address of the initial registered agent or
registered office, if a statement of change is on file with the Department of
State of the State of Florida;
(4) To delete any other information contained in the articles of
incorporation that is solely of historical interest;
(5) To change each issued and unissued authorized share of an outstanding
class into a greater number of whole shares if the corporation has only shares
of that class outstanding;
(6) To delete the authorization for a class or series of shares authorized
pursuant to Section 607.0602 of the Act, if no shares of such class or series
have been issued;
(7) To change the corporate name by substituting the word "corporation,"
"incorporated," or "company," or the abbreviation "corp.' Inc.," or Co.," for
a similar word or abbreviation in the name, or by adding, deleting, or
changing a geographical attribution for the name; or
(8) To make any other change expressly permitted by the Act to be made
without shareholder action.
Section 8.03. Amendment of Bylaws by Board of Directors.
The corporation's board of directors may amend or repeal the corporation's
bylaws unless the Act reserves the power to amend a particular bylaw provision
exclusively to the shareholders.
Section 8.04. Bylaw Increasing Quorum or Voting Reguirements for Directors.
(1) A bylaw that fixes a greater quorum or voting requirement for the board
of directors may be amended or repealed:
(a) If originally adopted by the shareholders, only by the shareholders;
(b) If originally adopted by the board of directors, either by the
shareholders or by the board of directors.
(2) A bylaw adopted or amended by the shareholders that fixes a greater
quorum or voting requirement for the board of directors may provide that it
may be amended or repealed only by a specified vote of either the shareholders
or the board of directors.
(3) Action by the board of directors under paragraph (1)(b) to adopt or amend
a bylaw that changes the quorum or voting requirement for the board of
directors must meet the same quorum requirement and be adopted by the same
vote required to take action under the quorum and voting requirement then in
effect or proposed to be adopted, whichever is greater.
ARTICLE IX
Records
Section 9.01. Corporate Records.
(1) The corporation shall keep as permanent records minutes of al meetings of
its shareholders and board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, and a record of all
actions taken by a committee of the board of directors in place of the board
of directors on behalf of the corporation.
(2) The corporation shall maintain accurate accounting records.
(3) The corporation or its agent shall maintain a record of its shareholders
in a form that permits preparation of a list of the names and addresses of all
shareholders in alphabetical order by class of shares showing the number and
series of shares held by each.
(4) The corporation shall maintain its records in written form or in another
form capable of conversion into written form within a reasonable time.
(5) The corporation shall keep a copy of the following records:
(a) Its articles or restated articles of incorporation and all amendments to
them currently in effect;
(b) Its bylaws or restated bylaws and all amendments to them currently in
effect;
(c) Resolutions adopted by the board of directors creating one or more
classes or series of shares and finding their relative rights, preferences,
and limitations, if shares issued pursuant to those resolutions are
outstanding;
(d) The minutes of all shareholders' meetings and records of all action taken
by shareholders without a meeting for the past three years;
(e) Written communications to all shareholders generally or all shareholders
of a class or series within the past three years, including the financial
statements furnished for the past three years;
(f) A list of the names and business street addresses of its current
directors and officers; and
(g) Its most recent annual report delivered to the Department of State of the
State of Florida.
Section 9.02. Financial Statements for Shareholders.
(1) Unless modified by resolution of the shareholders within 120 days of the
close of each fiscal year, the corporation shall furnish its shareholders
annual financial statements which may be consolidated or combined statements
of the corporation and one or more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the fiscal year, an income statement
for that year, and a statement of cash flows for that year. If financial
statements are prepared for the corporation on the basis of generally-accepted
accounting principles, the annual financial statements must also be prepared
on that basis.
(2) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(a) Stating his reasonable belief whether the statements were prepared on the
basis of generally-accepted accounting principles and, if not, describing the
basis of preparation; and
(b) Describing any respects in which the statements were not prepared on a
basis of accounting consistent with the statements prepared for the preceding
year.
(3) The corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the
corporation to prepare its financial statements, if for reasons beyond the
corporation's control, it is unable to prepare its financial statements within
the prescribed period. Thereafter, on written request from a shareholder who
was not mailed the statements, the corporation shall mail him the latest
annual financial statements.
Section 9.03. Other Reports to Shareholders.
