<PAGE>
- -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period from _________ to ____________
Commission File Number 000-22681
FINANTRA CAPITAL, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 13-3571419
- -------------------------------------------------------------------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
1100 Ponce de Leon Boulevard, Coral Gables, Florida 33134
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(305) 443-5002
- -------------------------------------------------------------------------------
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Number of Shares Outstanding
Class on November 12, 1998
----- ----------------------------
Common Stock, par value $.01 per share 4,047,528 shares
Transitional Small Business Disclosure Format Yes No X
--- ---
<PAGE>
<TABLE>
<CAPTION>
FINANTRA CAPITAL, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1 Condensed Consolidated Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheet at September 30, 1998 3
Condensed Consolidated Statements of Income for the
Three and Nine Months ended September 30, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II OTHER INFORMATION 16
Item 6 Exhibits 16
SIGNATURES 17
</TABLE>
-2-
<PAGE>
FINANTRA CAPITAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
------
Current assets:
<S> <C>
Cash and cash equivalents $ 2,314,399
Accounts receivable, net of allowance for doubtful
accounts of $3,000 3,689,660
Finance receivable 3,324,402
Note receivable - shareholder 26,796
Prepaid expenses 404,642
--------------
Total current assets 9,759,899
Property and equipment, at cost, net of accumulated depreciation 225,085
Other assets:
Goodwill, net 2,964,082
Note receivable - stockholders 233,204
Due from affiliates 218,296
Other 59,023
---------------
Total other assets 3,474,605
---------------
Total assets $13,459,589
===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FINANTRA CAPITAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
<S> <C>
Notes payable $ 2,973,489
Current portion of long-term debt 100,212
Current portion of obligations to finance companies 52,664
Accounts payable and accrued expenses 1,883,178
-------------
Total current liabilities 5,009,543
Other liabilities:
Long-term debt, net of current portion 105,932
Obligations to finance companies, net of current portion 29,756
-------------
Total other liabilities 135,688
-------------
Total liabilities 5,145,231
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 authorized,
2,958,817 shares issued and outstanding 29,588
Common stock, $.01 par value, 10,000,000 authorized,
4,021,661 shares issued and 292,500 to be issued 40,210
Additional paid-in capital 10,713,191
Treasury stock (89,644)
Accumulated deficit (2,378,987)
-------------
Total stockholders' equity 8,314,358
-------------
Total liabilities and stockholders' equity $13,459,589
=============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
FINANTRA CAPITAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- --------------
1998 1997 1998 1997
------ ------ ------ -----
<S> <C> <C> <C> <C>
Revenues $4,500,043 $ 67,044 $ 7,135,318 $ 297,330
Costs and expenses:
Depreciation 98,267 17,000 203,299 51,000
Interest expense 94,773 25,529 125,608 53,517
General and administrative expenses 4,073,040 89,096 6,427,975 203,859
---------- ---------- ----------- ----------
Total costs and expenses 4,266,080 131,625 6,756,882 308,376
---------- ---------- ----------- ----------
Income (loss) from operations 233,963 (64,581) 378,436 (11,046)
---------- ---------- ----------- ----------
Other income (expenses):
Gain (Loss) on sale of securities - 6,800 - (33,780)
---------- ---------- ----------- ----------
Total other income (expenses) - 6,800 - (33,780)
---------- ---------- ----------- ----------
Net income (loss) $ 233,963 $ (57,781) $ 378,436 $ (44,826)
========== ========== =========== ==========
Net income (loss) applicable to common shareholders $ 165,763 $ (131,752) $ 173,836 $ (266,674)
========== ========== =========== ==========
Net income (loss) per common share $ .04 $ (.08) $ .05 $ (.16)
========== ========== =========== ==========
Weighted average number of shares outstanding
and to be issued 3,723,000 1,680,000 3,472,000 1,680,000
========== ========== =========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
------ -----
<S> <C> <C>
Cash flows from operating activities:
Net cash used by operating activities $(1,351,577) $ (52,491)
----------- ---------
Cash flows from investing activities:
Cash acquired in acquisitions 46,044 -
Net advances (to) from affiliates (142,883) (76,228)
Note receivable - stockholders (260,000) -
Purchase of equipment (147,943) -
Purchase of securities available for sale - (75,010)
Proceeds from sale of securities available for sale - 34,401
Proceeds from sale of equipment - 27,800
Notes acquired for cash (2,824,402) -
---------- ---------
Net cash used by investing activities (3,329,184) (89,037)
---------- ---------
Cash flows from financing activities:
Borrowings on line-of-credit 2,832,964 -
Repayment of notes payable - (60,000)
Proceeds from long-term debt - 293,650
Repayments of long-term debt (104,628) (85,627)
Net proceeds from shareholder loans - 28,000
Payments of preferred dividends (204,600) -
Repayment of shareholder loans - (8,253)
Issuance of common stock 454,265 -
Purchase of treasury stock (89,644) -
---------- ---------
Net cash provided by financing activities 2,888,357 167,770
---------- ---------
Net (decrease) in cash (1,792,404) 26,242
Cash - beginning 4,106,803 -
---------- ---------
Cash - end $2,314,399 $ 26,242
========== =========
Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest $ 125,608 $ 28,475
========== =========
Supplemental noncash investing and financial activities:
Issuance of common stock for acquisition of
subsidiaries $3,173,282 $ -
========== =========
Leased equipment received from affiliated
company as payment on intercompany receivable $ - $ 87,758
========== =========
Obligations to finance companies transferred to
affiliated company $ - $ 27,807
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 1 - CORPORATION NAME CHANGE
On August 5, 1998, the Company changed its corporate name from Medley Credit
Acceptance Corp. to Finantra Capital, Inc.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Premier Provider Services, Inc., Medical Billing
Service Systems, Inc. and Ameri-Cap Leasing Corp., its approximate 91% owned
subsidiary, Ameritrust Holdings, Inc. ("Ameritrust"), and its 80% owned
subsidiaries, American Investment Management, Inc. ("AIM") and American Factors
Group, Inc.
NOTE 3 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required for complete
financial statements. In the opinion of management, all adjustments necessary
for a fair presentation of the results for the interim periods presented have
been included.
These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with those used in the
preparation of the Company's annual financial statements for the year ended
December 31, 1997. Operating results for the nine months ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998.
It is recommended that the accompanying condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997.
Certain items in the condensed consolidated financial statements for the
interim period ended September 30, 1997, have been reclassified to conform with
the current presentation. These reclassifications had no effect on net income.
NOTE 4 - ACQUISITIONS
On August 31, 1998, the Company, through a wholly owned subsidiary, acquired
approximately 91% of the outstanding capital stock of Ameritrust. In
consideration therefor, the Company issued an aggregate of 381,000 shares of
its common stock to Ameritrust's then stockholders. The remaining capital stock
of Ameritrust not originally acquired by the Company may be exchanged for
shares of the Company's common stock at annual intervals ending on June 30,
2002, at exchange rates based upon Ameritrust's financial performance during
such period. This acquisition was accounted for using the purchase method of
accounting and $286,779 in goodwill was recorded which is being amortized over
15 years under the straight-line method. The results of operations are included
in the condensed consolidated statements of operations since the date of the
acquisition.
7
<PAGE>
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 4 - ACQUISITIONS (CONTINUED)
The proforma unaudited results of operations for the nine months ended
September 30, 1998 and 1997, assuming consummation of the purchase of
Ameritrust at the beginning of each period, are as follows:
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1998 1997
------ -----
Revenues $7,673,380 $4,526,771
Net income $ 334,174 $ 42,268
Net income per common share after dividends $ .03 $ .07
========== ==========
This unaudited proforma information does not purport to be indicative of the
results of operations which would have resulted had the acquisitions been
consummated at the date assumed.
NOTE 5 - NOTES PAYABLE
Notes payable consists of the following at September 30, 1998:
$4,000,000 line-of-credit ($3,000,000 available at
September 30, 1998) with a financial institution; interest
is payable monthly at prime plus 1 1/2%. The line is
secured by certain finance receivables. $2,928,489
Note payable
Note payable due bank collateralized by certain of the
Company's assets not otherwise pledged and is personally
guaranteed by the Company's principal officer and an
affiliate 45,000
----------
Total $2,973,489
==========
8
<PAGE>
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
NOTE 6 - OBLIGATIONS TO FINANCE COMPANIES
Obligations to finance companies, secured by rental equipment and related
rental agreements, consist of:
<S> <C>
16.08% obligation payable in monthly installments of
$2,036, including interest, through February 1999. $ 9,811
23.6% obligation payable in varying monthly installments,
including interest, through November 1999. 19,156
21.2% obligation payable in varying monthly installments,
including interest, through November 1999. 36,722
18.3% obligation payable in varying monthly installments,
including interest, through November 1999. 10,998
12.5% obligation payable in monthly installments of
$311, including interest through June 2000. 5,733
--------
82,420
Less: current maturities (52,664)
--------
Long-term obligations $ 29,756
========
</TABLE>
NOTE 7 - DIVIDENDS PAYABLE - PREFERRED STOCK
The Company has paid $204,600 of dividends on its preferred stock between
January 1, 1998 and September 30, 1998.
NOTE 8 - LONG-TERM DEBT
At September 30, 1998, the Company is obligated to various individuals for
amounts aggregating $206,144. These notes are for various amounts and
maturities through July 2001. Interest is payable at rates ranging from 8% to
13.5% per annum. The unsecured portion of these notes is approximately $90,000.
9
<PAGE>
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company loaned its principal officer $60,000 as of September 30, 1998. The
note bears interest at 10% per annum with interest only payable quarterly. The
entire unpaid principal balance and accrued interest is due May 5, 2001.
In addition, the Company loaned $200,000 to a company owned by a shareholder of
the Company. The installment note carries a 12% interest rate per annum. The
note will be repaid in monthly installments of $3,500, commencing June 1, 1998
the entire unpaid principal balance, together with accrued interest is due on
May 31, 2001.
NOTE 10 - EMPLOYEE STOCK OPTIONS
Options to purchase 132,000 shares of the Company's common stock at an average
price per share of approximately $1.50 have been granted to certain of the
Company's officers and key employees.
The Company has elected to account for the stock options under Accounting
Principles Board Option No. 25, "Accounting for Stock Issued to Employees" and
related interpretations. Accordingly, no compensation expense has been
recognized on the stock options.
Had compensation expense for the stock option plan been determined based on the
fair value of the options at the grant date consistent with the methodology
prescribed under Statement of Financial Standards No. 123, "Accounting for
Stock Based Compensation", the Company's net income for the quarter ended
September 30, 1998 would have been decreased by approximately $47,060. Income
for the nine months ended September 30, 1998 would have been decreased by
approximately $53,881. The fair value of each option is estimated on the date
of grant using the fair market option pricing model with the assumption:
Risk-free interest rate 5.5%
Expected life (years) 2 to 3
Expected volatility .538
Expected dividends None
10
<PAGE>
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 10 - EMPLOYEE STOCK OPTIONS (CONTINUED)
A summary of option transactions during the nine months ended September 30,
1998 is shown below:
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
Outstanding at December 31, 1997 - $ -
Granted 132,000 1.50
Exercised - -
Forfeited - -
--------
Outstanding at September 30, 1998 132,000
========
Exercisable at September 30, 1998 -
========
Available for issuance at September 30, 1998 132,000
========
11
<PAGE>
FINANTRA CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 11 - INDUSTRY SEGMENT INFORMATION
The Company currently operates primarily two industry segments: specialty
finance and medical billing and financial administrative services. Revenues,
income from operations, identifiable assets, capital expenditures and
depreciation and amortization pertaining to the industries in which the Company
operates are presented below:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1998 1997
------ ------
<S> <C> <C>
Industry segments:
Revenues:
Specialty finance $ 3,971,884 $ 297,330
Medical billing and financial services 3,163,434 -
------------- -----------
Total $ 7,135,318 $ 297,330
============= -----------
Income (loss) from operations:
Specialty finance $ (106,640) $ (11,046)
Medical billing and financial services 485,076 -
------------- -----------
Total $ 378,436 $ (11,046)
============= ===========
Identifiable assets:
Specialty finance $ 9,831,055 $ 1,994,513
Medical billing and financial services 3,628,534 -
------------- -----------
Total $13,459,589 $ 1,994,513
============= ===========
Capital expenditures:
Specialty finance $ 129,337 $ -
Medical billing and financial services 18,606 -
------------- -----------
Total $ 147,943 $ -
============= ===========
Depreciation and amortization:
Specialty finance $ 71,625 $ 51,000
Medical billing and financial services 131,674 -
------------- -----------
Total $ 203,299 $ 51,000
============= ===========
</TABLE>
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a specialty finance company engaged, principally, in
accounts receivable financing (factoring), equipment leasing and traditional
financing business lines. Since the consummation, during late 1997 and early
1998, of the Company's initial public offering of securities (the "IPO"), the
Company's operations have focused primarily on growing an operation base and
establishing a market presence in each of the aforementioned businesses. The
Company's primary strategy for achieving its necessary growth and market
presence has been, among other things, to pursue acquisitions of existing
enterprises which, in the Company's opinion, have management experience and
earnings potential and long-term growth possibilities, and obtaining
institutional lines of credit for each financing business line.
