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U.S. Securities and Exchange
Commission Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
FLORIDA 65-0181535
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15544 N.W. 77th Court
Miami Lakes, FL 33016
----------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (305) 828-2599
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Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK
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PART I
Item 1. DESCRIPTION OF BUSINESS.
AMERICA'S SENIOR FINANCIAL SERVICES, INC. (the "Company", "AMSE" or
"America's Senior") is filing this Form 10-SB to register its common stock and
thus become a reporting company pursuant to Section 12(g) of the Securities
Exchange Act of 1934.
We are a licensed mortgage lender active in originating, processing
and obtaining funding for forward and reverse mortgage loans secured by single
family residences which are funded by financial institutions or independent
investors. We receive income from two sources in connection with our mortgage
lending activities: we charge certain non-refundable mortgage application fees
to potential borrowers and upon closing a loan, receive additional fees
payable by the borrower or investor which fees are based upon a percentage of
the loan and/or the interest rates charged.
We are a Florida corporation which was incorporated on February 26,
1990 under the name Phoenix Management Associates, Inc. We changed our name to
America's Senior Financial Services, Inc. on December 11, 1997. We do business
under the trade name: America's Senior Financial Services. Our executive
offices are located at 15544 NW 77th Court, Miami Lakes, FL 33016 and our
telephone number is 305-828-2599.
In July 1998 we acquired Dow Guarantee Corp. ("Dow"), a south Florida
mortgage lender since 1985. In January 1999 we acquired Capital Funding of
South Florida, Inc. ("Capital Funding"), a central and north Florida mortgage
lender since 1994. Accordingly, the discussion of our business herein includes
the business of our wholly-owned subsidiaries Dow and Capital Funding. Such
acquisitions were accounted for as purchases.
The following table sets forth the approximate loan production and fee
income for America's Senior, Dow and Capital Funding during the periods
indicated.
FISCAL YEARS ENDED DECEMBER 31
1998 1997
----------- ----------
Loans originated by America's Senior(l)
Gross dollars originated $45,550,000 $41,600,000
Total dollars funded $35,000,000 $32,000,000
Number of loans 350 320
Gross fee revenue $ 830,000 $ 542,000
Loans originated by Dow(2)
Gross dollars originated $84,000,000 $84,000,000
Total dollars funded $60,000,000 $60,000,000
Number of loans 615 630
Gross fee revenue $ 2,454,000 $ 2,600,000
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Loans originated by Capital Funding (3)
Gross dollars originated $62,500,000 $35,000,000
Total dollars funded $50,000,000 $28,000,000
Number of loans 512 287
Gross fee revenue $ 1,419,000 $ 773,000
(1) American Senior's retail production only. Does NOT include subsidiaries.
(2) Acquired in July 1998. The figures include the period before acquisition
by the Company.
(3) Acquired in January 1999.
The Company currently originates all types of residential mortgage
products, and serves all age groups and credit categories. While retaining its
traditional forward mortgage business we have implemented a plan to specialize
in serving the senior citizen homeowner market using the "Reverse Mortgage" as a
base. Reverse Mortgages (RM) are a special type of mortgage loan specifically
developed to serve the unique needs of the senior community. AMSE has been
originating Reverse Mortgages since 1994. On March 1, 1999, the Company launched
a training program for the employees of Dow and Capital Funding to support the
Company's overall business model, and to maximize consolidated Reverse Mortgage
production through the addition of this product category at its subsidiaries and
the education of its captive employee base to properly market and sell RM
product.
HOW REVERSE MORTGAGES WORK
A reverse mortgage (RM) is a type of home equity loan that allows
homeowners to convert some of the equity in their homes into cash without an
obligation on their part for monthly repayment. RMs works much like forward
mortgages, only in reverse. Rather than making a payment to the lender each
month, the lender pays the borrower. Unlike conventional home equity loans, RMs
do not require any repayment of principal, interest, or servicing fees for as
long as the borrower lives in their home. Funds obtained from an RM may be used
for any purpose, including meeting housing expenses such as taxes, insurance,
fuel, and maintenance costs, as well as any personal expenses such as health
care expenses. The loan does not come due until the borrower dies, sells, or
moves out of the home permanently.
REQUIREMENTS AND RESPONSIBILITIES OF THE REVERSE MORTGAGE BORROWER
The RM funds may be paid to the borrower in a lump sum, in monthly
advances, through a line-of-credit, or in a combination of the three, depending
on the type of RM and the lender. The amount the homeowner is eligible to
borrow is based on age, the equity in the home, and the interest rate the
lender is charging. The calculation is done utilizing special software
developed by the secondary market investors.
Because the borrower retains title to the home with an RM, the
borrower also remains responsible for taxes, repairs, and maintenance.
Depending on the plan selected, the RM becomes due with interest either when
the borrower permanently moves, sells the home or dies. The lender does not
take title to the home when the borrower dies, but the heirs must pay off the
loan. The debt
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is usually repaid by refinancing the loan into a forward mortgage (if the heirs
are eligible) or by using the proceeds from the sale of the home.
The Company has established ongoing correspondent relationships with
selected mortgage funding organizations such as Federal National Mortgage
Association (Fannie Mae), Federal Housing Administration and several
non-governmental lenders which have established reverse mortgage funding
programs. These organizations buy reverse mortgages which meet their individual
and agency or government underwriting requirements. The Company receives a fee
upon funding which is generally 2% of the appraised value of the subject
property.
LOAN OFFICE NETWORK. The Company originates mortgage loans through its
network of 12 retail loan offices. As of February 26, 1999 the following are
the locations of the loan origination offices maintained by America's Senior,
Dow and Capital Funding.
AMERICA'S SENIOR:
-----------------
Addresses: 15544 NW 77th Court; Miami Lakes FL 33016
2346 South Lynhurst Drive F101; Indianapolis IN 46241
5250 77 Center Drive-#350; Charlotte NC 28217
DOW:
----
Addresses: 9501 NE 2nd Ave; Miami Shores FL 33138
One SW 29 Ave; Suite 207; Pembroke Pines FL 33027
6801 Lake Worth Road; Lake Worth, FL 33480
CAPITAL FUNDING:
----------------
Addresses: 1000 South Federal Highway; Stuart FL 34994
729 SE Federal Highway; Stuart FL 34994
2014 SE Port St. Lucie Blvd.; Port St. Lucie FL 34952
3162 SW Martin Downs Blvd.; Palm City FL 34990
6375 Linton Street; Palm Beach Gardens FL 33418
316 North Bermuda Ave - #12; Kissimmee FL 34741
The Company's loan officers at its 12 retail loan offices assist the
applicant by explaining the various mortgage loan programs available,
completing the loan application, arranging for appraisals, credit reports,
pre-underwriting, quality control, fraud prevention, state and federal
compliance issues, and various other tasks in connection with the proper
preparation of a loan package. The loan package is then forwarded to the
Company's funding sources for compliance review and loan approval. If the loan
package is approved, the loan can be closed and funded and the Company receives
its fees, which are based upon a percentage on the amount of the loan and/or
interest rates charged.
Generally, the Company acts only to originate mortgage loans which are
funded by third party financing sources. While the Company has credit
arrangements to fund loans with its own funds, these are used in a very limited
manner, and loans funded with these facilities are generally not held longer
than 90 days. Accordingly, the risks of collection, delinquencies and
foreclosures are very limited.
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MARKETING AND ADVERTISING
As an independent mortgage originator, the Company seeks to identify
persons who are seeking mortgage loan funding. Currently, the Company
advertises in local and regional newspapers, yellow page telephone directories,
internet websites, direct mail and cable television. The Company markets
through national Trade Association participation, senior oriented direct mail,
participation in senior events, free video tapes given to potential clients,
state level trade shows, and HUD/Fannie Mae focus group activities. For the
fiscal year ended December 31, 1998, the Company expended approximately
$175,000 for sales and marketing activities. In 1999 the Company is seeking to
expand its marketing activities to consistently include nationwide advertising
of its Reverse Mortgage effort, and expects to invest more than $250,000 in
marketing and advertising costs.
FUNDING SOURCES
The Company has established ongoing correspondent relationships with
selected mortgage funding organizations such as Federal National Mortgage
Association (Fannie Mae), the FHLMC (Freddie Mac), the Federal Housing
Administration (FHA), the Veteran's Administration (VA), and certain conforming
and non-conforming non-governmental wholesale lenders.
The Company generally functions as a concurrent lender ("table
funding"), and has pre-sold its whole loans on a flow basis, prior to the
closing of the loan. This means that at the actual closing (or upon the
expiration of any applicable loan rescission period, such as would apply in the
case of a refinance) the funding organization wires the necessary monies
directly to the third party closing the loan. The funds generally do not flow
in to any of the Company's accounts. The Company then receives from the closer,
the fees due the Company.
The funding organizations have no contractual obligation to fund any
mortgage loans originated by the Company. Each loan is considered for funding
based upon the underwriting standards established by the individual funding
organization, in compliance with the government (FHA, VA) or quasi-governmental
agency (FNMA, FHLMQ which will ultimately acquire the loan as part of a
mortgage backed security (MBS).
The funding organizations are all major wholesale funding sources, and
the Company represents that it only sells loans to those organizations which
are properly licensed to conduct business in the states that the Company
operates in, and that the funding organizations are generally HUD, VA, FNMA, or
FHLMC approved conduits.
EXPANSION STRATEGY
In July 1998 and January 1999, the Company acquired Dow and Capital
Funding respectively. The Company is seeking to acquire additional mortgage
originators and may also
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consider the acquisition of ancillary organizations such as title companies,
health care providers, and other financial service organizations focused on the
senior citizen market.
COMPETITION
The Company faces intense competition in the business of originating
mortgage loans. The Company's competitors in the industry include consumer
finance companies, mortgage banking companies, savings banks, commercial banks,
credit unions, thrift institutions, credit card issuers and insurance
companies. Many of these competitors are substantially larger and have
considerably greater financial, technical and marketing resources than the
Company. In addition, many financial services organizations that are much
larger than the Company have formed national loan origination networks or
purchased home equity lenders. Competition among industry participants can take
many forms, including convenience in obtaining a loan, customer service,
marketing and distribution channels, amount and term of the loan, loan
origination fees and interest rates. To the extent any of these competitors
significantly expand their activities in the Company's market, the business of
the Company could be materially adversely affected. Fluctuations in interest
rates and general economic conditions may also affect the Company and its
competition. During periods of rising rates, competitors that have locked in
lower rates to potential borrowers may have a competitive advantage.
The Company believes its competitive strengths include emphasizing
customer education to attract borrowers for reverse mortgages, and its ongoing
high level of customer service which causes it to retain a very high percentage
of its clients.
REGULATION
The Company's operations are subject to extensive regulation,
supervision and licensing by federal, state and local governmental authorities
and are subject to various laws and judicial and administrative decisions
imposing requirements and restrictions on part or all of its operations. The
Company's consumer lending activities are subject to the Federal
Truth-in-Lending Act and Regulation Z (including the Home Ownership and Equity
Protection Act of 1994), the Federal Equal Credit Opportunity Act, as amended,
and Regulation B, the Fair Credit Reporting Act of 1970, as amended, the
Federal Real Estate Settlement Procedures Act and Regulation X, the Home
Mortgage Disclosure Act, the Federal Debt Collection Practices Act and the
National Housing Act of 1934, as well as other federal and state statutes and
regulations affecting the Company's activities.
The Company is also subject to the rules and regulations of, and
examinations by, state and federal regulatory authorities with respect to
originating and processing loans. These rules and regulations, among other
things, impose licensing obligations on the Company, establish eligibility
criteria for mortgage loans, prohibit discrimination, govern inspections and
appraisals of properties and credit reports on loan applicants, regulate
assessment, collection, foreclosure and claims handling, investment and interest
payments on escrow balances and payment features, mandate certain disclosures
and notices to borrowers and, in some cases, fix maximum interest rates, fees
and
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mortgage loan amounts. Failure to comply with these requirements can lead to
loss of approved status, certain rights of rescission for mortgage loans, class
action lawsuits and administrative enforcement action.
EMPLOYEES
At March 3, 1999, the Company employed approximately 150 persons. The
Company has satisfactory relations with its employees.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto that appear elsewhere herein.
This Form 10-SB contains forward looking statements including,
without limitation, statements relating to the Company's plans, expectations,
intentions, and adequate resources, and are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The words
"believes" "intends" "expects" "plans" "anticipates" "estimates" or "potential"
and similar expressions identify forward looking statements. The Company does
not undertake to update, revise, or correct any of the forward looking
information. Actual results may differ materially from those expressed in any
forward looking statement made by or on behalf of the Company. Some important
factors that could cause the Company's actual results or expectations to differ
materially from those discussed in the forward looking statements include, but
are not limited to loss of the Company's significant customers, changes in
consumer demand for the Company's core products, interest rates in general,
actions of regulatory or consumer protection agencies that have an effect on
the Company's ability to market its products, Federal and State legislation,
capital expenditures, economic conditions in general and inability to retain
qualified employees.
RESULTS OF OPERATIONS:
These results for 1998 are pro-forma, and include the following:
1998 - AMSE, Dow and Capital Funding pro-forma combined twelve
month performance.
1997 - AMSE stand alone.
1998 1997 Change
---- ---- ------
Gross loans originated $192,000,000 $41,600,000 +362%
Total dollars funded $145,000,000 $32,000,000 +353%
Units funded 1,477 320 +362%
Gross Fee Income $ 4,703,000 $ 542,000 +767%
Earnings (loss) before
non-recurring items: (121,600) (67,250)
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Non-recurring
expense items: 183,900 4,906
Net income (loss): (305,500) (72,200)
% of Gross Fee Income 6% 13%
FISCAL 1998 COMPARED TO FISCAL 1997:
In the mortgage industry, there are several benchmarks used to measure
a company's growth. The first benchmark offered is loan origination volume. In
1998, AMSE's pro-forma loan origination volume increased by $150,400,000 or
362% from our 1997 level of $41,600,000. This increase includes the origination
benefit derived from our acquisitions of Dow Guarantee Mortgage and Capital
Funding of South Florida. The second benchmark to review is our closed loan
unit volume. This number represents true unit production, and ties directly to
the Company's gross fee income level. In 1998, the Company closed 1,477 units,
versus 320 units in 1997. This is an increase in closed loans of 362%. The
third benchmark to be considered is gross fee income. This number represents
the commissions and other fees the Company earns on its closed loans. In 1998,
the Company grossed $4,703,000 in fees, versus $542,000 in 1997, primarily due
to the acquisition of Dow and Capital Funding. See, Item 1, Business, for loan
production and fee income of America's Senior, Dow and Capital Funding for
Fiscal 1998 and 1997 on an individual basis.
The Company's business strategy involves developing a mix of forward
and reverse mortgage originations, where the forward (or traditional) mortgage
products subsidize the costs to grow the reverse mortgage production. In 1998,
reverse mortgage production was limited to the Miami Lakes facility. In 1998,
Miami Lakes originated over 300 reverse mortgages, compared to the 1997
production level of under 100 loans. In 1999 the Company plans to increase its
training and development of the employees of its subsidiaries, and expects
their contribution to increase total reverse mortgage production. Ultimately,
the Company seeks a balance of business that is about 65% forward and 35%
reverse. In 1998, on a consolidated basis, the Company achieved a balance of
about 80% forward and 20% reverse. In 1997, less than 10% of the Company's
total production was reverse mortgages.
In 1998, the Company's pro-forma loss was $305,500. While most expense
categories showed increases, the increases relate to the acquisitions that
occurred. Several categories stand out because they are key to the development
of the Company's growth strategy. $103,600 is directly attributable to goodwill
amortization caused by acquisitions. The Company has elected to amortize the
goodwill over a shorter term than the maximum allowed by accounting rules,
thereby increasing the annual charge to earnings. In 1998, the Company spent
$64,800 in employee retention activity. By spending these funds, we saw
continuity in staff and avoided a drop in sales that could have resulted from a
less efficient staff. Another major expense increase occurred in advertising
and marketing. Consistent with the Company goal of establishing itself as a
national source for Reverse Mortgages, the Company spent over $175,000 on
advertising, versus $50,000 in 1997. In 1998 we expanded our direct mail
efforts and began utilizing cable television and radio. All the effort was
directed at development of the reverse mortgage origination, which increased by
over 500%. The
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\benefits will be felt in 1999, when we close these loans. By way of this
discussion, the reader can see that these few categories account for $343,300
which exceeds our entire year's pro-forma loss. These expenses should be
considered an investment in the Company's growth plan. Once our subsidiaries
begin to implement certain efficiencies derived from this consolidation, these
expense dollars may be offset by increased sales at higher margins, and should
result in a planned return to profitability.
LIQUIDITY AT YEAR END:
The Company ended 1998 with $219,272 in cash and cash equivalents,
compared to $86,376 in 1997. The Company has generated cash (to cover its
acquisition expenses and operating losses) through the sale of its common stock.
CURRENT LIABILITIES AT YEAR END:
The Company has minimal debt. At year end 1998 we had total liabilities
of $382,992 of which $199,813 was routine accounts payable and $66,927 was
routine compensation payable. In 1998, the Company hired a corporate controller,
whose responsibilities include strengthening and improving the Company's
internal control systems to insure that the Company is accurately recording the
monies it owes to creditors.
"Y2K" ISSUE:
The "Y2K" issue arises because the Company uses PC microcomputer
systems, some of which were originally designed to handle a two digit year, not
a four digit year. The Company has inventoried its entire PC ownership, and has
determined that about 25% of its inventory needs to be replaced in 1999. The
Company estimates that this will result in an investment of about $50,000 in
new equipment. Some of this investment will be recovered by the sale (or
donation) of the obsolete equipment. In general, the Company does not foresee
much impact from the "Y2K" issue, because the Company relies on third party
software and a funding network that has, in most cases, represented to the
Company that it has completed its own internal "Y2K" audit and plans to make
changes where necessary to insure seamless entry into the year 2000.
AVAILABILITY OF MORTGAGE FINANCING.
The success of our mortgage origination business is dependent upon the
availability of mortgage funding at reasonable rates. Although there has been
no limitation on the availability of mortgage funding in the last few years,
there can be no assurance that mortgages at attractive rates will continue to
be available.
INDUSTRY OBSTACLES ENCOUNTERED IN 1998:
The Reverse Mortgage Industry is fragmented, dominated by small
regional firms, and generally lacks nationwide leadership. We saw this as an
opportunity to aggregate production, and used this weakness as the core of our
growth strategy. In 1998, we were involved in the formation
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of the National Reverse Mortgage Lenders Association. NRMLA was created to help
this Industry become mainstream, and we are a driving member of NRMLA.
AMSE's results have started to reflect its business model which is
built on a mix of revenue weighted toward a higher forward mortgage
contribution. However, our overhead allocation is weighted toward the
development of our Reverse Mortgage business. In 1998, we used the more
predictable cash flows of forward mortgages to subsidize the growth of RMs.
Specific percentages have been developed that allow AMSE to invest heavily in
its RM marketing and development, while allowing the Company to achieve
profitable operation in the future.
In 1998, AMSE spent considerable resources to develop a program
whereby mortgage brokers, financial planners, and other advisors to the senior
demographic could participate in the growth of the Reverse Mortgage Industry.
Surveys have shown (NAMB 1998) there were about 200,000 brokers operating in
the United States. Yet, less than 2,000 brokers (internal estimate) know
anything significant about the product and even fewer know where to direct
their clients. By developing a program that allows them to participate in the
growth of our business, AMSE is opening a huge channel of potential RM
distribution.
FUTURE PLANS FOR GROWTH AND PROFITABILITY:
The Company has developed a specific strategy for the future. The
strategy addresses several key needs.
1. The Company plans to grow through internal development of its captive
(and growing) loan origination staff. Our training focus is on the
Reverse Mortgage segment of our business. In 1998, by following this
strategy, the Miami Lakes office increased its Reverse Mortgage
origination pipeline by almost 500%. Along the way, valuable lessons
were learned about the training involved with regular mortgage sales
people. In 1999, these internal techniques are being used to train our
subsidiaries to produce RMs.
2. In 1998, the key growth engine was acquisition activity. In July 1998
the Company acquired Dow Guarantee Mortgage, adding approximately
$84,000,000 in loan production. In 1998, the Company executed a letter
of intent to acquire Capital Funding of South Florida, adding another
$62,500,000 in loan production. The Capital Funding acquisition closed
in January 1999.
3. Simultaneous with growth through acquisitions, we are continuing to
develop our "participant network" of mortgage brokers, financial
planners, and other persons dedicated to working with the senior
demographic.
Item 3. DESCRIPTION OF PROPERTY.
All of the operations of the Company are conducted from premises
leased from independent landlords.
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The following table sets forth information concerning these
facilities:
<TABLE>
<CAPTION>
America's Senior Financial Services
Location Tenant Approx. Size Lease Expiration Monthly Rent
--------------- ------------ ---------------- ------------
<S> <C> <C> <C>
15544 NW 77th Court,
Miami Lakes, FL 33016 3,250 sf Aug. 2001 $3,500
2346 S Lynhurst Dr., F101 590 sf Aug. 1999 590
Indianapolis, IN 46241
5250 77 Center Dr., Suite 350 400 sf Apr. 1999 550
Charlotte, NC 28217
Dow Guarantee Mortgage
Location Tenant Approx. Size Lease Expiration Monthly Rent
--------------- ------------ ---------------- ------------
9501 NE 2nd Ave.
Miami Shores, FL 33138 5,500 sf Dec. 2001 $6,000
6801 Lake Worth Rd., #122 & 123 600 sf Oct. 2001 833
Lake Worth, FL 33480
One SW 129th Ave., Suite 207 1,420 sf Dec. 1999 2,012
Pembroke Pines, Florida
Capital Funding of South Florida
Location Tenant Approx. Size Lease Expiration Monthly Rent
--------------- ------------ ---------------- ------------
3162 Martin Downs Blvd. 600 sf June 2001 $2,000
Palm City, FL 34990
729 SE Federal Hwy., Suite 100 550 sf May 1999 2,000
Stuart, FL 34994
6376 Linton St. 550 sf May 1999 2,000
Palm Beach Gardens, FL 33418
</TABLE>
-There are currently three other Capital Funding Offices leased month
to month.
Leases may provide for rent escalations tied to increases in operating
expenses or fluctuations in the consumer price index.
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Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 5th, 1999, the beneficial
ownership of the company's 6,619,331 outstanding shares of common Stock by (1)
the only persons who own of record or are known to own, beneficially, more than
5% of the Company's Common Stock; (2) each director and executive officer of
the Company; and (3) all directors and officers as a group.
Number of
Name Shares(l) Percent(l)
---- ---------- ----------
Nelson A. Locke(2) 2,650,000 40%
Cheryl D. Locke(2) 2,650,000 40%
Brickell Equity Group, Inc. 356,667 5.4%
Charles M. Kluck(4) 550,000 8.3%
Elly Shea 21,000 0.3%
Thomas G. Sherman, Esq. 100,000 1.5%
Michael J. Shelley(3) 105,000 1.6%
All officers and directors
as a group (6 persons) 3,426,000 51.7%
- -------------------------
(1) Based upon 6,619,331 shares outstanding as of March 5th, 1999.
(2) Nelson A. Locke and Cheryl D. Locke own such shares as Joint
tenants.
(3) Represents shares owned by MJS Equity, Inc., an affiliate of Mr.
Shelley.
(4) Includes 200,000 owned by his sister, Linda Kluck.
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE PERSONS.
The directors and executive officers of the Company are:
Name Age Position
--------------- --- --------
Nelson A. Locke 48 Chairman of the Board,
President and Treasurer.
Cheryl D. Locke 42 Executive Vice President
Personnel, Director.
Audit Committee.
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Elly Shea 55 Senior Vice President, Production.
Thomas G. Sherman, Esq. 45 Director.
Compensation Committee.
Michael J. Shelley 37 Director.
Compensation and Audit Committees.
Charles M. Kluck 48 Director-President of Dow.
Nelson A. Locke and Cheryl D. Locke are married.
Nelson A. Locke founded the Company in 1990 and has served as its
President and Chairman of the Board of Directors since that time. He is the
architect of the Company's business model. He is the past President of the
Florida Association of Mortgage Brokers - Miami Chapter and has earned the
NAMB's certified residential mortgage lender designation. In 1997 he was named
FAMB"s "Broker of the Year", and in 1998 was awarded the prestigious FAMB
"President's Award" for his public relations efforts on behalf of the Florida
Mortgage Brokerage Industry. He is a founder and director of the National
Reverse Mortgage Lenders Association. Mr. Locke is a Marine Corps. veteran (non
commissioned officer) and holds a B.A. from California State University.
Cheryl D. Locke is the Company's Executive Vice President. She is a
member of the Board of Directors, and serves on the Company's audit committee.
She is directly responsible for the HR function, supervising the Company's
personnel department and reviewing AMSE's compliance with state and federal
employment issues. She joined the Company in 1990 on a part time basis, as a
loan officer. By 1994, she had risen to senior loan officer. From 1995 to 1998,
she directly supervised all loan production and closing. In January 1998, she
was appointed EVP and elected to the Company's Board of Directors.
Elly Shea has been an advocate of Reverse Mortgages since their
inception. Working in the industry for over 10 years, she has participated in
RM product development and marketing. From 1994 to 1998, she was Southeast
Correspondent Manager for TransAmerica HomeFirst. She understands the special
needs of senior citizens, and has worked diligently to help bring ethical
products to Florida seniors. She has been Senior Vice President-Production of
the Company since August 1998.
Thomas J. Sherman has been an attorney in private practice in Coral
Gables, Florida since 1980. He is also President and owner of Union Title
Services, Inc., a full service title insurance agency. Mr. Sherman is a
graduate of the University of Miami School of Law. Since 1990, Mr. Sherman has
served as the Company's general counsel. He became a director in January 1998.
Michael J. Shelley has been President and CEO of MJS Financial, Inc.
since 1993. From 1991 to 1993 he was senior sales representative for Siemens
Automotive. Mr. Shelley is a Phi Beta
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Kappa graduate of the University of Illinois with a B.A. in Economics and also
has a Master of Science degree from the University of Illinois in Finance. He
became a director in January 1998.
Charles M. Kluck has been the President of Dow Guarantee Corp. since
its founding in 1985, and continues to serve in that capacity. Dow was acquired
by the Company on July 31, 1998. He became a director of the Company in July
1998.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee, consisting of Cheryl Locke and
Michael Shelley, reviews the adequacy of internal controls and results and
scope of the audit and other services provided by the Company's independent
auditors. The Compensation Committee, consisting of Thomas Sherman and Michael
Shelley, establishes and recommends salaries, incentives and other forms of
compensation for officers and other key employees.
Item 6. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation paid to the
Company's chief executive officer for the last three completed fiscal years. No
executive officer of the Company received compensation of $100,000 or more
during any such year.
Other Annual
Principal Position Year Salary Bonus Compensation
------------------ ---- ------ ----- ------------
Nelson A. Locke 1998 $70,000 -0- 5,000
President 1997 $50,000 -0- -0-
1996 $30,000 -0- -0-
DIRECTOR COMPENSATION
No fees are paid for director services.
EXECUTIVE EMPLOYMENT AGREEMENTS
In January 1998 the Company entered into a five (5) year employment
agreement with Nelson A. Locke. Mr. Locke is employed as President and Chairman
at an annual salary of $70,000 and such additional compensation as he
determines. The agreement provides certain health, life and disability
insurance, and autos to Mr. Locke. The Agreement provides for the establishment
of an "Executive Performance Bonus Pool" described below. The agreement
provides that in any calendar year when the Company's stock price increases by
at least 20%, that he shall be eligible for stock options equal to 5% of his
total common stock holdings at the end of the calendar year which may be
exercised at $1.00 per share and may be paid for by interest-free promissory
note. Mr. Locke waived these options for 1998 as this event would have been
harmful to future business and investor prospects.
14
<PAGE> 15
In January 1998 the Company entered into a five (5) year employment
agreement with Cheryl D. Locke. Mrs. Locke is employed as Executive Vice
President, Secretary and Director at an annual salary of $50,000. The agreement
provides certain health, life and disability insurance, an auto to Mrs. Locke,
special performance bonus of up to $25,000 to be paid at the discretion of the
President. She is entitled to commission on loan originations for which she was
submitting loan officer. The agreement provides that in any calendar year when
the Company's loan origination's increase by at least 20%, that she shall be
eligible for stock options equal to 5% of her total common stock holdings at the
end of the calendar year which may be exercised at $1.00 per share and may be
paid for by interest-free promissory note. Mrs. Locke waived these options for
1998 as this event would have been harmful to future business and investor
prospects.
In July 1998 the Company's subsidiary, Dow Guarantee Corp., entered
into an employment agreement with Charles M. Kluck for a term of five years,
under which Mr. Kluck will be paid an annual salary of $110,000.
In July 1998 the Company's subsidiary, Dow Guarantee Corp., entered
into an employment agreement with Linda C. Kluck for a term of five years,
under which Ms. Kluck will be paid an annual salary of $70,000.
In August 1998 the Company entered into an employment agreement with
Elly Shea for a term of three years, under which Mrs. Shea will be paid an
annual salary of $65,000, an auto, certain health and life insurance, and
certain other performance bonuses which may be in the form of cash compensation
or stock.
In January 1999 the Company's subsidiary, Capital Funding of South
Florida, Inc., entered into an employment agreement with George Pollis for a
term of five years, under which Mr. Pollis will be paid an annual salary of
$50,000, plus commissions on his personal sales.
In January 1999 the Company's subsidiary, Capital Funding of South
Florida, Inc., entered into an employment agreement with Michael Pollis for a
term of five years, under which Mr. Pollis will be paid an annual salary of
$50,000, plus commissions on his personal sales.
EXECUTIVE PERFORMANCE BONUS POOL
The Company's employment agreement with its President, Nelson A.
Locke, provides that ten percent (10%) of the Company's pre-tax net income for
1998 through 2002 in excess of the pre-tax net income for December 31, 1997
shall be contributed to an annual bonus pool for the benefit of the President
and other key employees of the Company. The allocation of any bonus among the
President and other key employees is made by the Compensation Committee.
No bonus was allocated for 1998.
15
<PAGE> 16
STOCK OPTION PLANS.
INCENTIVE STOCK OPTION PLAN
The Company's Board of Directors and Shareholders have adopted two
stock option plans. Pursuant to the Incentive Stock Option Plan (the "ISO
Plan"), options to acquire a maximum of 2,500,000 shares, but not more than
eight percent (8%) of the total authorized shares of the Company (which
currently equals 2,000,000 shares), may be granted to directors, officers,
employees, consultants and other independent contractors and persons who
performed services relating to the Company, including wholly or partially owned
subsidiaries.
The Plan is administered by a Stock Option Committee consisting of two
or more nonemployee directors or in the absence of such a committee, the Board
of Directors.
Pursuant to the ISO Plan, the Company may grant Incentive Stock
Options as defined in Section 422(b) of the Internal Revenue Code of 1986 and
non-qualified stock options not intended to qualify under such section. The
price at which the Company's common stock may be purchased upon exercise of
Incentive Stock Options granted under the Plan will be required to be at least
equal to the fair market value of the common stock on the date of grant.
Non-qualified stock options may be at any price designated by the Committee on
the date of grant. Options granted under the Plan may have maximum terms of not
more than ten (10) years and are not transferable except by will or the laws of
descent and distribution. No Incentive Stock Options under the Plan may be
granted to an individual owning more than ten percent (10%) of the total
combined voting power of all classes of stock issued by the Company unless the
purchase price of the common stock under such option is at least one hundred
ten percent (110%) of the Fair Market Value of the shares issuable on exercise
of the option at the date of grant and such option is not exercisable more than
five (5) years from the date of grant.
Generally, options granted under the Plan terminate upon the grantee's
employment or affiliation with the Company, but the Committee may authorize an
expiration date of up to ninety (90) days following such termination. If
termination was due to death or disability, the options expire one (1) year
after such termination or the termination date set forth in the option,
whichever is earlier. If termination is due to retirement the option expires
ninety (90) days after termination or the termination date set forth in the
option, whichever is earlier.
If the Change of Control takes place, the Board may vote to
immediately terminate all outstanding options or may vote to accelerate the
expiration of options to the tenth day after the effective date of the Change
of Control. If the Board votes to immediately terminate the options, it shall
make a cash payment to the grantees equal to the difference between the
exercise price and the Fair Market Value of the shares that would have been
subject to the terminated option on the date of the Change of Control. A Change
of Control of the Company is generally deemed to occur when any person becomes
the beneficial owner of or acquires voting control with respect forty percent
(40%) or more of the total voting shares of the Company, the Company is merged
into any other company, or substantially all of its assets are acquired by
another company, or three or more
16
<PAGE> 17
directors nominated by the Board to serve as a director, each having agreed to
serve in such capacity, failed to be elected in a contested election of
directors.
Incentive Stock Options granted under the Plan are subject to the
restriction of the aggregate Fair Market Value as of the date of grant of
options which first become exercisable in any calendar year cannot exceed
$100,000.
The Plan provides for appropriate adjustments in the number and type
of shares covered by the Plan and options granted thereunder in the event of
any reorganization, merger, recapitalization or certain other transactions
involving the Company.
Until the closing of an underwritten public offering by the Company,
pursuant to a registration statement filed and declared effective under the
Securities Act of 1933 covering offer and sale of the Company's common stock
for the account of the Company, the Company has the right of first refusal to
acquire any shares which were acquired pursuant to the exercise of options
under the Plan at the Fair Market Value on the date of the shareholder's notice
to the Company and the Company shall have the right to repurchase any option
shares following holder's termination of service or affiliation with the
Company for any reason at the original exercise price of the option.
NON-QUALIFIED STOCK OPTION PLAN.
Pursuant to the Non-Qualified Stock Option Plan (the "Non-ISO Plan"),
options to acquire a maximum of two percent (2%) of the total authorized shares
of the Company may be granted to any person who performed services for the
Company and its subsidiaries.
Non-qualified stock options may be at any price designated by the
Committee on the date of grant. Options granted under the Plan may have maximum
terms of not more than ten (10) years and are not transferable except by will
or the laws of descent in distribution.
Generally, options granted under the Plan terminate thirty (30) days
after termination of the grantee's employment or affiliation with the Company.
If termination was due to death or disability, the options expire one (1) year
after such termination or the termination date set forth in the option,
whichever is earlier.
Any conditions or restrictions on exercise lapse on a Change of
Control unless otherwise set forth in the Option Agreement.
The Plan is administered by a Stock Option Committee consisting of two
or more non-employee directors or in the absence of such a committee, the Board
of Directors.
The Plan provides for appropriate adjustments in the number and type
of shares covered by the Plan and options granted thereunder in the event of
any reorganization, merger, recapitalization or certain other transactions
involving the Company.
17
<PAGE> 18
Until the closing of an underwritten public offering by the Company,
pursuant to a registration, filed and declared effective under the Securities
Act of 1933 covering offer and sale of the Company's common stock for the
account of the Company, the Company has the right of first refusal to acquire
any shares which were acquired pursuant to the exercise of options under the
Plan at the Fair Market Value on the date of the shareholder's notice to the
Company and the Company shall have the right to repurchase any option shares
following holder's termination of service or affiliation with the Company for
any reason at the original exercise price of the option.
NON-PLAN STOCK INCENTIVES.
In 1998, the Company issued 74,400 shares of its Common Stock to
employees as incentive compensation. The shares vest to the employees over a
three year period following the date of issuance.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
A shareholder, Louis Weltman of Vistra Growth Partners, Inc. provides
investment banking services to the Company. In 1998 such shareholder was paid
fees of $60,000 and 66,667 shares of the Company's common stock for services in
connection with the Company's acquisition of Dow.
The Company's President borrowed $22,500 from the Company in December
1998, which was repaid in January 1999 with interest at 5%.
Item 8. DESCRIPTION OF SECURITIES,
COMMON STOCK
The Company is authorized to issue 25,000,000 shares of Common Stock,
$.001 par value. The holders of Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors then up for election. The holders of
Common Stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Common Stock. All of the outstanding shares of Common Stock
are fully paid and nonassessable.
18
<PAGE> 19
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred
Stock with rights, preferences and limitations to be determined by the Board
of Directors. As of the date hereof, no shares of Preferred Stock have been
issued.
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
The Company's Common Stock has been trading on the over-the-counter
market since February 20, 1998. The following sets forth the range of high and
low bid quotations for the periods indicated as reported by National Quotation
Bureau, Inc. Such quotations reflect prices between dealers, without retail
mark-up, markdown or commission and may not represent actual transactions.
High bid Low bid
-------- -------
February 20, 1998 through March 31, 1998 $5.75 $5.75
April 1, 1998 through June 30, 1998 6.625 5.75
July 1, 1998 through September 30, 1998 7.375 5.50
October 1, 1998 through December 31, 1998 7.50 6.375
January 1, 1999 through March 1, 1999 5.75 7.00
There are no restrictions on the payment of dividends. In 1997, the
Company paid S Corporation distributions of $46,567. It was an S corporation for
tax purposes at that time. The S corporation status was terminated on November
2, 1997.
As of March 5, 1999 there were approximately 425 holders of record of
the Company's common stock.
Item 2. LEGAL PROCEEDINGS.
In April 1999 the Company sued Home Care of America, Inc. and Robert
G. Williams in the Circuit Court of the 11th Judicial Circuit, Miami-Dade
County, Florida for repayment of a $250,000 loan the Company made in 1998.
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
On July 23, 1998, the Company changed its independent auditor. This
change was by mutual consent due to the need for the Company's auditor to be
familiar with the requirements of financial statements for corporations
becoming reporting companies under the Securities Exchange Act of 1934. The
change was approved by the Board of Directors. The former accountant's report
on the Company's financial statements did not contain an adverse opinion on
disclaimer of opinion and was not modified as to uncertainty, audit scope, or
accounting principles. There were no disagreements with the former accountant
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
On July 23, 1998, the Company engaged Ahearn, Jasco + Company, P.A.,
as its independent auditor.
19
<PAGE> 20
Item 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following provides information concerning all sales of securities
within the last three years which were not registered under the Securities Act
of 1933.
In November and December 1997, the Company issued 1,117,000 shares of
common stock to its founders, directors, certain employees and advisors. Such
shares were issued for $2,767, which was received in cash or services. Such
shares were issued without registration pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933.
In December 1997, the Company sold 600,000 shares of common stock and
700,000 Common Stock Purchase Warrants to 41 investors for $100,000. Such
offering was made pursuant to Rule 504 of Regulation D. Each Common Stock
Purchase Warrant entitled to the holder to purchase one share of common stock
for $1.00 per share. During 1998, 700,000 of the Warrants were exercised and
the Company issued 700,000 shares of common stock pursuant to Rule 504 of
Regulation D.
In July 1998, the Company issued a total of 550,000 shares of common
stock to Charles and Linda Muck in connection with the acquisition of Dow and
66,667 to Vista Growth Partners, Inc. for services in connection with such
acquisition. Such shares were issued without registration pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933.