(1) If the corporation indemnifies or advances expenses to any director,
officer, employee or agent otherwise than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained by
the corporation, the corporation shall report the indemnification or advance
in writing to the shareholders with or before the notice of the next
shareholders' meeting, or prior to such meeting if the indemnification or
advance occurs after the giving of such notice but prior to the time such
meeting is held, which report shall include a statement specifying the persons
paid, the amounts paid, and the nature and status at the time of such payment
of the litigation or threatened litigation.
(2) If the corporation issues or authorizes the issuance of shares for
promises to render services in the future, the corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the
next shareholders' meeting.
Section 9.04. Annual Report for Department of State.
(1) The corporation shall deliver to the Department of State of the State of
Florida for filing a sworn annual report on such forms as the Department of
State of the State of Florida prescribes that sets forth the information
prescribed by Section 607.1622 of the Act.
(2) Proof to the satisfaction of the Department of State of the State of
Florida on or before July 1 of each calendar year that such report was
deposited in the United States mail in a sealed envelope, properly addressed
with postage prepaid, shall be deemed in compliance with this requirement.
(3) Each report shall be executed by the corporation by an officer or
director or, if the corporation is in the hands of a receiver or trustee,
shall be executed on behalf of the corporation by such receiver or trustee,
and the signing thereof shall have the same legal effect as if made under
oath, without the necessity of appending such oath thereto.
(4) Information in the annual report must be current as of the date the
annual report is executed on behalf of the corporation.
(5) Any corporation failing to file an annual report which complies with the
requirements of this section shall not be permitted to maintain or defend any
action in any court of this state until such report is filed and all fees and
taxes due under the Act are paid and shall be subject to dissolution or
cancellation of its certificate of authority to do business as provided in the
Act.
ARTICLE X
Miscellaneous
Section 10.01. Definition of the "Act.
All references contained herein to the "Act" or to sections of the "Act' shall
be deemed to be in reference to the Florida Business Corporation Act.
Section 10.02. Application of Florida Law.
Whenever any provision of these bylaws is inconsistent with any provision of
the Florida Business Corporation Act, Statutes 607, as they may be amended
from time to time, then in such instance Florida law shall prevail.
Section 10.03. Fiscal Year.
The fiscal year of the corporation shall be determined by resolution of the
board of directors.
Section 10.04. Conflicts with Articles of Incorporation.
In the event that any provision contained in these bylaws conflicts with any
provision of the corporation's articles of incorporation, as amended from time
to time, the provisions of the articles of incorporation shall prevail and be
given full force and effect, to the full extent permissible under the Act.
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section A. Definitions
Section B. Other Definitions.
Section C. Rules of Construction.
ARTICLE II.
THE SECURITIES
Section A. Form and Dating.
Section B. Execution.
Section C. Registrar and Paying Agent.
Section D. Paying Agent to Hold Money in Trust.
Section E. Securityholder Lists
Section F. Transfer and Exchange.
Section 2.7 Payment of Principal and Interest: Principal and Interest Rights
Preserved.
Section 2.8 Replacement Securities.
Section 2.9 Outstanding Securities.
Section 2.10 Treasury Securities.
Section 2.11 Temporary Securities.
Section 2.12 Cancellation.
Section 2.13 Defaulted Interest.
ARTICLE 3
REDEMPTION
ARTICLE 4
COVENANTS
Section 4.1 Payment of Securities.
Section 4.2 Maintenance of Office or Agency.
Section 4.3 SEC Reports.
Section 4.4 Stay, Extension and Usury Laws.
Section 4.5 Liquidation.
ARTICLE 5
SUCCESSORS
Section 5.1 When the Company May Merge, etc.
Section 5.2 Successor Corporation Substituted.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
Section 6.2 Acceleration.
Section 6.3 Other Remedies.
Section 6.4 Waiver of Past Defaults.
Section 6.5 Control by Majority.
Section 6.6 Limitation on Suits
Section 6.7 Rights of Holders to Receive Payment.
Section 6.8 Collection Suit by Holders.
Section 6.9 Holders by Committee or Association May File Proofs of Claim.
Section 6.10 Priorities.
ARTICLE 7
TRUSTEE (not applicable)
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.1 Company's Obligations.
Section 8.2 Application of Trust Money.
Section 8.3 Repayment to Company.
Section 8.4 Reinstatement.
ARTICLE 9
AMENDMENTS
Section 9.1 Without Consent of Holders.
Section 9.2 With Consent of Holders.
Section 9.3 Revocation and Effect of Consents.
Section 9.4 Notation on or Exchange of Securities.