While the Company has only a limited operating history in the accounts
receivable financing and traditional financing business lines, the Company has
more seasoned experience in the equipment leasing business. Prior to the
consummation of the Company's IPO, the Company's business and affairs focused
on the financing of (i) dry cleaning equipment to small dry cleaning businesses
throughout the eastern United States and (ii) refrigeration equipment sold or
leased by an affiliate. The Company has made a business decision to orderly
wind down its dry cleaning and refrigeration equipment financing operations.
In an effort to grow its accounts receivable financing, equipment
leasing and traditional financing business lines, while establishing a market
presence for the same, the Company, during the six-month period ended June 30,
1998, consummated several significant transactions. Principal among these were
(i) the Company's formation of its American Factors Group, Inc. subsidiary
("AFG"), an entity specializing in accounts receivable financing, (ii) the
Company's acquisition of a majority interest in Americal Investment Management
("AIM"), a marketer and manager of a variety of financial and insurance related
services, (iii) the Company's acquisition of Medical Billing Service Systems,
Inc. ("Medical Billing) and Premier Provider Services, Inc. ("Premier"; Medical
Billing and Premier are sometimes hereinafter collectively referred to as the
"Medical Billing Subsidiaries"), companies engaged, generally, in providing
back office accounting and other financial administrative services principally
to the medical industry, and (iv) the Company's acquisition, through its
wholly-owned Ameri-Cap Leasing Corp. subsidiary ("Ameri-Cap"), of a majority
interest in MFC Financial Corp. ("MFC"), an entity engaged, generally, in the
equipment leasing industry and, principally, medical equipment financing.
In an effort to expand its mortgage lending operations, the Company,
during the quarter ended September 30, 1998 ("Third Quarter 1998"), acquired
approximately 91% of the outstanding capital stock of Ameritrust Holdings, Inc.
("Ameritrust"), a licensed mortgage lender engaged in both residential and
commercial lending. Ameritrust's operations focus primarily on non-confirming
loans, sub-prime credits, home improvement loans, sales finance contracts and
debt consolidations. In consideration for its acquisition of its approximate
91% interest in Ameritrust, the Company issued an aggregate of 381,000 shares
of its common stock, $.01 par value per share (the "Common Stock"), to
Ameritrust's then stockholders. The remaining capital stock of Ameritrust not
originally acquired by the Company may be exchanged for shares of the Company's
Common Stock at annual intervals ending on June 30, 2002, at exchange rates
based upon Ameritrust's financial performance during such period.
In connection with the Ameritrust acquisition, the Company assumed the
employment agreements of Ameritrust's three principals, Larry Schwartz, Larry
S. Sazant and Bruce Lazarus. Mr. Schwartz's employment agreement expires in
2003 (subject to annual renewal), entitles Mr. Schwartz to an annual base
salary of $75,000 through 2001, increasing $5,000 per year thereafter, an
override commission on each
13
<PAGE>
residential mortgage transaction made by Ameritrust of 4% of the gross revenues
derived by Ameritrust from such transaction, a bonus, terminable upon the
satisfaction of certain financial obligations of Mr. Schwartz, equal to 10% of
Ameritrust's pre-tax net profits, if any, and the grant of stock options,
conditioned upon Ameritrust's financial performance, pursuant to the Company's
Stock Option Plan. Mr. Schwartz's employment agreement is terminable by the
Company for cause, including if, among other things, after the four month
period immediately following the Company's initial purchase of its controlling
interest in Ameritrust, Ameritrust's net monthly sales volume is less than 75%
of its projected sales goals for any consecutive three month period or
Ameritrust's annual sales volume is less than 75% of its projected annual
sales. Mr. Schwartz has further agreed not to compete with the Company in Dade
and Broward Counties, Florida, for the two year period following termination of
his employment with the Company.
Mr. Sazant's employment agreement expires in 2002, entitles Mr. Sazant
to an annual base salary of $45,000, an override commission on each commercial
loan generated by Mr. Sazant of 10% of the gross commission earned by
Ameritrust's commercial loan division with respect to such commercial loan, an
override commission with respect to other commissions generated by Ameritrust's
commercial loan division equal to the difference between any commission paid to
any loan officer or consultant and 50% of the total commission paid by
Ameritrust, and a bonus equal to 5% of Ameritrust's Residential Financial
Services' division pre-tax income, if any. Mr. Sazant has further agreed not to
compete with the Company for the five year period following the termination of
his employment agreement.
Mr. Lazarus' employment agreement expires in 2002 and entitles Mr.
Lazarus to an annual base salary of $75,000, a bonus equal to 5% of
Ameritrust's Residential Financial Services' division pre-tax income, if any,
and such commissions as Ameritrust customarily remits to brokers and co-brokers
on a transactional basis. Mr. Lazarus has further agreed not to compete with
the Company for the five year period following the termination of his
employment agreement.
The Company has agreed recently to acquire Creditmart, Inc. and
Consumer Loan Servicing, Inc., entities engaged in the sub-prime auto financing
industry. These acquisitions are subject, however, to the completion of due
diligence and other conditions.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997
For Third Quarter 1998, the Company generated revenues of $4,500,043,
an increase of $4,432,999 from revenues of $67,044 for the three months ended
September 30, 1997 ("Third Quarter 1997"). This increase in revenues was
primarily the result of the Company's acquisitions, during 1998, of AIM, the
Medical Billing Subsidiaries, MFC and Ameritrust, and the subsequent
commencement of the Company's accounts receivable financing (factoring) and
traditional financing business lines and expanded equipment leasing operations.
During Third Quarter 1998, the Company incurred an increase of
$4,134,455 in total costs and expenses over Third Quarter 1997 figures,
principally as a result of the Company's continuation of the businesses it
acquired during 1988, the commencement of its accounts receivables financing
(factoring) and traditional financing business lines and expanded equipment
leasing operations. Principally as a consequence thereof, the Company recorded
net income from operations of $233,963 for Third Quarter 1998, as compared to a
net loss from operations of $64,581 for Third Quarter 1997. When combined with
the provision for dividends with respect to shares of the Company's Series A
10% Convertible Preferred Stock (the "Preferred Stock"), the Company generated
net income applicable to common shareholders for Third Quarter 1998 of
$165,763, or approximately $.04 per share, as compared to incurring net losses
14
<PAGE>
applicable to common shareholders for Third Quarter 1997 of $131,752, or
approximately $.08 per share.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September
30, 1997
For the nine months ended September 30, 1998 ("Nine Months 1998"), the
Company generated revenues of $7,135,318, an increase of $6,837,988 from
revenues of $297,330 for the nine months ended September 30, 1997 ("Nine Months
1997"). This increase in revenues was primarily the result of the Company's
acquisitions, during 1998, of AIM, the Medical Billing Subsidiaries, MFC and
Ameritrust, and the subsequent commencement of the Company's accounts
receivable financing (factoring) and traditional financing business lines and
expanded equipment leasing operations.
For Nine Months 1998, the Company incurred an increase of $6,448,506
in total costs and expenses over Nine Months 1997 figures, principally as a
result of the Company's continuation of the businesses it acquired during 1998,
the commencement of its accounts receivables financing (factoring) and
traditional financing business lines and expanded equipment leasing operations.
Principally as a consequence thereof, the Company recorded net income from
operations of $378,436 for Nine Months 1998 as compared to a net loss from
operations of $11,046 for Nine Months 1997. When combined with the provision
for dividends with respect to shares of the Company's Preferred Stock, the
Company generated net income applicable to common shareholders for Nine Months
1998 of $173,836, or approximately $.05 per share, as compared to incurring net
losses applicable to common shareholders for Nine Months 1997 of $266,674, or
approximately $.16 per share.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had total assets of $13,459,589, as
compared to total assets of $4,944,831 at December 31, 1997. This significant
increase in total assets is primarily the result of the Company's acquisition
of AIM, the Medical Billing Subsidiaries, MFC and Ameritrust during 1998, and
the commencement of operations of AFG's accounts receivable financing
(factoring) business. At September 30, 1998, a finance receivable arising
predominantly from AFG's operations in the amount of $3,324,402 was recorded on
the Company's balance sheet. The $2,964,082 of goodwill, net, recorded on the
Company's balance sheet at September 30, 1998 represents the premium over net
equity paid by the Company in connection with its acquisitions of AIM, the
Medical Billing Subsidiaries, MFC and Ameritrust. The Company anticipates that
its future earnings (assuming its acquired subsidiaries continue to generate
earnings) will offset the amortization associated with the recording of this
goodwill.
At September 30, 1998, the Company had total liabilities of
$5,145,231, as compared to total liabilities of $751,211 at December 31, 1997.
This increase in total liabilities was primarily due to the incurrence of
borrowings under the accounts receivable credit facility established for AFG,
notwithstanding the Company's continued timely satisfaction of other
obligations.
At September 30, 1998, the Company had total stockholders' equity of
$8,314,358, as compared to total stockholders' equity of $4,204,620 at December
31, 1997. The significant increase in stockholders' equity is attributable
directly to the earnings generated by the Company from operations, values
associated with the Company's formation of AFG and acquisition, utilizing
primarily shares of the Company's Common Stock, of AIM, the Medical Billing
Subsidiaries, MFC and Ameritrust.
The Company's experience in the specialty finance business has
historically been conducted with a smaller capital base than currently is
available to the Company. As a consequence of the consummation of the IPO, the
Company believes that it is positioned to secure additional lines of credit and
traditional bank financings for the purpose of expanding and developing its
business lines. There can be no assurance,
15
<PAGE>
however, that the Company will successfully implement all or a portion of this
anticipated expansion.
During November 1998, the Company commenced a private placement of
securities seeking to raise up to $2,125,000. Pursuant to this offering, the
Company and The First American Investment Banking Corporation, the
non-exclusive placement agent for the offering, are selling up to 100 units at
a purchase price of $21,250 per unit. Each unit consists of 10,000 shares of
the Company's Common Stock and 10,000 Redeemable Common Stock Purchase Warrants
(the "Warrant"). Each Warrant is exercisable into one share of Common Stock at
$3.25 per share through November 2001. There is no minimum number of units that
must be sold before the Company can utilize the net proceeds from unit sales.
The Company anticipates, based on its current proposed plans and
assumptions relating to its operations and expansion, that it will be able to
satisfy its currently contemplated cash requirements for approximately the next
12 months from working capital and cash flow. In the event that the Company's
plans change or its assumptions prove to be inaccurate, or working capital and
cash flow prove to be insufficient to fund the Company's operations and
expansion (due to unanticipated expenses, delays, problems or otherwise), the
Company would be required to seek additional funding. Depending upon the
Company's financial strength and the state of the capital markets, the Company
may also determine that it is advisable to raise additional equity capital.
Except as set forth above, the Company has no current arrangements with respect
to, or sources of, any additional capital, and there can be no assurance that
such additional capital will be available to the Company, if needed, on
commercial reasonable terms, or at all. The inability of the Company to obtain
additional capital would have a material adverse effect on the Company and
could cause the Company to be unable to implement its business strategy or
proposed expansion or to otherwise significantly curtail or cease operations.
16
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS
No. Description
---- -----------
10.1 Stock Exchange Agreement, dated July 20, 1998, among
Ameri-Cap Finance Group, Inc., certain individuals named
therein, the Company and Ameritrust.
10.2 Amendment, dated October 21, 1998, to Stock Exchange
Agreement between Ameri-Cap Finance Group, Inc., the Company
and Ameritrust.