The Company issued 74,400 shares to employees as restricted stock
awards in 1998. Such shares were issued without registration pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933.
In 1998, the Company issued shares to investors pursuant to Rule 506
of Regulation D as follows:
Date Consideration Shares Purchaser
---- ------------- ------ ---------
9/11/98 $ 1,000 500 Carpenter
9/11/98 1,000 (a) 500 Shea
9/11/98 20,000 10,000 Weinstein
9/11/98 20,000 10,000 Snyder
9/14/98 20,000 10,000 Hoffberger
9/11/98 20,000 10,000 Aurelia
9/11/98 15,000 7,500 Donahue
9/16/98 10,000 5,000 Antosek
9/16/98 15,000 7,500 Gittelman
9/18/98 5,000 2,500 Stott
9/23/98 10,000 5,000 Bailey
10/12/98 10,000 10,000 Snyder
10/12/98 7,500 17,500 Gittleman
10/12/98 10,000 10,000 Aurelia
20
<PAGE> 21
10/12/98 5,000 2,500 Antosek
10/12/98 10,000 10,000 Weinstein
10/12/98 10,000 10,000 Hoffberger
10/28/98 10,000 5,000 Shelley IRA
10/26/98 1,000 (a) 500 Shea
12/11/98 3,000 1,500 Perez
12/11/98 15,000 7,500 Gibson
12/11/98 5,000 2,500 Prado
12/11/98 4,000 2,000 Allen
12/11/98 1,576 1,300 Prado
12/11/98 1,212 1,000 Prado
12/11/98 1,212 1,000 Prado
-------- -------
$231,500 140,800
======== =======
- --------------------
(a) These shares were purchased for cash by Elly Shea an officer of the
corporation.
In 1999 the Company issued shares to investors pursuant to Rule 506 as
follows:
Date Consideration Shares Purchaser
---- ------------- ------ ---------
1/4/99 $ 4,000 2,000 Deery IRA
2/17/99 100 100 Charlesworth, S
2/17/99 100 100 Charlesworth, J
2/17/99 100 100 Charlesworth, C
2/17/99 1,000 1,000 Charlesworth,
2/17/99 1,000 1,000 Hersha
2/17/99 1,000 1,000 Langston
2/17/99 1,000 1,000 Edgar
2/17/99 4,000 4,000 Fleming
2/17/99 4,000 4,000 Locke, V
2/26/99 15,000 15,000 Snyder
2/26/99 15,000 15,000 Aurelia
2/23/99 10,000 10,000 Biondo
3/1/99 1,500 1,500 Locke, Edwin
2/25/99 40,000 40,000 Brickell Equity
2/25/99 60,000 60,000 Palmun
-------- -------
$157,900 155,800
======== =======
In 1999 the Company issued the following shares to investors pursuant
to Rule 504 of Regulation D:
Date Consideration Shares Purchaser
---- ------------- ------ ---------
1/26/99 $100,000 100,000 Fidra
1/26/99 34,000 34,000 Fidra
1/26/99 50,000 50,000 Fidra
1/26/00 50,000 50,000 Fidra
21
<PAGE> 22
2/25/99 16,666 16,666 Weltman
2/25/99 16,667 16,667 Brickell
2/25/99 16,667 16,667 Palmun
-------- -------
$284,000 284,000
======== =======
In 1999, the Company issued 221,664 shares of its common stock to the
former shareholders of Capital Funding and 16,000 shares to its investment
banker in connection with the acquisition. Such shares were issued without
registration pursuant to Section 4(2) of the Securities Act of 1933.
None of the securities discussed above were registered under the
Securities Act of 1933, exemption being claimed in each case pursuant to
Regulation D or Section 4(2) thereof. All shares which were not issued under
Rule 504 exemption were issued with restrictive legend and stop transfer
orders. No general advertising or solicitation was utilized in connection with
any such sales. All investors were offered access to the Company's books and
records and the opportunity to meet with officers of the Company.
Item 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Florida Business Corporation Act provides that a person who is
successful on the merits or otherwise in defense of an action because of
service as an officer or director or a corporation, such person is entitled to
indemnification of expenses actually and reasonably incurred in such defense.
F.S. 607.0850(3).
Such Act also provides that the corporation may indemnify an officer
or director, advance expenses, if such person acted in good faith and in a
manner the person reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to a criminal action, had no
reasonable cause to believe his conduct was unlawful. F.S. 607.0850(l)(2).
A court may order indemnification of an officer or director if it
determines that such person is fairly and reasonably entitled to such
indemnification in view of all the relevant circumstances. F.S. 607.0850(9).
PART F/S
The following financial statements are included herein:
America's Senior Financial Services, Inc. and Subsidiary
Independent Auditors' Report
Consolidated Balance Sheets as of
December 31, 1998 and 1997
22
<PAGE> 23
Consolidated Statements of Operations,
years ended December 31, 1998 and 1997
Consolidated Statement of Changes in Stockholders'
Equity, years ended December 31, 1998 and 1997
Consolidated Statements of Cash Flows, years ended
December 31, 1998 and 1997
Notes to Financial Statements.
Dow Guarantee Corp.
Independent Auditors' Report
Balance Sheets as of
December 31, 1998 and 1997
Statements of Operations, years ended
December 31, 1998 and 1997
Statement of Changes in Stockholders'
Equity, years ended December 31, 1998 and 1997
Statements of Cash Flows, years ended
December 31, 1998 and 1997
Notes to Financial Statements.
Capital Funding of South Florida, Inc.
Independent Auditors' Report
Balance Sheet as of
December 31, 1998
Statement of Operations, year ended
December 31, 1998
Statement of Changes in Stockholders'
Equity, year ended December 31, 1998
Statement of Cash Flows, year ended
December 31, 1998
23
<PAGE> 24
Notes to Financial Statements.
Pro-Forma Financial Statements
PART III
Item 1. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Page Number Description
---------- ---------- -----------
<S> <C> <C>
2(a) Articles of Incorporation of the Registrant
2(b) Articles of Amendment to Articles of
Incorporation
2(c) By-Laws of the Registrant
2(d) Incentive Stock Option Plan
2(e) Non-Qualified Stock Option Plan
6(a) Employment Agreement as of January 2, 1998
between Registrant and Nelson A. Locke
6(b) Employment Agreement as of January 2, 1998
between Registrant and Cheryl D. Locke
6(c) Employment Agreement as of July 31, 1998 between
Registrant and Dow Guarantee Corp. and Charles M.
Kluck
6(d) Employment Agreement as of July 31, 1998 between
Registrant and Dow Guarantee Corp. and Linda C.
Kluck
6(e) Consulting Agreement as of August 25, 1998
between Registrant and Vistra Growth
Partners, Inc.
6(f) Agreement for purchase of Dow Guarantee Corp.
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
<S> <C> <C>
6(g) Agreement for purchase of Capital Funding
of South Florida, Inc.
21 Subsidiaries
27 Financial Data Schedule
</TABLE>
- -----------------------
* To be filed by amendment
SIGNATURES
In accordance with Section 12 of the Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized this 15th day of April, 1999.
AMERICA'S SENIOR FINANCIAL
SERVICES, INC.
By: /s/ Nelson A. Locke
------------------------------------
Nelson A. Locke
President
25
<PAGE> 26
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
INDEPENDENT AUDITORS' REPORT
<PAGE> 27
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
AND SUBSIDIARY
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statement of Changes in Stockholders' Equity 4
Consolidated Statements of Cash Flows 5-6
NOTES TO FINANCIAL STATEMENTS 7-15
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
America's Senior Financial Services, Inc.
We have audited the accompanying consolidated balance sheets of America's
Senior Financial Services, Inc. and subsidiary (collectively, the "Company") as
of December 31, 1998 and 1997, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of America's Senior
Financial Services, Inc. and subsidiary as of December 31, 1998 and 1997, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ Ahearn, Jasco + Company, P.A.
------------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
February 26, 1999, except for Note 10,
for which the date is March 26, 1999
1
<PAGE> 29
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 195,728 $ 86,376
Brokerage fees receivable 49,853 5,495
Employee advances 70,528 --
Due from shareholder 22,618 --
Prepaid expenses 46,699 --
---------- --------
TOTAL CURRENT ASSETS 385,426 91,871
PROPERTY AND EQUIPMENT, net 254,783 61,418
GOODWILL, net 1,059,413 --
OTHER ASSETS 319,940 27,770
---------- --------
TOTAL $2,019,562 $181,059
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 5,798 $ 10,754
Accounts payable 173,904 17,126
Accrued compensation and related taxes 49,054 17,640
---------- --------
TOTAL CURRENT LIABILITIES 228,756 45,520
---------- --------
LONG-TERM DEBT, less current portion 13,287 19,702
---------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; 25,000,000 shares
authorized, shares issued and outstanding, 5,898,867
in 1998 and 4,367,000 in 1997 5,899 4,367
Additional paid-in capital 2,247,432 169,647
Retained earnings (deficit) (408,745) (58,177)
Unearned compensation - restricted stock (67,067) --
---------- --------
TOTAL STOCKHOLDERS' EQUITY 1,777,519 115,837
---------- --------
TOTAL $2,019,562 $181,059
========== ========
</TABLE>
See notes to financial statements.
2
<PAGE> 30
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
REVENUES $1,797,632 $ 541,546
---------- ----------
EXPENSES:
Payroll and related expenses 1,335,488 307,690
Administrative, processing, and occupancy 722,828 301,106
---------- ----------
TOTAL EXPENSES 2,058,316 608,796
---------- ----------
LOSS FROM OPERATIONS (260,684) (67,250)
---------- ----------
OTHER EXPENSES:
Acquisition costs 14,969 --
Employee recruitment 50,333 --
Interest expense 2,041 4,906
Goodwill amortization 22,541 --
---------- ----------
TOTAL OTHER EXPENSES 89,884 4,906
---------- ----------
LOSS BEFORE INCOME TAXES (350,568) (72,156)
PROVISION FOR INCOME TAXES -- --
---------- ----------
NET LOSS $ (350,568) $ (72,156)
========== ==========
EARNINGS (LOSS) PER SHARE:
Basic $ (0.072) $ (0.025)
========== ==========
Diluted $ (0.072) $ (0.025)
========== ==========
Weighted average common shares outstanding 4,849,247 2,854,400
========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE> 31
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON Common Additional Retained Total
STOCK Stock, at Paid-in Restricted Earnings Stockholders'
# OF SHARES par value Capital Stock (Deficit) Equity
----------- --------- ----------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY, January 1, 1997 2,650,000 $2,650 $ 15,620 $ -- $ 120,126 $ 138,396
S corporation distributions -- -- -- -- (29,032) (29,032)
Issuances of common stock 1,117,000 1,117 1,650 -- -- 2,767
Record distribution payable and other
adjustments upon S corporation termination -- -- 59,580 -- (77,115) (17,535)
Private placement offering 600,000 600 92,797 -- -- 93,397
Net loss for the year ended
December 31, 1997 -- -- -- -- (72,156) (72,156)
--------- ------ ---------- ----------- --------- ----------
STOCKHOLDERS' EQUITY, December 31, 1997 4,367,000 4,367 169,647 -- (58,177) 115,837
Stock issued pursuant to the Dow acquisition 616,667 617 1,099,383 -- -- 1,100,000
Restricted stock issued to employees 74,400 74 - 74,326 (74,400) -- --
Recognition of restricted stock earned -- -- -- 7,333 -- 7,333
Issuances of common stock for cash, net
of expenses 840,800 841 904,076 -- -- 904,917
Net loss for the year ended
December 31, 1998 -- -- -- -- (350,568) (350,568)
--------- ------ ---------- --------- --------- ----------
STOCKHOLDERS' EQUITY, December 31, 1998 5,898,867 $5,899 $2,247,432 $ (67,067) $(408,745) $1,777,519
========= ====== ========== ========= ========= ==========
</TABLE>
See notes to financial statements.
4
<PAGE> 32
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(350,568) $(72,156)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 57,497 21,259
Recognition of restricted stock earned 7,333 --
Changes in certain assets and liabilities, net of amounts
from an acquisition:
Brokerage fee receivable 6,429 74,343
Employee advances 28,544 --
Prepaid expenses and other (46,464) 12,538
Accounts payable, accrued compensation and related taxes 14,046 10,806
--------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (283,183) 46,790
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (205,302) (18,538)
Acquisition expenditures, net of cash acquired (294,395) --
Changes in other assets 21,304 --
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (478,393) (18,538)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 904,917 96,164
Change in long-term debt (11,371) (12,130)
S corporation distributions -- (46,567)
Loan to shareholder (22,618) --
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 870,928 37,467
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 109,352 65,719
CASH AND CASH EQUIVALENTS, Beginning of year 86,376 20,657
--------- --------
CASH AND CASH EQUIVALENTS, End of year $ 195,728 $ 86,376
========= ========
</TABLE>
See notes to financial statements.
5
<PAGE> 33
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(continued)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 18,135 $ 4,906
========= ========
Income taxes paid in cash during the period $ -- $ --
========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On July 31, 1998, the Company recorded net tangible assets of $189,157 and goodwill of $1,081,954
in connection with the Dow acquisition (see Note 9). During 1998, the Company issued restricted
stock to employees valued at $74,400.
</TABLE>
See notes to financial statements.
6
<PAGE> 34
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
America's Senior Financial Services, Inc. ("AMSE") was
incorporated on February 26, 1990 and does business as Value Financial -
Senior Funding. On July 31, 1998, AMSE acquired Dow Guarantee Corp.
("Dow"). AMSE and its subsidiary Dow (collectively referred to as "the
Company"), are licensed mortgage lenders in the State of Florida. The
Company is engaged in originating, processing, and concurrently funding
mortgage loan applications. In addition to providing traditional (or
forward) mortgage loan services, the Company also arranges reverse
mortgages specifically developed to serve the special needs of the senior
citizen community, and has generated a substantial portion of the reverse
mortgages originated in Florida. The Company sells its closed loans to
investors for resale into the secondary market. All significant
intercompany balances and transactions are eliminated in consolidation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION AND CREDIT RISKS
The Company derives its revenues primarily from mortgage
application fees paid by potential borrowers and from brokerage and
processing fees payable by the borrower and others at the time of
closing. The brokerage and processing fees are recognized as revenue at
the time the loans are closed.
The Company operates in the mortgage banking industry;
therefore, it is highly dependent on the status of the economy and
interest rates.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated using
the straight-line method over the estimated useful lives of the assets.
Useful lives for most assets range from five to seven years. Expenditures
for routine maintenance and repairs are charged to expense as incurred.
INTANGIBLE ASSETS
The excess of investment cost over the fair value of net assets
acquired (goodwill) is being amortized over a period of 20 years. The
goodwill arose from the Dow acquisition. Amortization of goodwill in the
amount of $22,541 was charged to operations in 1998.
ADVERTISING
The costs of advertising, promotion, and marketing programs are
charged to operations in the year incurred. Advertising expense was
$155,132 and $46,586 for the years ended December 31, 1998 and 1997,
respectively.
INCOME TAXES
Through November 2, 1997, AMSE, with the consent of its
shareholders, had elected under provisions of the Internal Revenue Code
to be an S corporation. In lieu of corporation income taxes, the
shareholders of an S corporation are taxed on their proportionate share
of taxable income. Therefore, no provision or liability for income is
included in the accompanying financial statements for results of
operations through November 2, 1997. Effective that date, this election
was terminated when AMSE issued common stock to a corporation. This S
corporation status termination results in AMSE directly paying taxes on
its earnings.
7
<PAGE> 35
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES (continued)
Effective November 3, 1997, the Company accounts for its income
taxes in accordance with Financial Accounting Standards Board Statement
No. 109, "Accounting for Income Taxes." Deferred tax liabilities and
assets are recognized for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
NET LOSS PER COMMON SHARE
The Company has adopted SFAS No. 128, "Earnings Per Share." SFAS
128 requires companies with complex capital structures or common stock
equivalents to present both basic and diluted earnings per share ("EPS")
on the face of the income statement. Basic EPS is calculated as income
available to common stockholders divided by the weighted average number
of common shares outstanding during the period. Diluted EPS is calculated
using the "if converted" method for convertible securities and the
treasury stock method for options and warrants as previously prescribed
by Accounting Principles Board Opinion No. 15, "Earnings Per Share." The
effect of common shares issuable under the terms of the Company's
preferred stock outstanding are excluded from the calculation of diluted
EPS since the effect is antidilutive. The adoption of SFAS 128 did not
have an impact on the Company's reported results.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments
purchased with an original maturity of three months or less. The Company
occasionally maintains cash balances in financial institutions in excess
of the federally insured limits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, receivables, and accounts payable and accrued expenses are
reflected in the financial statements at fair value because of the
short-term maturity of those instruments. The fair values of the
Company's debt obligations, as disclosed in Note 3, are the same as the
recorded amounts because rates and terms approximate current market
conditions.
RECLASSIFICATIONS
Certain amounts in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 130 and 131 are effective for
fiscal years beginning after December 15, 1997. The Company adopted these
standards in 1998, and such adoption did not have any impact on the
Company's results of operations or financial position, as the new
standards are limited to the form and content of disclosures.
8
<PAGE> 36
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,
1998 and 1997:
1998 1997
------------ ---------
Office equipment $ 31,080 $ 47,930
Furniture and fixtures 176,674 18,525
Leasehold improvements 87,022 --
Vehicles 42,586 42,586
---------- --------
Total cost 337,362 109,041
Less: Accumulated depreciation (82,579) (47,623)
---------- --------
Property and equipment, net $ 254,783 $ 61,418
========== ========
Depreciation expense for the years ended December 31, 1998 and
1997 was $34,956 and $21,259, respectively.
NOTE 3 - LONG-TERM DEBT AND CREDIT AGREEMENTS
INSTALLMENT NOTES
Long-term debt consists of installment notes for the Company's
vehicles. The terms of the notes and the balances owed as of December 31,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Payable in monthly installments of $549, including interest at the rate of
4.9% per annum, through January 2002, secured by a vehicle. $ 19,085 $ 24,351
Other, repaid in 1998. -- 6,105
-------- --------
Total long-term debt 19,085 30,456
Less: Current portion (5,798) (10,754)
-------- --------
Long-term debt, net of current portion $ 13,287 $ 19,702
======== ========
</TABLE>
Future maturities of long-term debt are approximately $5,800 in
1999, $6,300 in 2000, $6,500 in 2001, and $500 in 2002.
CREDIT AGREEMENTS
The Company has two credit lines with a financial institution.
The credit lines are guaranteed by a director/shareholder. The total
amount available under the agreements is $50,000. As of December 31,
1998, no amounts were outstanding.
The Company has an agreement with a financial institution to
provide a $1,000,000 mortgage warehousing facility which assists the
Company in originating and closing mortgages. The Company is liable under
the agreement only if there is a default during a mortgage closing
process. There were no amounts owed under this agreement as of December
31, 1998. Interest paid during 1998 for borrowings under this agreement
totaled $16,094 and is included in operating expenses.
9
<PAGE> 37
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 4 - INCOME TAXES
As discussed in Note 1, AMSE was taxed as an S corporation from
inception through November 2, 1997. Effective that date, the S
corporation status was terminated, and therefore, AMSE must directly pay
taxes on its earnings. As a result of the termination, a final S
corporation distribution of $17,535 was accrued, $59,580 of undistributed
S corporation earnings were reclassified to additional paid-in capital,
and deferred income tax assets of $240 (net of an allowance of the same
amount) were established for the tax bases of assets and liabilities that
are different than those recognized for financial reporting purposes.
A summary of income taxes for the year ended December 31, 1998
and for the period from November 3, 1997 through December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Currently payable:
Federal $ -- $ --
State -- --
Deferred tax benefit (112,220) (2,200)
---------- --------
Income tax benefit for the applicable period (112,220) (2,200)
Deferred tax asset established November 2, 1997 -- (240)
---------- --------
Income tax benefit, prior to allowance (112,220) (2,440)
Valuation allowance 112,220 2,440
---------- --------
Net income tax provision $ -- $ --
========== ========
</TABLE>
Temporary differences between the financial statement carrying
amounts and tax bases of assets and liabilities that give rise to net
deferred income tax assets at December 31, 1998 and 1997 relate to the
following:
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Allowance accounts $ -- $ 2,240
Net operating loss carryforward 111,040 200
Restricted stock awards 3,620 --
Valuation allowance (114,660) (2,440)
--------- -------
Net deferred income tax liability $ -- $ --
========= =======
</TABLE>
There are no significant deferred tax liabilities. The Company
has used a combined estimated federal and state tax rate of approximately
35% for all deferred tax computations. The tax benefit prior to the
allowance differs from the Federal statutory rate of 34% because of
non-deductible expenses (including the goodwill amortization), the surtax
exemptions and rate brackets, and the effect of state income taxes.
The Company has recorded a valuation allowance in accordance
with the provisions of SFAS No. 109 to reflect the estimated amount of
deferred tax assets which may not be realized. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation future taxable income during the periods in
which temporary differences and/or carryforward losses become deductible.
10
<PAGE> 38
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 4 - INCOME TAXES (continued)
The Company has available tax net operating loss carryovers
("NOLs") as of December 31, 1998 of approximately $339,200. The NOLs
expire beginning in 2012. Certain provisions of the tax law may limit the
net operating loss carryforwards available for use in any given year in
the event of a significant change in ownership interest. There have
already been significant changes in stock ownership; however, management
believes that an ownership change has not yet occurred which would cause
the net operating loss carryover to be limited.
NOTE 5 - RELATED PARTY TRANSACTIONS
A shareholder of AMSE provides investment banking services to
the Company. In connection with these investment banking activities, this
shareholder received fees consisting of cash of $60,000 and 66,667 shares
of restricted AMSE stock [which were issued pursuant to the Dow
acquisition (see Note 9)].
At December 31, 1998, the Company's president and majority
shareholder owed the Company $22,500 (plus accrued interest of $118)
under notes bearing interest at 5%. These notes were repaid on January
28, 1999.
NOTE 6 - STOCKHOLDERS' EQUITY
COMMON STOCK
The holders of the common stock are entitled to one vote per
share and have non-cumulative voting rights. The holders are also
entitled to receive dividends when, as, and if declared by the Board of
Directors. Additionally, the holders of the common stock do not have any
preemptive right to subscribe for, or purchase, any shares of any class
of stock.
PREFERRED STOCK
Subsequent to December 31, 1998, the Company amended its
Articles of Incorporation to authorize preferred stock (see Note 10).
RECAPITALIZATION AND SHARE OFFERINGS
In November 1997, the Board of Directors voted to amend the
Company's articles of incorporation to change the number of authorized
shares to 25,000,000 with a par value of $0.001. The outstanding shares
of common stock at that date were converted into 2,650,000 shares of the
new $0.001 par value stock. The shares of the Company have been restated
to January 1, 1997, as well as other share and per share amounts, as if a
stock split had occurred.
During November and December 1997, 1,117,000 shares of common
stock were issued to various accredited investors and employees. In
December 1997, 600,000 shares were issued to new investors through a
Regulation D, Rule 504 private placement offering, as well as 700,000
common stock purchase warrants. In 1998, certain accredited investors
purchased 140,800 shares for $231,500 in cash (before expenses) and
66,667 shares were issued to the Company's investment banker pursuant to
the Dow acquisition, in which 550,000 shares were issued to the sellers.
11
<PAGE> 39
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 6 - STOCKHOLDERS' EQUITY (continued)
RECAPITALIZATION AND SHARE OFFERINGS (continued)
Each of the 700,000 stock purchase warrants issued pursuant to
the private placement offering entitled the registered holder to purchase
one share of the Company's common stock for $1. The warrants were
exchanged in 1998 with proceeds to the Company, before expenses, of
$700,000.
The Company had also issued 133,333 stock purchase warrants to
certain accredited investors. Each of these warrants entitled the holder
to purchase one share of common stock for $1 per share. The warrants
expired February 19, 1999.
CONTINGENT STOCK ISSUANCES
In conjunction with the acquisition of Dow in July 1998 (see
Note 9), the Company agreed to an aggregate value guarantee for the
550,000 shares of the Company's common stock issued in that transaction.
If, at such time as a registration statement has been declared effective
by the U.S. Securities and Exchange Commission (the initial measurement
date) and the value of the shares at that date is not at least
$2,750,000, then the Company shall issue additional shares of its common
stock so that the total shares received by the former Dow shareholders
multiplied by the then fair market value (as defined) equals $2,750,000.
There is also an additional measurement date if an underwriter of a
public offering of the Company's stock imposes a lock-up on the stock
issued to the former Dow shareholders; this date is one year after the
expiration of the lock-up period, and the adjustment formula is similar
to the initial formula. As of February 26, 1999, no shares would be due
to the former Dow shareholders if this date were the initial measurement
date.
RESTRICTED STOCK AWARDS
During 1998, a total of 74,400 restricted shares of the
Company's common stock were granted to certain employees. The market
value of shares awarded was $74,400. This amount was recorded as unearned
compensation - restricted stock and is shown as a separate component of
stockholders' equity. Unearned compensation is being amortized to expense
over the three-year vesting period and, net of forfeitures, amounted to
$7,333 in 1998.
NASD OTC BULLETIN BOARD TRADING
The Company's common stock began public trading on the
over-the-counter market in April 1998 under the symbol AMSE.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
OFFICE LEASES
The Company leases office space in various locations as well as
certain office equipment. Future minimum lease payments subsequent to
December 31, 1998 under these operating leases are as follows: $144,377
in 1999, $137,417 in 2000, $118,062 in 2001, and $12,956 in years 2002
and 2003. Rent expense for the years ended December 31, 1998 and 1997
totaled $60,841 and $40,906, respectively.
LITIGATION
From time to time, the Company is exposed to claims, regulatory,
and legal actions in the normal course of business, some of which are
initiated by the Company. At December 31, 1998, management believes that
any such outstanding issues will be resolved without significantly
impairing the financial condition of the Company.
12
<PAGE> 40
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 8 - NET INCOME (LOSS) PER COMMON SHARE
For the year ended December 31, 1998 and 1997, basic and diluted
weighted average common shares include only common shares outstanding.
The inclusion of common share equivalents would be anti-dilutive and, as
such, they are not included.
A reconciliation of the number of common shares shown as
outstanding in the consolidated financial statements with the number of
shares used in the computation of weighted average common shares
outstanding is shown below:
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
Common shares outstanding at December 31st 5,898,867 4,367,000
Effect of weighting (1,049,620) (1,512,600)
---------- ----------
Weighted average common shares outstanding 4,849,247 2,854,400
========== ==========
</TABLE>
The number of shares have been restated to reflect the number of
shares issued upon the 1997 amendment of the articles of incorporation,
as if a stock split had occurred (see Note 6).
NOTE 9 - ACQUISITION ACTIVITIES
DOW GUARANTEE CORP.
The acquisition of Dow was completed on July 31, 1998 and was
accounted for as a purchase. Identified tangible assets and liabilities
were recorded at their estimated fair market values and the excess of the
total cost over the net fair values of identified assets and liabilities
was recorded as goodwill. The purchase price for these assets totaled
$1,445,257, with 550,000 shares of common stock of the Company being
issued to the sellers (valued at $1,100,000), costs of $171,111
(including 66,667 shares issued to the Company's investment banker), and
assumed liabilities of $174,146. The cost of the acquisition was
allocated to tangible assets and goodwill totaling $363,303 and
$1,081,954, respectively.
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
On January 29, 1999, the Company completed an acquisition of
Capital Funding of South Florida, Inc. ("CFSF"). This acquisition will be
accounted for as a purchase. Identified tangible assets and liabilities
will be recorded at their estimated fair market values and the excess of
the total cost over the net fair values of identified assets and
liabilities will be recorded as goodwill. The financial statements of the
Company will include the operating results of the acquired entity from
the date of its acquisition.
Based on preliminary information, the purchase price for these
assets was estimated at $1,245,000, with 221,664 shares of common stock
of the Company being issued to the sellers (valued at $610,000), cash to
the sellers of $300,000, costs of $180,000, and assumed liabilities of
approximately $155,000. The cost of the acquisition is anticipated to be
allocated to the assets as follows:
Depreciable tangible property and equipment $ 80,000
Receivables and other current assets, net 75,000
Other assets 100,000
Goodwill 990,000
----------
Total $1,245,000
==========
13
<PAGE> 41
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 9 - ACQUISITION ACTIVITIES (continued)
CAPITAL FUNDING OF SOUTH FLORIDA, INC. (continued)
The acquisition agreement with CFSF contains provisions whereby
the former shareholders of CFSF may be entitled to additional shares of
the Company's common stock depending on future market values of the
Company's stock.
OTHER ACTIVITIES
In December 1998, the Company advanced $250,000 to a potential
acquisition target pursuant to a promissory note. The note is secured by
263,445 unrestricted and 2,148,500 restricted shares of the target's
stock, which have an aggregate value of approximately $580,000. The note
is non-interest bearing and presently has no due date. The Company also
advanced $10,000 to the target pursuant to a letter of intent to
negotiate an acquisition. These amounts are recorded as other assets on
the accompanying balance sheet at December 31, 1998.
PRO-FORMAS
The following pro forma summary presents the results of
operations as if the Dow and CFSF acquisitions had occurred at January 1,
1998, after giving effect to certain adjustments, including amortization
of goodwill. These pro forma results have been prepared for illustrative
purposes only and do not purport to be indicative of what would have
occurred had the acquisitions been made as of those dates, or results of
which may occur in the future.
<TABLE>
<CAPTION>
1998 Consolidated 1998 Consolidated
Pro forma (12 months) Pro forma (12 months)
AMSE and Dow AMSE, Dow and CFSF
--------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $3,287,900 $4,720,500
Expenses 3,533,000 4,849,200
----------- ----------
Loss from operations (245,100) (128,700)
Non-operating expenses 113,700 167,900
----------- ----------
Net loss $ (358,800) $ (296,600)
=========== ==========
</TABLE>
NOTE 10 - SUBSEQUENT EVENTS
PREFERRED STOCK
Effective March 23, 1999, the Company amended its Articles of
Incorporation to add the following provision: "THE CORPORATION IS ALSO
AUTHORIZED TO ISSUE TEN MILLION (10,000,000) SHARES OF PREFERRED STOCK
HAVING A PAR VALUE OF $.001 PER SHARE (THE `PREFERRED STOCK'). SHARES OF
PREFERRED STOCK MAY BE ISSUED FROM TIME TO TIME IN ONE OR MORE SERIES.
THE BOARD OF DIRECTORS IS AUTHORIZED TO FIX THE NUMBER OF SHARES IN EACH
SERIES, THE DESIGNATION THEREOF AND THE RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF EACH SERIES, AND SPECIFICALLY, THE BOARD OF DIRECTORS IS
AUTHORIZED TO FIX WITH RESPECT TO EACH SERIES (a) THE DIVIDEND RATE; (b)
REDEEMABLE FEATURES, IF ANY; (c) RIGHTS UPON LIQUIDATION; (d) WHETHER OR
NOT THE SHARES OF SUCH SERIES SHALL BE SUBJECT TO A PURCHASE, RETIREMENT
OR SINKING FUND PROVISION; (e) WHETHER OR NOT THE SHARES OF SUCH SERIES
SHALL BE CONVERTIBLE INTO OR EXCHANGEABLE FOR SHARES OF ANY OTHER CLASS
AND, IF SO, THE RATE OF CONVERSION OR EXCHANGE; (f) RESTRICTIONS, IF ANY,
UPON THE PAYMENT OF DIVIDENDS ON COMMON STOCK; (g) RESTRICTIONS, IF ANY,
UPON THE CREATION OF INDEBTEDNESS; (h) VOTING POWERS, IF ANY, OF THE
SHARES OF EACH SERIES; AND (i) SUCH OTHER RIGHTS, PREFERENCES AND
LIMITATIONS AS SHALL NOT BE INCONSISTENT WITH THE LAWS OF THE STATE OF
FLORIDA."
14
<PAGE> 42
AMERICA'S SENIOR FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 10 - SUBSEQUENT EVENTS (continued)
PREFERRED STOCK (continued)
As of March 26, 1999, no preferred stock has been issued.
STOCK OPTION PLAN
On March 15, 1999, the shareholders of the Company approved the
adoption of a stock option plan. The plan calls for a maximum of
2,000,000 incentive stock options and 500,000 non-qualified stock options
to be issued, at the discretion of the Board of Directors, over the next
ten years. Terms of the options, when issued, are as follows: (a) for
non-qualified options, the term of the option may not exceed ten years,
the options may be granted to any eligible person with the remaining
terms to be determined by the designated Board Committee; and (b) for
incentive options, the term of the option may not exceed ten years, the
exercise price may not be less than the fair market value of the optioned
share on the date of grant, the option may contain vesting provisions,
and the option may contain other terms to be determined by the designated
Board Committee. As of March 26, 1999, no options have been issued.
The Company will account for these options following the
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
SFAS No. 123 establishes optional alternative accounting methods for
stock-based compensation as well as certain required disclosures. The
Company has elected to account for stock-based employee compensation
under previously existing accounting guidance. As such, SFAS No. 123 for
employee compensation will be adopted for disclosure purposes only and
will not impact the Company's financial position, annual operating
results, or cash flows. For transactions with other than employees in
which services were received in exchange for stock or options, the
transactions will be recorded on the basis of the fair value of the
services received, or the fair value of the equity instrument issued,
whichever can be more reliably measured.
SEC REGISTRATION STATEMENT
In April 1999, the Company expects to file a Form 10-SB
registration statement with the U.S. Securities & Exchange Commission for
purposes of registering its common stock under the Securities Exchange
Act of 1934.
NOTE 11 - PRO FORMA INCOME TAXES AND EARNINGS (UNAUDITED)
As discussed in Note 1, having elected status as an S
corporation, the shareholders of AMSE paid the federal income tax on
AMSE's earnings through November 2, 1997. Additionally, AMSE was exempt
from Florida income tax on its earnings during that period since Florida
does not separately tax S corporations. As a result, no income tax
expense was provided in the historical financial statements for taxable
income through November 2, 1997.
Below is a pro forma schedule estimating the amount of income
tax benefit, and the resulting loss after taxes for the period ended
December 31, 1997, as if AMSE had not made the election to be taxed as an
S corporation.
Loss before income taxes - historical $(72,156)
Pro forma benefit for federal and state taxes 25,250
Valuation allowance for deferred tax asset (25,250)
--------
Net income (loss), after pro forma tax provision $(72,156)
========
15
<PAGE> 43
DOW GUARANTEE CORP.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
INDEPENDENT AUDITORS' REPORT
<PAGE> 44
DOW GUARANTEE CORP.
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statement of Changes in Stockholders' Equity 4
Statements of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6-9
<PAGE> 45
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Dow Guarantee Corp.
We have audited the accompanying balance sheets of Dow Guarantee Corp. (the
"Company"), as of December 31, 1998 and 1997, and the related statements of
operations, changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dow Guarantee Corp. as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 1, on July 31, 1998, all of the outstanding shares of the
Company were acquired by America's Senior Financial Services, Inc.
/s/ Ahearn, Jasco + Company, P.A.
------------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
February 26, 1999
1
<PAGE> 46
DOW GUARANTEE CORP.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 90,808 $185,767
Brokerage fees receivable 27,929 54,478
Employee advances 60,778 33,120
Prepaid expenses and taxes 18,268 1,890
---------- --------
TOTAL CURRENT ASSETS 197,783 275,255
PROPERTY AND EQUIPMENT, net 116,602 39,113
GOODWILL, net 1,059,413 --
DUE FROM PARENT 24,080 --
OTHER ASSETS 10,784 9,965
---------- --------
TOTAL $1,408,662 $324,333
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 106,259 $ 126,974
Accrued compensation and related taxes 40,724 29,963
---------- --------
TOTAL CURRENT LIABILITIES 146,983 156,937
---------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value; 1,000,000 shares
authorized, 1,000,000 shares issued and outstanding 90,462 90,462
Additional paid-in capital 1,255,649 --
Retained earnings (deficit) (84,432) 76,934
---------- --------
TOTAL STOCKHOLDERS' EQUITY 1,261,679 167,396
---------- --------
TOTAL $1,408,662 $324,333
========== ========
</TABLE>
See notes to financial statements.
2
<PAGE> 47
DOW GUARANTEE CORP.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
REVENUES $2,454,062 $2,599,574
---------- ----------
EXPENSES:
Payroll and related expenses 1,560,504 1,742,832
Administrative, processing, and occupancy 933,689 854,831
---------- ----------
TOTAL EXPENSES 2,494,193 2,597,663
---------- ----------
INCOME (LOSS) FROM OPERATIONS (40,131) 1,911
GOODWILL AMORTIZATION 22,541 --
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (62,672) 1,911
PROVISION FOR INCOME TAXES -- 820
---------- ----------
NET INCOME (LOSS) $ (62,672) $ 1,091
========== ==========
</TABLE>
See notes to financial statements.
3
<PAGE> 48
DOW GUARANTEE CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Additional Retained Total
Stock Common Paid-in Earnings Stockholders'
# of Shares Stock Capital (Deficit) Equity
-------------- ------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY,
January 1, 1997 1,000,000 $ 90,462 $ -- $ 75,843 $ 166,305
Net income for the year ended
December 31, 1997 -- -- -- 1,091 1,091
--------- -------- ---------- -------- ----------
STOCKHOLDERS' EQUITY,
December 31, 1997 1,000,000 90,462 -- 76,934 167,396
Recapitalization based on a
July 31, 1998 acquisition of the
shares of the Company (Note 1)
-- -- 1,180,649 (98,694) 1,081,955
Capital contributed by parent
-- -- 75,000 -- 75,000
Net loss for the year ended
December 31, 1998
-- -- -- (62,672) (62,672)
--------- -------- ---------- -------- ----------
STOCKHOLDERS' EQUITY,
December 31, 1998 1,000,000 $ 90,462 $1,255,649 $(84,432) $1,261,679
========= ======== ========== ======== ==========
</TABLE>
See notes to financial statements.
4
<PAGE> 49
DOW GUARANTEE CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (62,672) $ 1,091
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 48,950 25,483
Changes in certain assets and liabilities:
Brokerage fees receivable 26,549 (4,225)
Employee advances (27,658) 67,747
Prepaid expenses and taxes (16,378) (1,407)
Accounts payable, accrued compensation and other (9,954) 19,270
---------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (41,163) 107,959
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in other assets and due from parent (24,899) --
Acquisition of property and equipment (103,897) (9,294)
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (128,796) (9,294)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITY - Capital
contribution by parent 75,000 --
---------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (94,959) 98,665
CASH AND CASH EQUIVALENTS, Beginning of year 185,767 87,102
---------- ---------
CASH AND CASH EQUIVALENTS, End of year $ 90,808 $ 185,767
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 16,094 $ --
========== =========
Income taxes paid in cash during the period $ 10,000 $ 3,294
========== =========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On July 31, 1998, the Company recorded goodwill and additional
paid-in capital and adjusted its assets and liabilities to fair value in
connection with a purchase of the Company's stock.