ARTICLE 10
SUBORDINATION
Section 10.1 Agreement to Subordinate.
Section 10.2 Liquidation: Dissolution: Bankruptcy.
Section 10.3 Default on Designated Senior Debt.
Section 10.4 When Distribution Must Be Paid Over
Section 10.5 Notice by Company.
Section 10.6 Subrogation.
Section 10.7 Relative Rights.
Section 10.8 Subordination May Not Be Impaired by the Company or Holders of
Senior Debt.
Section 10.9 Distribution Or Notice to Representative.
Section 10.10 Rights of Paying Agent.
Section 10.11 Authorization to Effect Subordination.
Section 10.12 Article Applicable to Paying Agent.
Section l0.l3 Miscellaneous.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices.
Section 11.3 Communication by Holders with Other Holders.
Section 11.4 Rules by Majority Securityholder or Committees or Association or
Agents.
Section 11.5 Legal Holidays.
Section 11.6 No Recourse Against Others.
Section 11.7 Duplicate Originals.
Section 11.8 Governing Law.
Section 11.9 No Adverse Interpretation of Other Agreements.
Section 11.10 Successors.
Section 11.11 Severability.
Section 11.12 Counterpart Originals.
Section 11.13 Table of Contents, Headings, etc.
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 INCORPORATION BY REFERENCE
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[MPA1]180 East 5th Street,
St. paul , minnesota 55101, Attention: Mr. Richard Prok, 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 my 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.
"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.
"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 my 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) 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.
"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 D. 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 securities 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 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 the Company shall determine from time: to
time: provided, however, that the interest rate will be fixed for the term of
the Security upon issuance, subject to change upon extension.
Interest on a Security with a term of six (6) months or less will compound
daily and be payable at maturity. Interest on a Security of longer duration
will compound 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.
The Company will give each Holder (existing as of the applicable Maturity
Record Dated) a written notice at least seven days prior to the Maturity Date
of the Security held by such Holder reminding such Holder of the pending
maturity of the Security and noticing the Holder of the Company's intention to
repay or if the Company does not intend to repay the Security reminding the
Holder that the automatic extension provision described in the next paragraph
will take effect unless the Holder requests payment. Such notice shall also
state that payment of principal of a security be made upon presentation and
surrender of such Security arid shall specify the place where such Security
may be presented and surrendered for the making of such payment. If the
Company gives notice to a Holder of the Company's intention to repay a
Security at maturity, no interest will accrue after the Maturity Date for such
Security. Otherwise, if a Holder requests repayment within seven days after
the Maturity Date, the Company will pay interest on the Security during the
period after the Security's Maturity Date and prior to redemption at the lower
of (i) tile lowest interest rate then being paid on Securities being offered
by the Company to the general public or (ii) the rate being paid on such
Security immediately prior to its maturity.
If, within seven days after the Maturity Date of a Security, a Holder of such
Security has not demanded repayment of the Security, and the Company has not
noticed its intention to repay such Security at least seven days prior to
maturity, such Security shall be extended automatically for the same term, and
shall be deemed to have been renewed by the Holder thereof as of the Maturity
Date. A Security will continue to renew as described herein absent some
permitted action be either the Holder or the Company. Interest shall continue
to accrue 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 being offered by the Company on similar Securities as
of the renewal date. If similar Securities are not then being issued. the
interest rate upon renewal will be the rate specified by the Company on or
before the Maturity Date of such Security, or the Security's current rate if
no such rate is specified.
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 arid 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 and the Trustee:, by their execution and delivery of this
Indenture, and the Holders by accepting the Securities, expressly agree to
such terms arid 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 my 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
witbe14). 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 maturities 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, except that for purpose of determining whether the
Trustee shall be protected in relying on any such direction, waiver or
consent, only Securities that a Responsible Officer of the Trustee actually
knows to be so owned shall be so disregarded.
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 arid 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 or Plan 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 arid 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
Trustee, 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. arid 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; (13) consents to the entry of an order for relief
against it in an involuntary case; (a) 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 he 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 or
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 Assocaition 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 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 Trustee 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 dale 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 to 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 my 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 my 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,
what 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 or 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 or 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 or the Trustee 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 or by the Trustee 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 and the Trustee receive written notice (a
"Payment Notice") of such event of default (which notice shall be binding on
the Trustee and 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 Trustee 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 Trustee 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 me 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 my 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 Trustee, 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) my 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 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 my
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 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. Nothing in this Article 10 shall
apply to amounts due to, or impair the claims of, or payments to, the Trustee
under or pursuant to Section 7.7 hereof.