10.3 Employment Agreement, dated November 1998, between Ameritrust
and Larry Schwartz.
10.4 Employment Agreement, dated as of November 14, 1997, between
Residential Financial Services, Inc. and Bruce Lazarus.
10.5 Employment Agreement, dated as of November 14, 1997, between
Residential Financial Services, Inc. and Larry Sazant.
10.6 Addendum, dated as of July 1, 1998, to Employment Agreement
dated as of November 14, 1998, between Residential Financial
Services, Inc. and Larry Sazant.
27 Financial Data Schedule
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf of the undersigned, thereunto duly
authorized.
FINANTRA CAPITAL, INC.
Dated: November 13, 1998 By:/s/ Robert D. Press
---------------------------------------
Robert D. Press, Chairman of the Board,
President, Chief Executive Officer and
Chief Financial Officer
(Principal Executive and Financial Officer)
18
<PAGE>
EXHIBIT INDEX
No. Description
--- -----------
10.1 Stock Exchange Agreement, dated July 20, 1998, among
Ameri-Cap Finance Group, Inc., certain individuals named
therein, the Company and Ameritrust.
10.2 Amendment, dated October 21, 1998, to Stock Exchange
Agreement between Ameri-Cap Finance Group, Inc., the Company
and Ameritrust.
10.3 Employment Agreement, dated November 1998, between Ameritrust
and Larry Schwartz.
10.4 Employment Agreement, dated as of November 14, 1997, between
Residential Financial Services, Inc. and Bruce Lazarus.
10.5 Employment Agreement, dated as of November 14, 1997, between
Residential Financial Services, Inc. and Larry Sazant.
10.6 Addendum, dated as of July 1, 1998, to Employment Agreement
dated as of November 14, 1998, between Residential Financial
Services, Inc. and Larry Sazant.
27 Financial Data Schedule
<PAGE>
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement, dated this 20th day of July, 1998, is
made and entered into by and between Ameri-Cap Finance Group, Inc., a Florida
corporation ["Buyer"], the individuals named on Exhibit A attached hereto
[collectively referred to as "Sellers"], Medley Credit Acceptance Corp., a
Delaware corporation ["Medley"], and Ameritrust Holdings Inc., a Florida
corporation ["Corporation"]. [The Buyer and Sellers may be referred to
collectively throughout this Agreement as "Parties" for convenience].
WITNESSETH
WHEREAS, the Sellers collectively owns 100% of the authorized, issued,
and outstanding common shares of Ameritrust Holdings, Inc., consisting of
1,495,000 common shares [the "Shares"], and
WHEREAS, the Corporation is organized and existing under the laws of
the State of Florida and is engaged in commercial and residential lending and
home improvements, and
WHEREAS, the Buyer is a Florida corporation and is desirous of
purchasing from the Seller 90% of the authorized, issued, and outstanding
common shares of the Corporation at closing and the Seller is desirous of
selling same to the Buyer, and
WHEREAS, the Buyer shall have the right to acquire subsequent to
closing the balance of the Corporation's common shares, and
WHEREAS, the Buyer is a wholly owed subsidiary of Medley, and
WHEREAS, Medley is a publically traded over-the-counter company, and
WHEREAS, a portion of the Shares have been sold pursuant to an
exemption to the Securities Act of 1933 (the "Act") pursuant to Section 504,
and
<PAGE>
WHEREAS, the Parties desire to document their representations,
warranties, covenants, agreements, and conditions relating to the exchange of
the Shares in a written agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. RECITALS: The above and foregoing recitals are true and correct
and are incorporated herein.
2. EXCHANGE AND TRANSFER OF SHARES: The Seller shall transfer, and
convey to the Buyer and the Buyer shall acquire from the Seller 90% of the
authorized, issued, and outstanding common shares of the Corporation consisting
of 1,345,500 shares as follows:
A. 504 Shares: The Buyer will exchange with the Sellers owning the
Corporation's Shares sold pursuant to Section 504 of the Act ["504 Shares"] one
common share of Medley for each 504 Share owned by the Sellers. The total
number of 504 Shares outstanding by the Corporation are 95,000 shares and all
outstanding 504 Shares owned by the Sellers shall be exchanged on the closing
date.
(1) Medley agrees with respect to the Exchanged 504 Shares to
file a registration statement with the Securities and
Exchange Commission within 30 days following the closing date
and diligently pursue the registration of said shares,
including responding to comment letters, if any, and to do
its best to have the registration become effective.
B. Restricted Shares: The balance of the outstanding Shares of the
Corporation
2
<PAGE>
owned by the Sellers are not registered under the Act and shall hereafter be
referred to as the "Restricted Shares". The Restricted Shares shall be
exchanged as follows:
(1) At closing the Buyer shall exchange 400,000 common shares of
Medley for 1,345,500 Restricted Shares of the Corporation
owned by the Sellers. The Shares will be exchanged on a pro
rata basis with each selling Shareholder based upon the
number of Shares owned by the selling shareholder in the
Corporation. No fractional shares shall be issued by Medley
and the Sellers agree to determine the pro rata method of
distribution prior to closing and to deliver a written letter
of direction signed by all Sellers setting forth the
distribution computation to the Buyer.
(2) The Restricted Shares not exchanged at the closing shall be
retained solely in the possession of the Sellers and shall be
available for a future exchange with the Buyer according to
the following:
(a) Period 1: The year ending December 31, 1998. If net
earnings before taxes (the "earnings hurdle") of Ameritrust exceed $250,000,
Sellers will exchange 18,678.5 shares of their Restricted Shares for 125,000
shares of Medley Common Stock.
(b) Period 2, 3 and 4: The calendar years ending 1999, 2000,
and 2001, the earnings hurdle shall be $500,000; $750,000; $1,000,000 in each
year respectively. For each year that the net earnings before taxes of
Ameritrust exceed the earnings hurdle in that year, Sellers shall exchange
37,375 shares of their Restricted Shares for 250,000 shares of the Common Stock
of Medley.
3
<PAGE>
(c) Period 5: The six months ending June 30, 2002, the
earnings hurdle shall be $1,250,000 annualized. If the net earnings before
taxes of Ameritrust exceed the earnings hurdle, Sellers shall exchange 18,678.5
shares of their Restricted Shares for 125,000 shares of Common Stock of Medley.
(d) Adjustment to Shares to be Exchanged: If at the end of
each exchange period as delineated in (a), (b) or (c) above, net earnings
before taxes is less than the earnings hurdle, but greater than 80% of the then
applicable earnings hurdle, Sellers shall exchange their Restricted Shares
indicated for that period with an amount of Medley shares equal to the actual
net earnings before taxes divided by the earnings hurdle, with that number
multiplied by the number of Medley shares to be exchanged pursuant to the
above.
If the net earnings is greater than 33% of the earnings
hurdle but less 80% of the than the earnings hurdle, than no exchange of shares
shall take place. However, the date for the un-achieved earning hurdle shall be
extended for an additional one (1) calendar year or half year as applicable.
If the net earnings is equal to or below 33% of the earnings
hurdle then Sellers will deliver to Buyer the applicable shares for the period
for no additional Medley Shares and forfeit that period's exchange rights.
As of December 31, 2003, any remaining Restricted Shares of
Ameritrust Common Stock not exchanged by the Sellers due to the Company's
failure to achieve its earnings hurdle shall be conveyed to Buyer or its
assigns without exchange of Medley Shares or consideration.
3. DUE DILIGENCE PERIOD AND RIGHT OF TERMINATION:
4
<PAGE>
A. By Buyer: The Sellers and Buyer hereby acknowledge that the Buyer,
as of the effective date of this Agreement, has not had the opportunity to
review and evaluate all aspects of the Corporation, as represented by the
Sellers. Therefore, the Buyer shall have, from the effective date through the
end of business 20 days thereafter [Due Diligence Period] to inspect and assess
all aspects of the Corporation, financial and otherwise, and to make such
investigations as the Buyer deems necessary in the Buyer's sole discretion. The
Seller agrees to assist the Buyer in reviewing all records of the Corporation
and to aid and assist the Buyer in arranging meetings and providing documents,
records, and/or information reasonably required by the Buyer or the Buyer's
attorneys or other agents including accountants, in order that the Buyer may
determine the viability of the transaction contemplated by this Agreement.
During the Due Diligence Period, Sellers shall advise the Buyer of any negative
information learned by the Sellers which would have a material, financial
impact: upon the Corporation. In the event the Buyer determines in its sole and
absolute discretion that the representations made by the Sellers prior to
execution of this agreement or those made in this agreement are false,
misleading or incomplete so that the acquisition of the Shares would have a
negative impact on the Buyer or Medley, the Buyer may notify the Seller in
writing by facsimile delivery, mail or hand delivery, prior to the termination
of the Due Diligence Period and the Buyer may at the Buyer's sole discretion
terminate this Agreement. The Buyer's failure to provide written notice of
termination within the time period set forth in this section shall be deemed
conclusive evidence that the Buyer has waived its right to terminate as
contained herein.
B. By Seller: The Sellers and Buyer hereby acknowledge that the
Sellers, as of the effective date of this Agreement, have not had the
opportunity to review and evaluate all aspects of the Buyer and Medley, as
represented in this agreement. Therefore, the Sellers shall have, from
5
<PAGE>
the effective date through the end of business 20 days thereafter [Due
Diligence Period] to inspect and assess all aspects of the Buyer and Medley,
financial and otherwise, and to make such investigations as the Sellers deems
necessary in the Sellers' sole discretion. The Buyer and Medley agree to assist
the Sellers in reviewing all records of the Buyer and Medley and to aid and
assist the Sellers in arranging meetings and providing documents, records,
and/or information reasonably required by the Sellers or the Sellers'
attorneys or other agents including accountants, in order that the Sellers may
determine the viability of the transaction contemplated by this Agreement.
During the Due Diligence Period, Buyer shall advise the Sellers of any negative
information learned by the Buyer which would have a material, financial impact
upon the Sellers. In the event the Sellers determine in their sole and absolute
discretion that the representations made by the Buyer or Medley prior to
execution of this agreement or those made in this agreement are false,
misleading or incomplete so that the acquisition of the Shares would have a
negative impact on the Sellers, the Sellers may notify the Buyer in writing by
facsimile delivery, mail or hand delivery, prior to the termination of the Due
Diligence Period and the Sellers may at the Sellers' sole discretion terminate
this Agreement. The Sellers' failure to provide written notice of termination
within the time period set forth in this section shall be deemed conclusive
evidence that the Sellers have waived their right to terminate as contained
herein.
4. CLOSING DATE: The Closing under this Agreement shall take place on
or before August 15, 1998 at the Law Offices of Maynard J. Hellman, Esquire,
1100 Ponce de Leon Boulevard, Coral Gables, Florida 33134 or at such other time
and place as shall be set forth in a writing signed by the Parties hereto.