See notes to financial statements.
5
<PAGE> 50
DOW GUARANTEE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Dow Guarantee Corp. (the "Company") was incorporated on March 20,
1985. The Company is a licensed mortgage lender in the State of Florida
and is engaged in originating, processing, and funding mortgage loan
applications.
On July 31, 1998, the shareholders of the Company exchanged all
of the issued and outstanding common stock of the Company to America's
Senior Financial Services, Inc. ("AMSE") for 550,000 shares of AMSE
common stock in a tax-free transaction. As a result, the Company became a
wholly-owned subsidiary of AMSE on that date. In accordance with
applicable accounting principles, this transaction has been recorded as a
purchase of the Company by AMSE for financial reporting purposes.
Management of AMSE has placed a value of $1,100,000 on the common stock
of AMSE issued to the shareholders of the Company. This value was
determined at a discount from the common stock's trading level during the
time the transaction was completed, as the shares are restricted as to
transfer. According to "push down" accounting rules, this transaction,
including costs incurred, is recorded on the books of the Company. As a
result, the recorded values of the assets and liabilities of the Company
were adjusted to their fair values at that date and goodwill was recorded
for the excess of the purchase price over the net fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION AND CREDIT RISKS
The Company derives its revenues primarily from mortgage
application fees paid by potential borrowers and from brokerage and
processing fees payable by the borrower and others at the time of
closing. The brokerage and processing fees are recognized as revenue at
the time the loans are closed.
The Company operates in the mortgage banking industry,
therefore, it is highly dependent on the status of the economy and
interest rates.
INTANGIBLE ASSETS
The excess of investment cost over the fair value of net assets
acquired (goodwill) is being amortized over a period of 20 years.
Amortization of goodwill in the amount of $22,541 was charged to
operations in 1998.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at acquisition cost and
depreciated using the straight-line method over the estimated useful
lives of the assets. Useful lives range from five to seven years.
Expenditures for routine maintenance and repairs are charged to expense
as incurred.
ADVERTISING
The costs of advertising, promotion, and marketing programs are
charged to operations in the year incurred. Advertising expense was
$30,717 and $31,002 for the years ended December 31, 1998 and 1997,
respectively.
6
<PAGE> 51
DOW GUARANTEE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company accounts for its income taxes in accordance with
Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes." Deferred tax liabilities and assets are recognized for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse. The Company anticipates filing a consolidated return with AMSE.
The tax provision shown on the accompanying statement of operations was
calculated as if the Company filed a separate income tax return.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments
purchased with an original maturity of three months or less. The Company
occasionally maintains cash balances in financial institutions in excess
of the federally insured limits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, receivables, and accounts payable and accrued expenses are
reflected in the financial statements at fair value because of the
short-term maturity of those instruments.
STATEMENT OF COMPREHENSIVE INCOME
A statement of comprehensive income has not been included, per
SFAS 130, "Reporting Comprehensive Income," as the Company has no items
of other comprehensive income.
RECLASSIFICATIONS
Certain amounts in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,
1998 and 1997:
1998 1997
---------- ---------
Office equipment $ 77,906 $ 122,116
Furniture and fixtures 15,445 57,271
Leasehold improvements 31,080 5,991
---------- ---------
Total cost 124,431 185,378
Less: Accumulated depreciation (7,829) (146,265)
---------- ---------
Property and equipment, net $ 116,602 $ 39,113
========== =========
7
<PAGE> 52
DOW GUARANTEE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 2 - PROPERTY AND EQUIPMENT (continued)
Depreciation expense for the years ended December 31, 1998 and
1997 was $26,409 and $25,483, respectively. At July 31, 1998, the
historical cost of all property and equipment was adjusted to fair value
in connection with an acquisition (see Note 1).
NOTE 3 - CREDIT AGREEMENTS
LINES OF CREDIT
In October 1996, the Company established two credit lines with a
financial institution. The credit lines are guaranteed by an officer and
former shareholder. The total amount available under the agreements is
$50,000. As of December 31, 1998 and 1997, no amounts were used from the
credit facilities.
MORTGAGE WAREHOUSING AGREEMENT
In May 1997, the Company entered into an agreement with a
financial institution to provide a $1,000,000 mortgage warehousing
facility that assists the Company in originating and closing mortgages.
The Company is liable under the agreement only if there is a default
during a mortgage closing process. There were no amounts owed under this
agreement as of December 31, 1998 or 1997. Interest paid during 1998 for
borrowings under this agreement totaled $16,094.
NOTE 4 - INCOME TAXES
A summary of income taxes for the years ended December 31, 1998
and 1997 is as follows:
1998 1997
-------- --------
Currently payable:
Federal $ -- $ 800
State -- 20
Deferred benefit from net operating loss (14,050) --
Valuation allowance 14,050 --
-------- -----
Total income tax provision $ -- $ 820
======== =====
The tax provision differs from the Federal statutory rate of 34%
because of non-deductible expenses (including the goodwill amortization),
the surtax exemptions and rate brackets, and the effect of state income
taxes. There are no significant deferred tax assets or liabilities other
than from the net operating loss.
The Company has recorded a valuation allowance in accordance
with the provisions of SFAS No. 109 to reflect the estimated amount of
deferred tax assets that may not be realized. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized.
The Company has available tax net operating loss carryovers as
of December 31, 1998 of approximately $84,400.
8
<PAGE> 53
DOW GUARANTEE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE 5 - COMMITMENTS AND CONTINGENCIES
OFFICE LEASE
The Company leases office space in various locations, as well as
certain office equipment. Future minimum lease payments subsequent to
December 31, 1998 under these operating leases are as follows: $94,956 in
years 1999 and 2000, $93,293 in 2001, and $12,956 in years 2002 and 2003.
Rent expense for the years ended December 31, 1998 and 1997 totaled
$86,725, and $92,633, respectively.
LITIGATION
From time to time, the Company is exposed to claims, regulatory,
and legal actions in the normal course of business, some of which may be
initiated by the Company. At December 31, 1998, management believes that
any such outstanding issues will be resolved without significantly
impairing the financial condition of the Company.
9
<PAGE> 54
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND
INDEPENDENT AUDITORS' REPORT
<PAGE> 55
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Stockholders' Equity 4
Statement of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6-8
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Capital Funding of South Florida, Inc.
We have audited the accompanying balance sheet of Capital Funding of South
Florida, Inc. (the "Company"), as of December 31, 1998, and the related
statement of operations, changes in stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Capital Funding of South
Florida, Inc. as of December 31, 1998, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
As discussed in Note 1, on January 29, 1999, all of the outstanding shares of
the Company were acquired by America's Senior Financial Services, Inc.
/s/ Ahearn, Jasco + Company, P.A.
------------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
April 9, 1999
1
<PAGE> 57
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 23,543
Brokerage fees receivable 45,828
Interest receivable from shareholders 6,000
---------
TOTAL CURRENT ASSETS 75,371
PROPERTY AND EQUIPMENT, net 79,983
NOTES RECEIVABLE FROM SHAREHOLDERS 100,000
OTHER ASSETS 67,739
---------
TOTAL $ 323,093
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - lines of credit $ 110,455
Accounts payable 25,909
Accrued compensation 17,873
Other accrued liabilities 35,000
---------
TOTAL CURRENT LIABILITIES 189,237
---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 10,000 shares
authorized, 2,000 shares issued and outstanding 2,000
Additional paid-in capital 59,369
Retained earnings 72,487
---------
TOTAL STOCKHOLDERS' EQUITY 133,856
---------
TOTAL $ 323,093
=========
See notes to financial statements.
2
<PAGE> 58
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
REVENUES $1,419,184
----------
EXPENSES:
Compensation 826,415
Administrative, processing, and occupancy 476,956
----------
TOTAL EXPENSES 1,303,371
----------
INCOME FROM OPERATIONS 115,813
INTEREST INCOME 7,735
INTEREST EXPENSE (4,742)
----------
NET INCOME $ 118,806
==========
See notes to financial statements.
3
<PAGE> 59
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON Additional Total
STOCK Common Paid-in Retained Stockholders'
# OF SHARES Stock Capital Earnings Equity
-------------- ------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY,
January 1, 1998 2,000 $2,000 $59,369 $ 228,984 $ 290,353
S corporation distributions -- -- -- (275,303) (275,303)
Net income for the year ended
December 31, 1998 -- -- -- 118,806 118,806
----- ------ ------- --------- ---------
STOCKHOLDERS' EQUITY,
December 31, 1998 2,000 $2,000 $59,369 $ 72,487 $ 133,856
===== ====== ======= ========= =========
</TABLE>
See notes to financial statements.
4
<PAGE> 60
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 118,806
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and valuation allowance 59,518
Changes in certain assets and liabilities:
Brokerage fees receivable (38,406)
Interest receivable from shareholders (6,000)
Accounts payable and accrued liabilities 34,003
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 167,921
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in other assets 87
Purchases of property and equipment (34,524)
---------
NET CASH USED IN INVESTING ACTIVITIES (34,437)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
S corporation distributions (275,303)
Repayment of shareholder advances (150,000)
Proceeds from lines of credit, net 70,580
---------
NET CASH USED IN FINANCING ACTIVITIES (354,723)
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (221,239)
CASH AND CASH EQUIVALENTS, Beginning of year 244,782
---------
CASH AND CASH EQUIVALENTS, End of year $ 23,543
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 4,742
=========
Income taxes paid in cash during the period $ --
=========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Property and equipment with a net book value of $66,514 was
transferred from depreciable assets to other assets when the property was
removed from current use in the business.
See notes to financial statements.
5
<PAGE> 61
CAPITAL FUNDING OF SOUTH FLORIDA, INCORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Capital Funding of South Florida, Inc. (the "Company") was
incorporated on August 29, 1994. The Company is a licensed mortgage
lender in the State of Florida and is engaged in originating, processing,
and funding mortgage loan applications.
On January 29, 1999, the shareholders of the Company exchanged
all of the issued and outstanding common stock of the Company to
America's Senior Financial Services, Inc. ("AMSE") for 221,664 shares of
AMSE common stock in a tax-free transaction. As a result, the Company
became a wholly-owned subsidiary of AMSE on that date.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION AND CREDIT RISKS
The Company derives its revenues primarily from mortgage
application fees paid by potential borrowers and from brokerage and
processing fees payable by the borrower and others at the time of
closing. The brokerage and processing fees are recognized as revenue at
the time the loans are closed.
The Company operates in the mortgage banking industry,
therefore, it is highly dependent on the status of the economy and
interest rates.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at acquisition cost and
depreciated using the straight-line method over the estimated useful
lives of the assets. Useful lives range from five to seven years.
Expenditures for routine maintenance and repairs are charged to expense
as incurred.
ADVERTISING
The costs of advertising, promotion, and marketing programs are
charged to operations in the year incurred. Advertising expense was
$15,955 for the year ended December 31, 1998.
INCOME TAXES
The Company, with the consent of its shareholders, has elected
under the Internal Revenue Code to be an S corporation. In lieu of
corporation income taxes, shareholders of an S corporation are taxed on
their proportionate share of the Company's taxable income. Therefore, no
provision or liability for income taxes has been included in the
accompanying financial statements.
On January 29, 1999, as a result of the acquisition by AMSE of
the Company's common stock, the Company ceased to be an S corporation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments
purchased with an original maturity of three months or less. The Company
occasionally maintains cash balances in financial institutions in excess
of the federally insured limits.
6
<PAGE> 62
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, receivables, accounts payable and accrued expenses, and
notes payable are reflected in the financial statements at fair value
because of the short-term maturity of those instruments.
STATEMENT OF COMPREHENSIVE INCOME
A statement of comprehensive income has not been included, per
SFAS 130, "Reporting Comprehensive Income," as the Company has no items
of other comprehensive income.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,
1998:
Office and other equipment $ 78,100
Furniture and fixtures 13,125
Leasehold improvements 40,377
----------
Total cost 131,602
Less: Accumulated depreciation (51,619)
----------
Property and equipment, net $ 79,983
==========
Depreciation expense for the year ended December 31, 1998 was
$25,732. The balance sheet caption, "other assets," includes property not
currently in use in the operation of the Company; a valuation allowance
of $33,786 was charged to earnings in 1998 to reduce this property to its
estimated net realizable value of $66,514.
NOTE 3 - NOTES PAYABLE
The Company has two credit lines with financial institutions.
The balances due at December 31, 1998 were $61,455, with interest at
10.25%, and $49,000, with interest at 8.5%. The notes are due on demand,
are unsecured, and are guaranteed by a shareholder.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
OFFICE LEASE
The Company leases office space in various locations, as well as
certain office equipment. Future minimum lease payments subsequent to
December 31, 1998 under these operating leases are as follows: $43,900 in
1999, $24,000 in 2000, and $12,000 in 2001. Rent expense for the year
ended December 31, 1998 totaled $70,359.
LITIGATION
From time to time, the Company is exposed to claims, regulatory,
and legal actions in the normal course of business, some of which may be
initiated by the Company. At December 31, 1998, management believes that
any such outstanding issues will be resolved without significantly
impairing the financial condition of the Company.
7
2
<PAGE> 63
CAPITAL FUNDING OF SOUTH FLORIDA, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
NOTE 5 - RELATED PARTY TRANSACTIONS
NOTES RECEIVABLE
Two shareholders each owe the Company $50,000 under promissory
notes dated December 31, 1997. Both notes bear interest at 6% per annum
and the interest is payable annually on December 31st. The notes are due
on January 1, 2004. The interest due December 31, 1998 was not paid and
is therefore recorded as a receivable from shareholders.
The fair value of these notes is not subject to reasonable
estimation because of their related party nature.
DISTRIBUTIONS TO SHAREHOLDERS
The shareholders of the Company received S corporation
distributions totaling $275,303 in 1998.
SHAREHOLDER ADVANCES
At December 31, 1997, the Company owed its shareholders $150,000
pursuant to non-interest bearing advances received in December 1997.
These amounts were repaid in January 1998.
8
<PAGE> 64
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial statements of America's
Senior and the related notes are presented to give effect to the acquisition of
Dow Guarantee Corp. and Capital Funding of South Florida, Inc., assuming that
such acquisitions occurred as of January 1, 1998 using the purchase accounting
method. A pro forma balance sheet has been presented, assuming that the
acquisitions occurred as of December 31, 1998.
The unaudited pro forma financial statements are based on the
historical financial statements for America's Senior, Dow and Capital Funding
and the assumptions and adjustments described in the accompanying notes.
The unaudited pro formal financial statements do not purport to
represent what America's Senior results of operations and financial condition
actually would have been if the events described above had occurred as of the
dates indicated or what such results and financial condition will be for any
future periods. The unaudited pro forma financial statements are based upon
assumptions that America's Senior believes are reasonable and should be read in
conjunction with the Financial Statements and accompanying notes thereto
included elsewhere herein.
<PAGE> 65
AMSE/ DOW/ CFSF COMPARATIVE PROFORMA
CONSOLIDATED FINANCIAL STATEMENTS
AMERICA'S SENIOR FINANCIAL SERVICES AND SUBSIDIARIES
CONSOLIDATED PROFORMA BALANCE SHEET AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORIC HISTORIC HISTORIC PROFORMA PROFORMA
AMSE DOW CFSF ADJUSTMENTS CONSOLIDATED
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 104,920 90,809 23,543 219,272
Brokerage fee's receivable 21,924 27,929 45,828 95,681
Notes & Other Receivable 275,618 24,080 106,000 (24,080) a 381,618
Self-funded mortgages/ loans held
for sale -- -- -- --
Employee advances 9,750 60,777 -- 70,527
Prepaid expenses 53,452 29,052 -- 82,504
Property and equipment, net 118,807 116,602 79,983 315,392
Other Assets 2,516,111 1,059,413 990,000 (2,597,168) b 1,968,356
Acquisition Costs
53,509 -- -- 53,509
--------------------------------------------------------------------------------------------------------------------
Total Assets 3,154,091 1,408,662 1,245,354 (2,621,248) 3,186,859
LIABILITIES:
Current portion of long-term debt 5,798 -- 110,454 116,252
Accounts payable and accrued expenses 91,724 106,259 60,909 24,080 a 234,812
Commission payable 8,330 40,724 17,873 66,927
Income taxes payable -- -- -- --
Long-Term debt, less current portion 13,287 -- -- 13,287
--------------------------------------------------------------------------------------------------------------------
Total Liabilities 119,139 146,983 189,236 24,080 431,278
STOCKHOLDERS' EQUITY:
Common Stock 5,899 -- 2,000 7,899
Preferred Stock -- -- -- --
Additional paid-in capital 3,417,433 1,346,111 981,630 2,501,644 b 3,243,530
Retained earnings (122,243) (21,760) (46,318) (190,321)
Income YTD (266,137) (62,672) 118,806 95,524 c (305,527)
--------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 3,034,952 1,261,679 1,056,118 2,597,168 2,755,581
--------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity 3,154,091 1,408,662 1,245,354 2,621,248 $ 3,186,859
====================================================================================================================
</TABLE>
a To eliminate intercompany payable and receivable
b To eliminate intercompany investment.
c To recognize expenses annualized for Proforma purposes. See
Consolidated Statement of Operations.
<PAGE> 66
AMERICA'S SENIOR FINANCIAL SERVICES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORIC HISTORIC HISTORIC PROFORMA PROFORMA
AMSE DOW CFSF ADJUSTMENTS CONSOLIDATED
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Origination & Processing Fees $ 830,173 2,452,898 1,409,814 4,692,885
Income other -- 1,164 9,370 10,534
------------------------------------------------------------------------------
Total Revenues 830,173 2,454,062 1,419,184 -- 4,703,419
EXPENSES:
Various processing fees (COGS) -- 504,715 52,350 557,065
Bad debts - collection -- -- 3,183 3,183
Depreciation 27,127 26,409 21,531 75,067
Advertising/ Promotion 144,348 45,600 35,761 225,709
Auto fees misc. 19,509 1,618 13,169 34,296
Bank fees 765 688 907 2,360
Contributions\Donations 450 1,256 1,860 3,566
Client expenses -- -- -- --
Miscellaneous (27,250) 31,970 11,234 15,954
Insurance 11,125 55,148 21,915 88,188
Interest paid -- 16,094 -- 16,094
Professional fees 44,240 6,685 22,122 73,047
Postage & courier fees 18,889 7,861 20,091 46,841
Office expenses 78,668 68,764 55,885 203,317
Rent 42,498 88,168 70,359 201,025
Property taxes, licenses & related 356 6,083 9,572 16,011
Travel 23,047 -- 6,108 29,155
Meals& Entertainment 14,921 3,359 25,289 43,569
Telephone & Other Communications 38,152 72,377 44,061 154,590
Wages, Commissions & Associated Costs 661,070 1,546,889 826,415 14,467 c 3,048,841
Expenses other -- -- 33,786 33,786
Maintenance and repair -- 10,509 19,891 30,400
Meetings -- -- 7,882 7,882
------------------------------------------------------------------------------
Total Expenses 1,097,915 2,494,193 1,303,371 14,467 4,909,946
Interest Income 3,646 -- 7,735 11,381
Interest Expense 2,041 -- 4,742 6,783
Goodwill Amortization -- 22,541 -- 81,057 c 103,598
Profit (Loss) before tax (266,137) (62,672) 118,806 (95,524) (305,527)
------------------------------------------------------------------------------
Provision (Benefit) for income taxes -- -- --
------------------------------------------------------------------------------
Net Income (Loss) (266,137) (62,672) 118,806 (95,524) $ (305,527)
==============================================================================
Net Income per Common Share
Basic (0.1070) (0.0518)
Diluted (0.1070) (0.0518)
Weighted Average Shares Outstanding
Basic 2,854,400 5,898,867
Diluted 2,854,400 5,898,867
</TABLE>
c To annualize goodwill of an additional seven months for Dow Guarantee,
A full twelve months of CFSF, and to annualize accrued vesting costs
pertaining to employee recruitment and retention.
AMSE Represents twelve months of original Miami Lakes office as if it had
remained an independent entity.
<PAGE> 1
EXHIBIT 2(a)
ARTICLES OF INCORPORATION
OF
Phoenix Management Associates, Inc.
d/b/a Value Financial -- Mortgage Services
ARTICLE I
Name
The name of this corporation is:
Phoenix Management Associates, Inc.
d/b/a Value Financial -- Mortgage Services
ARTICLE II
Purpose
This corporation is organized for the purpose of transacting any and
all lawful business.
ARTICLE III
Capital Stock
This corporation is authorized to issue Five Hundred (500) shares of
One Dollar ($1.00) par value common stock.
ARTICLE IV
Preemptive Rights
Every shareholder, upon the issuance or sale of either new or treasury
stock for cash, property, services, in payment of corporate debts or otherwise,
shall have the right to purchase his proportionate share thereof.
<PAGE> 2
ARTICLE V
Initial Registered Office and Agent
The street address of the initial registered office of this corporation
is: 218 Almeria Avenue, Coral Gables, Florida 33134 and the name of the initial
registered agent of this corporation at that address is:
THOMAS G. SHERMAN, ESQ.
218 Almeria Avenue,
Coral Gables, FL 33134
which agent, pursuant to ss.48.091, Florida Statutes, shall accept service of
process within this state.
ARTICLE VI
Board of Directors
This corporation shall have 1 director(s) initially. The number of
directors may be increased or decreased from time to time in such manner as may
be prescribed by the bylaws. The name(s) and address(es) of the initial
director(s) of this corporation is (are):
Nelson Locke, Jr. 1205 B Wallace St.
Coral Gables, FL 33134
The corporation shall indemnify and hold harmless each person who shall
serve at any time hereafter as a director or officer of the corporation, and any
person who serves at the request of this corporation as a director or officer of
any other
-2-
<PAGE> 3
corporation from and against any and all claims and liabilities to which such
person shall become subject by reason of his having heretofore or hereafter
being a director or officer of the corporation, or by reason of any action
alleged to have been heretofore or hereafter taken or omitted by him as such
director or officer, and shall reimburse each such person for all expenses
(including attorney's fees) reasonably provided that no person shall be
indemnified against, or be reimbursed for, any expenses incurred in connection
with any claim or liability as to which it shall be adjudged that such officer
or director is liable for negligence or willful misconduct in the performance of
his duties.
The rights accruing to any person under the foregoing provisions shall
not exclude any other right to which he may be lawfully entitled, nor shall
anything herein contained restrict the right of the corporation to indemnify or
reimburse such person in any proper case even though not specifically herein
provided for.
No contract or other transaction between this corporation and any other
corporation, and no act of this corporation shall in any way be affected or
invalidated by the fact that any of the directors of the corporation are
pecuniarily or otherwise interested in or are directors or officers of such
other corporation; any director individually, or any firm of which any director
may be a member, may be a party to, or any be pecuniarily or otherwise
interested in, any contract or transaction of the corporation, provided that the
fact that he or such firm so interested
-3-
<PAGE> 4
shall be disclosed or shall have been known to the Board of Directors or such
members thereof as shall be present at any meeting of the Board at which action
upon any such contract or transaction shall be taken; and any director of the
corporation who is also a director or officer of such other corporation or is so
interested may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the corporation which shall authorize any
such contract or transaction, and may vote thereat to authorize any such
contract or transaction with like force and effect as if he were not such
director or officer of such other corporation or not so interested.
ARTICLE VII
Incorporator
The name and address of the person signing these Articles is:
THOMAS G. SHERMAN, ESQ.
218 Almeria Ave.
Coral Gables, FL 33134
ARTICLE VIII
By-Laws
The power to adopt, alter, amend or repeal by-laws shall be vested in
the shareholders.
IN WITNESS WHEREOF, the undersigned subscriber has executed these
Articles of Incorporation this 6 day of February, 1990.
/s/ THOMAS G. SHERMAN
------------------------------------
Subscriber: THOMAS G. SHERMAN
-4-
<PAGE> 5
STATE OF FLORIDA )
) SS:
COUNTY OF DADE )
I HEREBY CERTIFY that on this day before me, a notary public, duly
authorized in the state and county above named to take acknowledgments,
personally appeared
THOMAS G. SHERMAN
to me known to be the person who executed the foregoing Articles of
Incorporation and who acknowledged before me that (s)he executed those Articles
of Incorporation.
WITNESS my hand and official seal in the county and state named above
this 6 day of February, 1990.
/s/
--------------------------------
Notary Public, State of Florida
My commission expires:
The undersigned having been named to accept service of process for the
above corporation at the place designated in Article VI hereof, hereby accepts
such agency and agrees to comply with the provisions of the Florida Statutes
relative to keeping open said office.
/s/ THOMAS G. SHERMAN
---------------------------------
Resident Agent: THOMAS G. SHERMAN
-5-
<PAGE> 1
EXHIBIT 2(b)(1)
AMENDMENT TO ARTICLES OF INCORPORATION
OF PHOENIX MANAGEMENT ASSOCIATES, INC.
PHOENIX MANAGEMENT ASSOCIATES, INC., hereby files this Amendment to its
Articles of Incorporation and states:
1. The name of the Corporation is PHOENIX MANAGEMENT ASSOCIATES, INC.
2. The Corporation hereby amends its Articles by changing its name to:
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
3. Article III of the Articles is hereby amended by changing the number
of authorized shares to Twenty Five Million (25,000,000) of $.001 par value
common stock. In addition, all outstanding shares of common stock are hereby
converted to Two Million Six Hundred and Fifty Thousand (2,650,000) shares of
$.001 par value common stock.
4. Article IV, Preemptive Rights, is hereby deleted in its entirety.
5. This Amendment is ratified and approved by 100% of the shareholders,
and directors of the Corporation, as evidenced by the signature below.
/s/ NELSON LOCKE
--------------------------------
NELSON LOCKE, Sole shareholder,
sole director and President
STATE OF FLORIDA
COUNTY OF DADE
Before me, the undersigned authority, personally appeared NELSON LOCKE,
Sole Shareholder, Sole Director and President of Phoenix Management Associates,
Inc., who executed the foregoing document before me and who was personally known
to me and who did not take an oath.
*on November 5, 1997
/s/ MARTA M. BLANCO
--------------------------------
NOTARY PUBLIC, STATE OF FLORIDA
My Commission Expires:
<PAGE> 1
EXHIBIT 2(b)(2)
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
Pursuant to Sections 607.1003 and 607.1006 of the Florida Business
Corporation Act, the Articles of Incorporation of AMERICA'S SENIOR FINANCIAL
SERVICES, INC. (the "Corporation"), are hereby amended according to these
Articles of Amendment:
FIRST: The name of the Corporation is America's Senior Financial Services,
Inc.
SECOND: The Articles of Incorporation are hereby amended to add the
following provision to Article III Capital Stock:
The Corporation is also authorized to issue ten million
(10,000,000) shares of Preferred Stock having a par value of $.001 per
share (the "Preferred Stock"). Shares of Preferred Stock may be issued
from time to time in one or more series. The Board of Directors is
authorized to fix the number of shares in each series, the designation
thereof and the relative rights, preferences and limitations of each
series, and specifically, the Board of Directors is authorized to fix
with respect to each series (a) the dividend rate; (b) redeemable
features, if any; (c) rights upon liquidation; (d) whether or not the
shares of such series shall be subject to a purchase, retirement or
sinking fund provision; (e) whether or not the shares of such series
shall be convertible into or exchangeable for shares of any other class
and, if so, the rate of conversion or exchange; (f) restrictions, if
any, upon the payment of dividends on common stock; (g) restrictions,
if any, upon the creation of indebtedness; (h) voting powers, if any,
of the shares of each series; and (i) such other rights, preferences
and limitations as shall not be inconsistent with the laws of the State
of Florida.
FOURTH: The foregoing amendment was adopted effective March __, 1999 by
written consent of the directors of the Corporation, in accordance with
Sections 607.0821 of the Florida Statutes. The foregoing amendment was adopted
effective March __, 1999 by written consent of the shareholders of the
Corporation, in accordance with Sections 607.0704 of the Florida Statutes,
constituting a sufficient number of votes for the amendment to be approved.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned President of the Corporation has
executed this instrument effective March 23, 1999.
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
By: /s/ Nelson A. Locke
----------------------------------------
Nelson A. Locke, President
2
<PAGE> 1
EXHIBIT 2(c)
BYLAWS
OF
PHOENIX MANAGEMENT ASSOCIATES, INC.
ARTICLE 1. MEETINGS OF SHAREHOLDERS.
SECTION 1. ANNUAL MEETING. The annual shareholder meeting of this
corporation will be held on the 10 day of JANUARY of each year or at such other
time and place designated by the Board of Directors of the corporation provided
that if said day falls on a Sunday or legal holiday, then the meeting will be
held on the first business day thereafter. Business transacted at said meeting
will include the election of directors of the corporation.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders will be
held when directed by the President, Board of Directors, or the holders of not
less than 10 percent of all the shares entitled to vote at the meeting. A
meeting requested by shareholders of the corporation will be called for a date
not less than 10 nor more than 60 days after the request is made, unless the
shareholders requesting the meeting designate a later date. The call for the
meeting will be issued by the Secretary, unless the President, Board of
Directors, or shareholders requesting the meeting will designate another person
to do so.
Page
I
<PAGE> 2
SECTION 3. PLACE. Meetings of shareholders will be held at the principal
place of business of the corporation or at such other place as is designated by
the Board of Directors.
SECTION 4. NOTICE. Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose(s) for which said
special meeting is called, will be delivered not less than 10 nor more than 60
days before the meeting, either personally or by first class mail, by or at the
direction of the President, the Secretary or the officer or persons calling the
meeting to each shareholder of record entitled to vote at such meeting. If
mailed, such notice will be deemed to be delivered when deposited in the United
States mail and addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETING. When a meeting is adjourned to
another time or place, it will not be necessary to give any notice of the
adjourned meeting provided that the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken. At
such an adjourned meeting any business may be transacted that might have been
transacted on the original
Page
II
<PAGE> 3
date of the meeting. If, however, after the adjournment, the Board of Directors
fixes a new record date for the adjourned meeting, a notice of the adjourned
meeting will be given on the new record date as provided in this Article to each
shareholder of record entitled to vote at such meeting.
SECTION 6. SHAREHOLDER QUORUM AND VOTING. Majority of the shares entitled
to vote, represented in person or by proxy, will constitute a quorum at a
meeting of shareholders.
If a quorum, as herein defined, is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter thereof will be the act of the shareholders unless otherwise
provided by law.
SECTION 7. VOTING OF SHARES. Each outstanding share will be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
SECTION 8. PROXIES. A shareholder may vote either in person or by proxy
provided that any and all proxies are executed in writing by the shareholder or
his duly authorized attorney-in-fact. No proxy will be valid after the duration
of 11 months from the date thereof unless otherwise provided in the proxy.
Page
III
<PAGE> 4
SECTION 9. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action required
or permitted by law, these bylaws, or the Articles of Incorporation of this
corporation to be taken at any annual or special meeting of shareholders may be
taken without a meeting, without prior notice and without a vote, provided that
a written consent is filed setting forth the action so taken, and signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted, as provided by law.
ARTICLE 11. DIRECTORS
SECTION 1. FUNCTION. All corporate powers, business, and affairs will be
exercised, managed and directed under the authority of the Board of Directors.
SECTION 2. QUALIFICATION. Directors shall be residents of this state and
shall be shareholders of this corporation.
SECTION 3. COMPENSATION. The Board of Directors will have authority to fix
the compensation for directors of this corporation.
SECTION 4. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is
Page
IV
<PAGE> 5
taken will be presumed to have assented to the action taken unless he votes
against such action or abstains from voting in respect thereto because of an
asserted conflict of interest.
SECTION 5. NUMBER. This corporation will have 3-5 directors.
SECTION 5. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors will hold office
until his successor will have been qualified and elected at the first annual
meeting of shareholders, or until said director's earlier resignation, removal
from office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter, the shareholders will elect directors to hold office until the next
annual meeting. Each director will hold office for a term for which he is
elected until his successor will have been qualified and elected, his prior
resignation, his removal from office or his death.
SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors
will be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy will hold office only until the next election of directors by the
shareholders.
Page
V
<PAGE> 6
SECTION 8. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
SECTION 9. QUORUM AND VOTING. A majority of the number of directors
fixed by these bylaws shall constitute a quorum for the transaction of business.
The act of a majority of the directors present at a meeting at which a quorum is
present will be the act of the Board of Directors.
SECTION 10. EXECUTIVE AND OTHER COMMITTEES. A resolution adopted by a
majority of the Board of Directors, may designate from among its members an
executive committee and/or other committee(s) which will have and may exercise
all the authority of the Board of Directors to the extent provided in such
resolution, except as is provided by law.
SECTION 11. PLACE OF MEETING. Special or regular meetings of the
Board of Directors will be held at the headquarters of the Corporation.
SECTION 12. NOTICE, TIME AND CALL OF MEETINGS. Regular meetings of the
Board of Directors will be held without
Page
VI
<PAGE> 7
notice on January 10 of each year. Written notice of the time and place of
special meetings of the Board of Directors will be given to each director by
either personal delivery, telegram or cablegram at least 3 days before the
meeting or by notice mailed to the director at least 5 days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting will constitute a waiver of notice of such
meeting and waiver of any and all objections to the place of the meeting, the
time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted nor the purpose of, regular or
special meetings of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting will be given to the directors who were
Page
VII
<PAGE> 8
not present at the time of the adjournment.
Meetings of the Board of Directors may be called by the chairman of
the board, the president of the corporation or any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
SECTION 13. ACTION WITHOUT A MEETING. Any action required to be taken
at a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without
a meeting if a consent in writing, setting forth the action so to be taken,
signed by all the directors, or all the members of the committee, as the case
may be, is filed in the minutes of the proceedings of the board or of the
committee. Such consent will have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS. The officers of this corporation will consist of a
president, a vice president, a secretary and a treasurer, each of whom will be
elected by the Board of Directors. Such other officers and assistant
Page
VIII
<PAGE> 9
officers and agents as may be deemed necessary may be elected or appointed by
the Board of Directors from time to time. Any two or more offices may be held
by the same person.
SECTION 2. DUTIES. The officers of this corporation will have the
following duties:
The President will be the chief executive officer of the corporation,
who generally and actively manages the business and affairs of the corporation
subject to the directions of the Board of Directors. He will preside at all
meetings of the shareholders and Board of Directors.
The Vice President will in the event of the absence or inability of
the President to exercise his office become acting president of the
organization with all the rights, privileges and powers as if he had been duly
elected president.
The Secretary will have custody of, and maintain all of the
corporate records except the financial records. Furthermore, he will record the
minutes of all meetings of the shareholders and Board of Directors, send all
notices of meetings and perform such other duties as may be prescribed by the
Board of Directors or the President.
The Treasurer shall retain custody of all corporate funds and
financial records, maintain full and accurate
Page
IX
<PAGE> 10
accounts of receipts and disbursements and render accounts thereof at the
annual meetings of shareholders and whenever else required by the Board of
Directors or the President, and perform such other duties as may be prescribed
by the Board of Directors or the President.
SECTION 3. REMOVAL OF OFFICERS. An officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the corporation will be served
thereby.
Any vacancy in any office may be filled by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of share(s) in this corporation will
be entitled to have a certificate representing all share(s) to which he is
holder. No certificate representing share(s) will be issued until such share(s)
is/are fully paid.
SECTION 2. FORM. Certificates representing share(s) in this corporation
will be signed by the President or Vice President and the Secretary or an
Assistant Secretary and will be sealed with the seal of this corporation.
SECTION 3. TRANSFER OF STOCK. The corporation will register a stock
certificate presented for transfer if the certificate is properly endorsed by
the holder of
Page
X
<PAGE> 11
record or by his duly authorized agent.
SECTION 4. LOST, STOLEN, OR DESTROYED CERTIFICATES. If the shareholder
will claim to have lost or destroyed a stock certificate representing shares
issued and recorded by the corporation, a new certificate will be issued upon
said shareholder presenting an affidavit claiming the certificate of stock to
be lost, stolen or destroyed. At the discretion of the Board of Directors, said
shareholder will deposit a bond or other indemnity in such amount and with such
sureties, if any, as the board may require.
ARTICLE V. BOOKS AND RECORDS.
SECTION 1. BOOKS AND RECORDS. This corporation will keep accurate and
complete books, records of account, and minutes of the proceedings of all
meetings of shareholders, Board of Directors, committees of directors.
This corporation will keep, at its registered office, principal place
of business or office of its attorneys a record of all shareholders indicating
the name, address and number of shares held by each registered shareholder.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form.
Page
XI
<PAGE> 12
SECTION 2. SHAREHOLDER'S INSPECTION RIGHTS. Any person who has been or
presently is a holder of record of shares or of voting trust certificates at
least six months immediately preceding his demand or for at least five percent
of the outstanding shares of the corporation, upon written demand stating the
purpose thereof, will have the right to examine and to make extracts in person
or by agent or attorney, at any reasonable time(s), for any proper purpose, the
corporation's relevant books, records of accounts, minutes and records of
shareholders.
SECTION 3. FINANCIAL INFORMATION. Not later than four months after the
close of each fiscal year, this corporation will prepare a balance sheet showing
the financial condition of the corporation at the close of the fiscal year, and
a profit and loss statement showing the results of the operations of the
corporation during the fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation will mail to each
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement.
The balance sheet and profit and loss statement will be filed in the
registered office of the corporation in this state, will be kept for at least
five years, and
Page
XII
<PAGE> 13
will be subject to inspection during business hours by any shareholder or
holder of voting trust certificates, in person or by agent.
ARTICLE VI. DIVIDENDS.
The Board of Directors of this corporation may, from time to time
declare dividends on its shares in cash, property or its own shares, except
when the corporation is insolvent or when the payment thereof would render the
corporation insolvent, subject to the provisions of the Florida Statutes.
ARTICLE VII. CORPORATE SEAL.
The Board of Directors will provide a corporate seal which will be in
circular form embossing in nature and stating "Corporate Seal", "Florida", year
of incorporation and name of said corporation.
ARTICLE VIII. AMENDMENT.
These bylaws may be altered, amended or repealed, and altered, amended
or new bylaws may be adopted by a requisite number of the directors of this
Corporation.
Page
XIII
<PAGE> 14
ARTICLE IX. CORPORATE INDEMNIFICATION PLAN
The corporation shall indemnify any person:
(1) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in the
right of, the corporation) by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against such costs and expenses, and to the extent and in the manner provided
in Florida Statute 607.014;
(2) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another
Page
XIV
<PAGE> 15
corporation, partnership, joint venture, trust, or other enterprise against such
costs and expenses, and to the extent and in the manner provided in Florida
Statute 607.014.
The extent, amount, and eligibility for the indemnification provided
herein will be made by the Board of Directors. Said determinations will be made
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit, or proceeding or by the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such action, suit, or
proceeding.
The corporation will have the power to make further indemnification as
provided in Florida Statute 607.014(6) except to indemnify any person against
gross negligence or willful misconduct.