Section 10.11 Authorization to Effect Subordination.
Each Holder of a Security by his acceptance thereof authorizes and directs the
Company 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 Securityholder or Committees 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 my 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 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 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 interest on the Investment Notes will be
compounded daily and computed on the basis of a 360 Day year of twelve 30-day
months.]
This Note is being issued pursuant to a Dewed Poll Indenture ("Indenture")
dated as of ____________ ("Indenture") 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 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 the 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. Automatic Extension. At least seven (7) days prior to this Note's
Maturity Date, the Company will notify the Holder whether, subject to the
Holders demand for repayment within seven (7) days after the Maturity Date of
the Note, the Company intends to extend the term of this Note. In the event
that the Holder has not demanded repayment and the Company has notified the
Holder in accordance with this paragraph 7, this Note shall automatically be
extended for a term identical to the original term of this Note. This Note
will continue to renew as described in this paragraph 7 absent some action
permitted under the Indenture by the Holder or the Company. This Note, as
renewed, will continue in all its provisions, including provisions relating to
payment, provided, however, that the interest rate payable during any such
renewal term shall be the interest rate then being offered by the Company on
similar Notes being offered as of the renewal date. If similar Notes are not
then being offered, the interest rate shall be the rate specified by the
Company on or before the Maturity Date, or the original rate of this Note if
no such rate is specified.
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
Attention: President
Law Offices of
M. PETER AMARAL, ESQ.
Attorney at Law
PO Box 970771
Boca Raton, Florida 33428
March 14, 1997
Board of Directors
Riverbank Factors, Inc.
800 West Oakland Park Blvd.
Ft. Lauderdale, FL 33311
Re: Issuance of $4,900,00 unsecured, subordinated notes
Gentlemen:
In connection with the issuance of $4,900,00 unsecured, subordinated
notes (the "Notes") of Riverbank Factors, Inc., a Florida corporation (the
"Issuer"), pursuant to a registration statement on Form SB-2, which has been
filed with Securities Exchange Commission, under the Securities Act of 1933
(the "Act"), we have examined a copy of the Form SB-2, and have assumed the
accuracy of the information contained therein without an independent
investigation and have assumed such information will continue to be true. We
have also examined such other documents and have made such examinations of
law as we have deemed relevant. It is our opinion that the Notes, upon sale
and issuance, will be legally issued, binding obligations of Riverbank
Factors, Inc., and that such issuance is not in violation of the certificate
of incorporation or the by-laws of Riverbank Factors, Inc.
We consent to the use our opinion in the said Registration Statement.
Very truly yours,
/s/M. PETER AMARAL
M. Peter Amaral, Esq.
REVOLVING CREDIT NOTE
$1,200,000.00
JANUARY 3, 1997
FOR VALUE RECEIVED, RIVERBANK FACTORS, INC. a Florida corporation, with
offices at 800 Oakland Park Blvd. Suite 100, Fort Lauderdale, Florida 33311
("Borrower"), promises to pay to the order of LLOYD FUNDING, INC, a Florida
corporation ("Lender") with offices at 383 Kingston Avenue, Suite 102,
Brooklyn, N.Y. 11213 upon terms hereinafter set forth, the principal sum of
$400,000.00, or so much thereof as shall have been advanced and remain
outstanding by the Lender to the Borrower
The following definitions are applicable It this Revolving Credit Note
(hereinafter referred to as the "Note".
The term "Business Day" means Monday through Friday, excluding weekends. The
term "Loan Documents" includes this note, bank drafts and titles to motor
vehicles,. The term "Obligations" refers to those terms and agreements by
which the parties of this Note and Mortgage must abide. The term "revolving
Loans" means the ability of the Borrower to access an amount up to but not
exceeding the loan amount of this Note, i.e. $1,200,000.00, subject to the
provisions hereof. The term "Principal Amount" means, as of any date, the
aggregate unpaid principal amount of all revolving Loans advanced and
outstanding on such date. The fact that there may be no Revolving Loans
outstanding at any particular time shall note affect the continuing validity
of this note (except for promissory notes being offered to the public for
investment purposes).
The Principal of and interest on the Principal Amount shall be payable as
follows;
(a) interest only on the outstanding balance of the Principal sum shall be
payable monthly on the 15th day of each and every month, at the rate of one
(1%) percent interest per month, the first interest payment being due and
payable on February 3,1997.