5. REPRESENTATIONS AND WARRANTIES OF SELLER: The Sellers represent
6
<PAGE>
and warrant to the Buyer as follows:
a. The Corporation is a validly existing Corporation in good
standing under the laws of the State of Florida and is
validly conducting business pursuant to the laws of the State
of Florida.
b. The Sellers and the Corporation have the power to enter into
and carry out their obligations under this Agreement.
c. The Corporation holds all licenses necessary to conduct the
business of the Corporation and complies with all laws, rules
and regulations presently established by all governmental
agencies in connection with same.
d. The Shares being exchanged by the Seller to the Buyer are
fully paid and non-assessable.
e. The aggregate number of shares that the Corporation is
authorized to have outstanding as of the date hereof is
7,500,000 shares of common stock of which 1,495,000 are
presently issued and outstanding and held collectively in the
name of the Sellers.
f. The only stock authorized to be outstanding by the
Corporation is one class of common stock represented by the
shares owned by the Sellers.
g. The Seller is and will be on the closing date the sole owners
of all of the authorized, issued, and outstanding shares of
the common stock of the Corporation, free and clear of any
and all liens and encumbrances.
h. That as of the date of executing this Agreement, as well as
on the date of closing, the Corporation shall have no debts,
liabilities, or obligations for
7
<PAGE>
which payment needs to be made except for those debts,
liabilities, and obligations set forth on Exhibit "B"
attached to this Agreement.
i. The Sellers do not have any knowledge or any basis for the
assertion of any material liability against the Corporation.
j. The Corporation is not subject to any order, judgment,
decree, stipulation, or any other agreements with any
governmental body or agency with respect to the Corporation
unless specifically set forth in this Agreement.
k. The Corporation is not a party to any long-term contract or
commitment unless specifically set forth in this Agreement on
Exhibit "C" attached hereto. The only Employment Agreements
between the Corporation and its employees are attached as
Exhibit "D".
l. Neither the Sellers nor the Corporation have received notice
nor have any claims been made against the Corporation or the
Sellers by any governmental authority to the effect that the
Corporation or the business of the Corporation fails to
comply in any material respect to any law, rule, regulation,
or ordinance or that a license, permit, or order which is not
in the possession of the Corporation is necessary for the
Corporation to conduct its business.
m. On the day of closing, the Sellers will have the full and
unrestrictive legal and equitable title to the shares being
sold to the Buyer, free and clear of all liens and
encumbrances.
n. Any action required to be taken by the Corporation in order
to complete the transaction contemplated in this Agreement
has been or will be by the closing
8
<PAGE>
date duly approved by the Board of Directors and
Shareholders of the Corporation.
o. The Sellers represent that their are no liabilities,
including but not limited to liabilities for federal, state,
and local taxes, penalties, assessments, lawsuits or claims
against the Corporation or the Sellers, whether such
liabilities, suits, or claims are contingent or absolute,
direct or indirect, matured or unmatured, which could in any
way affect the shares being conveyed hereunder, the assets of
the Corporation, or the Corporation's ability to conduct its
business.
p. The Articles of Incorporation and By-Laws attached to this
Agreement as Exhibit "E" are complete and accurate as of the
date hereof and contain all amendments through the date
hereof. The Minute Book of the Corporation is complete and
accurate and reflects all proceedings of Shareholders and
Directors of the Corporation through the date of this
Agreement.
q. The transfer and delivery of the Shares to the Buyer,
pursuant to this Agreement, will be valid and will vest title
to the Shares in the Buyer free and clear of all liens,
encumbrances, conditions, and restrictions of any kind.
r. The Corporation will not issue any additional shares of its
common stock prior to the closing. There are no outstanding
options, contracts, commitments, warrants or other rights of
any character affecting or relating in any manner to the
common stock of the Corporation.
s. The documents, agreements, and materials delivered or to be
delivered by the
9
<PAGE>
Seller to the Buyer in furtherance of the Buyer's Due
Diligence examination of the Corporation shall be complete
and accurate in all material respects and will not have been
amended or modified by any oral agreements.
t. Financial Statements: The Corporation has furnished the Buyer
with Financial Statements of the Corporation as of December
31, 1997. The Financial Statements fairly present the
financial condition of the Corporation on such date. To the
best of the Seller's knowledge, there are no matters pending
which would have an adverse or material affect on the
Financial Statements of the Corporation.
u. Subsequent to the date of the Corporation's last Financial
Statement, the business of the Corporation has been conducted
in its ordinary course of business and to the best of the
Seller's knowledge there has been no material loss of any of
the Corporation's customers and clients which would have an
adverse affect on the Corporation's future income and
profitability.
v. The Sellers acknowledge that with the exception of the Buyers
obligation to register the Sellers 504 Shares, the balance of
the Exchange Shares have not been registered under the "Act"
for resale and may not be offered or sold except pursuant to
an effective registration under the Act or to the extent
applicable under Rule 144 of the Act or such other exemption
from registration as may be given in an opinion of counsel or
counsel acceptable to counsel for Medley.
10
<PAGE>
w. Following the closing date the Sellers shall not transfer,
convey, mortgage, pledge or otherwise hypothecate their
Shares to be exchanged subsequent to closing pursuant to
Section 2B(2).
x. The execution, delivery and performance of this agreement by
the Corporation has been duly approved by all requisite
actions of the Corporation's board of directors and
shareholders.
y. The Corporation has the following wholly owned subsidiaries:
(1) Residential Financial Services, Inc.
(2) Community Re-Development Corp.
All representations and warranties contained in this section
applicable to the Corporation are applicable to the subsidiaries as if restated
in full.
The representations and warranties set forth above shall survive the
closing.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER: The Buyer represents
and warrants to the Sellers as follows:
a. The Buyer is a Corporation, duly organized and validly
existing in good standing under the laws of the State of
Florida with full power and authority to carry on its
business.
b. The execution, delivery, and performance of this Agreement
has been duly approved or will be duly approved by all
requisite corporate actions by the closing date.
c. The Buyer has the power to enter into and carry out its
obligations under this
11
<PAGE>
agreement.
d. The common stock of Medley being transferred to the Seller
will be fully paid and non-assessable.
e. The authorized capital stock of the Buyer consists of one
class of common stock having 7,500,000 shares authorized at
$.01 per share all of which stock is owned by Medley.
f. The Buyer is not subject to any order, judgment, decree,
stipulation or other agreement which would prohibit the
transaction contemplated under this agreement.
g. Any action required to be taken by the Buyer in order to
complete the transaction contemplated in this agreement has
been or will be by the closing date duly approved by the
Board of Directors of the Buyer.
h. The transfer and delivery of the Medley shares contemplated
under this agreement will vest title to said shares in the
Sellers free of all liens, encumbrances, conditions and
restrictions except those pertaining to the Federal Securities
Act of 1933, as amended and such State Securities laws as may
be applicable.
7. REPRESENTATIONS AND WARRANTIES OF MEDLEY: Medley represents and
warrants to the Seller as follows:
A. Medley is a duly organized and existing corporation under the laws
of the State of Delaware and is authorized to conduct business in the state of
Florida.
12
<PAGE>
B. Medley has the power and authority to enter into this agreement and
the execution, delivery and performance of this agreement has been duly
approved or will be duly approved by all requisite corporate actions by the
closing date.
C. The authorized capital stock of Medley consists of the following:
(1) 15 million shares of Common Stock having a par value of $.001
per share
(2) five million shares of Preferred Stock
(3) five million Warrants
D. Medley is a publicly traded company, whose registered shares trade
in the over the counter market and to the best of its knowledge all filings
with the Security and Exchange Commission or other public and private governing
bodies were accurate as of the date of their filing.
E. The documents, agreements and materials delivered to the Seller in
furtherance of the Seller's due diligence of Medley and the Buyer are complete
and accurate in all material respects.
F. Medley does not have any knowledge or any basis for the assertion
of any material liability against Medley.
G. Medley is not subject to any order, judgment, decree, stipulation,
or any other agreements with any governmental body or agency with respect
Medley unless specifically set forth in this Agreement.
H. On the day of closing, Medley will have the full unrestrictive
legal and equitable title to the shares being exchanged, free and clear of all
liens and encumbrances.
13
<PAGE>
I. The transfer and delivery of the Exchanged Shares to the Sellers,
pursuant to this Agreement, will vest title to the shares in the Sellers free
and clear of all liens and encumbrances.
J. Financial Statements: Medley has furnished the Sellers with
financial statements as of December 31, 1997. The financial statements fairly
present the financial condition of Medley on such date. To the best of the
Sellers' knowledge, there are no matters pending which would have an adverse or
material affect on the financial statements of Medley.
8. CONDITIONS PRECEDENT TO CLOSING: The Buyer's obligation to close
the transaction contemplated by this Agreement is subject to the following
conditions:
a. Neither the Sellers or the Buyer have terminated this
Agreement during their Due Diligence Period.
b. The representations and warranties of the Parties contained
in this Agreement are true and correct in all material
respects on the closing date.
c. Any and all agreements to be performed by the Parties prior
to the closing date have been performed.
9. INDEMNIFICATION:
A. By The Seller: Subject to the items disclosed in this Agreement,
the Sellers shall defend, indemnify, and hold the Buyer or Medley and any of
the Buyer's or Medley's successors and assigns, harmless against all damages,
losses, costs, or expenses [including reasonable attorney's fees at all levels
of trial or appeal incurred in defending any claim for such damage, loss, cost,
or expense incurred by the Buyer or Medley resulting from or in respect to:
14
<PAGE>
(1) Any breach of the Sellers' representations, warranties, or
covenants in this Agreement or any untruth or inaccuracy
thereof.
(2) Any claim by a broker, agent, or finder alleged to be
employed by, representing, or otherwise involved with the
Corporation or the Sellers relating to this transaction.
(3) Any claim which accrued prior to closing attributable to the
Acts of the Corporation or Sellers not disclosed in this
agreement.
B. By Buyer and Medley: Subject to the items disclosed in this
Agreement, the Buyer and Medley shall defend, indemnify, and hold the Sellers
harmless against all damages, losses, costs, or expenses, including reasonable
attorneys' fees at all levels of trial or appeal incurred in defending any
claim for damage, loss, cost, or expense incurred by Sellers resulting from or
in respect to:
(1) Any breach of the Buyer or Medley's representations,
warranties or covenants in this Agreement or any untruth or
inaccuracy thereof.
(2) Any claim by a broker, agent, or finder alleged to be
employed by, representing, or otherwise involved with the
Corporation or the Buyer and Medley relating to this
transaction.
(3) The Buyer and/or its assigns agrees to indemnify and hold
harmless Bruce Lazarus, his personal representatives, heirs
and successors harmless against all damage, loss, costs or
expenses, including reasonable attorney's fees at all levels
of trial or on appeal which may arise from his execution as
co-maker of that certain promissory note dated July 1, 1996
in favor of Theresa Schmitz in the principal
15
<PAGE>
amount of $220,000.00, which note was assigned to Poser
Investments and has an outstanding principal balance as of
the date of this agreement of approximately $145,000.00 and
is payable in equal monthly installments of principal and
interest in the sum of $4,460.00 per month until July 31,
2001 when said note has been fully amortized. A copy of said
note is attached to this agreement as Exhibit "F". It is
agreed that the indemnification of Bruce Lazarus set forth
herein shall be absolute on the part of the Buyer without
defense or set off of any nature against Bruce Lazarus.
However, notwithstanding the agreement not to set off said
agreement shall not be construed as a waiver of the Buyer's
rights it may have in the future.
C. Notice of claims: In the event any party (Indemnified Party) shall
receive any written notice of any claim or proceeding against them (or in the
case of Buyer the Corporation shall receive notice of a claim or proceeding),
the Indemnified Party shall give the Indemnifying Party written notice of any
such claim or demand and the Indemnifying Party shall have the right to contest
or defend any action brought against the Indemnified Party at the Indemnifying
Party's own expense, provided, that should the Indemnifying Party fail to
notify the Indemnified Party of the assumption of the defense of any action
within 10 days of the Indemnified Party giving written notice to the
Indemnifying Party, then the Indemnified Party shall have the right to take any
such action it deems reasonable to defend, contest, settle or compromise any
action or claim made against the Indemnified Party. If the Indemnifying Party
defends any action for which indemnification is claimed, the
16
<PAGE>
Indemnified Party shall be entitled to participate at its own expense in the
defense of such action; provided, however, that the Indemnifying Party shall
bear the fees and expenses of the Indemnified Party's counsel should there
exist a conflict of interest between Indemnified Party and Indemnifying Party
which would render it inappropriate for counsel selected by the Indemnifying
Party to represent the Indemnified Party.
The indemnification set forth above shall survive the closing of this
transaction and shall enure to the benefit of the heirs, successors and assigns
of the parties to this agreement.
10. AGREEMENT NOT TO TRANSFER EXCHANGE SHARES: The Sellers agree that
they will not offer to sell, sell, transfer or otherwise dispose of their
Restricted Shares in Medley for a period of twelve months following the closing
date without the approval of Medley's Board of Directors. In addition should
the Company in the future elect to register any of its authorized but unissued
shares for sale under the Act, the Sellers agree to execute such restrictions
or lock up agreements on the sale of their Shares as the underwriters for
Medley may reasonably require of all insiders, officers, or Directors. The
obligation contained herein shall survive the closing and at Medley's option
may be restated in a separate instrument to be signed at closing.