The corporation is further authorized to purchase and maintain
insurance for indemnification of any person as provided herein and to the extent
provided in Florida Statutes 607.014(8) and 607.014(9).
Page
XV
<PAGE> 16
AMENDMENT TO BY-LAWS OF AMERICA'S SENIOR FINANCIAL SERVICES, INC.,
A FLORIDA CORPORATION
The foregoing amendment to the by-laws of the Corporation is hereby
adopted as of the 29th day of January, 1998:
1. Term of Directors:
Article II, Section 6 is hereby amended by providing as follows:
a. The directors of the Corporation shall be divided into three (3)
classes, the term of office of those of the first class to expire at the annual
meeting next ensuing; the second class 1 year thereafter; and the third class 2
years thereafter; and at each annual election held after such classification
and election, directors shall be chosen or a full term, as the case may be, to
succeed those whose terms expire. Any increase or decrease in the number of
directors shall be so apportioned among the classes to make all classes as
nearly equal in number as possible. Presently, the classes of directors shall
be as follows:
First class: Michael Shelley
Second class: Thomas G. Sherman (1 year after next annual meeting).
Third class: Nelson Locke and Cheri Locke (2 years after next annual
meeting).
This amendment was adopted by a majority of the shareholders of the
Corporation this 29 day of January, 1998.
/s/ Cheryl D. Locke
-------------------------------
Secretary
<PAGE> 17
AMENDMENT TO BY-LAWS OF AMERICAN SENIOR'S FINANCIAL SERVICES, INC.
The following provisions shall constitute an Amendment to the By-Laws
of American Senior's Financial Services, Inc., (hereinafter the Company). In
the event of a conflict between the provisions of this Addendum and the
provisions of the By-Laws as originally adopted, the provisions of this Addendum
shall control.
1. Article I, Section 1, is hereby amended to provide that annual
meetings of the Corporation shall be held on the 15th day of March of each year
or at such other time and place designated by the Board of Directors of the
Corporation.
2. Article I, Section 4, is hereby amended to provide that notices of
special meetings may be delivered personally, by first class mail, E-mail or by
facsimile.
3. Article II, Section 5, is amended to provide that the Corporation
shall have no less than five (5) but no more than nine (9) directors.
4. Article II, Section 11, is hereby amended to provide that a Special
or regular meetings of the Board of Directors will be held at the headquarters
of the Corporation or at such other location as designated by the Chairman of
the Board of Directors.
5. Article II, Section 12, is hereby amended to provide that regular
meeting of the Board of Directors will be held without notice on March 15, of
each year. Written notice of the time and place of special meetings of the Board
of Directors will be given to each director by either personal, delivery,
telegram, cablegram, E-mail or facsimile at least 3 days before the meeting or
by notice mailed to the director at least 5 days before the meeting.
6. Article II, Section 13 is hereby amended as follows:
Any action required to be taken at a meeting of the Board of Directors,
or any action which may be taken at a meeting of the Board of Directors, or a
committee thereof, may be taken without a meeting if a consent in writing,
(either in letter form, E-mail or facsimile), setting forth the action so to be
taken, signed by a majority of the Board of Directors so long as one of the case
may be, is filed in the minutes of the proceedings of the Board or of the
committee.
In all other respects the By-Laws shall remain the same.
Dated this 17th day of December, 1998.
/s/ Cheryl D. Locke
---------------------------------
SECRETARY
<PAGE> 1
Exhibit 2(d)
AMERICA'S SENIOR FINANCIAL SERVICES, INC (AMSE)
INCENTIVE STOCK OPTION PLAN
1. PURPOSE. The purpose of this Incentive Stock Option Plan (the "Plan")
is to further the interests of AMSE, a Florida corporation (the
"Company"), its subsidiaries and its shareholders by providing
incentives in the form of grants of stock options to key employees who
contribute materially to the success and profitability of the Company.
The grants will recognize and reward outstanding individual
performances and contributions and will give such persons a
proprietary interest in the Company, thus enhancing their personal
interest in the Company's continued success and progress. This program
will also assist the Company and its subsidiaries in attracting and
retaining key persons.
2. DEFINITIONS. The following definitions shall apply to this Plan:
a. "BOARD" means the board of directors of the Company.
b. "CHANGE OF CONTROL" occurs when (i) any person, including a
"group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, becomes the beneficial
owner of forty percent or more of the total number of shares
entitled to vote in the election of directors of the Board,
(ii) the Company is merged into any other company or
substantially all of its assets are acquired by any other
company, or (iii) three or more directors nominated by the
Board to serve as a director, each having agreed to serve in
such capacity, fail to be elected in a contested election of
directors.
c. "CODE" means the Internal Revenue Code of 1986, as amended.
d. "COMMITTEE" means the Stock Option Committee consisting
solely of two or more nonemployee directors appointed by the
Board. In the event that the Board does not appoint a Stock
Option Committee, "Committee" means the Board.
e. "COMMON STOCK" means the Common Stock, par value $.001 per
share, of the Company, or such other class of shares or
securities as to which the Plan may be applicable pursuant to
Section 8 herein.
f. "COMPANY" means AMSE.
g. "DATE OF GRANT" means the date on which the Option is
granted.
h. "DISPOSE OF" means pledge, hypothecate, give, assign,
encumber, sell, grant an option with respect to, or otherwise
transfer, to any party whether or not such party is a
shareholder of the Company.
i. "ELIGIBLE PERSON" means any person who performs or has in the
past performed services for the Company or any direct or
indirect partially or wholly owned subsidiary thereof,
whether as a director, officer, employee, consultant or other
independent contractor, and any person who performs services
relating to the Company in his or her capacity as an employee
or independent contractor of a corporation or other entity
that provides services for the Company.
j. "EMPLOYEE" means any person employed on an hourly or salaried
basis by the Company or any parent or Subsidiary of the
Company that now exists or hereafter is organized or acquired
by or acquires the Company.
<PAGE> 2
k. "FAIR MARKET VALUE" means the fair market value of the Common
Stock. If the Common Stock is not publicly traded on the date
as of which fair market value is being determined, the Board
shall determine the fair market value of the Common Stock,
using such factors as the Board considers relevant, such as
the price at which recent sales have been made, the book
value of the Common Stock, and the Company's current and
projected earnings. If the Common Stock is publicly traded on
the date as of which fair market value is being determined,
the fair market value is the mean between the high and low
sales prices of the Common Stock as reported by The NASDAQ
Stock Market on that date or, if the Common Stock is listed
on a stock exchange, the mean between the high and low sales
prices of the Stock on that date, as reported in THE WALL
STREET JOURNAL. If trading in the stock or a price quotation
does not occur on the date as of which fair market value is
being determined, the next preceding date on which the Stock
was traded or a price was quoted will determine the fair
market value.
l. "INCENTIVE STOCK OPTION" means a stock option granted
pursuant to either this Plan or any other plan of the Company
that satisfies the requirements of Section 422 of the Code
and that entitles the Recipient to purchase stock of the
Company or in a corporation that at the time of grant of the
option was a parent or subsidiary of the Company or a
predecessor corporation of any such corporation.
m. "INITIAL PUBLIC OFFERING" means the closing of an
underwritten public offering by the Company pursuant to a
registration statement filed and declared effective under the
Securities Act of 1933, as amended, covering the offer and
sale of the Company's common stock for the account of the
Company.
n. "NONQUALIFIED STOCK OPTION" means a stock option granted
pursuant to the Plan that is not an Incentive Stock Option
and that entitles the Recipient to purchase Stock of the
Company or in a corporation that at the time of grant of the
option was a parent or subsidiary of the Company or a
predecessor corporation of any such corporation.
o. "OPTION" means an Incentive Stock Option or a Nonqualified
Stock Option granted pursuant to the Plan.
p. "OPTION AGREEMENT" means a written agreement, entered into
between the Company and a Recipient that sets out the terms
and restrictions of an Option Award granted to the Recipient.
q. "OPTION SHAREHOLDER" shall mean an Employee who has exercised
his or her Option.
r. "OPTION SHARES" means Shares issued upon exercise of an
Option.
s. "PLAN" means this Incentive Stock Option Plan.
t. "RECIPIENT" means an individual who receives an Option.
u. "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 8 of the Plan.
v. "SUBSIDIARY" means any corporation 50 percent or more of the
voting securities of which are owned directly or indirectly
by the Company at any time during the existence of the Plan.
3. ADMINISTRATION. This Plan will be administered by the Committee. The
Committee has the exclusive power to select the Recipients of Options
pursuant to this Plan, to establish the terms of
2
<PAGE> 3
the Options granted to each Recipient, and to make all other
determinations necessary or advisable under the Plan. The Committee
has the sole and absolute discretion to determine whether the
performance of an Eligible Person warrants an Option under the Plan,
and to determine the size and type of the Option. The Committee has
full and exclusive power to construe and interpret this Plan, to
prescribe, amend, and rescind rules and regulations relating to this
Plan, and to take all actions necessary or advisable for the Plan's
administration. The Committee, in the exercise of its powers, may
correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any Agreement, in the manner and to
the extent it deems necessary or expedient to make the Plan fully
effective. In exercising this power, the Committee may retain counsel
at the expense of the Company. The Committee shall also have the power
to determine the duration and purposes of leaves of absence which may
be granted to a Recipient without constituting a termination of the
Recipient's employment for purposes of the Plan. Any determinations
made by the Committee will be final and blinding on all persons. A
member of the Committee will not be liable for performing any act or
making any determination in good faith.
4. SHARES SUBJECT TO PLAN. Subject to the provisions of Section 8 of the
Plan, the maximum aggregate number of Shares that may be subject to
Options under the Plan shall be 2,500,000. If an Option should expire
or become unexercisable for any reason without having been exercised,
the unpurchased Shares that were subject to such Option shall, unless
the Plan has then terminated, be available for other Options under the
Plan. The incentive stock option plan specifically authorizes 8% of the
total currently authorized shares of AMSE Stock, or 2,000,000 shares.
5. ELIGIBILITY. Any Eligible Person that the Committee in its sole
discretion designates is eligible to receive an Option under the Plan.
The Committee's grant of an Option to a Recipient in any year does not
entitle the Recipient to an Option in any other year. Furthermore, the
Committee may grant different Options to different Recipients and has
full discretion to choose whether to grant options to any Eligible
Person. The Committee may consider such factors as it deems pertinent
in selecting Recipients and in determining the types and sizes of
their Options, including, without limitation, (i) the financial
condition of the Company or its Subsidiaries;(ii) expected profits for
the current or future years;(iii) the contributions of a prospective
Recipient to the profitability and success of the Company or its
Subsidiaries; and (iv) the adequacy of the prospective Recipients
other compensation. Recipients may include persons to whom stock,
stock options, stock appreciation rights, or other benefits previously
were granted under this or another plan of the Company or any
Subsidiary, whether or not the previously granted benefits have been
fully exercised or vested. A Recipient's right, if any, to continue to
serve the Company and its Subsidiaries as an officer, Employee, or
otherwise will not be enlarged or otherwise affected by his
designation as a Recipient under this Plan, and such designation will
not in any way restrict the right of the Company or any Subsidiary, as
the case may be, to terminate at any time the employment or
affiliation of any participant.
6. OPTIONS. Each Option granted to a Recipient under the Plan shall
contain such provisions as the Committee at the Date of Grant shall
deem appropriate. Each Option granted to a Recipient will satisfy the
following requirements:
a. WRITTEN AGREEMENT. Each Option granted to a Recipient will be
evidenced by an Option Agreement. The terms of the Option
Agreement need not be identical for different Recipients. The
Option Agreement shall include a description of the substance
of each of the requirements in this Section 6 with respect to
that particular Option.
b. NUMBER OF SHARES. Each Option Agreement shall specify the
number of shares that may be purchased by exercise of the
Option.
c. EXERCISE PRICE. Except as provide in Section 6(l), the
exercise price of each Share subject to an Incentive Stock
Option shall be equal the exercise price designated by the
Committee on the Date of Grant, but shall not be less than
the fair Market Value of the Share on the Incentive Stock
Option's Date of Grant. The exercise price of each Share
3
<PAGE> 4
subject to a Nonqualified Stock Option shall equal the
exercise price designated by the Committee on the Date of
Grant.
d. DURATION OF OPTION. Except as otherwise provided in Section
6(l), an Incentive Stock Option granted to an Employee shall
expire on the tenth anniversary of its Date of Grant or, at
such earlier date set as is set by the Committee in
establishing the terms of the Incentive Stock Option at
grant. Except as provided in Section 6(l) a Nonqualified
Stock Option granted to an Employee shall expire on the tenth
anniversary of its Date of Grant or, at such earlier or later
date as is set by the Committee in establishing the terms of
the Nonqualified Stock Option at grant. If the Recipient's
employment with the Company terminates before the expiration
date of an Option granted to the Recipient, the Option shall
expire on the earlier of the date stated in this subsection
or the date stated in following subsections of this Section.
Furthermore, expiration of an Option may be accelerated under
subsection (j) below.
e. VESTING OF OPTION. Each Option Agreement shall specify the
vesting schedule applicable to the Option. The Committee, in
its sole and absolute discretion, may accelerate the vesting
of any Option at any time.
f. DEATH. In the case of the death of a Recipient, an Incentive
Stock Option granted to the Recipient shall expire on the
one-year anniversary of the Recipients death, or if earlier,
the date specified in subsection (d) above. During the
one-year period following the Recipient's death, the
Incentive Stock Option may be exercised to the extent it
could have been exercised at the time the Recipient died,
subject to any adjustment under Section 8 herein. In the case
of the death of a Recipient, a Nonqualified Stock Option
granted to the Recipient shall expire on the one-year
anniversary of the Recipient's death, or if earlier, the date
specified in subsection (d) above, unless the Committee sets
an earlier or later expiration date in establishing the terms
of the Nonqualified Stock Option at grant or a later
expiration date subsequent to the Date of Grant but prior to
the one-year anniversary of the Recipient's death. During the
period beginning on the date of the Recipient's death and
ending on the date the Nonqualified Stock Option expires, the
Nonqualified Stock Option may be exercised to the extent that
it could have been exercised at the time the Recipient died,
subject to any adjustment under Section 8 herein.
g. DISABILITY. In the case of the total and permanent disability
of a Recipient and a resulting termination of employment or
affiliation with the Company, an Incentive Stock Option
granted to the Recipient shall expire on the one-year
anniversary of the Recipient's last day of employment, or, if
earlier, the date specified in subsection (d) above. During
the one-year period following the Recipient's termination of
employment or affiliation by reason of disability, the
Incentive Stock Option may be exercised as to the number of
Shares for which it could have been exercised at the time the
Recipient became disabled, subject to any adjustments under
Section 8 herein. In the case of the total and permanent
disability of a Recipient and a resulting termination of
employment or affiliation with the Company, a Nonqualified
Stock Option granted to the Recipient shall expire on the
one-year anniversary of the Recipient's last day of
employment, or, if earlier, the date specified in subsection
(d) above, unless the Committee sets an earlier or a later
expiration date in establishing the terms of the Nonqualified
Stock Option at grant or a later expiration date subsequent
to the Date of Grant but prior to the one-year anniversary of
the Recipient's last day of employment or affiliation with
the Company. During the period beginning on the date of the
Recipient's termination of employment or affiliation by
reason of disability and ending on the date the Nonqualified
Stock Option expires, the Nonqualified Stock Option may be
exercised as to the number of Shares for which it could have
been exercised at the time the Recipient became disabled,
subject to any adjustments under Section 8 herein.
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<PAGE> 5
h. RETIREMENT. If the Recipient's employment with the Company
terminates by reason of normal retirement under the Company's
normal retirement policies, an Incentive Stock Option granted
to the Recipient will expire 90 days after the last day of
employment, or, if earlier, on the date specified in
subsection (d) above. During the 90-day period following the
Recipient's normal retirement, the Incentive Stock Option may
be exercised as to the number of Shares for which it could
have been exercised on the retirement date, subject to any
adjustment under Section 8 herein. If the Recipient's
employment with the Company terminates by reason of normal
retirement under the Company's normal retirement policies, an
Nonqualified Stock Option granted to the Recipient will
expire 90 days after the last day of employment, or, if
earlier, on the date specified in subsection (d) above,
unless the Committee sets an earlier or later expiration date
in establishing the terms of the Nonqualified Stock Option at
grant or a later expiration date subsequent to the Date of
Grant but prior to the end of the 90-day period following the
Recipient's normal retirement. During the period beginning on
the date of the Recipient's normal retirement and ending on
the date the Nonqualified Stock Option expires, the
Nonqualified Stock option may be exercised as to the number
of Shares for which it could have been exercised on the
retirement date, subject to any adjustment under Section 8
herein.
i. TERMINATION OF SERVICE. If the Recipient's employment or
affiliation with the Company for any reason other than death,
disability or retirement (as described above), an Option
granted to the Recipient shall lapse immediately following
the last day that the Recipient is employed by or affiliated
with the Company. However, the Committee may, in its sole
discretion, either at grant of the Option or at the time the
Recipient terminates employment, delay the expiration date of
the Option to a date after termination of employment;
provided, however, that the expiration date of an Incentive
Stock Option may not be delayed more than 90 days following
the termination of the Recipient's employment or affiliation
with the Company. During any such delay of the expiration
date, the Option may be exercised only for the number of
Shares for which it could have been exercised on such
termination date, subject to any adjustments under Section 8
herein. Notwithstanding any provisions set forth herein or in
the Plan, if the Recipient shall (i) commit any act of
malfeasance or wrongdoing affecting the Company or any parent
or subsidiary, (ii) breach any covenant not to compete or
employment agreement with the Company or any parent or
Subsidiary, or (iii) engage in conduct that would warrant the
Recipient's discharge for cause, any unexercised part of the
Option shall lapse immediately upon the earlier of the
occurrence of such event of the last day the Recipient is
employed by the Company.
j. CHANGE OF CONTROL. If a Change of Control occurs, the Board
may vote to immediately terminate all Options outstanding
under the Plan as of the date of the Change of Control or may
vote to accelerate the expiration of the Options to the tenth
day after the effective date of the Change of Control. If the
Board votes to immediately terminate the Options, it shall
make a cash payment to the Recipient equal to the difference
between the Exercise Price and the Fair Market Value of the
Shares that would have been subject to the terminated Option
on the date of the Change of Control.
k. CONDITIONS REQUIRED FOR EXERCISE. Options granted to
recipients under the Plan shall be exercisable only to the
extent they are vested according to the terms of the Option
Agreement. Furthermore, Options granted to Employees under
the Plan shall be exercisable only if the issuance of Stock
pursuant to the exercise would be in compliance with
applicable securities laws, as contemplated by Section 9 of
the Plan. Each Agreement shall specify any additional
conditions required for the exercise of the Option.
l. TEN PERCENT SHAREHOLDERS. An Incentive Stock Option to an
individual who, on the Date of Grant, owns stock possessing
more than 10 percent of the total combined voting power of
all classes of stock of either the Company or any parent or
Subsidiary, shall be granted
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<PAGE> 6
at an exercise price of 110 percent of Fair Market Value on
the Date of Grant and shall be exercisable only during the
five-year period immediately following the Date of Grant. In
calculating stock ownership of any person, the attribution
rules of Code Section 424(d) will apply. Furthermore, in
calculating stock ownership, any stock that the individual
may purchase under outstanding options will not be
considered.
m. MAXIMUM OPTION GRANTS. The aggregate Fair Market Value,
determined on the Date of Grant, of stock in the Company with
respect to which any Incentive Stock Options under the Plan
and all other plans of the Company or its Subsidiaries
(within the meaning of Section 422(b) of the Code) may become
exercisable by any individual for the first time in any
calendar year shall not exceed $100,000.
n. METHOD OF EXERCISE. An Option granted under this Plan shall
be deemed exercised when the person entitled to exercise the
Option (i) delivers written notice to the President of the
Company (or his or her delegate, in his absence) of the
decision to exercise. (ii) Concurrently tenders to the
Company full payment for the shares to be purchased pursuant
to the exercise and (iii) complies with such other reasonable
requirements as the Committee establishes pursuant to Section
9 of the Plan. Payment for Shares with respect to which an
Option is exercised may be made in cash, or by certified
check, or wholly or partially in the form of Common Stock
having a Fair Market Value equal to the exercise price, or by
delivery of a notice instructing the Company to deliver the
Shares being purchased to a broker subject to the broker's
delivery of cash to the Company equal to the exercise price.
No person will have the rights of a shareholder with respect
to Shares subject to an Option granted under this Plan until
a certificate or certificates for the Shares have been
delivered to him. A partial exercise of an Option will not
affect the holder's right to exercise the Option from time to
time in accordance with this Plan as to the remaining Shares
subject to the Option.
o. LOAN FROM COMPANY TO EXERCISE OPTION. The Committee may, in
its discretion, and subject to the requirements of applicable
law, recommend to the Company that it lend the Recipient the
funds needed by the Recipient to exercise an Option. The
Recipient shall make application to the Company for the loan,
completing the forms and providing the information required
by the Company. The loan will be secured by such collateral
as the Company may require, subject to its underwriting
requirements and the requirements of applicable law. The
Recipient will execute a promissory note and any other
documents deemed necessary by the Company.
p. DESIGNATION OF BENEFICIARY. Each Recipient shall designate,
in the Option Agreement he executes, a beneficiary to receive
Options awarded hereunder in the event of his death prior to
full exercise of such Options; provided, that if no such
beneficiary is designated or if the beneficiary does not
survive the Recipient, the estate of such Recipient shall be
deemed to be his beneficiary. Recipients may, by written
notice to the Committee, change the beneficiary designated in
any outstanding Option Agreements.
q. NONTRANSFERABILITY OF OPTION. An Option granted under the
Plan is not transferable except by will or the laws of
descent and distribution. During the lifetime of the
Recipient, all rights of the Option are exercisable only by
the Recipient.
r. TAXES; COMPLIANCE WITH LAW; APPROVAL OF REGULATORY BODIES;
LEGENDS. The Company shall have the right to withhold from
payments otherwise due and owing to the Recipient (or his
beneficiary) or to require the Recipient (or his beneficiary)
to remit to the Company in cash upon demand an amount
sufficient to satisfy any federal (including FICA and FUTA
amounts), state, and/or local withholding tax requirements at
the time the Recipient (or his beneficiary) recognizes income
for federal, state, and/or local tax purposes with respect to
any Option under the Plan.
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<PAGE> 7
Options can be granted, and Shares can be delivered under
this Plan, only in compliance with all applicable federal and state
laws and regulations and the rules of all stock exchanges on which the
Company's stock is listed at any time. An Option is exercisable only
if either (a) a registration statement pertaining to the Shares to be
issued upon exercise of the Option has been filed with and declared
effective by the Securities and Exchange Commission and remains
effective on the date of exercise, or (b) an exemption from the
registration requirements of applicable securities law is available.
The Plan does not require the Company, however, to file such a
registration statement or to assure the availability of such
exemptions. Any certificate issued to evidence Shares issued under the
Plan may bear such legends and statements, and shall be subject to
such transfer restrictions, as the Committee deems advisable to assure
compliance with federal and state laws and regulations and with the
requirements of this Section. No Option may be exercised, and Shares
may not be issued under the Plan, until the Company has obtained the
consent or approval of every regulatory body, federal or state, having
jurisdiction over such matters as the Committee deems advisable.
Each person who acquires the right to exercise an Option may be
required by the Committee to furnish reasonable evidence of ownership
of the Option as a condition to his exercise of the Option. In
addition, the Committee may require such consents and releases of
taxing authorities as the Committee deems advisable.
With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934 ("1934 Act"), transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 under
the 1934 Act as such Rule may be amended from time to time, or its
successor under the 1934 Act. To the extent any provision of the Plan
or action by the Committee or the Company fails to so comply, it will
be deemed null and void, to the extent permitted by law and deemed
advisable by the Plan administrators.
8. ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or
exchange of shares, stock split, stock dividend, rights offering, or
other expansion or contraction of the Common Stock of the Company
occurs, the number and class of Shares for which Options are
authorized to be granted under this Plan. The number and class of
Shares then subject to Options previously granted to Employees under
this Plan, and the price per Share payable upon exercise of each
Option outstanding under this Plan shall be equitably adjusted by the
Committee to reflect such changes. To the extent deemed equitable and
appropriate by the Board, subject to any required action by
shareholders, in any merger, consolidation, reorganization,
liquidation or dissolution, any option granted under the Plan shall
pertain to the securities and other property to which a holder of the
number of Shares of stock covered by the Option would have been
entitled to receive in connection with such event.
9. LIABILITY OF THE COMPANY. The Company, its parent and any Subsidiary
that is in existence or hereafter comes into existence shall not be
liable to any person for any tax consequences incurred by a Recipient
or other person with respect to an Option.
10. COMPANY'S RIGHT OF FIRST REFUSAL REGARDING OPTION SHARES. An Option
Shareholder who desires to Dispose Of any Option Shares shall first
offer the Option Shares to the Company. The Option Shareholder shall
provide notice signed by the Option Shareholder to the Company
indicating the Option Shareholder's desire to Dispose of Option
Shares. The Company shall have the irrevocable and exclusive first
option, but not the obligation, to purchase all or a portion of the
Option Shares, provided the Company provides notice of its election to
purchase the Option Shares within sixty days after the Company
receives the Option Shareholder's notice. The purchase price to be
paid by the Company for the Option Shares being offered by the Option
Shareholder shall be the Fair Market Value of the Option Shares on the
date of the Option Shareholder's notice, and the payment shall be made
in full at closing. If an Initial Public Offering occurs, the
provisions of this Section 10 shall cease to be effective.
7
<PAGE> 8
11. COMPANY RIGHT TO REPURCHASE OPTION SHARES. The Company shall have the
right to repurchase any Option Shares purchased by a Recipient
following such Recipient's termination of service or affiliation with
the Company for any reason. The price for repurchasing the Option
Shares shall be equal to the exercise price specified in the Option
with respect to such Option Shares. Should the Company fail to exercise
such repurchase right within sixty days following the date of such
Recipient's termination of service or affiliation, the Company shall be
deemed to have waived such right. If an initial Public Offering occurs,
the provisions of this Section 9 shall cease to be effective.
12. AMENDMENT AND TERMINATION OF PLAN. The Board may alter, amend, or
terminate the Plan from time to time without approval of the
shareholders of the Company. The Board may, however, condition any
amendment on the approval of the shareholders of the Company if such
approval is necessary or advisable with respect to tax, securities or
other applicable laws to which the Company, the Plan, Recipients or
Eligible Persons. Are subject. Any amendment, whether with or without
the approval of shareholders of the Company, that alters the terms or
provisions of an Option granted before the amendment (unless the
alteration is expressly permitted under this Plan) will be effective
only with the consent of the Recipient to whom the Option was granted
or the holder currently entitled to exercise it.
13. EXPENSES OF PLAN. The Company shall bear the expenses of administering
the Plan.
14. DURATION OF PLAN. Options may be granted under the Plan only during the
10 years immediately following the effective date of the Plan.
15. APPLICABLE LAW. The validity, interpretation, and enforcement of the
Plan are governed in all respects by the laws of Florida and the United
States of America.
16. EFFECTIVE DATE. The effective date of the Plan shall be the earlier of
(i) the date on which the Board adopts the Plan or (ii) the date on
which the Shareholders approve the Plan.
ADOPTED BY THE BOARD OF DIRECTORS ON
_________________________, 1999
APPROVED BY THE SHAREHOLDERS ON
_________________________, 1999
8
<PAGE> 1
Exhibit 2(e)
AMERICA'S SENIOR FINANCIAL SERVICES, INC (AMSE)
NON QUALIFIED STOCK OPTION PLAN
1. PURPOSE. The purpose of this Stock Incentive Plan (the "Plan") is to
further the interests of AMSE, its Subsidiaries and its shareholders
by providing incentives in the form of grants of stock options to key
employees and other persons who contribute materially to the success
and profitability of the Company. The Plan will also assist the
Company in attracting and retaining key persons.
2. DEFINITIONS. The following definitions will apply to the Plan:
a. "AWARD" means a grant under the Plan of an Option.
b. "BOARD" means the board of directors of AMSE.
c. "CAUSE" means (i) any intentional misapplication by the
Recipient of the Company's funds, intended to result directly
or indirectly in significant gain or personal enrichment at
the expense of the Company, or any other act of dishonesty
committed by the Recipient in connection with the Company's
business; (ii) the Recipient's conviction of a crime
involving moral turpitude; (iii) the Recipient's
non-performance or non-observance in any material respect of
any requirement with respect to the Recipient's employment;
or (iv) any other action by the Recipient involving willful
and deliberate malfeasance or negligence in the performance
of the Recipient's duties; provided that "Cause" may be
otherwise defined for purposes of any Award in the related
Option Agreement.
d. "CHANGE OF CONTROL" occurs when (i) any person, including a
"group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, becomes the beneficial
owner of forty percent (40%) or more of the total number of
shares entitled to vote in the election of directors of the
Board, (ii) the Company is merged into any other company or
substantially all of its assets are acquired by any other
company, or (iii) three or more directors nominated by the
Board to serve as a director, each having agreed to serve in
such capacity, fail to be elected in a contested election of
directors.
e. "COMMITTEE" means the committee appointed by the Board
consisting of two or more directors who are "outside
directors" as such term is defined in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
"nonemployee directors" as such term is defined in Rule 16b-3
under the Securities Exchange Act of 1934 ("1934 Act"). In
the event that the Board does not appoint a committee,
"Committee" means the Board.
f. "COMPANY" means AMSE and its Subsidiaries.
g. "DATE OF GRANT" means the date on which the option is
granted.
h. "DISABILITY" means "disability" as defined in the Company's
long term disability plan or policy
i. "ELIGIBLE PERSON" means any person who performs or has in the
past performed services for the Company, whether as a
director, officer, employee, consultant or other independent
contractor, and any person who performs services relating to
the Company as an employee or independent of a corporation or
other entity that provides services for the Company.
j. "FAIR MARKET VALUE" means the fair market value of the Stock.
If the Stock is not publicly traded on the date as of which
fair market value is being determined, the Board shall
<PAGE> 2
determine the fair market value of the Stock, using such
factors as the Board considers relevant, such as the price at
which recent sales have been made, the book value of the
Stock, and the Company's current and projected earnings. If
the Stock is publicly traded on the date as of which fair
market value is being determined, the fair market value is
the mean between the high and low sales prices of the Stock
as reported by The NASDAQ Stock Market on that date or, if
the Stock is listed on a stock exchange, the average between
the high and low sales prices of the Stock on that date, as
reported in THE WALL STREET JOURNAL. If trading in the Stock
or a price quotation does not occur on the date as of which
fair market value is being determined, the next preceding
date on which the Stock was traded or a price was quoted will
determine the fair market value.
k "INITIAL PUBLIC OFFERING" means the closing of an
underwritten public offering by the Company pursuant to a
registration statement filed and declared effective under the
Securities Act of 1933, as amended, covering the offer and
sale of the Company's Stock for the account of the Company.
l. "OPTION" means a nonqualified stock option granted pursuant
to the Plan that entitles the Recipient to purchase Stock.
Options granted under this Plan are not intended to comply
with the requirements of Section 422 of the Code.
m. "OPTION AGREEMENT" means a written agreement, between the
Company and a Recipient that sets out the terms and
restrictions of an Award.
n. "OPTION SHAREHOLDER" means an Eligible Person who has
acquired Stock upon exercise of an Option.
o. "OPTION STOCK" means Stock that a Recipient receives upon
exercise of an Option.
p. "PLAN" means this Non Qualified Stock Option Plan, as amended
from time to time.
q. "RECIPIENT" means an individual who receives an Award.
r. "STOCK" means the common stock, par value ________ per share
of AMSE, or such other class of shares or securities as to
which the Plan may be applicable pursuant to Section 8 of the
Plan.
s. "SUBSIDIARY" means any entity fifty percent (50%) or more of
the voting securities of which are owned directly or
indirectly by the Company at any time during the existence of
the Plan.
3. ADMINISTRATION. The Committee will administer the Plan. The Committee
has the exclusive power to select the Recipients, to establish the
terms of the Awards, and to make all other determinations necessary or
advisable under the Plan. The Committee has the sole discretion to
determine whether the performance of an Eligible Person warrants an
Award under the Plan, and to determine the size and type of the Award.
The Committee has full and exclusive power to construe and interpret
the Plan, to prescribe, amend, and rescind rules and regulations
relating to the Plan, and to take all actions necessary or advisable
for the Plan's administration. The Committee, in the exercise of its
powers, may correct any defect or supply any omission, or reconcile
any inconsistency in the Plan, or in any Agreement, in the manner and
to the extent it deems necessary or expedient to make the Plan fully
effective. Any of the Committee's determinations will be final and
blinding on all persons. A member of the Committee will not be liable
for performing any act or making any determination in good faith.
4. SHARES SUBJECT TO NON QUALIFIED STOCK OPTION PLAN. The total number of
shares of Stock that may be purchased pursuant to Options under the
Plan shall not exceed two (2%) percent of the total
2
<PAGE> 3
authorized shares of Stock. Stock subject to Options that terminate or
expire prior to exercise shall be available for future Awards. Stock
issued pursuant to the Plan may be either unissued shares of Stock or
reacquired shares of Stock held in treasury. The nonqualified stock
option plan specifically authorizes 2% of the currently authorized
shares of AMSE Stock, or 500,000 shares.
5. ELIGIBILITY. Any Eligible Person that the Committee in its sole
discretion designates is eligible to receive an Award under the Plan.
The Committee's grant of an Award to a Recipient in any year does not
entitle the Recipient to an Award in any other year. Furthermore, the
Committee may grant different Awards to different Recipients. The
Committee may consider such factors as it deems pertinent in selecting
Recipients and in determining the types and sizes of their Awards. An
Award will not enlarge or otherwise affect a Recipient's right, if
any, to continue to serve the Company and its Subsidiaries in any
capacity, and will not restrict the right of the Company or a
Subsidiary to terminate at any time the Recipient's employment.
6. OPTIONS. The Committee may grant Options to purchase Stock to
Recipients in such amounts as the Committee determines in its sole
discretion. Each Option will satisfy the following requirements:
a. WRITTEN AGREEMENT. Each Option granted to a Recipient will be
evidenced by an Option Agreement. The terms of the Option
Agreement need not be identical for different Recipients or
for different Awards. The Option Agreement will contain such
provisions as the Committee deems appropriate.
b. NUMBER OF SHARES. Each Option Agreement will specify the
number of shares of stock that the Recipient may purchase
upon exercise of the Option.
c. EXERCISE PRICE. Each Option Agreement will specify the
exercise price of each Option. The exercise price of each
Option will be established by the Committee.
d. DURATION OF OPTION. Except as otherwise provided in this
Section 6, an Option will expire on the tenth anniversary of
its Date of Grant or, at such earlier or later date set by
the Committee on the Date of Grant.
e. VESTING OF OPTION. Each Option Agreement will specify the
vesting schedule applicable to the Option. The Committee, in
its sole discretion, may accelerate the vesting of any Option
at any time.
f. DEATH. If a Recipient dies, an Option granted to the
Recipient will expire on the one-year anniversary of the
Recipients death, or if earlier, the date specified in the
Option Agreement or pursuant to subsection 6.d. of the Plan.
The Option will be exercisable only to the extent that it is
exercisable on the date the Recipient's employment
terminates.
g. DISABILITY. If the Recipient terminates employment with the
Company because of his or her Disability, an Option granted
to the Recipient will expire on the one-year anniversary of
the Recipient's last day of employment, or, if earlier, the
date specified in the Option Agreement or pursuant to
subsection 6.d. of the Plan. The Option will be exercisable
only to the extent that it is exercisable on the date the
Recipient's employment terminates.
h. TERMINATION OF SERVICE. If the Recipient's employment with
the Company terminates for any reason other than death,
disability or cause, an Option granted to the Recipient will
expire 30 days following the last day of the Recipient's
employment with the Company, or, if earlier, the date
specified in the Option Agreement or pursuant to subsection
6.d of the Plan. The Option will be exercisable only to the
extent it is exercisable on the date the Recipient's
employment terminates, subject to any adjustment under
Section 8 of the Plan.
3
<PAGE> 4
i. CAUSE. Notwithstanding any provisions set forth in the Plan,
if the Company terminates the Recipient's employment for
Cause, any unexercised portion(s) of the Recipient's
Option(s) will expire immediately upon the earlier of the
occurrence of the event that constitutes Cause or the last
day the Recipient is employed by the Company.
j. CONDITIONS REQUIRED FOR EXERCISE. An Option is exercisable
only to the extent it is vested according to the terms of the
Option Agreement. Furthermore, an Option is exercisable only
if the issuance of Stock upon exercise would comply with
applicable securities laws. Each Agreement will specify any
additional conditions required for the exercise of the
Option.
k. METHOD OF EXERCISE. An Option will be deemed exercised when
the person entitled to exercise the Option (i) delivers
written notice to the President of the Company (or his or her
delegate, in his or her absence) of the decision to exercise.
(ii) Concurrently tenders to the Company full payment for the
shares of Stock to be purchased pursuant to the exercise and
(iii) complies with such other reasonable requirements as the
Committee establishes pursuant to Section 7 of the Plan.
Payment for Stock with respect to which an Option is
exercised may be made (i) in cash, (ii) by certified check,
(iii) if permitted by the Committee in the case of such
exercise, in the form of Stock having a Fair Market Value
equal to the exercise price, or (iv) by delivery of a notice
instructing the Company to deliver the Stock to a broker
subject to the broker's delivery of cash to the Company equal
to the exercise price. No person will have the rights of a
shareholder with respect to Stock subject to an Option
granted under the Plan until a certificate or certificates
for such shares have been delivered. A partial exercise of an
Option will not affect the holder's right to exercise the
remainder of the Option from time to time in accordance with
the Plan.
l. LOAN FROM COMPANY TO EXERCISE OPTION. The Committee may, in
its discretion, and subject to the requirements of applicable
law, recommend to the Company that it lend the Recipient the
funds needed by the Recipient to exercise an Option. The
Recipient will apply to the Company for the loan, completing
the forms and providing the information required by the
Company. The loan will be secured by such collateral as the
Company may require, subject to its underwriting requirements
and the requirements of applicable law. The Recipient will
execute a promissory note and any other documents deemed
necessary by the Company.
m. NONTRANSFERABILITY OF OPTION. An Option granted under the
Plan is not transferable except by will or the laws of
descent and distribution. During the lifetime of the
Recipient, all rights of the Option are exercisable only by
the Recipient.
n. CHANGE OF CONTROL. Notwithstanding anything contained herein
to the contrary, unless otherwise provided by the Committee
in an Option Agreement, all conditions and restrictions to an
Award, including vesting, limitations on exercisability,
risks of forfeiture, deferral periods and conditions and
restrictions requiring the continued performance of services
or the achievement of performance objectives with respect to
the exercisability or settlement of such Award, shall
immediately lapse upon a Change of Control.