(a) The entire unpaid balance of the Principal Amount, plus all accrued and
unpaid interest and all other obligations of the Borrower hereunder, shall be
due and payable on January 3,1999 which date shall be the maturity date of
this loan (or earlier pursuant to the terms and conditions of this note).
The Borrower promises to pay to the order of the Lender, interest only on the
Principal Amount (calculated on a daily basis) outstanding from time to time,
from the date hereof until the maturity date of this Note (whether by
acceleration, declaration, extension or otherwise) at a fixed rate of interest
at one and one (1%) percent per month. Notwithstanding the entry of any
decree, order or judgment or other judicial action under, pursuant to, in
connection with, or otherwise concerning this Note, or any of the other
Financing Documents, upon the Occurrence of a Default and/or after the
maturity of this Note (whether by acceleration, declaration extension or
otherwise), the Borrower promises to pay to the Lender whenever demanded by
the Lender, a penalty of 5% per month on the Principal Amount and all other
amount then and thereafter due and payable hereunder
In that event that any payment made by the Borrower results in the exaction of
a rate of interest in excess of the rate which is lawfully collectible, all
sums paid in excess of those so lawfully collectible as interest shall be
deemed applied in payment of principal, immediately upon receipt of such
payment by the Lender, with the same force and effect as if this note had
specifically designated such payment to be so applied to such principal and
the holder hereof had to accept such sums as premium-free payment.
The lender will fund to the Borrower pursuant to this Note, from time to time,
as needed by borrower,
Upon the occurrence of a Default of this Note, the unpaid balance of the
Principal Amount, together with interest accrued and unpaid thereon, shall
immediately and automatically become due and payable by the Borrower to the
Lender. Upon the occurrence of any other Default, or upon the failure of the
Borrower to pay, as and when due and payable in accordance with this note, the
Principal Amount or any payment of interest on the Principal Amount, the
Lender or any other holder of this note may, at its option, accelerate the
maturity of this Note and declare the unpaid balance of the Principal Amount
of this Note then outstanding together with interest accrued and unpaid
thereon to be immediately due and payable; then and in that event the entire
balance of the Principal Amount of this Note then outstanding, together with
interest accrued and unpaid thereon, shall be immediately due and payable by
the Borrower to the Lender.
Alt payments due hereunder will be made to Lloyd Funding, Inc., 383 Kingston
Ave, Suite 102 Brooklyn, New York 11213 or such other place as the Lender or
any other holder of this note may at any time, or from time to time, designate
in writing to the Borrower.
The undersigned hereby agrees that in any one of the following events, this
Note shall become at once due and payable without notice, presentment or
demand for payment.
a. The failure to pay any installment of this Note on the due day hereof
b. The execution of an assignment for the benefit of creditors, or the
appointment of a receiver, trustee or custodian of the property of the
undersigned.
C. The failure of the Borrower to perform any of the terms
of this Note.
d. The filing of a petition of Bankrupt
e. The reorganization. merger or consolidation of the Borrower or the sale
of all or substantially alt of its assets.
f. The dissolution or liquidation of the undersigned If this Note is
forwarded to an attorney for collection, after maturity (whether by
acceleration, declaration, extension or otherwise), the Borrower shall pay to
the Lender on demand, a)l costs and expenses of collection including
reasonable attorney's fees.
The Borrower and Lender waive any right to trial by jury. The Note shall be
governed and construed by the laws of the State of Florida or New York and
jurisdiction for all legal proceedings shall be in Broward Countv, Florida, or
in New York City, all at the option of the Lender.
Presentment for payment, notice of dishonor, and notice of protest are hereby
waived.
This note may be assigned at any time by the Lender.
This Note may not be assigned by the Borrower without written consent of the
Lender.
IN WITNESS WHEREOF, the Borrower has caused this note to be executed in its
respective name) under its seal and on its behalf by its duly authorized
representative the day and year first written above
RIVERBANK FACTORS, INC.,
/STEVE RASABI/
Steve Rasabi, President
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in the Form SB-2 Registration
Statement of Riverbank Factors, Inc. our report dated January 24,
1997, relating to the balance sheet of Riverbank Factors, Inc. as
of December 31, 1996, which appear in such Form SB-2 Registration
Statement.
WEINBERG, PERSHES & COMPANY, P.A.
Certified Public Accountants
Boca Raton, FL
March 14, 1997