11. COVENANTS:
A. Anti-Dilution Restrictions on Medley Stock: Medley agrees that if
at any time after effective date of this Agreement that it issues or sells any
shares of common stock, including shares held in its treasury, shares of common
stock issued upon the exercise of any options, rights or warrants to subscribe
for shares of common stock, shares of common stock issued upon the direct or
indirect conversion or exchange of securities for shares of common stock or
effect any transactions, including, but not limited to the write-off of assets
which results either, directly or
17
<PAGE>
indirectly, in the reduction of Sellers' equity per share for the shares of
Medley's common stock acquired pursuant to this Agreement below the sum of
$1.75 per share, then forthwith upon such issuance or sale or upon the
happening of said event which results in the reduction of a Sellers' equity per
share below the sum of $1.75 per share, Medley shall immediately issue to
Sellers an increased quantity of common stock having an aggregate equity
necessary to equal that which should have existed had Medley's stockholder's
equity per share remained at the sum of $1.75 per share. Notwithstanding the
foregoing, shares issued pursuant to Medley's employee stock option plan dated
December 1, 1996 and shares issued pursuant to existing employment or existing
consulting agreements, shall not be subject to this provision.
B . Restrictions on Depletion of Assets of the Corporation: Medley
agrees following the closing of this transaction that it will not take any
action which would have the effect of reducing the net worth of the Corporation
to an amount less than it is on the closing date. Medley further agrees that it
will not withdraw the capital from the Corporation so as to impair the
Corporation's ability to conduct its business. Income received by the
Corporation from operations shall be used for corporate purposes in the
ordinary course of business.
C. Piggy-Back Registration: If at any time following the Closing Date
the Company proposes to file a registration statement under the Securities Act
of 1933 with respect to an offering of common stock for the Company's own
account, then the Company shall give written notice of such proposed filing to
Sellers and any other holders of the Company's common stock that possess
Piggy-Back Registration Rights for shares of common stock held by them as soon
as practicable but in no event less than 30 days before the anticipated filing
date and such notice shall offer Sellers and other holders of registerable,
shares subject to the terms and conditions hereof, the
18
<PAGE>
opportunity to request that such registration statement include some or all of
their registerable shares for sale, pro rata with the registerable shares of any
other holders of registerable shares participating in such Piggy-Back
Registration statement on the same terms and conditions as the Company's common
stock.
D. Material Change: In the event that there is a material change in
the control of Medley, Medley agrees to immediately register with the
Securities and Exchange Commission all of Seller's unregistered shares acquired
pursuant to this Agreement at the Seller's expense and shall use its best
effort to cause the statement to become effective.
E. Indemnification of Sellers: Medley agrees that it shall indemnify
the Sellers for any liability or payment on obligations included on the
attached Exhibit "F".
F. Board of Directors: When the Medley Board of Directors is increased
to seven members within 45 days thereafter Medley agrees that a representative
of the Corporation shall be named to the Board of Directors of Medley and said
representative shall continue to be on the Board so long as Ameritrust achieves
its earnings hurdles as described herein.
G. Right of Rescission: For a period of twelve months from the date of
closing, any representations made by Buyer and/or Medley discovered to be
materially untrue or in the event that the value of Medley's stock falls below
the sum of $1.75 or Medley fails to issue additional shares as required
pursuant to this Agreement or should any regulatory body suspend the trading of
Medley's registered shares for a period of greater than 30 days as a result of
acts occurring prior to December 31, 1997, the parties to this transaction
shall have the right to rescind this transaction and return of all shares
transferred. In the event of recission, any outstanding loans owed by
Ameritrust to Medley or any of its subdivisions or any loans by Ameritrust
guaranteed by Medley or any of its
19
<PAGE>
subsidiaries will be immediately due and payable at closing of the recission.
12. INSTRUMENTS TO BE DELIVERED AT CLOSING: At the Closing, the
following instruments shall be executed and delivered, if required.
A. Certificates representing the Shares of the Corporation being
exchanged, duly endorsed by the Sellers in favor of the Buyer with all required
transfer tax stamps affixed.
B. A Resolution of the Board of Directors of the Corporation
authorizing the execution and delivery of this agreement and the consummation
of the transactions contemplated hereby certified as of the closing date by an
officer of the Corporation as having been adopted being in full force and
effect and unmodified on the closing date.
C. An affidavit by the Sellers affirming that the warranties and
representations of the Sellers are true and correct on the closing date.
D. A certificate by the Board of Directors of the Corporation to the
effect that the representations and warranties of the Corporation are true and
correct in all material respects as of the closing date.
E. Certificates representing the shares of Medley being duly endorsed,
being transferred to the Sellers in such pro rata amounts as the Sellers direct
in writing with all required transfer tax stamps affixed, if required.
F. A resolution of the Board of Directors of the Buyer authorizing the
transaction.
G. A resolution of the Board of Directors of Medley authorizing the
transaction.
H. A certificate by the Board of Directors of the Buyer to the effect
that the
20
<PAGE>
representations and warranties of the Corporation are true and correct in all
material respects as of the closing date.
I. A certificate by the Board of Directors of Medley to the effect
that the representations and warranties of the Corporation are true and correct
in all material respects as of the closing date.
J. Such other documents as may reasonably be requested by either party
or their counsel.
13. COVENANT OF FURTHER ASSURANCES: After the closing, each party to
this agreement shall, at the reasonable request of the other party and without
further consideration, furnish, executed and deliver such documents,
instruments, certificates, notices or other further assurances as the
requesting party shall reasonably request as necessary or desirable to effect
complete consummation of this agreement and the transaction contemplated
herein.
14. NOTICES: Except as otherwise provided for herein, all notices,
requests, demands and other communications hereunder shall be in writing and
will be deemed to have been duly given if personally delivered, or when
transmitted by facsimile with confirmation of receipt from one party to the
other or when received if mailed by the United States first class certified or
registered mail, postage prepaid, with return receipt requested and marked
delivered or refused, or via an overnight delivery service with proof of
delivery or refusal of delivery, to the other parties at the following
addresses:
To the Buyer: Medley Credit Acceptance Corporation
I 100 Ponce De Leon Blvd.
Coral Gables, Florida 33134
with a copy to: Maynard J. Hellman, Esq.
21
<PAGE>
1100 Ponce De Leon Blvd.
Coral Gables, Florida 33134
To the Sellers: SEE EXHIBIT A
To the Corporation: Ameritrust Holdings, Inc.
2525 N. State Road 7
Suite 100
Hollywood, Florida 33328
with a copy to: Mark C. Perry
2455 East Sunrise Blvd.
Suite 905
Fort Lauderdale, FL 33304
15. MISCELLANEOUS PROVISIONS:
A. Assignment: No party may assign its obligations or rights under
this agreement without the written consent of the other parties.
B. Modification: There are no other agreements, promises or
undertakings between the parties except as specifically set forth herein. No
alteration, change, modification or amendment to this agreement shall be made
except in writing and signed by the parties hereto.
C. Severability: If any provision or paragraph of this agreement is
deemed to be unlawful or unenforceable by any court, administrative agency or
statute, law or ordinance, the said provision or paragraph shall be severed
from this agreement without affecting the enforceability of the remainder of
this agreement. The parties shall make a good faith effort to redraft the
severed provision or paragraph consistent with the party's original intention
but in such a way as to be lawful and enforceable.
D. Binding Effect: This agreement supersedes and cancels any and all
other agreements referring to the subject matter herein. This agreement shall
be binding upon and
22
<PAGE>
inure to the benefit of the respective parties, their successors and assigns,
if applicable as well as to the heirs and legal representatives of the parties
hereto, if applicable.
E. Construction: This agreement shall be construed and enforced under
the laws of the state of Florida.
F. Counterparts: This agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument representing the
agreement between the parties.
G. Captions and Headings: The captions and headings of each section or
subsection in this agreement are for convenience of reference only and shall in
no manner or way whatsoever effect the interpretation or meaning of such
section or subsection.
H. Exhibits: The exhibits attached hereto together with all documents
incorporated by reference herein form an integral part of this agreement and
are hereby incorporated herein wherever reference is made to them to the same
extent as if they were set out in full at the point at which such reference is
made.
I. Attorney's Fees: The prevailing party in any litigation arising out
of the terms of this agreement shall be entitled to reimbursement of reasonable
attorney's fees and costs at the trial and appellate court level.
IN WITNESS WHEREOF, the parties have hereunto executed this agreement
the date above written.
AMERI-CAP FINANCE GROUP, INC.
a Florida corporation
By: /s/ Robert D. Press
--------------------------------
ROBERT D. PRESS, President
23
<PAGE>
MEDLEY CREDIT ACCEPTANCE CORP., a
Delaware corporation
By: /s/ Robert D. Press
------------------------------------
ROBERT D. PRESS, President
SELLER:
/s/ Robert Pozner
---------------------------------------
Robert Pozner
/s/ Debra Ellenson
---------------------------------------
Debra Ellenson
Carrington Capital Corp.
By:/s/
------------------------------------
Marshall Family Limited Holdings
By:/s/
------------------------------------
Blue Lake Capital Corp.
By:/s/
------------------------------------
/s/ Michelle Tucker
---------------------------------------
Michelle Tucker cust. for Montana Tucker
/s/ Michelle Tucker
---------------------------------------
Michelle Tucker cust. for Shayna Tucker
/s/ Michelle Tucker
---------------------------------------
Michelle Tucker
/s/ Eamon Toner
---------------------------------------
Eamon Toner
/s/ Maurice Barbakow
---------------------------------------
Maurice Barbakow J/Ten
/s/ Hope Gerber Barbakow
---------------------------------------
Hope Gerber Barbakow J/Ten
24
<PAGE>
/s/ Bruce Lazarus
---------------------------------------
Bruce Lazarus J/Ten
/s/ Cindy Lazarus
---------------------------------------
Cindy Lazarus J/Ten
/s/ Larry Sazant
---------------------------------------
Larry Sazant J/Ten
/s/ Sheila Sazant
---------------------------------------
Sheila Sazant J/Ten
AMERITRUST HOLDINGS, INC.
By /s/ Larry Sazant
---------------------------------------
LARRY S. SAZANT, President
25
<PAGE>
EXHIBIT A
NAMES OF SELLERS
AND NUMBER OF SHARES
A. Robert Posner .................................................. 75,000
B. Debra Ellenson ................................................. 20,000
C. Carrington Capital Corp . ...................................... 360,000
D. Marshall Family Limited Holdings ............................... 40,000
E. Blue Lake Capital Corp . ....................................... 100,000
F. Michelle Tucker cust. for Montana Tucker ....................... 25,000
G. Michelle Tucker cust. for Shayna Tucker ........................ 25,000
H. Michelle Tucker ................................................ 50,000
I. Eamon Toner .................................................... 200,000
J. Maurice Barbakow and Hope Gerber Barbakow J/Ten ................ 200,000
K. Bruce Lazarus and Cindy Lazarus J/Ten .......................... 200,000
L. Larry Sazant and Sheila Sazant J/Ten ........................... 200,000
<PAGE>
AMENDMENT TO STOCK EXCHANGE AGREEMENT
This agreement is made and entered into this 21 day of October, 1998
by and between AMERI-CAP FINANCE GROUP, INC., a Florida corporation ("Buyer")
and FINANTRA CAPITAL, INC. (f/k/a Medley Credit Acceptance Corp.) ("Finantra")
and AMERITRUST HOLDINGS, INC., a Florida corporation ("Corporation").
WITNESSETH:
WHEREAS, the Buyer entered into a Stock Exchange Agreement with the
owners of all of the common stock of the Corporation on July 20, 1998, and
WHEREAS, Eamon Toner as the owner of 200,000 shares of the
Corporation's common stock and Maurice Barbakow and Hope Barbakow, his wife,
the owners of 200,000 shares of the Corporation have entered into an agreement
with the Corporation whereby they have returned their shares of common stock to
the Corporation in exchange for the return of all of the authorized, issued and
outstanding common stock of Community Redevelopment Corp., a subsidiary of the
Corporation, and
WHEREAS, Finantra and the Buyer have agreed with the Corporation to
amend the Stock Exchange Agreement so as to delete the shares of the stock of
Finantra which would be exchanged for the common shares of the Corporation
owned by Toner and Barbakow and to further amend said agreement by modifying
the number of shares to be distributed at closing to the remaining sellers of
the common shares of the Corporation as well as adjust the earnings hurdles for
the distribution of common shares of Finantra subsequent to the initial
exchange of stock pursuant to the Stock Exchange Agreement, and
WHEREAS, the Corporation, Buyer and Finantra desire to document their
amendment into a written instrument.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
<PAGE>
1. RECITALS: The above and foregoing recitals are true and correct and
are incorporated herein.