7. TAXES; COMPLIANCE WITH LAW; APPROVAL OF REGULATORY BODIES; LEGENDS.
The Company will have the right to withhold from payments otherwise
due and owing to the Recipient or his or her beneficiary or to require
the recipient or his or her beneficiary to remit to the Company in
cash upon demand an amount sufficient to satisfy any federal
(including FICA and FUTA amounts), state, and/or local withholding tax
requirements at the time the Recipient or his or her beneficiary
recognizes income for federal, state, and/or local tax purposes with
respect to any Award under the Plan.
4
<PAGE> 5
The Committee may grant Awards and the Company may deliver Stock under
the Plan only in compliance with all applicable federal and state laws
and regulations and the rules of all stock exchanges on which the
Company's stock is listed at any time. An Option is exercisable only
if (i) a registration statement pertaining to the Stock to be issued
upon exercise of the Option has been filed with and declared effective
by the Securities and Exchange Commission and remains effective on the
date of exercise, or (ii) an exemption from the registration
requirements of applicable securities law is available. The Plan does
not require the Company, however, to file such a registration
statement or to assure the availability of such exemptions. Any
certificate issued to evidence Stock issued under the Plan may hear
such legends and statements, and will be subject to such transfer
restrictions, as the Committee deems advisable to assure compliance
with federal and state laws and regulations and with the requirements
of this Plan. No Option may be exercised, and Stock may not be issued
under the Plan, until the Company has obtained the consent or approval
of every regulatory body, federal or state, having jurisdiction over
such matters as the Committee deems advisable.
Each person who acquires the right to exercise an Option by transfer,
bequest or inheritance may be required by the Committee to furnish
reasonable evidence of ownership of the Option as a condition to his
or her exercise of the Option. In addition, the Committee may require
such consents and releases of taxing authorities, as the Committee
deems advisable. With respect to persons subject to Section 16 of the
1934 Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 under the 1934 Act as such Rule
may be amended from time to time, or its successor under the 1934 Act.
To the extent any provision of the Plan or action by the Committee or
the Company fails to so comply, it will be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee.
8. ADJUSTMENT UPON CHANGE OF STOCK. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or
exchange of shares, stock split, stock dividend, rights offering, or
other expansion or contraction of the Stock occurs, the Committee will
equitably adjust the number and class of shares for which Awards are
authorized to be granted to Eligible Employee under the Plan, and the
price per Share payable upon exercise of each Award outstanding under
the Plan.
9. COMPANY RIGHT TO REPURCHASE OPTION STOCK. The Company shall have the
right to repurchase any Option Stock purchased by a Recipient
following such Recipient's termination of service or affiliation with
the Company for any reason. The price for repurchasing the Option
Stock shall be equal to the exercise price specified in the Option
with respect to such Option Stock. Should the Company fail to exercise
such repurchase right within sixty days following the date of such
Recipient's termination of service or affiliation, the Company shall
be deemed to have waived such right. If an initial Public Offering
occurs, the provisions of this Section 9 shall cease to be effective.
10. COMPANY'S RIGHT OF FIRST REFUSAL REGARDING OPTION STOCK. An Option
Shareholder who desires to Dispose Of any Option Stock shall first
offer the Option Stock to the Company. The Option Shareholder shall
provide notice signed by the Option Shareholder to the Company
indicating the Option Shareholder's desire to Dispose of Option Stock.
The Company shall have the irrevocable and exclusive first option, but
not the obligation, to purchase all or a portion of the Option Stock,
provided the Company provides notice of its election to purchase the
Option Stock within sixty days after the Company receives the Option
Shareholder's notice. The purchase price to be paid by the Company for
the Option Stock being offered by the Option Shareholder shall be the
Fair Market Value of the Option Stock on the date of the Option
Shareholder's notice, and the payment shall be made in full at
closing. If an Initial Public Offering occurs, the provisions of this
Section 10 shall cease to be effective.
11. LIABILITY OF THE COMPANY. Neither the Company, its parent nor any
Subsidiary that is in existence or hereafter comes into existence will
be liable to any person for any tax consequences incurred by a
Recipient or other person with respect to an Award.
5
<PAGE> 6
12. AMENDMENT AND TERMINATION OF PLAN. The Board may alter, amend, or
terminate the Plan from time to time without approval of the
shareholders of the Company. The Board may, however, condition any
amendment on the approval of the shareholders of the Company if such
approval is necessary or advisable with respect to tax, securities or
other laws applicable to the Company, the Plan, Recipients or Eligible
Persons. Any amendment, whether with or without the approval of
shareholders of the Company, that alters the terms or provisions of an
Award granted before the amendment (unless the alteration is expressly
permitted under the Plan) will be effective only with the consent of
the Recipient of the Award or the holder currently entitled to
exercise the Award. Notwithstanding this Section 12, the Board may
establish a date or event upon which the Plan and all unexercised
Options will terminate; provided, however that the Board must provide
to the Recipients of the unexercised Options or the holders currently
entitled to exercise the Options written notice of the termination of
the Plan and all outstanding Options no less than 30 days prior to the
date or event upon which the Plan and all unexercised Options will
terminate.
13. DURATION OF PLAN. Awards may be granted under the Plan only during the
10 years immediately following the original effective date of the
Plan.
14. NOTICES. All notices to the Company will be in writing and will be
delivered to the President of the Company. All notices to a Recipient
will be delivered personally or mailed to the Recipient at his or her
address appearing in the Company's personnel records.
15. APPLICABLE LAW. The validity, interpretation, and enforcement of the
Plan are governed in all respects by the laws of Florida and the
United States of America.
16. EFFECTIVE DATE. The effective date of the Plan will be the earlier of
(i) the date on which the Board adopts the Plan or (ii) the date on
which the Shareholders approve the Plan.
ADOPTED BY THE BOARD OF DIRECTORS ON
_________________________, 1999
APPROVED BY THE SHAREHOLDERS ON
_________________________, 1999
6
<PAGE> 1
Exhibit 6(a)
America's Senior Financial Services, Inc.
VALUE FINANCIAL - SENIOR FUNDING
15536 NW 77th Court - Miami Lakes, FL 33016
(305)828-2599
EMPLOYMENT AGREEMENT
This Employment Agreement ("this Agreement") is made effective as of January 2,
1998, by and between America's Senior Financial Services, Inc., ("the
Employer"), of 15536 NW 77th Court, Miami Lakes, FL 33016, and Nelson A. Locke,
("the Employee"), of 15921 SW 14 Street, Pembroke Pines, FL 33027.
A. Employer is engaged in the business of Mortgage Lending (Reverse and
Forward Mortgages)
B. Employer desires to have the services of Employee.
C. Employee is willing to be employed by Employer.
Therefore, the parties agree as follows:
1. EMPLOYMENT. Employee shall provide to Employer the following services: to act
as President and Chairman of the Board of Directors in the full time daily
management of all aspects of the continuing operation of America's Senior
Financial Services; with his duties being soley defined by himself in his
capacity as the majority shareholder of the firm.
2. BEST EFFORTS OF EMPLOYEE. Employee agrees to perform faithfully,
industriously, and to the best of Employee's ability, experience, and talents,
all of the duties that may be required by the express and implicit terms of this
Agreement, to the reasonable satisfaction of Employer. Such duties shall be
provided at Miami Lakes, FL and at such other place(s) as the needs, business,
or opportunities of the Employer may require from time to time.
3. COMPENSATION OF EMPLOYEE. As compensation for the services provided by
Employee under this Agreement, Employer will pay Employee an annual salary of
$70,000.00 payable in bi-weekly installments on Tuesday of every other week.
Upon termination of this Agreement, payments under this paragraph shall cease;
provided, however, that the Employee shall be entitled to payments for periods
or partial periods that occurred prior to the date of termination and for which
the Employee has not yet been paid.
4. COMMISSION PAYMENTS. In addition to the payments under the preceding
paragraph, Employer will make commission payments to the Employee based on
100.00% of any amount that the president decides to pay himself as additional
compensation for his efforts regarding any function of the management of
America's Senior Financial Services, Inc. This commission will be paid
bi-weekly, no later than 5 days after the payroll period that ended on the
preceding Saturday.
5. REIMBURSEMENT FOR EXPENSES IN ACCORDANCE WITH EMPLOYER POLICY. The Employer
will reimburse Employee for "out-of-pocket" expenses in accordance with Employer
policies in effect from time to time.
6. VACATION. Employee is entitled to a minimum of four weeks paid vacation per
calendar year, time to accrue for unused vacation, with additional vacation time
to be allowed as needed at the President's sole discretion.
7. SICK LEAVE/PERSONAL BUSINESS. Employee shall be entitled to as much "sick" or
"disability" time as is necessary due to employee's illness or injury.
<PAGE> 2
All requests for sick days and personal days off shall be made by Employee in
accordance with Employer policies in effect from time to time.
8. HOLIDAYS. Employee shall be entitled to the following holidays with pay
during each calendar year:
- New Year's Day
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Christmas Day
9. OTHER BENEFITS. Certain health, life, and disability insurance; autos to be
provided at company expense to the employee and his spouse at no cost to them;
certain dividends and a special performance bonus (of up to $50,000) to be paid
at the sole discretion of the President; and other benefits including the
use of corporate credit cards, as may arise from time to time at the sole
discretion of the company president. RE: Stock Options - In any calendar year
where the company's common stock "per share price" gains a minimum of 20%, the
employee shall be eligible for stock options in an amount equal to 5% of his
total common stock holdings at the end of the calendar year. Such options may be
exersized at a cost of $1 per share, and may be paid for via interest free
promissory note to the company. Such stock, when issued, shall be subject to all
the required restrictions of rule 144 of the SEC.
10. TERM/TERMINATION. Employee's employment under this Agreement shall be for
an unspecified term.
11. NOTICES. All notices required or permitted under this Agreement shall be in
writing and shall be deemed delivered when delivered in person or deposited in
the United States mail, postage paid, addressed as follows:
Employer:
America's Senior Financial Services, Inc.
Nelson A. Locke
President
15536 NW 77th Court
Miami Lakes, FL 33016
Employee:
Nelson A. Locke
15921 SW 14 Street
Pembroke Pines, FL 33027
Such addresses may be changed from time to time by either party by providing
written notice in the manner set forth above.
12. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This agreement supersedes any prior written
-2-
<PAGE> 3
or oral agreements between the parties.
13. AMENDMENT. This Agreement may be modified or amended, if the amendment is
made in writing and is signed by both parties.
14. SEVERABILITY. If any provisions of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
15. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or limitation of
that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
16. APPLICABLE LAW. This Agreement shall be governed by the laws of the State of
Florida.
Employer:
America's Senior Financial Services, Inc.
By: /s/ Nelson A. Locke
------------------------------------------
America's Senior Financial Services, Inc.
Nelson A. Locke, President
Employee:
By: /s/ Nelson A. Locke
------------------------------------------
Nelson A. Locke
-3-
<PAGE> 1
Exhibit 6(b)
America's Senior Financial Services, Inc.
VALUE FINANCIAL - SENIOR FUNDING
15536 NW 77th Court - Miami Lakes, FL 33016
(305) 828-2599
EMPLOYMENT AGREEMENT
This Employment Agreement ("this Agreement") is made effective as of January 2,
1998, by and between America's Senior Financial Services, Inc., ("the
Employer"), of 15536 NW 77th Court, Miami Lakes, FL 33016, and Cheryl D. Locke,
("the Employee"), of 15921 SW 14 Street, Pembroke Pines, FL 33027.
A. Employer is engaged in the business of Mortgage Lending (Reverse and
Forward Mortgages)
B. Employer desires to have the services of Employee.
C. Employee is willing to be employed by Employer.
Therefore, the parties agree as follows:
1. EMPLOYMENT. Employee shall provide to Employer the following services: to act
as Executive Vice President and Director/Secretary in the full time daily
management of all aspects of the continuing operation of America's Senior
Financial Services; with her duties being soley defined by the company
President.
2. BEST EFFORTS OF EMPLOYEE. Employee agrees to perform faithfully,
industriously, and to the best of Employee's ability, experience, and talents,
all of the duties that may be required by the express and implicit terms of this
Agreement, to the reasonable satisfaction of Employer. Such duties shall be
provided at Miami Lakes, FL and at such other place(s) as the needs, business,
or opportunities of the Employer may require from time to time.
3. COMPENSATION OF EMPLOYEE. As compensation for the services provided by
Employee under this Agreement, Employer will pay Employee an annual salary of
$50,000.00 payable in bi-weekly installments on Wednesday of every other week.
Upon termination of this Agreement, payments under this paragraph shall cease;
provided, however, that the Employee shall be entitled to payments for periods
or partial periods that occurred prior to the date of termination and for which
the Employee has not yet been paid.
4. COMMISSION PAYMENTS. In addition to the payments under the preceding
paragraph, Employer will make commission payments to the Employee based on
100.00% of any loan originations where the EVP acts as submitting loan officer.
This commission will be paid bi-weekly, no later than 5 days after the payroll
period that ended on the preceding Saturday.
5. REIMBURSEMENT FOR EXPENSES IN ACCORDANCE WITH EMPLOYER POLICY. The Employer
will reimburse Employee for "out-of-pocket" expenses in accordance with Employer
policies in effect from time to time.
6. VACATION. Employee is entitled to a minimum of four weeks paid vacation per
calendar year, time to accrue for unused vacation, with additional vacation time
to be allowed as needed at the President's sole discretion.
7. SICK LEAVE/PERSONAL BUSINESS. Employee shall be entitled to as much "sick" or
"disability" time as is necessary due to employee's illness or injury.
All requests for sick days and personal days off shall be made by Employee in
accordance with Employer policies in effect from time to time.
<PAGE> 2
8. HOLIDAYS. Employee shall be entitled to the following holidays with pay
during each calendar year:
- New Year's Day
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Christmas Day
9. OTHER BENEFITS. Certain health, life, and disability insurance; auto to be
provided at company expense to the employee, at no cost to her; certain
dividends and a special performance bonus (of up to $25,000) to be paid at the
sole discretion of the president; and other benefits including the use of
corporate credit cards, as may arise from time to time at the sole discretion of
the company President. RE: Stock Options - In any calendar year where the
company's loan originations increase by a minimum of 20%, the employee shall be
eligible for stock options in an amount equal to 5% of her total common stock
holdings at the end of the calendar year. Such options may be exersized at a
cost of $1 per share, and may be paid for via interest free promissory note to
the company. Such stock, when issued, shall be subject to all the required
restrictions of rule 144 of the SEC.
10. TERM/TERMINATION. Employee's employment under this Agreement shall be for an
unspecified term.
11. NOTICES. All notices required or permitted under this Agreement shall be in
writing and shall be deemed delivered when delivered in person or deposited in
the United States mail, postage paid, addressed as follows:
Employer:
America's Senior Financial Services, Inc.
Nelson A. Locke
President
15536 NW 77th Court
Miami Lakes, FL 33016
Employee:
Cheryl D. Locke
15921 SW 14 Street
Pembroke Pines, FL 33027
Such addresses may be changed from time to time by either party by providing
written notice in the manner set forth above.
12. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.
13. AMENDMENT. This Agreement may be modified or amended, if the amendment is
made in writing and is signed by both parties.
14. SEVERABILITY. If any provisions of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
-2-
<PAGE> 3
15. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or limitation of
that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
16. APPLICABLE LAW. This Agreement shall be governed by the laws of the State of
Florida.
Employer:
America's Senior Financial Services, Inc.
By: /s/ Nelson A. Locke
-----------------------------------------
America's Senior Financial Services, Inc.
Nelson A. Locke, President
Employee:
By: /s/ Cheryl D. Locke
-----------------------------------------
Cheryl D. Locke
-3-
<PAGE> 1
Exhibit 6(c)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as of this 31 day
of July, 1998, between Dow GuaranteeCorp. (the "Company"), and Charles M. Kluck
(the "Executive").
WHEREAS, the Company desires to employ the Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Company and
the Executive agree as follows:
1. TERM OF EMPLOYMENT.
(a) TERM. The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, for a period
commencing on the date of this Agreement and ending five years thereafter
(the "Term").
(b) CONTINUING EFFECT. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections
6 and 7 shall remain in full force and effect and the provisions of
Section 7 shall be binding upon the legal representatives, successors and
assigns of the Executive.
2. DUTIES.
(a) GENERAL DUTIES. The Executive shall serve as the Company's
President and Chairman of the Board of Directors (the "Board") and shall
be responsible for and have such duties and responsibilities that are
customary for executives who act in such capacity for similar size
corporations. The Executive shall report directly to the Company's Board.
The Executive shall also perform such services for such subsidiaries of
the Company as may be necessary. The Executive shall use his best efforts
to perform his duties and discharge his responsibilities pursuant to this
Agreement competently, carefully and faithfully.
(b) DEVOTION OF TIME. The Executive shall devote all of his time,
attention and energies during normal business hours (exclusive of periods
of sickness and disability and of such normal holiday and vacation periods
as have been established by the Company) to the affairs of the Company.
The executive shall not enter the employ of or serve as a consultant to,
or
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<PAGE> 2
in any way perform any services with or without compensation to, any other
persons, business or organization without the prior consent of the Board
of the Company; provided, that the Executive shall be permitted to devote
a limited amount of his time, without compensation, to professional
charitable or similar organizations.
(c) ADHERENCE TO INSIDE INFORMATION POLICIES. The Executive
acknowledges that America's Senior Financial Services, Inc. ("AMSE"), the
sole shareholder of the Company, is publicly-held and, as a result, has
implemented inside information policies designed to preclude its
employees and those of its subsidiaries from violating the federal
securities laws by trading on material, non-public information or passing
such information on to others in breach of any duty owed to AMSE or its
subsidiaries including the Company. The Executive shall-promptly execute
any agreements and amendments and supplements thereto generally
distributed by AMSE from time to time to its employees requiring such
employees to abide by its inside information policies.
3. COMPENSATION, EXPENSES AND OFFICE.
(a) SALARY. For the services of the Executive to be rendered under
this Agreement, the Company shall pay the Executive an annual salary of
$110,000 during the Term. The Company shall pay the Executive his annual
compensation in equal installments no less frequently than monthly in
accordance with the normal payroll practices of the Company or of the
Company's sole shareholder, AMSE.
(b) EXPENSES. In addition to any compensation received pursuant to
Section 3 (a) , the Company shall reimburse or advance funds to the
Executive for all reasonable travel and expenses incurred in connection
with the performance of his duties under this Agreement, provided that the
Executive properly accounts for such expenses to the Company in accordance
with AMSE's practices. Such reimbursement or advances shall be made in
accordance with policies and procedures of AMSE in effect from time to
time relating to reimbursement of or advances to executive officers.
4. BENEFITS.
(a) VACATION. For each 12-month period during the Term, the
Executive shall be entitled to four weeks of vacation without loss of
compensation or other benefits to which he is entitled under this
Agreement, to be taken at such times as the Executive may select and the
affairs of the company may permit.
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<PAGE> 3
(b) EXECUTIVE BENEFIT PROGRAMS. The Executive is entitled to
participate in any pension, 401(k), insurance or other employee benefit
plan that is currently maintained by the Company for its executive
officers, including programs of life and medical insurance and
reimbursement of membership fees in civic, social and professional
organizations. However, any changes in these benefits after the date of
this Agreement which result in increased costs to the Company shall not be
made unless approved by AMSE.
5. TERMINATION.
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for cause
by given written notice of termination. Such termination will become
effective upon the giving of such notice. Upon any termination for cause,
the Executive shall have no right to compensation, or reimbursement under
Section 3 or to participate in any employee benefit programs under Section
4 for any period subsequent to the effective date of termination. For
purposes of this Section 5(a), "cause" shall mean: (i) the Executive is
convicted of a felony or misdemeanor or commits a criminal act; (ii) the
Executive, in carrying out his duties hereunder, has acted with ordinary
negligence, gross negligence or intentional misconduct resulting, in any
case, in harm to the Company; (iii) the Executive misappropriates Company
funds or otherwise defrauds the Company; (iv) the Executive breaches his
fiduciary duty to the Company resulting in profit to him, directly or
indirectly; (v) the Executive materially breaches any agreement with the
Company; (vi) the Executive breaches any provision of Section 6 or Section
7; (vii) the Executive fails to competently perform his duties under
Section 2; (viii) the Executive suffers from active alcoholism or drug
addiction or otherwise uses alcohol to excess or uses drugs in any form
except strictly in accordance with the recommendation of a physician or
dentist; or (ix) it is later determined that the Executive fraudulently
concealed facts or made material misrepresentations in connection with the
sale by the Executive of his common stock of the Company to AMSE.
(b) DEATH OR DISABILITY. Except for the conditions and obligations
contained in this section 5 (b) , this Agreement and the obligations of
the Company hereunder will terminate upon the death or disability of the
Executive. For purposes of this Section 5(b), "disability" shall mean that
for a period of three months in any 12-month period the Executive is
incapable of substantially fulfilling the duties set forth in Section 2
because of physical, mental or emotional incapacity resulting from injury,
sickness or disease. However, the references in Section 5(a)(viii) above
shall not be deemed a "disability" as defined in this Section 5(b).
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<PAGE> 4
Upon termination by death or disability, the Company shall pay the
Executive or his legal representative, as the case may be, his unpaid
salary at such time pursuant to Section 3(a) through the date of such
termination of employment. Such sums shall be paid upon the same terms and
conditions as if this Agreement were in full force and effect.
(c) CONTINUING EFFECT. Notwithstanding any termination of the
Executive's employment as provided in this Section 5 or otherwise, the
provisions of Sections 6 and 7 shall remain in full force and effect.
6. NON-COMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. During the term of this Agreement
and for a period of 24 months commencing on the date of termination of the
Executive's employment with the Company, the Executive shall not, directly
or indirectly, compete with the Company by managing or operating, either
full or part-time, a business in the same or similar industry or
industries currently or during the term of this Agreement conducted, or
planned to be conducted by the Company anywhere in the United States.
However following termination of the Executive's employment with the
Company, the Executive may take a sales position with a business in the
same or similar industry or industries as the Company.
(b) SOLICITATION OF CUSTOMERS OR PROSPECTS. During the periods in
which the provisions of Section 6(a) shall be in effect, the Executive,
directly or indirectly, shall not seek business from any Customer or
Prospect (as defined below) on behalf of any enterprise or business other
than the Company, refer any business from any Customer or Prospect to any
enterprise or business other than the Company or receive commissions based
on sales or otherwise relating to the business from any Customer or
Prospect, from any enterprise or business other than the Company. For
purposes of this Section 6, the term "Customer" means any person, firm,
corporation, partnership, association or other entity, government or
nonprofit organization to which the Company or any of its affiliates sold
or provided goods or services during the 24-month period prior to the time
at which any determination is required to be made as to whether any such
person, firm, corporation, partnership, association or other entity is a
Customer. For purposes of this Section 6 the term "Prospect" means any
person, firm, corporation, partnership, association, other entity,
government or non-profit organization with which an employee of the
Company has had at least one written communication or meeting with during
the 90 days prior to the date of termination of the Executive's employment
with the company which written communication or meeting related to the
Company selling goods or services to such Prospects.
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<PAGE> 5
(c) NO PAYMENT. The Executive acknowledges and agrees that no separate or
additional payment shall be required to be made to him in consideration of
his undertakings in this Section 6.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive acknowledges
that during his employment he shall learn and shall have access to confidential,
information regarding the Company and AMSE, its affiliates, including without
limitation (i) confidential or secret plans, programs, documents, agreements or
other material relating to the business, services or activities of the Company,
AMSE and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company and AMSE or its affiliates (collectively referred to
as "Confidential Information"). The Executive acknowledges that such
Confidential Information as is acquired and used by the Company or its
affiliates is a special, valuable and unique asset. All records, files,
materials and Confidential Information obtained by the Executive in the course
of his employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case
may be. The Executive shall not, except in connection with and as required by
his performance of his duties under this Agreement, for any reason use for his
own benefit or the benefit of any person or entity with which he may be
associated or disclose any such Confidential Information to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever
without the prior written consent of the Board and AMSE, unless such
Confidential Information previously shall have become public knowledge through
no action by or omission of the Executive.
8. EQUITABLE RELIEF.
(a) The Company and the Executive recognize that the services to be
rendered under this Agreement by the Executive are special, unique and of
extraordinary character, and that in the event of the breach by the
Executive of the terms and conditions of this Agreement or if the
Executive, without the prior consent of the Board and AMSE, shall leave
his employment for any reason and take any action in violation of Section
6 or Section 7, the Company and AMSE shall be entitled to institute and
prosecute proceedings in any court of competent jurisdiction referred to
in Section 8(b) below, to enjoin the Executive from breaching the
provisions of section 6 or Section 7. In such action, the Company and AMSE
shall not be required to plead or prove irreparable harm or lack of an
adequate remedy at law. Nothing contained in this Section 8 shall be
construed to prevent the Company and AMSE from seeking such other remedy
in arbitration in case of any breach of this Agreement by the Executive,
as the Company and AMSE may elect.
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<PAGE> 6
(b) Any proceeding or action must be commenced in Miami, Florida
where the Company maintains its executive offices. The Executive and the
Company irrevocably and unconditionally submit to the jurisdiction of such
courts and agree to take any and all future action necessary to submit to
the jurisdiction of such courts. The Executive and the Company irrevocably
waive any objection that they now have or hereafter irrevocably waive any
objection that they now have or hereafter may have to the laying of venue
of any suit, action or proceeding brought in any such court and further
irrevocably waive any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Final
judgment against the Executive or the Company in any such suit shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment, a certified or true copy of which shall be conclusive evidence
of the fact and the amount of any liability of the Executive or the
Company therein described, or by appropriate proceedings under any
applicable treaty or otherwise.
9. ASSIGNABILITY. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company, provided that such successor or assign shall acquire all
or substantially all of the assets and business of the Company. The Executive's
obligations hereunder may not be assigned or alienated and any attempt to do so
by the Executive shall be void.
10. SEVERABILITY.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are
reasonable in light of the circumstances as they exist on the date hereof.
Should a decision, however, be made at a later date by a court of
competent jurisdiction that the character, duration or geographical scope
of such provisions is unreasonable, then it is the intention and the
agreement of the Executive and the Company that this Agreement shall be
construed by the court in such a manner as to impose only those
restrictions on the Executive's conduct that are reasonable in the light
of the circumstances and as are necessary to assure to the Company the
benefits of this Agreement. If, in any judicial proceeding, a court shall
refuse to enforce all of the separate covenants deemed included herein
because taken together they are more extensive than necessary to assure to
the Company the intended benefits of this Agreement, it is expressly
understood and agreed by the parties hereto that the provisions of this
Agreement that, if eliminated, would permit the remaining separate
provisions to be enforced in such proceeding shall be deemed eliminated,
for the purposes of such proceeding, from this Agreement.
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<PAGE> 7
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be
considered divisible as to such provision and such provision shall be
inoperative in such state or jurisdiction and shall not be part of the
consideration moving from either of the parties to the other. The
remaining provisions of this Agreement shall be valid and binding and of
like effect as though such provision were not included.
11. NOTICES AND ADDRESSES. All notices, offers, acceptance and any other
acts under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by Federal Express
or similar receipted delivery, by facsimile delivery or, if mailed, postage
prepaid, by certified mail, return receipt requested, as follows:
To the Company:
Dow GuaranteeCorp.
9700 Northeast 2nd Avenue
Miami Shores, Florida 33138
Facsimile: 305-757-2929
With a Copy to:
Michael D. Harris, Esq.
Michael Harris, P.A.
712 U.S. Highway One, 4th Floor
North Palm Beach, FL 33408
Facsimile: 561-845-0108
To the Executive:
Charles M. Kluck
Dow GuaranteeCorp.
9700 Northeast 2nd Avenue
Miami Shores, Florida 33138
Facsimile: 305-757-2929
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person
or by mailing.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
13. Arbitration. Except as provided in Section 8 hereof, any controversy,
dispute or claim arising out of or relating to this Agreement, or its
interpretation, application, implementation,
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breach of enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in West Bangor, Maine (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
14. ATTORNEY'S FEES. In the event that there is any controversy or claim
arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof, and any action or proceeding including an arbitration
proceeding is commenced to enforce the provisions of this Agreement, the
prevailing party shall he entitled to an award by the court or arbitrator, as
appropriate, of reasonable attorney's fees, costs and expenses.
15. GOVERNING LAW. This Agreement and any dispute, disagreement, or issue
of construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
17. ADDITIONAL DOCUMENTS. The parties hereto shall execute such additional
instruments as may be reasonably required by their counsel in order to carry out
the purpose and intent of this Agreement and to fulfill the obligations of the
parties hereunder.
18. SECTION AND PARAGRAPH HEADINGS. Section headings herein have been
inserted for reference only and shall not be deemed to limit or otherwise
affect, in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Agreement.
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IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
WITNESSES: DOW GUARANTEECORP.
By: /s/ Linda Kluck
- -------------------------------- --------------------------------
Linda Kluck, Vice President
- --------------------------------
/s/ Charles M. Kluck
- -------------------------------- --------------------------------
Charles M. Kluck
- --------------------------------
<PAGE> 1
Exhibit 6(d)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement ") entered into as of this 31
day of July, 1998, between Dow GuaranteeCorp. (the "Company"), and Linda C.
Kluck (the "Executive").
WHEREAS, the Company desires to employ the Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Company and
the Executive agree as follows:
1. TERM OF EMPLOYMENT.
(a) Term. The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, for a period
commencing on the date of this Agreement and ending five years thereafter
(the "Term").
(b) CONTINUING EFFECT. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections
6 and 7 shall remain in full force and effect and the provisions of
Section 7 shall be binding upon the legal representatives, successors and
assigns of the Executive.
2. DUTIES.
(a) GENERAL DUTIES. The Executive shall serve as the Company's
Vice-President and director and shall be responsible for and have such
duties and responsibilities that are customary for executives who act in
such capacity for similar size corporations. The Executive shall report
directly to the Company's President. The Executive shall also perform such
services for such subsidiaries of the Company as may be necessary. The
Executive shall use her best efforts to perform her duties and discharge
her responsibilities pursuant to this Agreement competently, carefully and
faithfully.
(b) DEVOTION OF TIME. The Executive shall devote all of her time,
attention and energies during normal business hours (exclusive of periods
of sickness and disability and of such normal holiday and vacation periods
as have been established by the Company) to the affairs of the Company.
The Executive shall not enter the employ of or serve as a consultant to,
or in any way perform any services with or without compensation
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to, any other persons, business or organization without the prior consent
of the Board of the Company; provided, that the Executive shall be
permitted to devote a limited amount of her time, without compensation, to
professional charitable or similar organizations.
(c) ADHERENCE TO INSIDE INFORMATION POLICIES. The Executive
acknowledges that America's Senior Financial Services, Inc. ("AMSE"), the
sole shareholder of the Company, is publicly-held and, as a result, has
implemented inside information policies designed to preclude its employees
and those of its subsidiaries from violating the federal securities laws
by trading on material, non-public information or passing such information
on to others in breach of any duty owed to AMSE or its subsidiaries
including the Company. The Executive shall promptly execute any agreements
and amendments and supplement thereto generally distributed by AMSE from
time to time to its employees requiring such employees to abide by its
inside information policies.
3. COMPENSATION, EXPENSES AND OFFICE
(a) SALARY. For the services of the Executive to be rendered under
this Agreement, the Company shall pay the Executive an annual salary of
$70,000 during the Term. The Company shall pay the Executive her annual
compensation in equal installments no less frequently than monthly in
accordance with the normal payroll practices of the Company or of the
Company's sole shareholder, AMSE.
(b) EXPENSES. In addition to any compensation received pursuant to
Section 3 (a), the Company shall reimburse or advance funds to the
Executive for all reasonable travel and expenses incurred in connection
with the performance of her duties under this Agreement, provided that the
Executive properly accounts for such expenses to the Company in accordance
with AMSE's practices. Such reimbursement or advances shall be made in
accordance with policies and procedures of AMSE in effect from time to
time relating to reimbursement of or advances to executive officers.
4. BENEFITS.
(a) VACATION. For each 12-month period during the Term, the
Executive shall be entitled to four weeks of vacation without loss of
compensation or other benefits to which she is entitled under this
Agreement, to be taken at such times as the Executive may select and the
affairs of the Company may permit.
(b) EXECUTIVE BENEFIT PROGRAMS. The Executive is entitled to
participate in any pension, 401(k), insurance or
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other employee benefit plan that is currently maintained by the Company
for its executive officers, including programs of life and medical
insurance and reimbursement of membership fees in civic, social and
professional organizations. However, any changes in these benefits after
the date of this Agreement which result in increased costs to the Company
shall not be made unless approved by AMSE.
5. TERMINATION.
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for cause
by given written notice of termination. Such termination will become
effective upon the giving of such notice. upon any termination for cause,
the Executive shall have no right to compensation, or reimbursement
under Section 3 or to participate in any employee benefit programs under
Section 4 for any period subsequent to the effective date of termination.
For purposes of this Section 5(a), "cause" shall mean: (i) the Executive
is convicted of a felony or misdemeanor or commits a criminal act; (ii)
the Executive, in carrying out her duties hereunder, has acted with
ordinary negligence, gross negligence or intentional misconduct resulting,
in any case, in harm to the Company; (iii) the Executive misappropriates
Company funds or otherwise defrauds the Company; (iv) the Executive
breaches heris fiduciary duty to the Company resulting in profit to her,
directly or indirectly; (v) the Executive materially breaches any
agreement with the Company; (vi) the Executive breaches any provision of
Section 6 or Section 7; (vii) the Executive fails to competently perform
her duties under Section 2; (viii) the Executive suffers from active
alcoholism or drug addiction or otherwise uses alcohol to excess or uses
drugs in any form except strictly in accordance with the recommendation of
a physician or dentist; or (ix) it is later determined that the Executive
fraudulently concealed facts or made material misrepresentations in
connection with the sale by the Executive of her common stock of the
Company to AMSE.
(b) DEATH OR DISABILITY. Except for the conditions and obligations
contained in this Section 5(b), this Agreement and the obligations of
the Company hereunder will terminate upon the death or disability of the
Executive. For purposes of this Section 5(b), "disability" shall mean that
for a period of three months in any 12-month period the Executive is
incapable of substantially fulfilling the duties set forth in Section 2
because of physical, mental or emotional incapacity resulting from injury,
sickness or disease. However, the references in Section 5(a)(viii) above
shall not be deemed a "disability" as defined in this Section 5(b).
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Upon termination by death or disability, the Company shall pay the
Executive or heris legal representative, as the case may be, her unpaid
salary at such time pursuant to Section 3(a) through the date of such
termination of employment. Such sums shall be paid upon the same terms and
conditions as if this Agreement were in full force and effect.
(c) CONTINUING EFFECT. Notwithstanding any termination of the
Executive's employment as provided in this Section 5 or otherwise, the
provisions of sections 6 and 7 shall remain in full force and effect.
6. NON-COMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. During the term of this Agreement
and for a period of 24 months commencing on the date of termination of the
Executive's employment with the Company, the Executive shall not, directly
or indirectly, compete with the Company by managing or operating, either
full or part-time, a business in the same or similar industry or
industries currently or during the term of this Agreement conducted, or
planned to be conducted by the Company anywhere in the United States.
However following termination of the Executive's employment with the
Company, the Executive may take a sales position with a business in the
same or similar industry or industries as the Company.
(b) SOLICITATION OF CUSTOMERS OR PROSPECTS. During the periods in
which the provisions of Section 6(a) shall be in effect, the Executive,
directly or indirectly, shall not seek business from any Customer or
Prospect (as defined below) on behalf of any enterprise or business other
than the Company, refer any business from any Customer or Prospect to any
enterprise or business other than the Company or receive commissions based
on sales or otherwise relating to the business from any Customer or
Prospect, from any enterprise or business other than the Company. For
purposes of this Section 6, the term "Customer" means any person, firm,
corporation, partnership, association or other entity, government or
nonprofit organization to which the Company or any of its affiliates sold
or provided goods or services during the 24-month period prior to the time
at which any determination is required to be made as to whether any such
person, firm, corporation, partnership, association or other entity is a
Customer. For purposes of this Section 6 the term "Prospect" means any
person, firm, corporation, partnership, association, other entity,
government or non-profit organization with which an employee of the
Company has had at least one written communication or meeting with during
the 90 days prior to the date of termination of the Executive's employment
with the Company which written communication or meeting related to the
Company selling goods or services to such Prospects.
4
<PAGE> 5
(c) NO PAYMENT. The Executive acknowledges and agrees that no
separate or additional payment shall be required to be made to her in
consideration of her undertakings in this Section 6.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive acknowledges
that during her employment she shall learn and shall have access to confidential
information regarding the Company and AMSE, its affiliates, including without
limitation (i) confidential or secret plans, programs, documents, agreements or
other material relating to the business, services or activities of the Company,
AMSE and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company and AMSE or, its affiliates (collectively referred to
as "Confidential Information"). The Executive acknowledges that such
Confidential Information as is acquired and used by the Company or its
affiliates is a special, valuable and unique asset. All records, files,
materials and Confidential Information obtained by the Executive in the course
of her employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case may
be. The Executive shall not, except in connection with and as required by her
performance of her duties under this Agreement, for any reason use for her own
benefit or the benefit of any person or entity with which she may be associated
or disclose any such Confidential Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of the Board and AMSE, unless such Confidential
Information previously shall have become public knowledge through no action by
or omission of the Executive.
8. EQUITABLE RELIEF.
(a) The Company and the Executive recognize that the services to be
rendered under this Agreement by the Executive are special, unique and of
extraordinary character, and that in the event of the breach by the
Executive of the terms and conditions of this Agreement or if the
Executive, without the prior consent of the Board and AMSE, shall leave
her employment for any reason and take any action in violation of Section
6 or Section 7, the Company and AMSE shall be entitled to institute and
prosecute proceedings in any court of competent jurisdiction referred to
in Section 8(b) below, to enjoin the Executive from breaching the
provisions of Section 6 or Section 7. In such action, the Company and AMSE
shall not be required to plead or prove irreparable harm or lack of an
adequate remedy at law. Nothing contained in this Section 8 shall be
construed to prevent the Company and AMSE from seeking such other remedy
in arbitration in case of any breach of this Agreement by the Executive,
as the Company and AMSE may elect.
5
<PAGE> 6
(b) Any proceeding or action must be commenced in Miami, Florida
where the Company maintains its executive offices. The Executive and the
Company irrevocably and unconditionally submit to the jurisdiction of such
courts and agree to take any and all future action necessary to submit to
the jurisdiction of such courts. The Executive and the Company irrevocably
waive any objection that they now have or hereafter irrevocably waive any
objection that they now have or hereafter may have to the laying of venue
of any suit, action or proceeding brought in any such court and further
irrevocably waive any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Final
judgment against the Executive or the Company in any such suit shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment, a certified or true copy of which shall be conclusive evidence
of the fact and the amount of any liability of the Executive or the
Company therein described, or by appropriate proceedings under any
applicable treaty or otherwise.