2. RELEASE OF BARBAKOW AND TONER FROM STOCK EXCHANGE AGREEMENT AND
APPROVAL OF DIVESTITURE OF COMMUNITY REDEVELOPMENT CORP. AS A SUBSIDIARY OF THE
CORPORATION: The Buyer and Finantra agree that the Corporation can return to
Toner and Barbakow all of the authorized, issued and outstanding common stock
owned by the Corporation in Community Redevelopment Corp. in exchange for the
return to the Corporation by Barbakow and Toner of their collective 400,000
shares of the common stock of the Corporation.
3. AMENDMENTS TO STOCK EXCHANGE AGREEMENT: The Buyer, Finantra and
the Corporation agree to the following amendment to the Stock Exchange
Agreement dated July 20, 1998:
3.1 The first WHEREAS clause shall be amended to provide as
follows:
WHEREAS, the Sellers collectively own 100% of the authorized,
issued and outstanding common shares of Ameritrust Holdings,
Inc., consisting of 1,095,000 common shares (the "Shares").
3.2 Section 2 is hereby amended as follows:
2. EXCHANGE AND TRANSFER OF SHARES: The Seller shall
transfer, and convey to the Buyer and the Buyer
shall acquire from the Seller 90% of the authorized,
issued, and outstanding common shares of the
Corporation consisting of 1,000,000 shares as
follows:
A. 504 Shares: The Buyer will exchange with
the Sellers owning the Corporation's Shares sold
pursuant to Section 504 of the Act ["504 Shares"]
one common share of Medley for each 504 Share owned
by the Sellers. The total number of 504 Shares
outstanding by the Corporation are 95,000 shares and
all outstanding 504 Shares owned by the Sellers
shall be exchanged on the closing date.
(1) Medley agrees with respect to the
Exchanged 504 Shares to file a
registration statement with the
Securities and Exchange Commission
within 30 days following the
closing date and diligently pursue
the registration of said shares,
including responding to comment
letters, if any, and to do its
best to have the registration
become effective.
B. Restricted Shares: The balance of the
outstanding
<PAGE>
Shares of the Corporation owned by the Sellers are
not registered under the Act and shall hereafter be
referred to as the "Restricted Shares". The
Restricted Shares shall be exchanged as follows:
(1) At closing the Buyer shall
exchange 286,000 common shares of
Medley for 900,000 Restricted
Shares of the Corporation owned by
the Sellers. The Shares will be
exchanged on a pro rata basis with
each selling Shareholder based
upon the number of Shares owned by
the selling shareholder in the
Corporation. No fractional shares
shall be issued by Medley and the
Sellers agree to determine the pro
rata method of distribution prior
to closing and to deliver a
written letter of direction signed
by all Sellers setting forth the
distribution computation to the
Buyer.
(2) The Restricted Shares not
exchanged at the closing shall be
retained solely in the possession
of the Sellers and shall be
available for a future exchange
with the Buyer according to the
following:
(a) Period 1: The four
months ending December
31, 1998. If net earnings
before taxes (the
"earnings hurdle") of
Ameritrust exceed
$183,100, Sellers will
exchange 12,500 shares of
their Restricted Shares
for 89,250 shares of
Medley Common Stock.
(b) Period 2, 3 and 4:
The calendar years ending
1999, 2000, and 2001, the
earnings hurdle shall be
$366,200; $549,300;
$732,400 in each year
respectively. For each
year that the net
earnings before taxes of
Ameritrust exceed the
earnings hurdle in that
year, Sellers shall
exchange 25,000 shares of
their Restricted Shares
for 178,500 shares of the
Common Stock of Medley.
(c) Period 5: The six
months ending June 30,
2002, the earnings hurdle
shall be $900,000
annualized. If the net
earnings before taxes of
Ameritrust
<PAGE>
exceed the earnings
hurdle, Sellers shall
exchange 125,000 shares
of their Restricted
Shares for 89,250 shares
of Common Stock of
Medley.
(d) Adjustment to Shares
to be Exchanged: If at
the end of each exchange
period as delineated in
(a), (b) or (c) above,
net earnings before taxes
is less than the earnings
hurdle, but greater than
80% of the then
applicable earnings
hurdle, Sellers shall
exchange their Restricted
Shares indicated for that
period with an amount of
Medley shares equal to
the actual net earnings
before taxes divided by
the earnings hurdle, with
that number multiplied by
the number of Medley
shares to be exchanged
pursuant to the above.
If the net earnings is
greater than 33% of the earnings hurdle but
less 80% of the than the earnings hurdle,
than no exchange of shares shall take
place. However, the date for the unachieved
earning hurdle shall be extended for an
additional one (1) calendar year or half
year as applicable.
If the net earnings is
equal to or below 33% of the earnings
hurdle then Sellers will deliver to Buyer
the applicable shares for the period for no
additional Medley Shares and forfeit that
period's exchange rights.
As of December 31, 2003,
any remaining Restricted Shares of
Ameritrust Common Stock not exchanged by
the Sellers due to the Company's failure to
achieve its earnings hurdle shall be
conveyed to Buyer or its assigns without
exchange of Medley Shares or consideration.
3.3 Paragraph 3.e. is hereby amended as follows:
e. The aggregate number of shares that the
Corporation is authorized to have outstanding as of the date
hereof is 7,500,000 shares of common stock of which 1,095,000
are presently issued and outstanding and held collectively in
the name of the Sellers.
4. That except for the amendments contained in this agreement all of
the terms, conditions and provisions contained in the Stock Exchange Agreement
dated July 20, 1998 are hereby ratified and confirmed and are in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, the Parties have hereunto set their hands and
seals this ___ day of October, 1998.
FINANTRA CAPITAL, INC.
By: /s/ Robert D. Press
-------------------------------
ROBERT D. PRESS, President
AMERI-CAP FINANCE GROUP, INC.
By: /s/ Robert D. Press
-------------------------------
ROBERT D. PRESS, President
AMERITRUST HOLDINGS, INC.
By: /s/ Bruce Lazarus
-------------------------------
BRUCE LAZARUS, President
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
as of this day of , 1998 by and between AMERITRUST HOLDINGS, INC., a
Florida corporation (the "Company") and LARRY SCHWARTZ ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is experienced in the development, marketing and
operating a mortgage banking company, and
WHEREAS, the Company desire to retain, engage and employ Employee and
Employee desires to be so retained, engaged and employed by the Company in the
capacity of President upon the terms and conditions set forth in this
Agreement, and
WHEREAS, Employee by reason of the nature of Employee's duties and
responsibilities will be provided access to the Company's confidential and
proprietary information which the Company and its parent, Finantra Capital,
Inc. desires to maintain confidential.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained here, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. The above and foregoing recitals are true and correct and are
incorporated herein.
2. Relationship of the Parties: The Company hereby employs, hires and
engages Employee as its President and the Employee hereby accepts and
agrees to such hiring, engagement and employment subject to the
supervision and pursuant to the orders, advice and discretion of the
Company's Board of Directors. The
1
<PAGE>
Employee shall also perform such other duties as are customarily
performed by one holding such position in other, same or similar
businesses as that engaged in by the Employer.
3. Duties" During the term of the Employee's employment, the Employee
shall be responsible for the development, refinement and
implementation of the Company's mortgage programs and the compliance
of such programs with governmental laws, rules and regulations. The
Employee shall work on a full-time basis and carry out his employment
in a good and professional manner and to the reasonable satisfaction
of the Company's Board of Directors.
4. Term: The term of the Employee's employment shall be for a term of
five (5) years commencing upon the execution of this Agreement and
subject to the termination provisions set forth in this Agreement,
provided however, that the term of this Agreement shall be
automatically extended for an additional one (1) year term unless the
Company or Employee gives written notice to the other no later than
thirty (30) days prior to the expiration of any term electing to
decline such extension.
5. Compensation:
5.1 The company covenants and agrees that in consideration of the
services performed and to be performed hereunder, it will pay
to employee, during the term of Employee's employment under
this Agreement, at the Company's regular and customary
intervals for payment of compensation to employees, but not
less than twice per month, an annual base salary in the sum
of $75,000.00 during the first three years of this Agreement.
Commencing in the fourth employment year and each year
thereafter, the
2
<PAGE>
Employee shall be entitled to an annual increase in salary in
the sum of $5,000.00 per year.
5.2 Override Commissions: Employee shall be entitled to an
override commission on each residential mortgage transaction
made by Employer in an amount equal to 4% of the gross
revenues derived by employer and all mortgage related
companies. Gross revenue shall consist solely of the income
derived from original fees, loan discount fees, par-plus or
service release premiums. Commissions shall be paid monthly
within fifteen (150) days following the close of the month in
which the commission was earned and received.
5.3 Bonus: The Employee during the term of his employment shall
be entitled to a bonus equal to ten (10%) percent of the
Company's pre-tax net profit. The employee's bonus shall be
monthly, within fifteen (15) days of the end of the previous
month. Any overpayment shall be repaid to the Company by the
Employee. The Bonus funds received by the Employee shall be
used to amortize and pay his outstanding debts due Internal
Revenue Service and others. *
6. Benefits: The Employee shall be entitled to the following benefits
during the period of his employment hereunder:
6.1 Employee shall be entitled in accordance with the Company's
general policies for executives to participate in health,
casualty, disability and life insurance programs and any
other benefits as are made available from time to time by the
Company to other employees or executives.
* The Bonus funds described in this paragraph shall be used in full to amortize
and pay the Employee's liability on the monies owed to Jack Schwartz on the
Promissory Notes having an outstanding balance as of the date hereof in the sum
of $126,000.00; to the Internal Revenue Service in an amount to be negotiated
for unpaid payroll taxes which accrued by SunTrust Financial Corp. and the
monies due Bruce Lazarus and Larry Sazant and Ameritrust Holdings, Inc. in the
amount of $117,000.00. Upon payment in full of the obligations described herein
the bonus payable to Employee pursuant to this section 5.3 shall cease and no
longer be payable.
3
<PAGE>
6.2 During the term of his employment the Employee shall be
entitled to reimbursement of all reasonable expenses actually
paid or incurred by Employee in the course of an pursuant to
the performance of his duties hereunder. Any single expense
in excess of Five Hundred and 00/100 ($500.00) Dollars shall
be verbally approved in advance by the Board Chairman or
other person designated by the Company to approve such
expenditure.
6.3 Employee shall be entitled to two (2) weeks paid vacation in
any twelve (12) month period during the term of this
Agreement. Paid vacation shall be prorated in any calendar
year during which the employee is employed under this
Agreement for less than an entire year. The Employee shall
also be entitled to all paid holidays given by the Company to
its executives or employees. In the event any annual accrued
vacation time is unused at the conclusion of a calendar year,
the unused time may be carried over into the next calendar
year or years until utilized.
6.4 Car Allowance: Employee shall receive a monthly car allowance
in the sum of $500.00 per month for the use of his automobile
on Company business. The Company agrees to reimburse fuel,
maintenance, and automobile insurance for employee. Employee
acknowledges liability coverage of not less than $300,000.00.
6.5 The Employee shall have annual five (5) sick days, which if
not used in any year shall be non-cumulative.
6.6 The Company shall reimburse Employee for his cellular phone
charges and his business telephone line installed in his
home.
4
<PAGE>
7. Incentive Stock Option Program: Employee shall be entitled to
participate in the Incentive Stock Option program of the Company's
parent, Finantra Capital, Inc. on an annual basis beginning with the
calendar year January 1, 1999. The number of incentive stock options
distributable by the Company to the Employee will be based upon the
Company's annual net pre-tax income as follows:
If the Net Pre-Tax Income of the Company is in excess of:
NET PRE-TAX INCOME ISO GRANT
500,000 25,000
750,000 50,000
1,000,000 75,000
1,250,000 100,000
1,500,000 125,000
1,750,000 150,000
2,000,000 175,000
2,250,000 200,000
Notwithstanding the above distribution schedule, should the
Company achieve net pre-tax income in the calendar year 1999 of at
least $250,000.00, Employee shall be granted 50,000 ISO's. This
exception to the distribution schedule shall only apply to the
calendar year 1999.
The Incentive Stock Option Program shall be funded with
common shares of the Company's parent, Finantra Capital, Inc. The
ISO's shall have a vesting period of six months and an exercise period
of eighteen (18) months from the date of issuance. The exercise price
of the options shall be equal to the closing price of the stock on the
date of issuance multiplied by 65%. Payment shall be due in full upon
the exercise of the option by the Employee.
5
<PAGE>
8. Disability: In the event that Employee shall become incapacitated by
reason of mental or physical disability during the term of his
employment such that he is prevented from performing his principal
duties and services hereunder for a period of sixty (60) consecutive
days or for shorter periods aggregating ninety (90) days during any
twelve (12) month period, the Company thereafter shall have the right
to terminate Employee's employment under this Agreement by sending
written notice of such termination to the Employee or his legal
representative and thereupon his employment shall hereunder
immediately terminate. Upon such termination Employee shall be
entitled to receive and shall be paid by the Company his salary in
effect on the date of termination paid at the Company's regular and
customary intervals for the payment of salaries for the lesser of
three (3) months or the remaining terms of this Agreement. In
addition, during such period, Employee shall continue to receive his
benefits described in this Agreement as in effect at the date of
termination. Immediately following the expiration of such applicable
period the employee shall no longer be entitled to further Company
benefits. The employee agrees to accept the payments described herein
I full discharge and release of the Company of and from any further
obligations under this Agreement. Such discharge and release shall not
affect any rights or remedies which may be available to Employee or
the Company otherwise than under this Agreement.
9. Termination:
9.1 Cause: The Company shall have the right to terminate the
employment of Employee hereunder at any time for cause [as
used herein, "cause"] if:
9.1.1 Employee shall be convicted by a court of competent
and final
6
<PAGE>
jurisdiction of any crime [whether or not involving
the Company] which constitute a felony in the
jurisdiction involved or otherwise commit acts of
moral turpitude in such a manner as to adversely
reflect upon the reputation of the Company; or
9.1.2. Employee shall commit any act of embezzlement or
similar material dishonest and injurious conduct
against the Company; or
9.1.3. Employee shall demonstrate reckless disregard or
grossly negligent and injurious conduct in
connection with the performance of, or a gross
disregard for, his duties and responsibilities
under, or assigned pursuant to this Agreement; or
9.1.4. In the event, commencing four months following the
Commencement date of this Agreement, the net monthly
sales volume of the Company is less than 75% of the
Company's projected sales goals per month as set
forth on Exhibit attached hereto in any consecutive
three month period, or the net annual sales volume
is less than 75% of the Company's annual projected
sales.
9.1.5. Employee is in material default in the performance
of his obligations, services or duties under this
Agreement and such default continues for a period of
fifteen (15) days after written notice to Employee.
9.2 Mutual Agreement: Company and Employee may mutually agree to
terminate this Agreement.
9.3 In the event that the employment of Employee shall be
terminated by the Company, Employee shall be entitled to
receive his salary then in effect through the date of such
termination. Employee shall
7
<PAGE>
accept the payments pursuant to this paragraph in full
discharge and release of the company of and from any further
obligations under this Agreement. Nothing contained in this
paragraph shall constitute a waiver or release by the Company
of any rights or claims it may have against the employee,
including, but not limited to, any claims or rights pursuant
to the provisions set forth in this Agreement.
10. Best Efforts of Employee: The Employee agrees that employee will, at
all times, faithfully, industriously and to the best of his ability,
experience and talents, perform all of the express and implicit terms
hereof, to the reasonable satisfaction of the Company and its Board of
directors. It is understood that the Employee must devote his full
time and effort to the business of the Company and may not render the
same or similar services or duties during the term hereof to a
business which is the same or similar to that of the Company.
10.B. Employer's Covenant.
The corporation (parent company) will assist Mr. Schwartz in
performance of his duties through employment of appropriate staff of
employees and professionals and sufficient working capital to reach
the corporation business objectives.
11. Employee's Limitations on Ability to Make Company Commitments: The
employee shall have the legal authority to enter into contracts and
commitments for and on behalf of the Company. However, the Employee
shall not enter into any contract or commitment on behalf of the
Company which would violate the parameters of the Company's
underwriting guidelines or be in derogation of the express
requirements of the Company's credit committee with respect to any
loan made
8
<PAGE>
by the Company or an expense in excess of One Thousand ($1,000.00)
Dollars for non-business related expenditures without the express
written consent of the Company's Board of Directors or the Company's
Credit Committee.
12. Trust Funds: All money belonging to the Company which comes into the
possession of Employee shall be received by Employee in trust for the
Company and Employee shall immediately deliver said funds to the
Company for deposit. All of such funds shall be considered "Trust
Funds."
13. Covenants, Representations and Warranties of Employee: The Employee
represents and warrants to the Company as follows:
13.1 Employee has the power and authority to enter into this
Agreement and perform its duties hereunder.
13.2 Employee shall use his best efforts to comply with all laws,
regulations, rules and ordinances pertaining to the Company's
business.
13.3 Employee shall weekly, or at such other interval designated
by the company, deliver to the Chairman of the Board of the
Company and its parent, activity reports which shall identify
all clients and financial activity of the company in forms
prescribed by the company.
14. Restrictive Covenants:
14.1 Employee recognizes and acknowledges that as a consequence of
his duties hereunder, Employee will be provided access to or
will come in contact with confidential information of or
regarding the Company and its parent, Finantra Capital, Inc.,
from time to time. Accordingly, Employee agrees that he will
not, during or after the term of his employment except with
prior written consent of the Company, disclose any
confidential
9
<PAGE>
information relating to the Company or its Parent. The
provisions of this section shall not apply to information
which Employee is required to disclose bylaw or by order a
court of competent jurisdiction, but only to the extent
required by law or by order and when reasonably possible,
only if Employee shall give the Company prior notice of such
intended disclosure so that the company has the opportunity
to seek a protective order if it deems such appropriate.
14.2 As used in this Agreement, "confidential information" shall
mean and include studies, plans, reports, records,
promotional materials, agreements, memoranda, documents,
information related to Company activities, systems, finances,
client lists, research data, personnel data, financing
sources, and such other related information not of a public
knowledge.
14.3 For so long as the Employee is employed hereunder, Employee
shall not engage either as principal, agent or consultant, or
through any corporation, firm or organization in which he is
or may be an officer, director, employee, shareholder,
partner, member or with which he is otherwise affiliated in
any business for profit which is engaged in any activity or
business similar to that of the Employer.
14.4 The Employee covenants and agrees that for a period of two
(2) years from the date of his termination of employment with
the company, either voluntary or involuntary, that he will
not directly or indirectly solicit or aid in the solicitation
of any company client who has done business with the Company
during the period of time that the Employee was in the employ
10
<PAGE>
of the Company. This provision shall apply to Broward and
Dade Counties.
14.5 It is agreed by the Employee that should he violate the
provisions of this section, the Company shall have the right
to obtain an Order from a court of competent jurisdiction
enjoining him from violating any and all of the provisions of
this section or of this Agreement and the Company's
application for such a writ of injunction shall be deemed
without prejudice to any and all other rights, remedies or
actions which may accrue in favor of the Company as a result
of the Employee's breach of this provision or of the terms of
this Agreement. In the event the Company is required to
institute any litigation concerning the terms and conditions
of this section or of this Agreement, the prevailing party
shall be entitled to reimbursement of all reasonable
attorney's fees and costs at both the trial and the appellate
court level. The Employee further agrees that in the event of
litigation venue shall be only be proper in Dade County,
Florida.
15. Notices: All notices, requests, demands, waivers, consents, approvals
or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been given when received if
delivered personally or by recognized overnight carrier, or three (3)
days after being sent if sent by Certified or Registered Mail, postage
prepaid, Return Receipt Requested, to the following addresses:
11
<PAGE>
If to the Company: Ameritrust Holdings, Inc.
Attention: Robert D. Press, Chairman
1100 Ponce de Leon Boulevard
Coral Gables, Florida 33134
With a copy to: Maynard J. Hellman, Esquire
1100 Ponce de Leon Boulevard
Coral Gables, Florida 33134
If to the Employee: Larry Schwartz
-------------------------------
-------------------------------
Any party may by notice change the address to which notice or
other communications to it are to be delivered or mailed.
16. Miscellaneous Provisions:
16.1 Captions and Paragraph Headings. Captions and paragraph
headings contained in this Contract are for convenience and
reference only and in no way define, describe, extend or
limit the copy or intent of this Contract nor the intent of
any provision hereof.
16.2 Counterparts: This Contract may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same Contract.
16.3 Binding Effect: This Contract shall enure to the benefit of
and shall be binding upon the parties hereto and their
respective heirs, personal representatives, successors and
assigns. However, under no circumstances shall this Contract
be assignable by Employee.
16.4 Entire Agreement: This contract constitute the entire
understanding agreement between the parties and may not be
changed, altered or
12
<PAGE>
modified, except by an instrument in writing signed by all
parties against whom and enforcement of such Contract would
be sought. In the event any provision of this Contract shall
be determined by appropriate judicial authority to be illegal
or otherwise invalid, such provision, shall be given its
nearest legal meaning or be construed or deleted as such
authority determines. The remainder of this Contract shall be
construed to be in full force and effect. This Contract shall
not be modified unless said modification is in writing and
signed by the party to be charged.
16.5 Governing Law and Venue: This Contract shall be construed and
interpreted according to the laws of the State of Florida,
Venue for any litigation hereunder shall be in Dade County,
Florida.
16.6 Joint Preparation: The preparation of this Contract has been
a joint effort of the parties and the resulting documents
shall not, solely as a matter of judicial construction, be
construed more severely against one of the parties than the
other.
16.7 Attorney's Fees: In the event of any litigation arising out
of or relating to this Contract, the unsuccessful party in
such litigation shall pay to the successful party all costs
and expenses incurred therein by the successful party,
including, without limitation, reasonable attorney's fees and
costs at the trial and appellate court level.
13
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and
effective as of Nov. 14th 1997 between RESIDENTIAL FINANCIAL SERVICES, INC.
(the "Corporation"), and BRUCE LAZARUS an individual ("Mr. Lazarus")
WHEREAS, The Corporation desires to retain the services of Mr. Lazarus
as Set forth herein, Whereas the parties agree as follows:
1. Employment. Corporation hereby employs Mr. Lazarus and Mr. Lazarus
accepts such employment on the terms and conditions set forth herein.
1.1 Mr. Lazarus covenants to perform in good faith his employment
duties as outlined herein, devoting all of his business time, energies and
abilities to the proper and efficient management of the business of the
Corporation, and for its benefit.
1.2 Mr. Lazarus shall not, without the prior written consent of the
Corporation, directly or indirectly, during the term of this agreement and for
a period of five (5) years after termination of this agreement: (1) render
services of business, professional or commercial nature to any other person or
entity, whether for compensation or otherwise, similar or relating to the
business of the Corporation, or (ii) engage in any activity competitive with or
adverse to the Corporation's business or welfare, whether alone, as a partner
or member, or as an officer, director, employee or 1% or greater shareholder of
a corporation.
2. Term of Employment. Subject to the provisions set forth herein, the
term of Mr. Lazarus's employment hereunder shall continue for five (5) years.
3. Duties. Mr. Lazarus shall be employed as President and perform all
duties as may be assigned by the Board of Directors.
The Corporation will assist Mr. Lazarus in performance of his duties
through employment of appropriate staff of employees and professionals and
employment of sufficient working capital to reach the Corporation's business
objectives.
4. Compensation. For all services he may render to the Corporation
during the term of this Agreement, Mr. Lazarus shall receive the following
compensation:
<PAGE>
4.1 Mr. Lazarus shall receive a salary at the rate of $75,000,00
per year payable in 52 equal weekly payments. Salaries may be increased
annually by 5% upon approval of the Board of Directors.
4.2 Mr. Lazarus shall receive a 5% cash bonus on all Residential
Financial Services, Inc. pretax income as per the certified year end financial
statement.
4.3 Mr. Lazarus will continue to act as broker or co-broker for the
company as if he were any other commissioned employee and will be entitled to
commissions in accordance with the company payment policy.
5. Benefits. During the term of this Agreement, Mr. Lazarus shall be
entitled to the following executive benefits:
5.1 Mr. Lazarus shall be entitled to two weeks vacation time per
year without reduction in salary.
5.2 Mr. Lazarus shall be entitled to receive health insurance and
reasonable business expenses generally available to members of management.