9. ASSIGNABILITY. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company, provided that such successor or assign shall acquire all
or substantially all of the assets and business of the Company. The Executive's
obligations hereunder may not be assigned or alienated and any attempt to do so
by the Executive shall be void.
10. SEVERABILITY.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are
reasonable in light of the circumstances as they exist on the date hereof.
Should a decision, however, be made at a later date by a court of
competent jurisdiction that the character, duration or geographical scope
of such provisions is unreasonable, then it is the intention and the
agreement of the Executive and the Company that this Agreement shall be
construed by the court in such a manner as to impose only those
restrictions on the Executive's conduct that are reasonable in the light
of the circumstances and as are necessary to assure to the Company the
benefits of this Agreement. If, in any judicial proceeding, a court shall
refuse to enforce all of the separate covenants deemed included herein
because taken together they are more extensive than necessary to assure to
the Company the intended benefits of this Agreement, it is expressly
understood and agreed by the parties hereto that the provisions of this
Agreement that, if eliminated, would permit the remaining separate
provisions to be enforced in such proceeding shall be deemed eliminated,
for the purposes of such proceeding, from this Agreement.
6
<PAGE> 7
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be
considered divisible as to such provision and such provision shall be
inoperative in such state or jurisdiction and shall not be part of the
consideration moving from either of the parties to the other. The
remaining provisions of this Agreement shall be valid and binding and of
like effect as though such provision were not included.
11. NOTICES AND ADDRESSES. All notices, offers, acceptance and any other
acts under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by Federal Express
or similar receipted delivery, by facsimile delivery or, if mailed, postage
prepaid, by certified mail, return receipt requested, as follows:
To the Company:
Dow Guarantee Corp.
9700 Northeast 2nd Avenue
Miami Shores, Florida 33138
Facsimile: 305-757-2929
With a Copy to:
Michael D. Harris, Esq.
Michael Harris, P.A.
712 U.S. Highway One, 4th Floor
North Palm Beach, FL 33408
Facsimile: 561-845-0108
To the Executive:
Linda C. Kluck
Dow Guarantee Corp.
9700 Northeast 2nd Avenue
Miami Shores, Florida 33138
Facsimile: 305-757-2929
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
13. ARBITRATION. Except as provided in Section 8 hereof, any controversy,
dispute or claim arising out of or relating to this Agreement, or its
interpretation, application, implementation,
7
<PAGE> 8
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in Dade County, Florida (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
14. ATTORNEY'S FEES. In the event that there is any controversy or claim
arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof, and any action or proceeding including an arbitration
proceeding is commenced to enforce the provisions of this Agreement, the
prevailing party shall be entitled to an award by the court or arbitrator, as
appropriate, of reasonable attorney's fees, costs and expenses.
15. GOVERNING LAW. This Agreement and any dispute, disagreement, or issue
of construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
17. ADDITIONAL DOCUMENTS. The parties hereto shall execute such additional
instruments as may be reasonably required by their counsel in order to carry out
the purpose and intent of this Agreement and to fulfill the obligations of the
parties hereunder.
18. SECTION AND PARAGRAPH HEADINGS. Section headings herein have been
inserted for reference only and shall not be deemed to limit or otherwise
affect, in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
WITNESSES: DOW GUARANTEE CORP.
/s/ By: /s/ Charles M. Kluck
- -------------------------------- --------------------------------
Charles M. Kluck, President
/s/
- --------------------------------
/s/ /s/ Linda C. Kluck
- -------------------------------- --------------------------------
Linda C. Kluck
- --------------------------------
9
<PAGE> 1
EXHIBIT 6(e)
CONSULTING AGREEMENT
It is hereby understood that ViStra Growth Partners, Inc. (the "Financial
Advisor") will advise America's Senior Financial Services, Inc. ("AMSE") to
develop and implement AMSE's public markets strategy. Financial Advisor and
AMSE shall hereinafter collectively be referred to as the "Parties".
The Purpose and scope of this Agreement is to set forth the services to be
provided to AMSE by Financial Advisor, the compensation to be received by
Financial Advisor from AMSE for providing such services and the terms and
conditions that shall govern the relationship between the Parties. Financial
Advisor has been engaged as an exclusive financial advisor by AMSE for a period
of three (3) years commencing May 1, 1998.
In connection with the foregoing assignment, the Financial Advisor will provide
the following services to AMSE:
a. Study and review the business operations, historical financial
performance of AMSE (based upon management's forecast of financial
performance) so as to enable the Financial Advisor to provide advice to
AMSE.
b. Assist AMSE in attempting to formulate the optimal strategy to meet
AMSE's working capital and capital resources needs during the period of
this Agreement.
c. Assist AMSE in effecting the exercise of the outstanding warrants to
purchase AMSE's Common Stock and/or other authorized and outstanding shares
of Stock as applicable.
d. Assist in the formulation of the terms and structure of any reasonable
proposed business combination transaction ("Transaction") involving AMSE
and presented to Financial Advisor by AMSE, or to AMSE by Financial
Advisor.
e. Arrange for or assist AMSE in obtaining debt and/or equity financing in
such amounts that AMSE and the Financial Advisor agree are required for the
purpose of financing AMSE's operations ("Financing").
f. Assist in any presentation to the Board of Directors of AMSE, as
requested, in connection with a proposed Transaction or Financing.
g. If requested, render an opinion (a "Fairness Opinion") to the Board of
Directors of AMSE as to whether the consideration to be paid in any
proposed acquisition of any business by AMSE is fair and appropriate from
a financial point of view to its shareholders.
h. Advise AMSE as to the expected reaction of the financial community to
any Transaction and assist in determining the optimum means of
communicating the pertinent aspects, such as strategic considerations,
benefits to AMSE and financial impact, to the financial community.
Please note that the Financial Advisor is not an underwriter, broker-dealer nor
a merchant bank in any financing transaction and does not purport to serve in
that capacity. Further, Financial Advisor does not represent that it is acting
as an Attorney or Certified Public Accountant, and AMSE should seek
professional advice necessary in all legal and accounting matters. Rather,
Financial Advisor's role is to use its best efforts to assist AMSE in its effort
to obtain financing and to perform the advisory services detailed herein.
Accordingly, Financial Advisor will identify potential investors, help
negotiate one or more mutually agreeable transaction(s) and coordinate the
needed professionals to prepare the documentation, review same to confirm that
it meets the needs of AMSE and assure the timely closing of the contemplated
transaction(s).
For providing the financial advisory and investment banking services, AMSE
agrees to compensate the Financial Advisor as follows:
TRANSACTION FEE - ACQUISITIONS
It is understood by the Parties that Financial Advisor is relying upon AMSE to
provide compensation to it based on the successful completion of one or more
transactions and/or financing as herein defined. Upon execution of
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08/25/98
this Agreement between the Financial Advisor and AMSE, AMSE shall make an
initial payment to the Financial Advisor in the amount of $100.00. Upon AMSE's
receipt of a signed copy of this Agreement, AMSE shall cause a check to be
written to Vistra to remit the $100 as agreed.
1. In the event the Financial Advisor arranges for or assists in a
transaction closed by AMSE, a transaction fee ("Transaction Fee")
computed as follows and payable in the event of and upon the closing of
a Transaction: five percent (5%) of the first two million dollars; four
percent (4%) of the next two million dollars; three percent (3%) of the
next two million dollars; two percent (2%) of the next two million
dollars and one percent (1%) of the balance of the value of the
transaction, but in no event less than $25,000 for any transaction
consummated by AMSE.
2. For transactions involving acquisition candidates identified by AMSE
or its management who are acquired by or merged with AMSE and where
Financial Advisor assists to structure or negotiate such a transaction,
Financial Advisor shall be paid cash compensation for the consummation
of the transaction out of the proceeds of the transaction as follows:
A success fee based on seventy-five (75%) percent of the Modified
Lehman Formula defined in the preceding Paragraph.
3. In the event of a merger or reorganization of AMSE, Financial
Advisor shall be compensated as follows: a success fee to be paid "in
kind" based on the modified Lehman Formula defined in Paragraph 1,
above.
A Transaction means everything paid or payable by one party to the other in a
transaction, including but not limited to, cash, securities, promissory notes,
loans or any other purchase related consideration including payments contingent
upon future events or conditions all of which are agreed to be an integral part
of the transaction. Any such Transaction Fee due to the Financial Advisor will
be paid in cash or other consideration that is acceptable to the Financial
Advisor, at the closing of the particular Transaction for which the Transaction
Fee is due.
TRANSACTION FEE - PRIVATE PLACEMENT OR SECONDARY PUBLIC OFFERING
As part of this agreement, AMSE agrees to retain Financial Advisor to advise
AMSE with respect to AMSE's ongoing capital formation initiatives and generally,
to consult to the company. Financial Advisor will receive compensation for such
consulting services and a "success fee" under the different circumstances
outlined herein, as follows:
1. Financial Advisor shall be compensated for the consummation of any
Private Placement Financing(s), and paid at each closing, out of the
proceeds of the Financing, as follows: a success fee based on a
"Modified Lehman Formula", as herein defined, (7.5% of the first
$500,000; 6% of the next two million dollars of transaction value; 4%
of the next two million dollars of transaction value; 3% of the next
two million dollars of transaction value; 2% of the next two million
dollars of transaction value; and 1% of the transaction value in
excess of $8.5 million), provided however, that if AMSE identifies the
funding source, or in the event of a secondary public offering, then
the compensation provided to the Financial Advisor shall be 60% of the
success fee calculated hereunder.
2. In addition to the cash compensation to be paid to Financial Advisor
upon the closing of a Financing as described in Number 1 above,
Financial Advisor shall be entitled to participate in the equity of
AMSE after a Private Placement Financing has been funded or a
secondary public offering has been completed. Specifically, Financial
Advisor shall receive .5% of the equity of AMSE for each $500,000 of
capital raised by Financial Advisor up to a maximum amount of 5% of
AMSE's equity based on the shares issued and outstanding immediately
after the capital raise. In addition to the grant of equity as detailed
herein, Financial Advisor shall receive options to purchase common
stock of AMSE under the following terms and conditions: Financial
Advisor shall receive, without limitation, options to purchase 0.75%
of the
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Consulting Agreement, cont'd.
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08/25/98
company's common stock for each $500,000 of cash consideration received by AMSE
pursuant to the efforts of Financial Advisor. Said options shall expire five (5)
years from the date of the financing. The exercise price of the options shall be
100% of the per share price paid by an investor(s) pursuant to the Financing, or
the average per share price of AMSE's common stock for the twenty (20) days
preceding the closing of a debt funding. All equity earned by Financial Advisor
shall be subject to the same dilution factors as is the privately held stock of
the founding shareholders. Company agrees to provide reasonable piggyback,
cashless exercise and non-dilutive provisions with regard to such options. The
Financial Advisor hereby agrees to provide Nelson A. Locke with an irrevocable
proxy with respect to the voting rights associated with any shares obtained by
the Financial Advisor pursuant to this paragraph 2. Financial Advisor further
agrees to normal and reasonable lock-up provisions with respect to the shares
obtained by the Financial Advisor pursuant to this paragraph 2, subject to the
other provisions of this paragraph.
In the event of a successful funding as described herein, AMSE shall retain
Financial Advisor as a consultant with respect to such matters as may from time
to time be requested by the Board of Directors of AMSE, any of its
subsidiaries, or members of AMSE's Executive Committee. In exchange for these
Consulting Services to be provided by Financial Advisor for a period of
twenty-four (24) months subsequent to the completion of the Private Placement
or Secondary Public Offering, Financial Advisor shall be paid a monthly
retainer in an amount to be determined by mutual agreement between the Board of
Directors of AMSE and the Financial Advisor, provided however, that the minimum
monthly retainer shall not be less than $5,000 per month, to be paid on a
mutually acceptable schedule that recognizes the Company's normal cash flow
requirements and leaves adequate cash resources for the Company to properly
fund its ongoing operation.
OTHER CONSIDERATION
In addition to any fees that may be payable to the Financial Advisor hereunder
and regardless of whether any Transaction or Financing is consummated:
(i) AMSE will be responsible for all of its legal and other professional
fees associated with the preparation and review of any necessary
documentation and the closing of any agreed upon transaction. Any investor
or acquisition candidate will be responsible for all of his or its legal
and other professional fees associated with the closing of any agreed upon
transaction. And, should Financial Advisor choose to retain professionals
in addition to those retained by AMSE, then Financial Advisor will be
responsible for all of such legal and professional fees unless approved in
writing by AMSE. In the event either Party shall enforce any remedy at law
or in equity and is the prevailing Party in such action, it shall be
entitled to recover its reasonable attorneys' fees and cost including on
appeal from the other Party.
(ii) AMSE hereby agrees from time to time upon request to reimburse the
Financial Advisor (a) for all reasonable travel, legal and all other
out-of-pocket expenses incurred in performing the services hereunder (it is
understood that the reimbursement for expenses in excess of $200.00 shall
be subject to the prior approval of AMSE, such approval not to be
unreasonably withheld); and (b) for all reasonable travel, legal and
out-of-pocket expenses incurred in assisting AMSE to prepare for, or defend
against any action, suit, proceeding, or claim brought or threatened to be
brought arising out of or based upon our services hereunder and in
providing evidence, producing documents or otherwise participating in any
such action, suit, proceeding, or claim except in the event that the costs
are incurred as a result of the ordinary negligence or willful misconduct
of the financial advisor.
Financial Advisor acknowledges that AMSE will be providing confidential
information to Financial Advisor. The Parties hereto agree that they will
cooperate with each other and provide full due diligence, and that all
conversations, documentation, or work products will be kept in the utmost
confidence. Financial
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Consulting Agreement, cont'd.
Page 4
08/25/98
Advisor agrees to execute as part of this Agreement a more detailed
confidentiality and non-disclosure agreement. Likewise, AMSE acknowledges that
Financial Advisor will be providing confidential information to AMSE.
Accordingly, AMSE agrees that the information, including but not limited to
Financial Advisor data base of investors, methods, systems and procedures, will
be kept confidential and shall not, without the prior written consent of
Financial Advisor, be disclosed by AMSE. Also, in recognition of the value
which Financial Advisor place on the information as defined herein, for the
term of this agreement and for a period of one (1) year thereafter, AMSE shall
not, without Financial Advisor's written consent, participate in any business
venture with any person or company introduced to it directly or indirectly by
Financial Advisor. Finally, Financial Advisor intends to introduce the Client to
its contacts including private and institutional financing sources or strategic
alliances. AMSE agrees that it will respect Financial Advisor's relationships
with these investors and other sources of financing and that AMSE shall not
participate in or permit the circumvention of any obligation to Financial
Advisor created by this Agreement by any means. It is agreed that should the
Client receive funds from a financing source introduced by Financial Advisor
within a period of one (1) years from the date of introduction, the Client
shall promptly pay Financial Advisor its fees according to this Agreement. As
used herein, the term "introduced" shall mean one or more formal meetings (where
a formal meeting is defined as a meeting with a principal investor or his
authorized agent who has been qualified by Financial Advisor and who has
reviewed AMSE's materials and expressed an interest in making an investment in
AMSE) or substantive discussions in connection with the provision of funds, and
shall exclude sources to whom the client is previously known or to whom the
client has been previously introduced prior to the introduction facilitated by
Financial Advisor.
Recognizing the matters of the type contemplated in this engagement sometimes
result in litigation and that the Financial Advisor's role is advisory, AMSE
agrees to hold the Financial Advisor harmless and to indemnify the Financial
Advisor (including any of its affiliated companies and any director, officer,
employee or agent of the Financial Advisor) and any other controlling person
within the meaning of Section 15 of the Securities Act of 1993 (the "1993 act")
or Section 20(a) of the Securities Exchange Act of 1934 (the "1934 act") or the
Financial Advisor (including any of its affiliated companies) (collectively,
"Indemnified Persons") from and against any and all losses, claims, damages,
liabilities or expenses whatsoever as incurred by an Indemnified Person in
investigating, preparing or defending any litigation or proceeding, commenced or
threatened, or in connection with any claim whatsoever, whether or not resulting
in any liability, to which such Indemnified Person may become subject under
any applicable Federal or state law or otherwise caused by or arising out of our
based upon or otherwise relating to or in connection with the Financial
Advisor's engagement hereunder, or any Transaction and if such indemnification
were for any reason not to be available, to contribute to the settlement, loss,
or expenses involved in the proportion that AMSE's interest bears to the
Financial Advisor's interest in any transaction referred to herein. Under no
circumstances, however, shall contributions by the Financial Advisor exceed the
fees received by the Financial Advisor pursuant to this letter. However, such
indemnification and contribution shall not apply to any claim, loss or expense,
which has arisen solely from the Financial Advisor's ordinary negligence or
willful misconduct in performing its services hereunder.
The indemnity provided herein shall remain operative and in full force and
effect regardless of (i) any withdrawal, termination, or consummation or failure
to initiate or consummate any transaction referred to herein, (ii) any
investigation made by or on behalf of any Indemnified Person, (iii) any
termination or the completion or expiration of this Agreement or the Financial
Advisor's engagement as AMSE's Financial Advisor and (iv) whether or not the
Financial Advisor shall be called upon to render any formal or informal advise
in the course of such agreement.
The invalidity or enforceability of any particular provision of this Agreement
shall affect the other provisions hereof, and this Agreement shall be construed
in all respects as if such invalid or unenforceable provision were omitted.
The terms and conditions of this Agreement constitute an offer on the part of
Financial Advisor to provide the services comtemplated herein to AMSE. Upon
execution, this Agreement may only be modified by an addendum which shall be in
writing and which shall be incorporated and merged into this Agreement as if
fully
<PAGE> 5
Consulting Agreement, cont'd.
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08/25/98
set forth at the time of the initial execution of this Agreement. All such
addenda hereto shall not alter the original terms and conditions of this
Agreement, except as specifically stated in the addendum.
Should AMSE not pay invoices upon presentation, any material, documentation, or
work completed by Financial Advisor shall be returned immediately to Financial
Advisor. Work performed by Financial Advisor and not returned upon request shall
constitute work accepted and shall be paid for by AMSE based on normal and
customary fees for such work product. During the term of this Agreement, work
may be submitted to AMSE in rough form such as research and final drafts of work
product. The Parties hereto agree that non-payment of an invoice upon
presentation shall constitute a termination and breach of this Agreement.
However, the Financial Advisor agrees that AMSE shall pay such invoices in a
mutually decided manner on a case by case basis, (such as was demonstrated in
the processing of the DOW transaction invoices), that is to say in a manner that
preserves adequate cash resources to allow AMSE to protect the ordinary course
of its operations. This Agreement shall not be assigned by either Party without
the prior written consent of the parties.
No waiver by a Party of any default or breach by any other Party under this
Agreement shall operate as a waiver of any future default or breach, whether of
like or different character or nature.
The Company may terminate this Agreement with the Financial Advisor pursuant to
its terms at any time for cause by giving written notice of termination. Such
termination will become effective upon the giving of such notice. Upon any such
termination for cause, the Financial Advisor shall have no right to the
transaction fees or other consideration as provided for hereunder. For purposes
of this agreement, "cause" shall mean: (i) the Chief Executive Officer of the
Financial Advisor is convicted of a felony which is related to the Financial
Advisor's services to be provided to AMSE hereunder or to the business of the
Company; (ii) the Chief Executive Officer of the Financial Advisor, in carrying
out his duties hereunder, has been found in a civil action to have committed
gross negligence or intentional misconduct resulting in either case in material
harm to the Company, or (iii) the Financial Advisor materially breaches any
provision of this Agreement. The term "found in a civil action" shall not apply
until all appeals permissible under the applicable rules of procedure or
statutes have been determined and no further appeals are permissible.
Other than the provisions for termination of the Financial Advisor by AMSE,
either Party may terminate this Agreement upon the occurrence of any of the
following events: (i) an assignment by the other Party for the benefit of
creditors; or (ii) the filing of a voluntary or involuntary petition by or
against the other Party under any federal or state law for the purpose of
adjudicating the other Party bankrupt, or (iii) the filing of a voluntary or
involuntary petition by or against the other Party for reorganization,
dissolution, or arrangement on account of or to prevent bankruptcy or
insolvency, or (iv) the appointment of a receiver for the assets of the other
Party; or (v) loss of any permit or approvals needed to conduct the business of
the parties. Each of the foregoing events shall constitute a default hereunder
and a breach of this Agreement. All remedies of both Parties hereunder are
cumulative and may, to the extent permitted by law, be exercised concurrently or
separately, and the exercise of any one remedy shall not preclude the exercise
of any other remedy. No failure or delay on the part of either Party to exercise
any right or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by either Party of any right or remedy hereunder
preclude any other or further exercise of any right or remedy. If any payment is
not made when due hereunder, the Parties shall pay interest on such payment at
the maximum rate permitted by Florida law.
Any notice required or permitted by this Agreement shall be in writing and shall
be deemed given at the time it is deposited in the United States Mail, postage
prepaid, certified or registered mail, return receipt requested or hand
delivered with a receipt addressed to the Party whom it is to be given as
follows:
AMSE: Financial Advisor:
15544 NW 77th Court ViStra Growth Partners, Inc
Miami Lakes, Florida 33018 2386 NW 32nd Street
Attention: Nelson A. Locke, President Boca Raton, FL 33431
Attn: Louis S. Weltman, President
<PAGE> 6
Consulting Agreement, cont'd.
Page 6
08/25/98
Either Party may change its address to which notices shall be sent by a notice
similarly sent.
This Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Florida and venue for any dispute relating to or
arising under this Agreement shall be in Broward County, Florida courts.
This Agreement represents the entire understanding of the Parties with respect
to the subject matter hereof and supersedes and merges herein all prior
negotiations, understanding, agreements and representations. No amendment of
this Agreement shall be binding or any affect unless in writing duly signed by
the Party against which such amendment is sought to be enforced.
Any titles herein have been inserted as a matter of convenience of reference
only and shall not control or affect the meaning or construction of any of the
terms and provisions hereof. As used in this Agreement, the plural shall include
the singular and the singular shall include the plural whenever appropriate.
The Parties hereto may execute this Agreement in any number of separate
counterparts, each of which, when executed and delivered by the Parties hereto,
shall have the force and effect of any original. All such counterparts shall be
deemed to constitute one and the same instrument.
The Parties to this Agreement each agree to keep the contractual relationship
and the terms and conditions herein confidential except as may be required by
force of law or due to demand of any federal or state or local agency, or except
to the Party's attorney, accountant or employees who have a need to know. Each
Party agrees to notify the other Party if disclosure is required.
IT IS HEREBY AGREE THAT THE TERMS AND CONDITIONS AS CONTAINED HEREIN ARE
SATISFACTORY TO ALL PARTIES AND THEY SET THEIR HANDS AND SEAL TO THIS AGREEMENT
THIS 25TH DAY OF AUGUST 1998.
For ViStra Growth Partners, Inc.:
/s/ Louis S. Weltman
- ------------------------------------
Louis S. Weltman
President
Date: 8-25-98
---------
Agreed for America's Senior Financial Services, Inc.
/s/ Nelson A. Locke
- ------------------------------------
Nelson A. Locke, President
Date: 8/25/98
---------
<PAGE> 1
EXHIBIT 6(f)
STOCK PURCHASE AGREEMENT
By and Among
AMERICA'S SENIOR FINANCIAL SERVICES, INC.
and
CHARLES M. KLUCK
and
LINDA KLUCK
Dated as of July 3, 1998
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C>
Page
(r) Intellectual Property and Intangible Assets ................................. 17
(s) Compliance With Law ......................................................... 17
(t) Tax Matters ................................................................. 18
(u) Year 2000 Compliance ........................................................ 18
(v) Disclosure .................................................................. 18
(w) No Other Representations .................................................... 19
4. Representations and Warranties of the Company ..................................... 19
(a) Capitalization ............................................................... 19
(b) Organization and Qualification ............................................... 19
(c) Licensing with the Department of Banking and Finance ......................... 19
(d) Authorization of the Company ................................................. 20
(e) Subsidiaries and Other Investments ........................................... 20
(f) Governmental Authorization ................................................... 20
(g) Non-Contravention ............................................................ 20
(h) Financial Statements; Undisclosed Liabilities ................................ 21
(i) Absence of Certain Changes ................................................... 21
(j) Properties; Leases; Tangible Assets .......................................... 23
(k) Affiliates ................................................................... 24
(l) Litigation ................................................................... 24
(m) Contracts .................................................................... 24
(n) Permits ...................................................................... 25
(o) Employment Agreements ........................................................ 26
(p) Employment Matters ........................................................... 28
(q) Intellectual Property and Intangible Assets .................................. 28
(r) Compliance With Law .......................................................... 29
(s) Tax Matters .................................................................. 29
(t) Year 2000 Compliance ......................................................... 29
(u) Disclosure ................................................................... 30
(v) No Other Representations ..................................................... 30
</TABLE>
-ii-
<PAGE> 3
PAGE
10. General Provisions.................................................... 36
(a) Termination by the Company or 36
by the Sellers................................................... 37
(b) Severability...................................................... 37
(c) Counterparts...................................................... 37
(d) Benefit........................................................... 37
(e) Notices and Addresses............................................. 37
(f) Attorney's Fees................................................... 38
(g) Oral Evidence..................................................... 38
(h) Additional Documents.............................................. 38
(i) Governing Law..................................................... 38
(j) Arbitration....................................................... 38
(k) Expenses.......................................................... 38
(l) Section Headings.................................................. 39
(m) Effective Investigation........................................... 39
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<PAGE> 4
DEFINITIONS
Each of the following terms is defined in this Agreement in the respective
Section referenced adjacent to such term:
<TABLE>
<CAPTION>
<S> <C>
DEFINED TERM SECTION REFERENCE
Adjustment Date ............................................................. 33
Affiliate ................................................................... 10
Agreement ................................................................... 1
Annual Statements ........................................................... 9
Associate ................................................................... 10
Associated With ............................................................. 10
Assumed Purchase Price ...................................................... 5
Attributed Value ............................................................ 6
Balance Sheet ............................................................... 9
Benefit Arrangement ......................................................... 10
Benefit Plan ................................................................ 10
C. Kluck .................................................................... 1
Closing Date ................................................................ 1
Closing ..................................................................... 1
Code ........................................................................ 15
Common Stock ................................................................ 1
Company ..................................................................... 1
Company Indemnitee .......................................................... 35
Company Material Adverse Effect ............................................. 21
Company's Indemnitees ....................................................... 35
Contract .................................................................... 8
Current Value ............................................................... 6
Distributions ............................................................... 11
Dow ......................................................................... 1
Dow Material Adverse Effect ................................................. 9
Employee Benefit Plan ....................................................... 10
Employment Agreements ....................................................... 14
Encumbrances ................................................................ 1
Equity Securities ........................................................... 7
ERISA ....................................................................... 10
Fair Market Value ........................................................... 5
Financial Statements ........................................................ 9
GAAP ........................................................................ 9
Gross Proceeds .............................................................. 6
Independent Contractors ..................................................... 16
Information Technology ...................................................... 18
Intangible Assets ........................................................... 16
Intellectual Property ....................................................... 16
Interim Statements .......................................................... 9
</TABLE>
-v-
<PAGE> 5
<TABLE>
<S> <C>
IRS..................................................... 15
Knowledge............................................... 12
L. Kluck................................................ 1
Laws.................................................... 17
Leases.................................................. 12
Liens................................................... 8
Lock-Up Letter.......................................... 2
Losses.................................................. 34
Measuring Date.......................................... 5
Notes................................................... 6
Ordinary Course of Business............................. 9
Permits................................................. 13
Personal Property Leases................................ 11
Premium................................................. 6
Proceedings............................................. 12
Public Offering......................................... 5
Real Property Leases.................................... 12
Schedule Contracts...................................... 13
SEC..................................................... 5
Securities Act.......................................... 2
Seller Indemnitee....................................... 34
Sellers................................................. 1
Sellers' Indemnitees.................................... 34
Shares.................................................. 1
USDL.................................................... 15
Volume.................................................. 6
</TABLE>
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<PAGE> 6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
this 31st day of July, 1998, by and among America's Senior Financial Services,
Inc., a Florida corporation (the "Company"), and Charles M. Kluck ("C. Kluck")
and Linda Kluck ("L. Kluck") (collectively the "Sellers").
WHEREAS, the Sellers own 100% of the issued and outstanding common stock
(the "Shares") of Dow Guarantee Corp. ("Dow"), a Florida corporation, which is
engaged in and fully licensed to operate a mortgage business in the State of
Florida;
WHEREAS, the Company wishes to purchase the Shares pursuant to the terms
and conditions contained in this Agreement; and
WHEREAS, the Sellers desire to sell the Shares to the Company in exchange
for an aggregate of 550,000 shares of the Company's common stock (the "Common
Stock") pursuant to the terms and conditions contained in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
intending to be legally bound agree as follows:
I. PURCHASE AND SALE OF SHARES.
(a) Sale of Shares. Upon the terms and subject to the conditions of
this Agreement and in reliance upon the representations, warranties and
agreements herein set forth, the Sellers to sell to the Company all of the
Shares on the Closing Date, as defined. At the Closing, the Sellers shall
deliver to the Company certificates evidencing the Shares duly endorsed for
transfer and with all transfer stamps attached and such other instruments as
may be reasonably requested by the Company to transfer full legal and
beneficial ownership of the Shares to the Company, free and clear of all liens,
charges, claims, options, pledges, rights of other parties, voting trust,
proxies, shareholder or similar agreements, restrictions, adverse claims or any
other encumbrances of any nature whatsoever (collectively "the Encumbrances").
(b) Closing Date. The closing of the transactions contemplated by
this Agreement shall take place on July 31st, 1998, at 10:00 a.m. (the
"Closing" or "Closing Date") at the offices of Michael Harris, P.A., 712 U.S.
Highway One, Suite 400, North Palm Beach, Florida, 33408 or, at such other
date, time and place as may be agreed upon by the parties.
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(c) Execution of Investment Letters and Lock-Up Letters. At the
Closing, in connection with the delivery of the Shares, C. Kluck and L.
Kluck shall each execute (i) an investment letter in customary form in
which each of the Sellers acknowledges that he/she is acquiring the
shares of Common Stock for investment and not with a view to
distribution, (ii) a letter acknowledging receipt of such information
concerning the Company as the Company's counsel deems appropriate, and
(iii) a letter agreeing not to sell, hypothecate or otherwise transfer
any of the shares of Common Stock issued by the Company ("Lock-Up
Letter") for a period of not less than 12 months following the effective
date of the Public Offering, as defined. Such restrictive period may be
longer than 12 months if requested by the managing underwriter of the
Public Offering as long as such restrictive period also applies to all
executive officers, directors and beneficial owners of more than 5% of
the Company's Common Stock.
(d) Registration Rights.
(i) In the event that during the period ending two years after
the Closing, the Company files a registration statement or
post-effective amendment under the Securities Act of 1933 (the
"Securities Act") which relates to a current offering of securities
by the Company (except in connection with an offering on Forms S-4
or S-8 or successor forms), such registration statement or
post-effective amendment on one occasion shall at the written
request of the Sellers relate to, and meet the requirements of the
Securities Act with respect to so as to permit the public sale of
all or some portion of the Common Stock in compliance with the
Securities Act. The Company shall give written notice to the Sellers
30 or more days prior to the filing of such registration statement
of its intention to file a registration statement under the
Securities Act relating to a current offering of the securities of
the Company. The Sellers shall give the Company written notice to
include the specified number of shares of Common Stock in such
registration statement. Such notice shall be given 20 or more days
prior to the date specified in the notice(s) as the date on which
the Company intends to file such registration statement. Neither the
delivery of such notice by the Company nor of such request by any
Seller shall in any way obligate the Company to file such
registration statement or post-effective amendment and
notwithstanding the filing of such registration statement or
post-effective amendment, the Company may, at any time prior to the
effective date thereof, determine not to offer the securities to
which such registration statement or post-effective amendment
relates, without liability to the Sellers, except that the Company
shall pay such expenses as are contemplated to be paid by it under
Section 1(d).
(ii) In each instance in which, pursuant to Section 1(d), the
Company shall take any action to permit a public offering or sale or
other distribution of the shares of Common Stock,the Company shall:
(A) Supply to any Underwriter as representative of the
Sellers
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<PAGE> 8
intending to make a public distribution of their Common Stock (the Sellers
acknowledge their appointment of such Underwriter as their representative), two
executed copies of each registration statement or post-effective amendment and
a reasonable number of copies of the preliminary, final and other prospectus in
conformity with requirements of the Securities Act and the Rules and
Regulations promulgated thereunder and such other documents as the Underwriter
shall reasonably request.
(B) Unless pre-empted by the National Securities Markets Improvement Act
of 1996, use its best efforts to cause the Common Stock to be registered or
qualified under such other securities acts or blue sky laws of such
jurisdictions as the Underwriter shall reasonably request and do any and all
other acts and things which may be necessary or advisable to enable the Holders
of such Common Stock to consummate such proposed sale or other disposition of
the Common Stock in any such jurisdiction; provided, however, that in no event
shall the Company be obligated, in connection therewith, to qualify to do
business or to file a general consent to service of process in any jurisdiction
where it shall not then be qualified.
(C) Keep current for a period of 90 days after the initial effectiveness
thereof all such registration statements or post-effective amendments under the
Securities Act and cooperate in taking such action as may be necessary to keep
effective such other registrations and qualifications, and do any and all other
acts and things for such period not to exceed said 90 days as may be necessary
to permit the public sale or other disposition of such shares of Common Stock by
the Sellers.
(D) Indemnify and hold harmless each such Seller and each underwriter,
within the meaning of the Securities Act, who may purchase from or sell for any
such Seller, any shares of Common Stock, from and against any and all losses,
claims, damages, and liabilities (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigation, preparing, defending
or settling any claim) arising from (i) any untrue or alleged untrue statement
of material fact contained in any such registration statement or post-effective
amendment, or any prospectus contained therein or delivered thereunder, or from
(ii) any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, unless each untrue
statement or omission or such alleged untrue statement or omission was based
upon information furnished or required to be furnished in writing to the Company
by the Sellers or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any Seller
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<PAGE> 9
or underwriter within the meaning of the Securities Act;
provided, however, that the Company shall not be so
obligated to indemnify any such Seller or underwriter or
controlling person unless such Seller and underwriter shall
at the same time indemnify the Company, its directors, each
officer signing any registration statement, post-effective
amendment or any amendment thereto and each person, if any,
who controls the Company within the meaning of the
Securities Act, from and against any and all losses, claims,
damages and liabilities (including, but not limited to, any
and all expenses whatsoever reasonably incurred in
investigation, preparing, defending or settling any claim)
arising from (a) any untrue or alleged untrue statement of a
material fact contained in any registration statement or
post-effective amendment, or any amendment thereto, or
prospectus contained therein or (b) any omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, but the indemnity of such Seller,
underwriter or controlling person shall be limited to
liability (A) based upon information furnished in writing to
the Company by such Seller or underwriter or controlling
person expressly for use therein, (B) sales by a Seller in
violation of the registration provisions of any state in
which the Common Stock is sold where the Company did agree
to and successfully register or qualify such Common Stock,
and (C) sales in violation of any broker-dealer registration
requirements. The indemnity agreement of the Company herein
shall not inure to the benefit of the Sellers or any
underwriter (or to the benefit of any person who controls
such underwriter) on account of any losses, claims, damages,
liabilities (or actions or proceedings in respect thereof)
arising from the sale of any such Common Stock by such
underwriter to any person if such underwriter failed to send
or give a copy of the prospectus as the same may then be
supplemented or amended (if such supplement or amendment
shall have been furnished to the Underwriter) to such person
with or prior to written confirmation of the sale involved.
Provided further that the Company's liability to each of the
Sellers shall be limited the aggregate amount of gross
proceeds received by each of the Sellers in connection with
the sale of the Common Stock pursuant to such registration
statement or post-effective amendment.
(iii) The Company shall comply with the requirements of
Section 1(d) at its own expense, including legal, accounting,
filing, state qualification, and printing fees and costs, but
excluding counsel fees for the Sellers.
(iv) The Company's obligation under said Section 1(d) shall
be conditioned, as to each such public offering, upon a timely
receipt by the Company in writing of:
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<PAGE> 10
(A) Information as to the terms of such public offering
furnished by or on behalf of each Seller intending to make a
public distribution of his or her Common Stock; and
(B) Such other information as the Company may reasonably
require from such Sellers, or any underwriter for any of them, for
inclusion in such registration statement or post-effective
amendment.
2. PAYMENT OF PURCHASE PRICE.
(a) Purchase Price. As consideration for the Shares and the covenants
and agreements of the Sellers set forth herein, the Company shall deliver to the
Sellers at the Closing an amount equal to an aggregate of $2,750,000 in Common
Stock of the Company which shall for purposes of this Agreement have a value
equal to $5.00 per share (the "Assumed Purchase Price"). Of the 550,000 shares
of Common Stock delivered to the Sellers, 350,000 shares of Common Stock shall
be delivered to C. Kluck and 200,000 shares of Common Stock to L. Kluck.
(b) Adjustments to Purchase Price.
(i) Initial Adjustment to Purchase Price. The Company intends to
file a registration statement with the Securities and Exchange
Commission (the "SEC") in order to raise equity capital to fund its
business plan (the "Public Offering"). At such time as the registration
statement for the Public Offering has been declared effective by the
SEC, the fair market value of the shares of Common Stock issued to the
Sellers shall be determined using the Public Offering price offered to
the public. If upon the effective date of the registration statement
for the Public Offering, the Fair Market Value of the Common Stock
issued to the Sellers is not at least $2,750,000, the Company shall
issue pro-rata to the Sellers additional shares of Common Stock (on a
63.64%/36.36% basis) so that the Sellers had, as of the closing date of
the Public Offering, $2,750,000 in Common Stock using the Fair Market
Value of the Common Stock described above.
(c) Second Adjustment to Purchase Price.
(i) One year after expiration of the Lock-Up period imposed by
the Underwriter of the public offering (the "Measuring Date"), the
Company shall again determine the Fair Market Value of the shares of
Common Stock issued to the Sellers. The Fair Market Value shall be
based upon the following formula:
(A) if the Company's Common Stock is regularly quoted on an
inter-dealer quotation system which reports the last sale prices,
the average closing price for the Common Stock over the last 20
trading days
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<PAGE> 11
shall be the fair market value of the Company's Common Stock (the
"Fair Market Value"); or
(B) if the last sale prices for the Company's Common Stock
are not available, Fair Market Value shall be determined based
upon (A) the average of all bid prices and all asked prices
reported in the National Quotation Bureau, Inc.'s pink sheets for
20 trading days, or (B) if bid and asked prices have not been
quoted in the pink sheets for such 20 trading days, by a polling
of all dealers which have published quotations in any of the 20
trading days. Provided, however, if any dealers have only
published bid or asked prices but did not make a two-sided market,
the quotations submitted by such dealers shall be disregarded;
(ii) In determining whether the Purchase Price should be
adjusted, the Fair Market Value shall be multiplied by the number of
shares of Common Stock then owned by the Sellers to determine current
value ("Current Value"). For each Seller there shall be added to the
Current Value (x) the gross proceeds received by the Seller from the
sale of any shares of Common Stock (the "Gross Proceeds"), and (y) the
amount the Seller could have received if he/she sold Common Stock in
the one-year following expiration of the Lock-Up period (the
"Attributed Value") as described below. The sum of the Current Value
plus Gross Proceeds and the Attributed Value for each Seller is the
Adjusted Value. The Attributed Value, if any, shall be calculated by
initially determining if the average of Fair Market Value for any
period of 60 trading days is at least 20% of the Assumed Purchase Price
(the "Premium"). During the 60-day period, if any, in which the Premium
was the highest, 20% of the average daily volume shall be attributed to
Sellers on a pro-rata 63.64%/36.36% basis (the "Volume"). The
Attributed Value for each Seller shall be the product of (A) the
Premium times (B) the Volume times (C) 60.