6. Termination. The employment of Mr. Lazarus may be terminated at any
time by:
6.1 Mutual agreement; or
6.2 Action of the Board of Directors, on thirty (30) days' prior
written notice, in the event of illness or disability of Mr. Lazarus resulting
in failure to discharge his duties under this Agreement for ninety or more
consecutive days or for a total of one hundred eighty or more days in a period
of twelve consecutive months; or
6.3 Action of the Board of Directors, if it shall be established
that Mr. Lazarus is in material default in the performance of his obligations,
services or duties hereunder (other than for illness or incapacity) or has
materially breached any
<PAGE>
provision of this Agreement and any such default or breach has continued for
twenty (20) days after written notice of such non-performance or breach.
Termination of employment under this sub-paragraph shall not be utilized except
for a material default or breach which has resulted in a material damage to the
Corporation.
7. Indemnification.
The Corporation shall indemnify Mr. Lazarus against expenses
(including attorneys' fees and costs of investigation), judgements, fines, and
amounts paid in settlement actually and reasonably incurred by Mr. Lazarus in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, derivative, investigative, or
administrative by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation or an affiliate of the Corporation or a
participant in another corporation, partnership or other enterprise at the
request of the Corporation if he acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interest of the Corporation or
such other entity, and with respect to any criminal action or proceeding, had
no reasonable cause to believe that his conduct was unlawful. The Corporation
shall pay the foregoing expenses as incurred and Mr. Lazarus shall repay any
such amounts upon the final determination that he was not entitled to such
indemnification, such determination to be by a court of competent
jurisdiction.
8. Miscellaneous.
8.1 The failure of either party to enforce any provision of this
Agreement shall not be construed as a waiver of any such provision, nor prevent
such party thereafter from enforcing such provision or any other provision of
this Agreement. The rights granted both parties herein are cumulative and the
election of one shall not constitute a waiver of such party's right to assert
all other legal remedies available under the circumstances.
<PAGE>
8.2 Any notice to be given to the Corporation under the terms of
this Agreement shall be addressed to the Corporation, at the address of its
principal place of business, and any notice to be given to Mr. Lazarus shall be
addressed to him at his home address last shown on the records of the
Corporation, or such other address as either party may hereafter designate in
writing to the other. Any notice shall be deemed duly given when mailed by
registered or certified mail, postage prepaid, as provided herein,
8.3 The provisions of the Agreement are severable, and if any
provision of this Agreement shall be held invalid or otherwise unenforceable,
in whole or in part, the remainder of the provisions, or enforceable parts
thereof, shall not be affected thereby.
8.4 The rights and obligations of the Corporation under this
Agreement shall inure to the benefit of and be binding upon the successors and
assignees of the Corporation.
8.5 This Agreement supersedes all prior agreements and
understandings between the parties hereto, oral or written, and may not be
notified or terminated orally. No modification, termination or attempted waiver
shall be valid unless in writing, signed by the party against whom such
modification, termination, or waiver is sought to be enforced.
8.6 The parties further specifically agree that any action sought
to enforce any of the terms and conditions of this agreement or to remedy any
default thereof shall be brought in the appropriate court in Dade County,
Florida. The parties specifically agree that appropriate courts in Dade County,
Florida constitute the proper venue to bring such action.
8.7 The parties agree that in the event it is necessary to enforce
any of the terms and conditions of this contract or to bring an action based
upon a default of
<PAGE>
this agreement that the prevailing party will be entitled to seek and recover
all reasonable attorney's fees incurred therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
BRUCE LAZARUS RESIDENTIAL FINANCIAL SERVICES, INC.
By /s/ Bruce Lazarus By /s/ Larry Sazant
------------------------------------ ----------------------------------
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and
effective as of Nov. 14th 1997 between RESIDENTIAL FINANCIAL SERVICES, INC.
(the "Corporation"), and LARRY SAZANT an individual ("Mr. Sazant")
WHEREAS, The Corporation desires to retain the services of Mr.
Sazant as set forth herein, Whereas the parties agree as follows:
1. Employment. Corporation hereby employs Mr. Sazant and Mr. Sazant
accepts such employment on the terms and conditions set forth herein.
1.1 Mr. Sazant covenants to perform in good faith his employment
duties as outlined herein, devote a substantial part of his business time,
energies and abilities to the proper and efficient management of the business
of the Corporation, and for its benefit. It is understood that Mr. Sazant is
involved in other businesses including the practice of Law and devotes time and
attention to the said matters.
1.2 Mr. Sazant shall not, without the prior written consent of
the Corporation, directly or indirectly, during the term of this agreement and
for a period of five (5) years after termination of this agreement: (i) render
services of business, professional or commercial nature to any other person or
entity, whether for compensation or otherwise, similar or relating to the
business of the Corporation, or (ii) engage in any activity competitive with or
adverse to the Corporation's business or welfare, whether alone, as a partner
or member, or as an officer, director, employee or 1% or greater shareholder of
a corporation. It is understood and agreed that Mr. Sazant may render services
in connection with the practice of Law. In regard to the business of the
Corporation, Mr. Sazant will grant right of first refusal to the Corp. to meet
the terms and conditions thereof before offering or concluding a transaction
with
<PAGE>
a third party.
2. Term of Employment. Subject to the provisions set forth herein,
the term of Mr. Sazant's employment hereunder shall continue for five (5)
years.
3. Duties. Mr. Sazant shall be employed as Vice-President and
perform all duties as may be assigned by the Board of Directors.
The Corporation will assist Mr. Sazant in performance of his
duties through employment of appropriate staff of employees and professionals
and employment of sufficient working capital to reach the Corporation's
business objectives.
4. Compensation. For all services he may render to the Corporation
during the term of this Agreement, Mr. Sazant shall receive the following
compensation:
4.1 Mr. Sazant shall receive a salary at the rate of $ 45,000.00
per year payable in 52 equal weekly payments. Salaries may be increased
annually by 5% upon approval of the Board of Directors.
4.2 Mr. Sazant shall receive a 5% cash bonus on all Residential
Financial Services, Inc. pretax income as per the certified year end financial
statement.
4.3 Mr. Sazant shall continue to act as broker or co-broker for
the company as if he were any other commissioned employee and will be entitled
to commissions in accordance with the company payment policy.
5. Benefits. During the term of this Agreement, Mr. Sazant shall be
entitled to the following executive benefits:
5.1 Mr. Sazant shall be entitled to two weeks vacation time per
year without reduction in salary.
5.2 Mr. Sazant shall be entitled to receive health insurance and
reasonable business expenses generally available to members of management.
6. Termination The employment of Mr. Sazant may be terminated at
any
<PAGE>
time by:
6.1 Mutual agreement; or
6.2 Action of the Board of Directors, on thirty (30) days' prior
written notice, in the event of illness or disability of Mr. Sazant resulting
in failure to discharge his duties under this Agreement for ninety or more
consecutive days or for a total of one hundred eighty or more days in a period
of twelve consecutive months, or
6.3 Action of the Board of Directors, if it shall be established
that Mr. Sazant is in material default in the performance of his obligations,
services or duties hereunder (other than for illness or incapacity) or has
materially breached any provision of this Agreement and any such default or
breach has continued for twenty (20) days after written notice of such
non-performance or breach. Termination of employment under this sub-paragraph
shall not be utilized except for a material default or breach which has
resulted in a material damage to the Corporation.
7. Indemnification.
The Corporation shall indemnify Mr. Sazant against expenses
(including attorneys' fees and costs of investigation), judgements, fines, and
amounts paid in settlement actually and reasonably incurred by Mr. Sazant in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, derivative, investigative, or
administrative by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation or an affiliate of the Corporation or a
participant in another corporation, partnership or other enterprise at the
request of the Corporation if he acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interest of the Corporation or
such other entity, and with respect to any criminal action or proceeding, had
no reasonable cause to believe that his conduct was unlawful. The Corporation
shall pay the foregoing
<PAGE>
expenses as incurred and Mr. Sazant shall repay any such amounts upon the final
determination that he was not entitled to such indemnification, such
determination to be by a court of competent jurisdiction.
8. Miscellaneous.
8.1 The failure of either party to enforce any provision of this
Agreement shall not be construed as a waiver of any such provision, nor prevent
such party thereafter from enforcing such provision or any other provision of
this Agreement. The rights granted both parties herein are cumulative and the
election of one shall not constitute a waiver of such party's right to assert
all other legal remedies available under the circumstances.
8.2 Any notice to be given to the Corporation under the terms of
this Agreement shall be addressed to the Corporation, at the address of its
principal place of business, and any notice to be given to Mr. Sazant shall be
addressed to him at his home address last shown on the records of the
Corporation, or such other address as either party may hereafter designate in
writing to the other. Any notice shall be deemed duly given when mailed by
registered or certified mail, postage prepaid, as provided herein.
8.3 The provisions of the Agreement are severable, and if any
provision of this Agreement shall be held invalid or otherwise unenforceable,
in whole or in part, the remainder of the provisions, or enforceable parts
thereof, shall not be affected thereby.
8.4 The rights and obligations of the Corporation under this
Agreement shall inure to the benefit of and be binding upon the successors and
assignees of the Corporation.
8.5 This Agreement supersedes all prior agreements and
understandings between the parties hereto, oral or written, and may not be
notified or
<PAGE>
terminated orally. No modification, termination or attempted waiver shall be
valid unless in writing, signed by the party against whom such modification,
termination, or waiver is sought to be enforced.
8.6 The parties further specifically agree that any action sought
to enforce any of the terms and conditions of this agreement or to remedy any
default thereof shall be brought in the appropriate court in Dade County,
Florida. The parties specifically agree that appropriate courts in Dade County,
Florida constitute the proper venue to bring such action.
8.7 The parties agree that in the event it is necessary to enforce
any of the terms and conditions of this contract or to bring an action based
upon a default of this agreement that the prevailing party will be entitled to
seek and recover all reasonable attorney's fees incurred therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
LARRY SAZANT RESIDENTIAL FINANCIAL SERVICES INC
By /s/ Larry Sazant By /s/ Bruce Lazarus
------------------------- --------------------------------
<PAGE>
ADDENDUM To Executive Employment Agreement Between Residential Financial
Services, Inc. and Larry S. Sazant on November 1997
This Addendum to the Executive Employment Agreement is entered into by and
between Residential Financial Services, Inc., and Larry S. Sazant, an
individual ("Mr. Sazant") on this 1st day of July 1998.
Whereas the parties hereto previously executed an Executive employment
Agreement effective November 14, 1997; and
Whereas the parties desire to amend the said agreement;
Now, Therefore in consideration of the mutual promises contained herein, the
Corporation and Mr. Sazant agree as follows:
1. That in addition to the compensation set forth in paragraph 4 that Mr.
Sazant shall receive as additional compensation, 10% of the gross commissions
earned by the Corporation for commercial loans by Mr. Sazant.
(A) That in respect to other commissions generated by the Commercial Loan
division of the Corporation, it is agreed that Mr. Sazant shall receive a
commission equal to the difference between any commission paid to any loan
officer or loan consultant and the sum of 50% of the total commission paid by
the Corporation.
E.g. Loan of $100,000 and commission paid to loan officer is $4000.00 being 40%
of the commission of 10% on the overall transaction; Mr. Sazant is entitled to
$1000.00 Total commission not to exceed 50% in relation to commission of Mr.
Sazant.
Should the commission paid to the loan officer be 50% or more then no
commission is to be earned by Mr. Sazant
2. That said compensation shall be paid by the Corporation to Mr. Sazant within
10 days of payment to the corporation of its compensation.
All of the terms and conditions of the Employment Agreement except as modified
herein shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this addendum as of the date
first above written.
BY: Larry S. Sazant Residential Financial Services, Inc.,
/s/ Larry S. Sazant By: /s/ Bruce Lazarus
- ------------------------------ ----------------------------------
Its Pres
------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-21-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,314,399
<SECURITIES> 0
<RECEIVABLES> 7,014,062
<ALLOWANCES> 3,000
<INVENTORY> 0
<CURRENT-ASSETS> 9,759,899
<PP&E> 225,085
<DEPRECIATION> 98,267
<TOTAL-ASSETS> 13,459,589
<CURRENT-LIABILITIES> 5,009,543
<BONDS> 0
0
29,588
<COMMON> 40,210
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,459,589
<SALES> 4,500,043
<TOTAL-REVENUES> 4,500,043
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,266,080
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,773
<INCOME-PRETAX> 233,963
<INCOME-TAX> 0
<INCOME-CONTINUING> 233,963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165,763
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