(iii) If the Adjusted Value does not equal $1,750,000 for C.
Kluck and $999,000 for L. Kluck, the Company shall issue its
non-interest bearing secured promissory notes (the "Notes") to C. Kluck
and/or L. Kluck in an amount equal to $1,750,000 and $999,000,
respectively, less the Adjusted Value for each Seller as applicable.
Such Notes shall be due 180 days from the Measuring Date and secured by
a security interest covering all of the assets of Dow.
(iv) By way of example, if the Current Value is $1,500,000
($954,600 for C. Kluck and $545,400 for L. Kluck), C. Kluck has
received 400,000, L. Kluck has received $40,000, the Premium is $1.50
and the Volume is 6,364 shares for C. Kluck and 3,636 shares for L.
Kluck. The Attributed Value would be $572,760 for C. Kluck and $327,240
for L. Kluck. Therefore:
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<TABLE>
<CAPTION>
<S> <C> <C>
C. KLUCK L. KLUCK
Current Value $ 954,600 $ 545,400
Gross Proceeds 400,000 40,000
Attributed Value 572,760 327,240
----------------------------------------------
TOTAL $1,927,360 $ 912,640
</TABLE>
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers, jointly and
severally, hereby represent and warrant to the Company, all of which
representations and warranties are true, complete, and correct in all respects
as of the date hereof and as of the Closing Date, as follows:
(a) Capitalization. The authorized capital stock of Dow consists of
1,000,000 Shares of which 1,000,000 Shares are outstanding. All of the
issued and outstanding Shares are validly issued and are fully paid,
nonassessable and free of preemptive rights.
(b) Ownership of Shares. C. Kluck and L. Kluck are the legal and
beneficial owners of 636,400 and 363,600 Shares, respectively, constituting
63.64% and 36.36%, respectively, of the outstanding capital stock of Dow,
free and clear of all Encumbrances. The delivery to the Company of the
Shares pursuant to the provisions of this Agreement will transfer to the
Company valid title thereto, free and clear of any and all Encumbrances.
All of the Shares have been duly authorized and were validly issued and are
fully paid and nonassessable and were not issued in violation of any
preemptive rights. The Shares represent all of the issued and outstanding
shares of capital stock of Dow. There are not, and on the Closing Date
there will not be, outstanding (i) any options, warrants, rights of first
refusal or other rights to purchase from the Sellers or Dow any capital
stock of Dow, (ii) any securities of Dow convertible into or exchangeable
for shares of such stock, or (iii) any other commitments of any kind for
the issuance of additional shares of capital stock or options, warrants or
other securities of Dow (such options, warrants, rights of first refusal or
other rights, convertible securities, exchangeable securities or other
commitments are referred to herein collectively as "Equity Securities").
There is no contract, right or option outstanding to require the Sellers or
Dow to redeem, purchase or otherwise reacquire any Shares or Equity
Securities of Dow, and there are no preemptive rights with respect to any
Shares or Equity Securities of Dow.
(c) Organization and Qualification. Dow is a corporation duly
organized, validly existing and in good standing under the Laws, as
defined, of the State of Florida. Dow has all requisite power and
authority to own those properties and conduct those businesses presently
owned or conducted by it, and is duly qualified to do business as it
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<PAGE> 13
is now being conducted and is in good standing as a foreign corporation
in each other jurisdiction where the property owned, leased or used by it
or the conduct of its business makes such qualification necessary. The
copies of the Articles of Incorporation and By-Laws of Dow, which have
been delivered to the Company, are complete and correct and are in full
force and effect at the date hereof.
(d) Licensing with the Department of Banking and Finance. Dow is
fully licensed with the Florida Department of Banking and Finance as a
correspondent mortgage lender and has all licenses necessary to carry on
a correspondent mortgage lending business in the State of Florida
including the business of brokering reverse mortgages. There is not now
pending any investigations or inquiries, formal or informal, by the
Florida Department of Banking and Finance concerning or relating to Dow
or either of the Sellers.
(e) Authorization of the Sellers. This Agreement has been duly
executed by the Sellers and constitutes the legal, valid, binding and
enforceable obligation of the Sellers, enforceable against each in
accordance with its terms.
(f) Subsidiaries and Other Investments. Dow has no subsidiaries.
(g) Governmental Authorization. The execution, delivery and
performance by the Sellers of this Agreement requires no action by,
consent or approval of, or filing with, any governmental authority.
(h) Non-Contravention. The execution, delivery and performance by
the Sellers of this Agreement, and consummation of the transactions
contemplated hereby, including without limitation, the transfer of the
Shares to the Company, do not and will not (i) contravene or conflict
with the Articles of Incorporation or By-Laws of Dow, (ii) contravene or
conflict with or constitute a violation of any provision of any Laws, as
defined, applicable to the Sellers or Dow; (iii) constitute a default
under or give rise to any right of termination, cancellation or
acceleration of, or to a loss of any benefit to which the Sellers or Dow
are entitled under, any material Contract, as defined, to which any is a
party or any material Permit, as defined, or similar authorization; or
(iv) under any Contract of Dow or to which either Seller is a party or
under applicable Laws, result in the imposition or creative of any
Encumbrances on the Shares or any Liens, as defined, on any asset of Dow
or impose any contractual obligation or restriction under such Contract
on the Company. As used in this Agreement, the word "Contract" means all
contracts, agreements, mortgages (including any undivided interests in
any mortgages), options, leases, license agreements, sales and purchase
orders, commitments, instruments and other obligations of any kind,
whether written or oral, inclusive of amendments, to which Dow or either
Seller is a party. As used in this Agreement, the word "Liens" shall mean
all liens, encumbrances, claims, charges, security interests, rights of
either Seller and any third party, rights of redemption, equities, and
any other restrictions of any kind or nature whatsoever, including any
leases, escrows options,
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<PAGE> 14
security or other deposits, rights of redemption, chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements.
(i) Financial Statements; Undisclosed Liabilities. Schedule 3(i)
contains true and complete copies of (i) the audited balance sheets and related
statements of operations and retained earnings and of cash flows for Dow for
the years ended December 31, 1996 and December 31, 1997 (the "Annual
Statements"), (ii) the balance sheets and related statements of operations for
the five-month period ended May 31, 1998 (the "Interim Statements") (the Annual
Statements and the Interim Statements, collectively the "Financial Statements").
Each of the Financial Statements has been prepared based on the books and
records of Dow in accordance with Generally Accepted Accounting Principles
("GAAP") and present fairly the financial condition, results of operations
and cash flows of Dow as of the dates indicated or for the periods indicated,
subject in the case of the Interim Statements to normal year-end audit
adjustments, which adjustments in the aggregate are not material. Except as set
forth on Schedule 3(i), there are no Liabilities, as defined, of any Dow other
than: (i) on the balance sheet contained in the Interim Statements (the "Balance
Sheet"); (ii) Liabilities specifically disclosed and identified as such in the
Schedules to this Agreement; (iii) Liabilities incurred since the date of the
Balance Sheet contained in the Interim Statements, that do not, and will not,
individually or in the aggregate, have a material adverse effect on the
business, results of operations, financial condition or future prospects of
Dow (each a "Dow Material Adverse Effect"); and (iv) Liabilities incurred since
the date of the Balance Sheet that have been incurred in the ordinary course
of business ("Ordinary Course of Business") of Dow. As used in this Agreement,
the phrase "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
(j) Absence Of Certain Changes. Since the date of the Balance Sheet,
Dow has conducted its business in the ordinary course consistent with past
practice, and without limitation, there has not been:
(i) any event, occurrence, development or state of circumstances
or facts or change in the assets, liabilities, business, operations
or financial conditions of Dow that has had or that could reasonably
be expected to have, either alone or together with all such events,
occurrences, developments, states of circumstances or facts or changes,
a Dow Material Adverse Effect;
(ii) any incurrence, assumption or guarantee of any indebtedness
of Dow, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or other similar instruments
or letters of credit (or reimbursement obligations in respect thereof)
or banker's acceptances or representing capitalized lease obligations
or the balance deferred and unpaid of the purchase price of any
property as well as all indebtedness of others secured
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by a Lien on any asset of Dow and, to the extent not otherwise included, any
guarantee by Dow of any indebtedness of any other Person;
(iii) any creation, assumption or sufferance of the existence
Lien;
(iv) any transaction or commitment made, or any Contract
entered into, by Dow (including the acquisition or disposition of any assets),
or any waiver, amendment, termination or cancellation of any Contract by Dow, or
any relinquishment of any rights thereunder by Dow, or of any other right or
debt owed to Dow, other than in each such case actions taken in the Ordinary
Course of Business consistent with past practice;
(v) any (A) grant of any severance, continuation or
termination pay to any director, officer, shareholder or employee of Dow or
any Associate, as defined, of any of the foregoing, (B) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer, shareholder or
employee of Dow or any Associate of any of the foregoing, (C) increase in
benefits payable or potentially payable under any severance, continuation or
termination pay policies or employment agreements with any director, officer,
shareholder or employee of Dow or any Associate of any of the foregoing,
(D) increase in compensation, bonus or other benefits payable or potentially
payable to directors, officers, shareholders or employees of Dow or any
Associate of any of the foregoing, other than in the Ordinary Course of Business
consistent with past practice or pursuant to existing Contracts, or (E) change
in the terms of any bonus, pension, insurance, health or other Benefit Plan, as
defined, Dow or its Affiliates. As used in this Agreement, the word "Associate"
and the phrase "Associated With" means, when used to indicate a relationship
with any Person, as defined, (a) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities issued by such other Person, (b) any
trust or other estate in which such Person has a substantial beneficial interest
or as to which such Person serves as trustee or in a similar fiduciary capacity,
and (c) any relative or spouse of such Person, or any relative of such spouse
who has the same home as such Person or who is a director or officer of such
Person or any Affiliate thereof. As used in this Agreement, the word "Affiliate"
means, with respect to any Person, any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with such
Person. As used in this phrase "Benefit Plan" means any Employee Benefit Plan or
Benefit Arrangement, as defined. As used in this Agreement, the phrase "Employee
Benefit Plan" means any employee benefit plan, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that is
sponsored or contributed to by Dow or any ERISA Affiliate thereof covering
employees or former employees of Dow.
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As used in this Agreement, the phrase "Benefit Arrangement" means any material
benefit arrangement that is not an Employee Benefit Plan, including, without
limitation, (1) each employment or consulting agreement, (2) each arrangement
providing for insurance coverage or workers' compensation benefits, (3) each
incentive bonus or deferred bonus arrangement, (4) each arrangement providing
termination allowance, severance or similar benefits, (5) each equity
compensation plan, (6) each deferred compensation plan and (7) each
compensation policy and practice maintained by Dow covering the employees,
former employees, directors and former directors thereof and the beneficiaries
of any of them;
(vi) any loan to or guarantee or assumption of any loan or
obligation on behalf of any shareholder, director, officer or employee of Dow
or any of its Affiliates or of any Associate of any of the foregoing, except
business expense advances to employees of Dow occurring in the Ordinary Course
of Business, as defined;
(vii) except as required by GAAP, any material change by Dow in
its accounting principles, methods or practices or in the manner it keeps its
books and records or any material change of Dow of its current practices with
regards to inventory, sales, receivables, payables or accrued expenses which
would affect the timing of collection of receivables or the payment of payables;
(viii) any distribution, dividend, bonus or other payment by Dow
to the Sellers or any Affiliate of the Sellers or any officer, director,
shareholder or Affiliate of the Sellers or Dow (collectively, "Distributions");
and;
(ix) any payment, discharge or satisfaction of any Liabilities
of Dow, other than payments, discharges or satisfactions in the Ordinary Course
of Business; or (A) any payment, discharge or other satisfaction of any claim,
Liability or obligation owed by Dow to either or both of the Sellers or any of
their Affiliates, or (B) any prepayment of any Debt.
(k) Properties; Leases; Tangible Assets.
(i) Except for those Liens identified on Schedule 3(k)(i), Dow
owns all of the assets (real, personal or mixed, tangible or intangible)
reflected on the Balance Sheet (except those assets disposed of in the Ordinary
Course of Business after the date thereof), free and clear of all Liens;
(ii) All tangible properties and assets and premises owned or
leased by Dow are in good condition and repair and are adequate in all material
respects for the uses to which they are put, and no tangible properties or
assets necessary for the conduct of the business of Dow in substantially the
same manner as it has
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<PAGE> 17
been conducted are in need of replacement, maintenance or repairs,
except for routine and not materially deferred replacement,
maintenance and repair;
(iii) Schedule 3(k) sets forth a true and complete list of
all material personal property leases (the "Personal Property Leases")
and all leases of real property (the "Real Property Leases")
(collectively with the Personal Property Leases and the Real Property
Leases, the "Leases") to which Dow is a party or by which Dow is
bound. With respect to the Leases, there exist no defaults by Dow or,
to the Knowledge, as defined, of the Sellers, any default or
threatened default by any lessor or third party thereunder, that has
affected or could reasonably be expected to materially affect the
rights and privileges thereunder of Dow. As used in this Agreement,
"Knowledge" means information known to an executive officer of the
Company or if relating to the Sellers, to either Seller or to an
officer of Dow. The sale of the Shares to the Company will not
adversely affect any Leases to which Dow is a party or by which Dow
is bound; and
(iv) No real property is owned by Dow except as set forth
on Schedule 3(k).
(l) Affiliates. Except as set forth in Schedule 3(l), to the
Knowledge of the Sellers, no shareholder of Dow or any officer or director
of Dow (or any immediate family member of any such officer or director):
(i) now has or at any time subsequent to May 31, 1998 had,
directly or indirectly, an equity interest in, or holds debt of, any
Person which furnishes or sells or during such period furnished or
sold services or products to Dow or purchases or during such period
purchased from Dow any goods or services, or otherwise does or
during such period did business with Dow. Provided, however, that no
shareholder of Dow or any of their respective officers, directors or
other Affiliates shall be deemed to have such an interest solely by
virtue of the ownership of less than 5% of the outstanding voting
stock or debt securities of any publicly-held company, the stock or
debt securities of which are traded on a national stock exchange or
quoted on Nasdaq;
(ii) now is or at any time subsequent to May 31, 1998 was,
directly or indirectly, a party to any Contract to which Dow is or
during such period was a party or under which Dow is or was obligated
or bound or to which Dow's properties may be or may have been subject.
(m) Litigation. Except as disclosed on Schedule 3(m), (i) there are
no actions, claims, suits, hearings, arbitrations, proceedings (public or
private) or, to Sellers' Knowledge, governmental investigations or
inquiries, that have been brought by or against any governmental authority
or any other Person (collectively, "Proceedings")
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pending or, to the Knowledge of the Sellers, threatened, against or by Dow or
against either Seller or which seek to enjoin or rescind the transactions
contemplated by this Agreement or otherwise seek to prevent the Sellers or Dow
from complying with the terms and provisions of this Agreement, and (ii) there
are no existing orders, judgments or decrees of any governmental authority
affecting Dow.
(n) Contracts.
(i) Schedule 3(n) sets forth a complete list of all material
Contracts (the "Scheduled Contracts") including, without limitation:
(A) each Contract between Dow and (1) each present or
former director, officer or other member of management or other
personnel of Dow, (2) any supplier of services or products to Dow
whose dollar volume of sales to Dow taken as a whole exceeded
$25,000 in 1997, and (3) any Person in which the aggregate
payments made to Dow under such Contract exceeded $25,000 in
1997;
(B) each other agreement or arrangement of Dow that
requires the payment or incurrence of Liabilities, or the
rendering of services, by Dow, subsequent to the date hereof of
more than $25,000 or that is reasonably expected to require
payment of more than $25,000 in the aggregate;
(C) all Contracts relating to, and evidences of or
guarantees of, or providing security for, Debt or the deferred
purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset); and
(D) all partnership, joint venture or other similar
Contracts, arrangements or agreements.
(ii) Each Scheduled Contract relating to Dow is a legal, valid
and binding obligation of Dow that is party thereto and, to the
Knowledge of the Sellers, each other party thereto, enforceable
against Dow and, to the Knowledge of the Sellers, each such other
party thereto, in accordance with its terms, and neither Dow nor to
the Knowledge of the Sellers, any other party thereto, is in material
default or has failed to perform any material obligation thereunder.
Complete and correct copies of each Scheduled Contract have been
delivered or made available to the Company. There is no default or
failure to perform under other Contracts which could reasonably be
expected to have a Dow Material Adverse Effect.
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(o) Permits.
(i) Schedule 3(o) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities (and all other Persons)
necessary for the operation of Dow in substantially the same manner as currently
operated or affecting or relating in any way to Dow (the "Permits").
(ii) Schedule 3(o) lists (A) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver required under applicable laws to be obtained by the
Seller or Dow by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby to avoid the loss of any
material Permit or otherwise, and (B) each Scheduled Contract with respect to
which the consent of the other party or parties thereto must be obtained by the
Sellers or Dow by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby to avoid the invalidity of
the transfer of such Contract, the termination thereof, a breach or default
thereunder or any other change or modification to the terms thereof. Each Permit
is valid and in full force and effect in all material respects and, assuming all
necessary consents have been obtained prior to the Closing, are or will be
transferable and assuming the necessary consents have been obtained prior to the
Closing, none of the Permits will be terminated or become terminable or impaired
in any material respect as a result of the transactions contemplated hereby. To
the Knowledge of the Sellers, there are no facts relating to the identity or
circumstances of the Sellers that would prevent or materially delay obtaining
any of the consents.
(p) Employment Agreements.
(i) There are no employment, consulting, severance pay,
continuation pay, termination pay or indemnification agreements or other similar
agreements of any nature whatsoever (collectively, "Employment Agreements")
between or binding upon Dow, on the one hand, and any current or former
shareholder, officer, director, employee or Affiliate of Dow or any of its
respective Associates or any consultant or agent of Dow, on the other hand, that
are currently in effect;
(ii) There are no Employment Agreements or any other similar
agreements to which Dow is a party or by which it is bound under which the
transactions contemplated by this Agreement (A) will require any payment by Dow
or the Company, or any consent or waiver from any shareholder, officer,
director, employee or Affiliate of Dow or any of its respective Associates or
any consultant or agent of Dow, or the Company, or (B) will result in any
increase, acceleration, vesting or other change in the compensation, benefits or
other rights of any shareholder, officer, director, employee or Affiliate of Dow
or any of its
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<PAGE> 20
respective Associates or any consultant or agent of Dow under any
such Employment Agreement or other similar agreement.
(iii) Schedule 3(p) sets forth all Benefit Plans of Dow, in
which any employees or former employees and their beneficiaries of
Dow participate. Sellers have made available to the Company true and
correct copies of all governing instruments and related agreements
pertaining to such Benefit Plans.
(iv) Neither Dow nor any Affiliate or ERISA Affiliate of Dow
has ever sponsored, maintained, contributed to, or incurred an
obligation to contribute to, any Employee Benefit Plan except as
disclosed on Schedule 3(p). In connection with any Employee Benefit
Plan currently maintained by Dow, (A) there have been no accumulated
funding deficiencies (within the meaning of Internal Revenue Code
(the "Code") Section 412), whether or not waived, (B) there have been
no reportable events (within the meaning of ERISA Section 4043(b))
other than any reportable event that may arise in connection with the
transactions contemplated by this Agreement, and (C) no circumstances
exist that would warrant a termination of any such plan by the
Pension Benefit Guaranty Corporation pursuant to ERISA Section 4042.
No Employee Benefit Plan has been terminated within the last five
years in other than a standard termination under Section 4041(b) of
ERISA and all liabilities under such plans have been adequately and
properly discharged. The foregoing applies only to the extent any of
the events results in a material Liability of Dow.
(v) No agreement, commitment or obligation exists to increase
benefits under any Benefit Plan or to adopt any new Benefit Plan.
Further, no individual shall accrue or receive additional benefits,
service or accelerated rights to payments of benefits under any
Benefit Plan, including the right to receive any parachute payment,
as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a direct
result of the transactions contemplated hereby. Dow is not a party to
any agreement or arrangement that could result in the payment of any
such benefits or payments.
(vi) No Benefit Plan has participated in, engaged in or been a
party to any non-exempt Prohibited Transaction, as defined, and none
of Dow or any Affiliate has had asserted against it any material
claim for taxes under Chapter 43 of Subtitle A of the Code and
Section 5000 of the Code, or for material penalties under ERISA
Section 502(c), (i) or (l), with respect to any Employee Benefit Plan
nor, to the Knowledge of the Sellers, is there a material basis for
any such claim. No officer, director or employee of Dow has committed
a material breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA with respect to any Benefit Plan,
with respect to which breach Dow is or could be directly or
indirectly liable.
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(vii) Other than routine claims for benefits, there is no claim
pending, or to the Knowledge of the Sellers, threatened, involving Dow by any
Person against such Plan. There is no pending, or to the Knowledge of the
Sellers, threatened, proceeding involving any Employee Benefit Plan before the
Internal Revenue Service ("IRS"), the United States Department of Labor
("USDL") or any other governmental authority that affects any Benefit Plan.
(viii) There is no material violation of any reporting or
disclosure requirement imposed by ERISA or the Code with respect to any
Employee Benefit Plan.
(ix) Each Employee Benefit Plan has at all times prior hereto
been maintained in all material respects, by its terms and in operation, in
accordance with ERISA and the Code. Dow and its respective Affiliates and ERISA
Affiliates have made full and timely payment of all amounts required to be
contributed under the terms of each Employee Benefit Plan and applicable Laws
or required to be paid as expenses under such Employee Benefit Plan, and Dow
and its Affiliates shall continue to do so through the Closing. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
is and has always been so qualified, and either has received a favorable
determination letter with respect to such qualified status from the IRS or has
filed a request for such a determination letter with the IRS within the
remedial amendment period such that such determination of qualified status will
apply from and after the effective date of any such Employee Benefit Plan.
(x) Dow has made available to the Company a copy of the most
recently filed Federal Form 5500 series and accountant's opinion, if
applicable, for each Employee Benefit Plan.
(q) Employment Matters. Annexed as Schedule 3(q) is a copy of Dow's
employee manual. (i) to the best of the Sellers' Knowledge, there are no
charges or complaints of discrimination pending before the United States Equal
Employment Opportunity Commission or any other federal, state, local or foreign
agency or tribunal against Dow; (ii) to the best of the Sellers' Knowledge, Dow
does not presently employ, and at no time during the past year did it employ,
any illegal alien; (iii) Dow is in compliance in all material respects with all
federal, state and local labor and employment-related Laws applicable to its
business; (iv) to the best of the Sellers' Knowledge, no employee or former
employee of Dow has never made any formal or informal charge or allegation
relating to sexual harassment; and (v) all individuals who are performing or
have performed services for Dow or any affiliate thereof and are or during
1996, 1997 or 1998 were classified by Dow as "independent contractors"
qualified for such classification under Section 530 of the Revenue Act of 1978
or Section 1706 of the Tax Reform Act of 1986, as applicable.
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(r) Intellectual Property and Intangible Assets. Dow owns or possesses
valid and binding licenses or other rights to use, whether or not registered,
all of its Intellectual Property and Intangible Assets. As used in this
Agreement, the phrase "Intellectual Property" means all right, title and
interest in and to all patents, licenses, copyrights, trademarks, trade names,
service marks (including the trademark and name of Dow or any derivation
thereof), logos and slogans, and all of the goodwill associated therewith, and
all registrations, applications and other rights associated with the foregoing,
if any, whether registered or unregistered, now used or presently planned to be
used by Dow in connection with its business, including, without limitation,
those set forth on Schedule 3(r), including the right to sue for past
infringement. As used in this Agreement, the phrase "Intangible Assets" means
all right, title and interest in and to all know-how, technology, slogans, data,
studies, confidential information, restrictive covenants, computer software
(including documentation and related object and source codes), indemnity rights,
and other intangible assets now used or presently planned to be used by Dow, and
all of the goodwill associated therewith, confidentiality obligations and
similar obligations of present and former shareholders, officers and employees
of Dow. Schedule 3(r) sets forth a complete and accurate list of all such
Intellectual Property and Intangible Assets (identifying those owned and those
licensed), including all United States, state and foreign registrations or
applications for registration thereof and all agreements (including, without
limitation, agreements pursuant to which Dow has granted licenses to third
parties to use any Intellectual Property or Intangible Asset) relating thereto.
All actions necessary to maintain the registered Intellectual Property and
Intangible Assets have been taken by Dow. Dow is not required to pay any
royalty, license fee or similar compensation with respect to the Intellectual
Property or Intangible Assets in connection with the current or prior conduct of
its business. The use by Dow of any of the Intellectual Property or Intangible
Assets does not violate the proprietary rights of any other Person and no claims
have been asserted by any Person with respect to the use of the Intellectual
Property or Intangible Assets by Dow. To the best of the Sellers' Knowledge, no
Person is infringing upon the Intellectual Property or Intangible Assets. Dow
has taken reasonable security measures to protect the secrecy, confidentiality
and value of the Intellectual Property. No Person, other than Dow, owns or has
any proprietary, financial or other interest, direct or indirect, in whole or in
part, in any Intellectual Property or Intangible Asset. Except as set forth in
Schedule 3(r), Dow is not a party to any confidentiality, secrecy or similar
agreements with third parties.
(s) Compliance With Law. Dow has at all times operated in all respects
and is presently in compliance in all material respects with all applicable
federal, state, local, foreign or other laws, rules, regulations, guidelines,
orders, injunctions, building and other codes, ordinances, Permits, licenses,
authorizations, judgments, decrees of federal, state, local, foreign or other
authorities, and all orders, writs, decrees and consents of any governmental or
political subdivision or agency thereof, or any court or similar Person
established by any such governmental or political subdivision or agency thereof
(collectively, the "Laws"), including but not limited to all applicable domestic
and
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foreign Laws, rules and regulations relating to the safe conduct of business,
employment discrimination, wages and hours, employment of illegal aliens,
collective bargaining, the payment of withholding and social security taxes,
product labelling, antitrust, consumer protection, occupational safety and
health, consumer product safety, the importation of goods, product liability,
currency exchange, securities and trading with the enemy matters, and to the
best of the Sellers' Knowledge no event has occurred which would constitute
reasonable grounds for a claim that non-compliance has occurred or is occurring
and any non-compliance will not have a Dow Material Adverse Effect.
(t) Tax Matters.
(i) Dow (A) has accurately prepared and timely filed or caused to
be filed with the appropriate tax authorities all material tax returns
required to have been filed by it under applicable Laws, and (B) has
paid or caused to be paid to the appropriate tax authorities all
material taxes required to have been paid by them. No tax Liens or
assessments have been filed by any tax authority against Dow or any its
property or assets.
(ii) Dow is not and has not been required to be included in any
state, local or foreign combined, unitary or consolidated tax return
filed by any Person.
(u) Year 2000 Compliance. The information technology, including
computer software, computer firmware, computer hardware (whether general or
specific purpose), and other similar or related items of automated, computerized
and/or software systems ("Information Technology") that is used or relied on by
Dow in the conduct of its business is designed to be used prior to, during and
after the calendar Year 2000. The Information Technology used during each such
time period will accurately receive, provide and process date forward-time data
(including, but not limited, to calculating, comparing and sequencing) from,
into and between the 20th and 21st Centuries, including the years 1999 and 2000,
and leap year calculations and will not malfunction, cease to function or
provide invalid or incorrect results as a result of date/time data, to the
extent that other Information Technology, used in combination with the
Information Technology of Dow, properly exchanges date/time data with it. To the
best of the Sellers' Knowledge, the Information Technology used by any mortgage
lender which Dow does business fully complies with the Year 2000 in the same
manner as described above relating to Dow.
(v) Disclosure. This Agreement and the Schedules do not contain and
will not contain an untrue statement of a material fact or omits or will omit
any information or statement of a material fact necessary in order to make the
information or statements herein or therein not misleading. After reasonable
investigation, including, without limitation, consultation with counsel, there
is no fact or condition within the Knowledge of the Sellers which materially and
adversely affects the assets, Liabilities, business, operations or financial
condition of Dow, which has not been set forth in this Agreement
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or any Schedules hereto or certificate or other document delivered in
accordance with the terms hereof or any other written statement or other
document delivered to the Company by or on behalf of the Sellers.
(w) No Other Representations. Dow and the Sellers shall not be deemed
to have made any representation or warranty other than as is expressly made
in Section 3(a) through (v).
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Sellers, all of which representations and
warranties are true, complete, and correct in all respects as of the date
hereof and as of the Closing Date, as follows:
(a) Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock of which 4,485,500 shares are
outstanding. All of the issued and outstanding shares are validly issued and
are fully paid, non-assessable and free of preemptive rights. The delivery
to the Sellers of the Common Stock of the shares pursuant to the provisions
of this Agreement will transfer to the Sellers valid title thereto, free and
clear of any and all Encumbrances. All of the shares of Common Stock which
are outstanding have been duly authorized and were validly issued and are
fully paid and nonassessable and were not issued in violation of any
preemptive rights. Except as set forth on Schedule 4(a), there are not, and
on the Closing Date there will not be, outstanding any Equity Securities.
There is no contract, right or option outstanding to require the Company to
redeem, purchase or otherwise reacquire any Equity Securities of the
Company, and there are no preemptive rights with respect to any shares or
Equity Securities of the Company.
(b) Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the Laws, as defined,
of the State of Florida. The Company has all requisite power and authority
to own those properties and conduct those businesses presently owned or
conducted by it, and is duly qualified to do business as it is now being
conducted and is in good standing as a foreign corporation in each other
jurisdiction where the property owned, leased or used by it or the conduct
of its business makes such qualification necessary. The copies of the
Articles of Incorporation and By-laws of the Company, which have been
delivered to the Sellers, are complete and correct and are in full force and
effect at the date hereof.
(c) Licensing with the Department of Banking and Finance. The Company
is fully licensed with the Florida Department of Banking and Finance as a
correspondent mortgage lender and has all licenses necessary to carry on a
correspondent mortgage lending business in the State of Florida including
the business of brokering reverse mortgages. There is not now pending any
investigations or inquiries, formal or informal, by the Florida Department
of Banking and Finance concerning or relating to the Company.
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(d) Authorization of the Company. The Company has full power and
authority to enter into and perform this Agreement and all corporate action
necessary to authorize the execution and delivery of this Agreement and the
performance by it of its obligations hereunder has been duly taken. This
Agreement has been duly executed by the Company and constitutes the legal,
valid, binding and enforceable obligation of the Company, enforceable against it
in accordance with its terms.
(e) Subsidiaries and Other Investments. The Company has no
subsidiaries except as set forth on Schedule 4(e) which Schedule sets forth a
complete list of each direct or indirect Subsidiary, as defined, of the Company,
its jurisdiction of organization, the authorized capital stock of each such
Subsidiary, the number of shares of outstanding capital stock of each such
Subsidiary and the owners thereof. All such issued and outstanding shares of
capital stock of each such Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable and were not issued in violation
of any preemptive rights. Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all corporate power and all material governmental
licenses, governmental authorizations, governmental consents and governmental
approvals required to carry on the business as now conducted by such Subsidiary
and to own and operate the business as now owned and operated by such
Subsidiary. Except as disclosed in Schedule 4(e), no Subsidiary holds any of
its issued and outstanding shares of capital stock in its treasury, and there
are not, and on the Closing Date there will not be, outstanding any Equity
Securities of or with respect to such Subsidiary. Except as otherwise disclosed
in Schedule 4(e), the Company or a wholly-owned Subsidiary of the Company owns,
directly or indirectly, free and clear of all Encumbrances, all of the
outstanding capital stock or other Equity Securities of each of its Subsidiaries
identified in Schedule 4(e). No Subsidiary is required to be qualified to
conduct business in any states set forth in Schedule 4(e), in which states the
relevant Subsidiary is duly qualified and in good standing.
(f) Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement requires no action by, consent or
approval of, or filing with, any governmental authority.
(g) Non-Contravention. The execution, delivery and performance by
the Company of this Agreement, and consummation of the transactions contemplated
hereby, including without limitation, the transfer of the Common Stock to the
Sellers does not and will not (i) contravene or conflict with the Articles of
Incorporation or By-Laws of the Company, true and correct copies of all of which
have been delivered to the Sellers by the Company; (ii) contravene or conflict
with or constitute a violation of any provision of any Laws, as defined,
applicable to the Company; (iii) constitute a default under or give rise to any
right of termination, cancellation or acceleration of, or to a loss of any
benefit to which the Company is entitled under, any material Contract of which
it is a party or any material permit or similar authorization; or (iv) result in
the creation or imposition, under any Contract of the Company or to which it is
a party or applicable
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Laws, or any Encumbrances on the Shares or any Liens on any asset of the
Company or any Subsidiary of the Company, or impose any contractual obligation
or restriction under such Contract on the Sellers.
(h) Financial Statements; Undisclosed Liabilities. Schedule 4(h)
contains true and complete copies of the Financial Statements of the Company.
Each of the Company's Financial Statements has been prepared based on the books
and records of the Company in accordance with GAAP and present fairly the
financial condition, results of operations and cash flows of the Company as of
the dates indicated or for the periods indicated, subject in the case of the
Interim Statements to normal year-end audit adjustments, which adjustments in
the aggregate are not material. Except as set forth on Schedule 4(h), there are
no Liabilities of the Company other than: (i) on the Company's Balance Sheet;
(ii) Liabilities specifically disclosed and identified as such in the Schedules
to this Agreement; (iii) Liabilities incurred since the date of the Company's
Balance Sheet contained in the Interim Statements, that do not, and will not,
individually or in the aggregate, have a material adverse effect on the
business, results of operations, financial condition or future prospects of the
Company (each a "Company Material Adverse Effect"); and (iv) Liabilities
incurred since the date of the Company's Balance Sheet that have been incurred
in the Ordinary Course of Business of the Company.
(i) Absence of Certain Changes. Since the date of the Balance Sheet,
the Company has conducted its business in the ordinary course consistent with
past practice, and without limitation, there has not been:
(i) any event, occurrence, development or state of circumstances
or facts or change in the assets, liabilities, business, operations or
financial conditions of the Company that has had or that could
reasonably be expected to have, either alone or together with all such
events, occurrences, developments, states of circumstances or facts or
changes, a material adverse effect;
(ii) any incurrence, assumption or guarantee of any indebtedness
of the Company, whether or not contingent, in respect of borrowed money
or evidenced by bonds, notes, debentures or other similar instruments
or letters of credit (or reimbursement obligations in respect thereof)
or bank's acceptances or representing capitalized lease obligations or
the balance deferred and unpaid of the purchase price of any property
as well as all indebtedness of others secured by a Lien on any asset of
the Company (whether or not such indebtedness is assumed by the
Company) and, to the extent not otherwise included, any guarantee by
the Company of any indebtedness of any other Person;
(iii) any creation, assumption or sufferance of the existence of
any Lien;
(iv) any transaction or commitment made, or any Contract entered
into,
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by the Company (including the acquisition or disposition of any
assets), or any waiver, amendment, termination or cancellation of any
Contract by the Company, or any relinquishment of any rights thereunder
by the Company, or of any other right or debt owed to the Company,
other than in each such case actions taken in the Ordinary Course of
Business consistent with past practice;
(v) any (A) grant of any severance, continuation or termination
pay to any director, officer, shareholder or employee of the Company or
any Associate, as defined, of any of the foregoing, (B) entering into
of any employment, deferred compensation or other similar agreement (or
any amendment to any such existing agreement) with any director,
officer, shareholder or employee of the Company or any Associate of any
of the foregoing, (C) increase in benefits payable or potentially
payable under any severance, continuation or termination pay policies
or employment agreements with any director, officer, shareholder or
employee of the Company or any Associate of any of the foregoing,
(D) increase in compensation, bonus or other benefits payable or
potentially payable to directors, officers, shareholders or employees
of the Company or any Associate of any of the foregoing, other than in
the Ordinary Course of Business consistent with past practice or
pursuant to existing Contracts, or (E) change in the terms of any
bonus, pension, insurance, health or other Benefit Plan of each Seller
or any of its Affiliates applicable to the Company. As used in this
Agreement, the word "Associate" and the phrase "Associated With" means,
when used to indicate a relationship with any Person, (a) any other
Person of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities issued by such other Person, (b) any trust or other estate
in which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity,
and (c) any relative or spouse of such Person, or any relative of such
spouse who has the same home as such Person or who is a director or
officer of such Person or any Affiliate thereof. As used in this
Agreement, the word "Affiliate" means, with respect to any Person, any
Person directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person. As used in this
phrase "Benefit Plan" means any Employee Benefit Plan or Benefit
Arrangement, as defined. As used in this Agreement, the phrase
"Employee Benefit Plan" means any employee benefit plan, as defined in
Section 3(3) of ERISA, that is sponsored or contributed to by the
Company or any ERISA Affiliate thereof covering employees or former
employees of the Company. As used in this Agreement, the phrase
"Benefit Arrangement" means any material benefit arrangement that is
not an Employee Benefit Plan, including, without limitation, (1) each
employment or consulting agreement, (2) each arrangement providing for
insurance coverage or workers' compensation benefits, (3) each
incentive bonus or deferred bonus arrangement, (4) each arrangement
providing termination allowance, severance or similar benefits, (5)
each equity compensation plan, (6) each deferred compensation plan and
(7) each compensation policy and practice
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<PAGE> 28
maintained by the Company covering the employees, former employees, directors
and former directors thereof and the beneficiaries of any of them;
(vi) any loan to or guarantee or assumption of any loan or
obligation on behalf of any shareholder, director, officer or employee of the
Company or any of its Affiliates or of any Associate of any of the foregoing,
except business expense advances to employees of the Company occurring in the
Ordinary Course of Business consistent with past practice;
(vii) except as required by GAAP, any material change by the
Company in its accounting principles, methods or practices or in the manner it
keeps its books and records or any material change of the Company of its
current practices with regards to inventory, sales, receivables, payables or
accrued expenses which would affect the timing of collection of receivables or
the payment of payables;
(viii) any distribution, dividend, bonus or other payment by
the Company to the Sellers or any Affiliate of the Sellers or any officer,
director, shareholder or Affiliate of the Company (collectively,
"Distributions"); and
(ix) any payment, discharge or satisfaction of any Liabilities
of the Company, other than payments, discharges or satisfactions in the
Ordinary Course of Business consistent with past practice; or (A) any payment,
discharge or other satisfaction of any claim, Liability or obligation owed to
the Company by its Affiliates, or (B) any prepayment of any Debt.
(j) Properties; Leases; Tangible Assets.
(i) Except for those Liens identified on Schedule 4(j), the
Company owns all of the assets (real, personal or mixed, tangible or
intangible) reflected in the Balance Sheet (except those assets disposed of in
the Ordinary Course of Business after the date thereof), free and clear of all
Liens;
(ii) All tangible properties and assets and premises owned or
leased by the Company are in good condition and repair and are adequate in all
material respects for the uses to which they are put, and no tangible
properties or assets necessary for the conduct of the business of the Company
in substantially the same manner as it has heretofore been conducted are in
need of replacement, maintenance or repairs, except for routine and not
materially deferred replacement, maintenance and repair;
(iii) Schedule 4(j) sets forth a true and complete list of all
material the Leases to which the Company is a party or by which the Company is
bound. With respect to the Leases, there exist no defaults by the Company or,
to the Knowledge of the Company, any default or threatened default by any
lessor or
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<PAGE> 29
third party thereunder, that has affected or could reasonably be expected
to materially affect the rights and privileges thereunder of the Company.
The sale of the Common Stock to the Sellers will not adversely affect any
Leases to which the Company is a party or by which it is bound; and
(iv) No real property is owned by the Company.
(k) Affiliates. Except as set forth in Schedule 4(k) to the Knowledge, of
the Company, no shareholder of the Company or any officer or director of the
Company (or any immediate family member of any such officer or director):
(i) now has or at any time subsequent to May 31, 1998 had, directly
or indirectly, an equity interest in, or holds debt of, any Person which
furnishes or sells or during such period furnished or sold services or
products to the Company or purchases or during such period purchased from
the Company any goods or services, or otherwise does or during such
period did business with the Company. Provided, however, that no
shareholder of the Company or any of its respective officers, directors
or other Affiliates shall be deemed to have such an interest solely by
virtue of the ownership of less than 5% of the outstanding voting stock
or debt securities of any publicly-held company, the stock or debt
securities of which are traded on a national stock exchange or quoted on
Nasdaq; or
(ii) now is or at any time subsequent to May 31, 1998 was, directly
or indirectly, a party to any Contract to which the Company is or during
such period was a party or under which the Company is or was obligated or
bound or to which the Company's properties may be or may have been
subject.
(l) Litigation. Except as disclosed on Schedule 4(l), there are no
actions, claims, suits, hearings, arbitrations, proceedings (public or
private) or, to the Company's Knowledge, Proceedings pending or, to the
Knowledge of the Company, threatened, against or by the Company or which seek
to enjoin or rescind the transactions contemplated by this Agreement or
otherwise seek to prevent the Company from complying with the terms and
provisions of this Agreement, and (ii) there are no existing orders, judgments
or decrees of any governmental authority affecting the Company.
(m) Contracts.
(i) Schedule 4(m) sets forth a complete list of all Scheduled
Contracts including, without limitation:
(A) each Contract between the Company and (A) each present or former
director, officer or other member of management or other personnel of the
Company, (B) any supplier of services or products to the
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<PAGE> 30
Company whose dollar volume of sales to the Company taken
as a whole exceeded $50,000 in 1997, and (C) any Person in
which the aggregate payments made to the Company in 1997
under such Contract exceeded $50,000;
(B) each other agreement or arrangement of the Company
that requires the payment or incurrence of Liabilities, or the
rendering of services, by the Company, subsequent to the date
hereof of more than $50,000 or that is reasonably expected to
require payment of more than $50,000 in the aggregate;
(C) Contracts relating to, and evidences of or guarantees
of, or providing security for, Debt or the deferred purchase
price of property (whether incurred, assumed, guaranteed or
secured by any asset); and
(D) all partnership, joint venture or other similar
Contracts, arrangements or agreements.
(ii) Each Scheduled Contract relating to the Company is a legal,
valid and binding obligation of the Company that is party
thereto and, to the Knowledge of the Company, each other party
thereto, enforceable against the Company and, to the Knowledge
of the Company, each such other party thereto, in accordance
with its terms, and the Company is party thereto, and neither
the Company nor to the Knowledge of the Company, any other party
thereto, is in material default or has failed to perform any
material obligation thereunder. Complete and correct copies of
each Scheduled Contract have been delivered or made available to
the Company. There is no default or failure to perform under
other Contracts which could reasonably be expected to have a
material adverse effect.
(n) Permits.
(i) Schedule 4(n) sets forth all material Permits necessary for
the operation of the Company in substantially the same manner as
currently operated or affecting or relating in any way to the Company
(the "Permits").
(ii) Schedule 4(n) lists (A) each governmental or other
registration, filing, application, notice, transfer, consent,
approval, order, qualification and waiver required under applicable
laws to be obtained by the Company by virtue of the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby to avoid the loss of any material Permit or
otherwise, and (B) each Scheduled Contract with respect to which the
consent of the other party or parties thereto must be obtained by the
Company by virtue of the execution and delivery of this Agreement or
the consummation of the
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transactions contemplated hereby to avoid the invalidity of the
transfer of such Contract, the termination thereof, a breach or
default thereunder or any other change or modification to the terms
thereof. Each Permit is valid and in full force and effect in all
material respects and, assuming all necessary consents have been
obtained prior to the Closing, are or will be transferable and
assuming the necessary consents have been obtained prior to the
Closing, none of the Permits will be terminated or become terminable
or impaired in any material respect as a result of the transactions
contemplated hereby. To the Knowledge of the Company there are no
facts relating to the identity or circumstances of the Company that
would prevent or materially delay obtaining any of the consents.
(o) Employment Agreements.
(i) There are no Employment Agreements between or binding upon
the Company, on the one hand, and any current or former shareholder,
officer, director, employee or Affiliate of the Company or any of its
respective Associates or any consultant or agent of the Company, on
the other hand, that are currently in effect;
(ii) Except as disclosed on Schedule 4(o), there are no
Employment Agreements or any other similar agreements to which the
Company is a party or by which it is bound under which the
transactions contemplated by this Agreement (A) will require any
payment by the Company, or any consent or waiver from any
shareholder, officer, director, employee or Affiliate of the Company
or any of its respective Associates or any consultant or agent of the
Company, or (B) will result in any increase, acceleration, vesting
or other change in the compensation, benefits or other rights of any
shareholder, officer, director, employee or Affiliate of the Company
or any of its respective Associates or any consultant or agent of the
Company under any such Employment Agreement or other similar
agreement.
(iii) Set forth all Benefit Plans of the Company, in which any
employees or former employees and their beneficiaries of the Company
participate. The Company has made available to the Sellers true and
correct copies of all governing instruments and related agreements
pertaining to such Benefit Plans.
(iv) Neither the Company nor any Affiliate or ERISA Affiliate
sponsors or has ever sponsored, maintained, contributed to, or
incurred an obligation to contribute to, any Employee Benefit Plan.
In connection with any Employee Benefit Plan currently maintained by
the Company, (A) there have been no accumulated funding deficiencies
(within the meaning of the Code, Section 412), whether or not waived,
(B) there have been no reportable events (within the meaning of ERISA
Section 4043(b)) other than any reportable event that may
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arise in connection with the transactions contemplated by this Agreement, and
(C) no circumstances exist that would warrant a termination of any such plan by
the Pension Benefit Guaranty Corporation pursuant to ERISA Section 4042. No
Employee Benefit Plan has been terminated within the last five years in other
than a standard termination under Section 4041(b) of ERISA and all liabilities
under such plans have been adequately and properly discharged. The foregoing
applies only to the extent any of the events results in a material Liability of
the Company.
(v) No agreement, commitment or obligation exists to increase
benefits under any Benefit Plan or to adopt any new Benefit Plan. Further, no
individual shall accrue or receive additional benefits, service or accelerated
rights to payments of benefits under any Benefit Plan, including the right to
receive any parachute payment, as defined in Section 280G of the Code, or
become entitled to severance, termination allowance or similar payments as a
direct result of the transactions contemplated hereby, the Company is not a
party to any agreement or arrangement that could result in the payment of any
such benefits or payments.
(vi) No Benefit Plan has participated in, engaged in or been a
party to any non-exempt Prohibited Transaction, as defined, and none of the
Company or any Affiliate has had asserted against it any material claim for
taxes under Chapter 43 of Subtitle A of the Code and Section 5000 of the Code,
or for material penalties under ERISA Section 502(c), (A) or (B), with respect
to any Employee Benefit Plan nor, to the Knowledge of the Company, is there a
material basis for any such claim. No officer, director or employee of the
Company has committed a material breach of any responsibility or obligation
imposed upon fiduciaries by Title I of ERISA with respect to any Benefit Plan,
with respect to which breach the Company is or could be directly or indirectly
liable.
(vii) Other than routine claims for benefits, there is no claim
pending, or to the Knowledge of the Company, threatened, involving the Company
by any Person against such Plan. There is no pending, or to the Knowledge of
the Company, threatened, proceeding involving any Employee Benefit Plan before
the IRS, the USDL or any other governmental authority that affects any Benefit
Plan.
(viii) There is no material violation of any reporting or
disclosure requirement imposed by ERISA or the Code with respect to any Benefit
Plan.
(ix) Each Employee Benefit Plan has at all times prior hereto
been maintained in all material respects, by its terms and in operation, in
accordance with ERISA and the Code. The Company and its respective Affiliates
and ERISA Affiliates have made full and timely payment of all amounts required
to be contributed under the terms of each Employee Benefit Plan and applicable
Laws or required to be paid as expenses under such Employee Benefit Plan, and
the
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Company and its Affiliates shall continue to do so through the Closing.
Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code is and has always been so qualified, and
either has received a favorable determination letter with respect to
such qualified status from the IRS or has filed a request for such a
determination letter with the IRS within the remedial amendment period
such that such determination of qualified status will apply from and
after the effective date of any such Employee Benefit Plan.
(x) The Company has made available to the Sellers, a copy of
the most recently filed Federal Form 5500 series and accountant's
opinion, if applicable, for each Employee Benefit Plan.
(p) Employment Matters. Annexed as Schedule 4(p) is a copy of the
Company's employee manual. (i) to the best of the Company's Knowledge, there
are no charges or complaints of discrimination pending before the United States
Equal Employment Opportunity Commission or any other federal, state, local or
foreign agency or tribunal against the Company; (ii) to the best of the
Company's Knowledge, the Company does not presently employ, and at no time
during the past year did it employ, any illegal alien; (iii) the Company is in
compliance in all material respects with all federal, state and local labor and
employment-related Laws applicable to its business; (iv) to the best of the
Company's Knowledge, no employee or former employee of the Company has never
made any formal or informal charge or allegation relating to sexual harassment;
and (v) all individuals who are performing or have performed services for the
Company or any affiliate thereof and are or during 1996 or 1997 were classified
by the Company as "independent contractors" qualified for such classification
under Section 530 of the Revenue Act of 1978 or Section 1706 of the Tax Reform
Act of 1986.
(q) Intellectual Property and Intangible Assets. The Company owns or
possesses valid and binding licenses or other rights to use, whether or not
registered, all of its Intellectual Property and Intangible Assets. Schedule
4(q) sets forth a complete and accurate list of all such Intellectual Property
and Intangible Assets (identifying those owned and those licensed), including
all United States, state and foreign registrations or applications for
registration thereof and all agreements (including, without limitation,
agreements pursuant to which the Company has granted licenses to third parties
to use any Intellectual Property or Intangible Asset) relating thereto. All
actions necessary to maintain the registered Intellectual Property and
Intangible Assets have been taken by the Company. The Company is not required
to pay any royalty, license fee or similar compensation with respect to the
Intellectual Property or Intangible Assets in connection with the current or
prior conduct of its business. The use by the Company of any of the
Intellectual Property or Intangible Assets does not violate the proprietary
rights of any other Person and no claims have been asserted by any Person with
respect to the use of the Intellectual Property or Intangible Assets by the
Company. To the Company's Knowledge, no Person is infringing upon the
Intellectual Property or Intangible Assets. The Company has taken reasonable
security measures to protect the secrecy,
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confidentiality and value of the Intellectual Property. No person, other than
the Company, owns or has any proprietary, financial or other interest, direct
or indirect, in whole or in part, in any Intellectual Property or Intangible
Asset. Except as set forth in Schedule 4(q), the Company is not a party to any
confidentiality, secrecy or similar agreements with third parties.
(r) Compliance With Law. The Company has at all times operated in all
respects and is presently in compliance in all material respects with all
applicable Laws including but not limited to all applicable domestic and foreign
Laws, rules and regulations relating to the safe conduct of business, employment
discrimination, wages and hours, employment of illegal aliens, collective
bargaining, the payment of withholding and social security taxes, product
labelling, antitrust, consumer protection, occupational safety and health,
consumer product safety, the importation of goods, product liability, currency
exchange, securities and trading with the enemy matters, and to the Company's
Knowledge no event has occurred which would constitute reasonable grounds for a
claim that non-compliance has occurred or is occurring and any non-compliance
will not have a Company Material Adverse Effect.
(s) Tax Matters.
(i) The Company (A) has accurately prepared and timely filed or
caused to be filed with the appropriate tax authorities all material
tax returns required to have been filed by it under applicable Laws,
and (B) has paid or caused to be paid to the appropriate tax
authorities all material taxes required to have been paid by them. No
tax Liens or assessments have been filed by any tax authority against
the Company or any its properties or assets.
(ii) The Company is not and has not been required to be included
in any state, local or foreign combined, unitary or consolidated tax
return filed by any person.
(t) Year 2000 Compliance. The Information Technology, including
computer software, computer firmware, computer hardware (whether general or
specific purpose), and other similar or related items of automated, computerized
and/or software systems that is used or relied on by the Company in the conduct
of its business is designed to be used prior to, during and after the calendar
Year 2000. The Information Technology used during each such time period will
accurately receive, provide and process date forward-time data (including, but
not limited, to calculating, comparing and sequencing) from, into and between
the 20th and 21st Centuries, including the years 1999 and 2000, and leap year
calculations and will not malfunction, cease to function or provide invalid or
incorrect results as a result of date/time data, to the extent that other
Information Technology, used in combination with the Information Technology of
the Company, properly exchanges date/time data with it. To the Company's
Knowledge, the Information Technology used by any mortgage lender with which the
Company does
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business fully complies with the Year 2000 in the same manner as described
above relating to the Company.
(u) Disclosure. This Agreement and the Schedules do not contain and
will not contain an untrue statement of a material fact or omits or will omit
any information or statement of a material fact necessary in order to make the
information or statements herein or therein not misleading. After reasonable
investigation, including, without limitation, consultation with counsel, there
is no fact or condition within the Knowledge of the Company which materially and
adversely affects the assets, Liabilities, business, operations or financial
condition of the Company, which has not been set forth in this Agreement or any
Schedules hereto or certificate or other document delivered in accordance with
the terms hereof or any other written statement or other document delivered to
the Sellers by or on behalf of the Company.
(v) No Other Representations. The Company shall not be deemed to have
made to any representation or warranty other than as is expressly made in
Sections 4(a) through (u).
5. COVENANTS PRIOR TO CLOSING.
(a) The Company's Covenants. The Company covenants that, except as
otherwise consented to in writing by the Sellers, from and after the date hereof
until the Closing or the earlier termination of this Agreement:
(i) Except as set forth in Schedule 5(a), the Company shall not
engage in any practice, take any action or enter into any transaction
outside the Ordinary Course of Business. Without limiting the
generality of the foregoing:
(A) The Company will not authorize or effect any change in
its Articles of Incorporation or By-Laws; and
(B) The Company shall not issue any note, bond or other
debt security or create, incur, assume or grant any indebtedness
or borrow money or capitalize lease obligations outside the
Ordinary Course of Business.
(ii) All real property, machinery and equipment and other
operating properties used in the business of the Company will be kept
and maintained in good repair and working order (ordinary wear and tear
excepted) on a basis consistent with past practices, and the Company
will duly observe and conform to all material terms and conditions upon
or under which any of such properties are held.
(iii) The Company will use its best efforts to maintain in full
force and
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effect in all material respects all insurance coverages for its
business currently in effect and shall undertake to obtain equivalent
replacement coverage with respect to any policies hereafter canceled
or terminated.
(iv) The Company shall give the Sellers access to such
information as they request from time to time.
(b) Cooperation. The Company and the Sellers agree to cooperate with
each other in determining whether any filings are required to be made or
consents required to be obtained in any jurisdiction in connection with the
consummation of the transactions contemplated hereby and in making or causing to
be made any such filings promptly and in seeking to obtain in a timely manner
any such consents; and to use all reasonable efforts to obtain promptly the
satisfaction of the conditions to the Closing of the transactions contemplated
herein. The Company and the Sellers shall furnish to each other and to each
other's counsel all such information as may be reasonably required in order to
effectuate the foregoing.
(c) The Sellers' Covenants. The Sellers covenant that, except as
otherwise consented to in writing by the Company, from and after the date hereof
until the Closing or the earlier termination of this Agreement:
(i) Except as set forth in Schedule 5(a), Dow will not engage in
any practice, take any action or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of
the foregoing:
(A) Dow will not authorize or effect any change in its
Articles of Incorporation or By-Laws; and
(B) Dow shall not issue any note, bond or other debt
security or create, incur, assume or grant any indebtedness or
borrow money or capitalize lease obligations outside the Ordinary
Course of Business.
(ii) All real property, machinery and equipment and other
operating properties used in the business of the Dow will be kept and
maintained in good repair and working order (ordinary wear and tear
excepted) on a basis consistent with past practices, and the Dow will
duly observe and conform to all material terms and conditions upon or
under which any of such properties are held.
(iii) Dow will use its best efforts to maintain in full force
and effect in all material respects all insurance coverages for its
business currently in effect and shall undertake to obtain equivalent
replacement coverage with respect to any policies hereafter canceled
or terminated.
(iv) The Sellers shall give the Company access to such
information as
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they request from time to time.
6. CONDITIONS TO CLOSING.
(a) Conditions to the Obligations of the Company. The obligations of
the Company under this Agreement shall be subject to satisfaction of the
following conditions, unless waived by the Company:
(i) The Sellers shall deliver stock certificates properly
endorsed which constitute all of the issued and outstanding capital
stock of Dow.
(ii) There shall not have occurred since May 31, 1998, except
as set forth in Schedule 6(a), any material adverse change with
respect to the business, assets, financial condition or results of
operations of Dow.
(iii) The Sellers shall have performed in all material respects
all other agreements, and satisfied in all material respects all
other conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date.
(iv) All of the representations and warranties of the Sellers
herein shall have been true and correct in all material respects when
made, shall have continued to have been true and correct in
all material respects at all times subsequent thereto, and shall be
true and correct in all material respects on and as of the Closing
Date as though made on, as of and with reference to such date.
(v) The Sellers shall have obtained all consents and approvals
required to be obtained on their behalf or on behalf of Dow in
connection with the sale of the Shares as contemplated by this
Agreement.
(vi) Delivery of an opinion of counsel to the Sellers,
addressed to the Company and dated the Closing Date, in substance
similar to that contained on Schedule 6(a).
(vii) Each of the Sellers shall have executed an employment
agreement, copies of which are annexed as Schedule 6(a)(vii).
(b) Conditions to the Obligations of the Sellers. The obligations of
the Sellers under this Agreement shall be subject to satisfaction of the
following conditions, unless waived by the Sellers:
(i) The Company shall have performed in all material respects
all agreements, and satisfied in all material respects all conditions
on its part to be performed or satisfied hereunder at or prior to the
Closing Date.
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(ii) All representations and warranties of the Company herein
shall have been true and correct in all material respects when made,
shall have continued to have been true and correct in all material
respects at all times subsequent thereto, and shall be true and
correct in all material respects on and as of the Closing Date as
though made on, as of and with reference to such date.
(iii) There shall not have occurred since May 31, 1998, except
as set forth in Schedule 6(b), any material adverse change with
respect to the business, assets, financial condition or results of
operations of the Company.
(iv) The Company shall have delivered to the Sellers the
appropriate number of shares of Common Stock of the Company as
contemplated by this Agreement.
(v) Delivery of an opinion of counsel to the Company addressed
to the Sellers and dated the Closing Date in substance similar to
that on Schedule 6(b).
(c) Conditions to the Obligations of the Company and the Sellers.
The obligations of the Company and the Sellers to consummate any of the
transactions contemplated by this Agreement shall be subject to there being no
injunction or temporary restraining order granted restraining or prohibiting
the consummation of the transactions contemplated by this Agreement, and no
action, suit or other proceeding by any federal, state, or local governmental
authority seeking such an injunction or order shall be pending or threatened.
(d) Closing Documents. If there is a Closing as contemplated by this
Agreement, the parties shall deliver to each other, in form and substance
reasonably satisfactory and consistent with this Agreement all documents
necessary including stock certificates and officers certificates as to the
accuracy of representations and warranties.
7. POST-CLOSING COVENANTS. Following the Closing, the parties hereto shall be
bound by the following covenants;
(a) Adjustments. The Adjustments contained in Section 2(b) of this
Agreement, the Company shall, to the extent applicable have been made by the
Company.
(b) Further Assurances. The Company and the Sellers from time to
time after the Closing, upon request, will execute, acknowledge and deliver
such other instruments of conveyance and transfer and will take such other
actions and execute and deliver such other documents, certifications and
further assurances as the other party may reasonably require. Each of the
parties hereto will cooperate with the other and execute and deliver to the
other parties hereto such other instruments and documents and take such other
actions as may be reasonably requested from time to time by any other party
hereto as
33
<PAGE> 39
necessary to carry out, evidence and confirm the intended purposes of this
Agreement.
(c) Board of Directors of Dow. Following the Closing, until such time
as the adjustments to the Purchase Price provided for by Section 2 of this
Agreement have been made and the Notes, if any, are paid (the later of which
date is the "Adjustment Date"), the Board of Directors of Dow shall consists of
three persons, two of whom shall be designated by the Sellers and one of whom
by the Company.
(d) Board of Directors of the Company. Until the Adjustment Date, the
Sellers shall have the right to designate one person to serve on the Board of
Directors of the Company. The Company shall use its best efforts to either
cause such person to be elected at the meetings of its shareholders or
appointed, as the case may be.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
(a) Survival of Representation and Warranties. The representations
and warranties contained in this Agreement shall survive the Closing for a
period of two years except as otherwise provided in this Agreement.
(b) Indemnification by the Company. The Company shall defend,
indemnify, and hold harmless the Sellers and their affiliates and their
respective officers, directors, shareholders, agents and employees
(individually, a "Seller Indemnitee" and collectively the "Sellers'
Indemnitees"), from and against any and all claims, losses, deficiencies,
liabilities, obligations, damages, penalties, punitive damages, costs, and
expenses (including, without limitation, reasonable legal, accounting and
consulting fees), whether or not resulting from third party claims
(collectively, "Losses"), suffered by a Seller Indemnitee, which arise out of
or result from:
(i) any inaccuracy or misrepresentation in or breach of any of
the representations, warranties, covenants or agreements made by the Company in
this Agreement or in any document, certificate or affidavit delivered by the
Company pursuant to the provisions of this Agreement;
(ii) any other matter related to the conduct of its business by
the Company or any predecessor prior to the Closing (including, but not limited
to, all acts, omissions and conditions existing or occurring prior to the
Closing for which any of the Seller Indemnitees is alleged to be liable
pursuant to any successor or similar theory of liability).
(c) Indemnification by the Sellers. The Sellers shall defend,
indemnify, and hold harmless the Company and its affiliates and its respective
officers, directors, shareholders, agents and employees (individually, a
"Company Indemnitee" and collectively the "Company's Indemnitees"), from and
against any and all Losses, suffered by a Company Indemnitee, which arise out
of or result from:
34
<PAGE> 40
(i) any inaccuracy or misrepresentation in or breach of any of
the representations, warranties, covenants or agreements made by the
Sellers in this Agreement or in any document, certificate or affidavit
delivered by the Sellers pursuant to the provisions of this Agreement;
(ii) any other matter related to the conduct of Dow's business
or of any predecessor prior to the Closing (including, but not limited
to, all acts, omissions and conditions existing or occurring prior to
the Closing for which any of the Company Indemnitees is alleged to be
liable pursuant to any successor or similar theory of liability).
(iii) If the Company makes a claim for indemnification under
this Agreement, the Common Stock of the Seller (or both) and her or
his transferees (unless the Common Stock has been publicly sold in the
over-the-counter market) shall be subject to immediate stock transfer
restrictions until the claim for indemnification has been finally
adjudicated and all times for appeal have expired. The Sellers consent
to the placing of an appropriate legend on all stock certificates
which shall refer to such restriction the earlier of: (A) public sale
of Common Stock (as to such certificates) in the over-the-counter
market, or (B) two years from the date of closing.
(d) Indemnification Payments. Subject to Section 8(g), all indemnity
payments, whether by the Company or the Sellers to be made under this
Agreement shall be made in immediately available funds.
(e) Procedure for Third Party Claims.
(i) Notice to the indemnifying party shall be given promptly
after receipt by any Seller Indemnitee or Company Indemnitee of actual
Knowledge of the commencement of any action or the assertion of any
claim that will likely result in a claim by it for indemnity pursuant
to this Agreement. Such notice shall set forth in reasonable detail
the nature of such action or claim to the extent known, and include
copies of any written correspondence or pleadings from the party
asserting such claim or initiating such action. The indemnifying party
shall be entitled, at its own expense, to assume or participate in the
defense of such action or claim. In the event that the indemnifying
party assumes the defense of such action or claim, it shall be
conducted by counsel chosen by such party and approved by the party
seeking indemnification, which approval shall not be unreasonably
withheld.
(ii) With respect to actions as to which the indemnifying party
does not exercise its right to assume the defense, the party seeking
indemnification shall assume and control the defense of and contest
such action with counsel chosen by it and approved by the indemnifying
party, which approval shall not be
35
<PAGE> 41
unreasonably withheld. The indemnifying party shall be entitled to
participate in the defense of such action, the cost of such
participation to be at its own expense. The indemnifying party shall be
obligated to pay the reasonable attorneys' fees and expenses of the
party seeking indemnification to the extent that such fees and expenses
related to claims as to which indemnification is payable under Sections
8(b) or (c), as such expenses are incurred.
(iii) Both the indemnifying party and the indemnified party shall
cooperate fully with one another in connection with the defense,
compromise, or settlement of any such claim or action, including,
without limitation, by making available to the other all pertinent
information and witnesses within its control.
(f) Remedies Cumulative. The remedies provided for herein shall be
cumulative and shall not preclude assertion by any party of any other rights
or the seeking of any other remedies against any other party. Nothing
contained in Sections 8(c) and (d) shall be construed in any way to limit,
impair or modify any provisions of this Agreement or to otherwise impose any
additional liability or obligation on either party at any time for any
liability or obligation of the any other party other than such party's
obligation to indemnify as provided in this Agreement.
(g) Limits on Indemnification. Notwithstanding the provisions of
Sections 8(b) and (c) above, neither the Buyer Indemnitees nor the Seller
Indemnitees shall be entitled to receive indemnification under this
Agreement for a claim relating to a breach of a representation or warranty
contained herein until the aggregate amount of indemnification claims they
shall have asserted hereunder shall exceed $50,000.
9. BROKERAGE. Each of the parties represents that it has dealt with no
broker or finder in connection with any of the transactions contemplated by this
Agreement, and, insofar as it knows, no broker or other person is entitled to
any compensation including, without limitation, a commission or finder's fee, in
connection with any of these transactions except the Company shall be
responsible to pay for the fees and costs of its financial advisor, Vistra
Growth Partners, Inc. The parties each agree to indemnify and hold harmless one
another against any loss, liability, damage, cost, claim, or expense incurred by
reason of any compensation, including, without limitation, brokerage,
commission, or finder's fee, alleged to be payable because of any act, omission,
or statement or the indemnifying party.
10. GENERAL PROVISIONS.
(a) Termination by the Company or by the Sellers. If the transaction
contemplated by this Agreement fails to close by July 31, 1998, either the
Company on one hand or both of the Sellers, on the other hand, may terminate
this Agreement by the giving of notice.
36
<PAGE> 42
(b) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future Laws, such provision
shall be fully severable and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
hereof and the remaining provisions hereof shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision by
its severance herefrom.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
(d) Benefit. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal representatives,
successors and assigns.
(e) Notices and Addresses. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted delivery or by facsimile delivery as follows:
The Company: America's Senior Financial Services, Inc.
15536 N.W. 77th Court
Miami Lakes, FL 33016
Attention: Nelson A. Locke, President
Facsimile: (305) 556-8640
with a copy to: Michael D. Harris, Esq.
Michael Harris, P.A.
712 U.S. Highway One
North Palm Beach, FL 33408
Facsimile (561) 845-0108
The Sellers: Charles M. Kluck
Linda Kluck
9700 NE 2nd
Miami Shores, FL 33138
Facsimile: (305) 757-2929
with a copy to: Charles Kelly, P.A.
11098 Biscayne Blvd. #245
Miami, FL 33161
Facsimile (305) 893-7666
37
<PAGE> 43
or to such other address as either of them, by notice to the other may
designate from time to time. The transmission confirmation receipt from the
sender's facsimile machine shall be conclusive evidence of successful facsimile
delivery. Time shall be counted to, or from, as the case may be, the delivery
in person or by mailing.
(f) Attorney's Fees. In the event that there is any controversy or
claim arising out of or relating to this Agreement, or to the interpretation,
breach or enforcement thereof, and any action or arbitration proceeding is
commenced to enforce the provisions of this Agreement, the prevailing party
shall be entitled to an award by the court or arbitrators, as appropriate, of
reasonable attorney's fees, including the fees on appeal, costs and expenses.
(g) Oral Evidence. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated, except by a statement in writing signed by the party or parties
against which enforcement or the change, waiver discharge or termination is
sought.
(h) Additional Documents. The parties hereto shall execute such
additional instruments as may be reasonably required by their counsel in order
to carry out the purpose and intent of this Agreement and to fulfill the
obligations of the parties hereunder.
(i) Governing Law. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided herein or performance
shall be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
(j) Arbitration. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in Dade County, Florida (unless the
parties agree in writing to a different location), before three arbitrators in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrators. The decision and award made by
the arbitrators shall be final, binding and conclusive on all parties hereto for
all purposes, and judgment may be entered thereon in any court having
jurisdiction thereof.
(k) Expenses. The Company and the Sellers shall each pay all of their
own expenses relating to the negotiation and preparation of this Agreement and
all other
38
<PAGE> 44
documents relating to the consummation of the transaction contemplated by
this Agreement.
(l) Section Headings. Section headings herein have been inserted
for reference only and shall not be deemed to limit or otherwise affect,
in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Agreement.
(m) Effective Investigation. Any inspection, preparation or
compilation of information or Schedules, or review of the inventories,
properties, financial condition or other matters relating to the Company
conducted by or on behalf of the Sellers or relating to Dow conducted by
or on behalf of the Company pursuant to this Agreement shall in no way
limit, affect or impair the ability of the Company or the Sellers to rely
upon the representations, warranties, covenants and agreements of the
Sellers or the Company, as may be applicable, contained in this Agreement.
IN WITNESS WHEREOF the parties hereto have set their hand and seals as of
the date first above written.
AMERICA'S SENIOR FINANCIAL SERVICES
/s/ By: /s/
- -------------------------------- -------------------------------
Nelson A. Locke, President
/s/
- --------------------------------
/s/ /s/
- -------------------------------- ------------------------------------
Charles M. Kluck
/s/
- --------------------------------
/s/ /s/
- -------------------------------- ------------------------------------
Linda Kluck
/s/
- --------------------------------
39
<PAGE> 45
SCHEDULE 4(A) TO
STOCK PURCHASE AGREEMENT
------------------------
SUBSIDIARIES AND OTHER INVESTMENTS
------------------------
590,000 Class A Warrants
200,000 Class B Warrants
<PAGE> 1
EXHIBIT 6(g)
AGREEMENT AND PLAN OF MERGER
AMONG
AMERICA'S SENIOR FINANCIAL SERVICES, INC.,
CAPITAL FUNDING OF SOUTH FLORIDA, INC.,
AMSE ACQUISITIONS, INC.
AND
GEORGE M. POLLIS
TRACI ANN POLLIS
PAULA M. POLICE
January 29, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.......................................................................................... 1
1.1 Defined Terms................................................................................. 1
1.2 Other Definitional Provisions................................................................. 4
ARTICLE II MERGER.............................................................................................. 5
2.1 Effective Time of the Merger.................................................................. 5
2.2 Closing....................................................................................... 5
2.3 Effects of the Merger......................................................................... 5
2.4 Directors and Officers of the Surviving Corporation........................................... 5
2.5 Conversion of Capital Stock................................................................... 5
2.6 Exchange Shares............................................................................... 6
2.7 Manner of Payment of Merger Consideration..................................................... 6
2.8 Initial Adjustment............................................................................ 6
2.9 Second Adjustment............................................................................. 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................................ 8
3.1 Corporate Status.............................................................................. 8
3.2 Power and Authority........................................................................... 8
3.3 Enforceability................................................................................ 9
3.4 Capitalization................................................................................ 9
3.5 Purchaser Common Stock........................................................................ 9
3.6 No Violation.................................................................................. 9
3.7 Records of the Purchaser...................................................................... 10
3.8 Subsidiaries.................................................................................. 10
3.9 Financial Statements.......................................................................... 10
3.10 Changes Since the Purchaser's Current Balance Sheet Date...................................... 11
3.11 Liabilities of the Purchaser and its Subsidiaries............................................. 11
3.12 Litigation.................................................................................... 11
3.13 Environmental Matters......................................................................... 11
3.14 Real Estate................................................................................... 12
3.15 Good Title to and Condition of Assets......................................................... 12
3.16 Compliance with Laws.......................................................................... 12
3.17 Labor and Employment Matters.................................................................. 12
3.18 Employee Benefit Plans........................................................................ 13
3.19 Tax Matters................................................................................... 13
3.20 Insurance..................................................................................... 13
3.21 [Intentionally Deleted]....................................................................... 13
3.22 Licenses and Permits.......................................................................... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
3.23 Adequacy of the Assets........................................................................ 13
3.24 [Intentionally Deleted]....................................................................... 14
3.25 Contracts..................................................................................... 14
3.26 Investor Status............................................................................... 14
3.27 No Commissions................................................................................ 14
3.28 Accuracy of Information Furnished by the Company, or the Shareholder.......................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS THE COMPANY.................................................................. 14
4.1 Corporate Status.............................................................................. 15
4.2 Power and Authority........................................................................... 15
4.3 Enforceability................................................................................ 15
4.4 Capitalization................................................................................ 15
4.5 Shareholders.................................................................................. 16
4.6 No Violation.................................................................................. 16
4.7 Records of the Company........................................................................ 16
4.8 No Subsidiaries............................................................................... 16
4.9 Financial Statements.......................................................................... 17
4.10 Changes Since the Current Balance Sheet Date.................................................. 17
4.11 Liabilities of the Company.................................................................... 18
4.12 Litigation.................................................................................... 18
4.13 Environmental Matters......................................................................... 18
4.14 Real Estate................................................................................... 19
4.15 Good Title to and Condition of Assets......................................................... 19
4.16 Compliance with Laws.......................................................................... 19
4.17 Labor and Employment Matters.................................................................. 19
4.18 Employee Benefit Plans........................................................................ 20
4.19 Tax Matters................................................................................... 20
4.20 Insurance..................................................................................... 21
4.21 Intentionally Deleted......................................................................... 21
4.22 Licenses and Permits.......................................................................... 21
4.23 Adequacy of the Assets........................................................................ 21
4.24 Pipeline Applications......................................................................... 21
4.25 Contracts..................................................................................... 21
4.26 Accuracy of Information Furnished by the Company, or the
Shareholders.................................................................................. 21
4.27 Investment Intent; Sophisticated Investor Status; Market for Purchaser........................ 22
4.28 Bank Accounts................................................................................. 22
4.29 No Commissions................................................................................ 22
4.30 Year 2000..................................................................................... 22
4.31 Other Business Interests...................................................................... 23
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V ADDITIONAL AGREEMENTS............................................................................... 23
5.1 Further Assurances............................................................................ 23
5.2 Cooperation-General........................................................................... 23
5.3 Notification of Certain Matters............................................................... 23
5.4 Confidentiality; Publicity.................................................................... 23
5.5 Shareholder Deliveries........................................................................ 23
5.6 Purchaser's Deliveries........................................................................ 24
5.7 Release of Guarantees......................................................................... 24
5.8 Taxes......................................................................................... 24
ARTICLE VI INDEMNIFICATION..................................................................................... 25
6.1 Agreement by the Shareholders to Indemnify.................................................... 25
6.2 Agreement by Purchaser to Indemnify........................................................... 25
6.3 Survival of Representations and Warranties.................................................... 26
6.4 Third Party Actions........................................................................... 27
6.5 Payment Solely in Purchaser's Common Stock; Adjustment to Merger
Consideration................................................................................. 27
6.6 Limitations on Indemnification Payments....................................................... 27
6.7 No Other Rights............................................................................... 28
ARTICLE VII SECURITIES LAW MATTERS............................................................................. 28
7.1 Disposition of Shares......................................................................... 28
7.2 Legend........................................................................................ 28
ARTICLE VIII REGISTRATION RIGHTS............................................................................... 29
8.1 Piggyback Registration Rights................................................................. 29
8.2 Registration.................................................................................. 30
ARTICLE IX GENERAL PROVISIONS.................................................................................. 34
9.1 Notices....................................................................................... 34
9.2 Entire Agreement.............................................................................. 35
9.3 Expenses...................................................................................... 35
9.4 Amendment; Waiver............................................................................. 36
9.5 Binding Effect; Assignment.................................................................... 36
9.6 Counterparts.................................................................................. 36
9.7 Interpretation................................................................................ 36
9.8 Severability.................................................................................. 36
9.9 Governing Law; Mediation; Arbitration......................................................... 36
9.10 Arm's Length Negotiations..................................................................... 38
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
This Agreement (this "Agreement") is entered into as of January 29,
1999 among America's Senior Financial Services, Inc., a Florida corporation (the
"Purchaser"), Capital Funding of South Florida, Inc., a Florida corporation (the
"Company"), AMSE Acquisitions, Inc., a Florida corporation and a wholly-owned
subsidiary of Purchaser (the "Sub"), and George M. Pollis, Traci Ann Pollis and
Paula M. Police (each individually, a "Shareholder" and collectively, the
"Shareholders").
RECITALS
The Company is engaged in the business of originating and transacting
residential and commercial real estate mortgage loans. The Shareholders
collectively own all the outstanding capital stock of the Company. This
Agreement contemplates a merger of Sub, a wholly-owned subsidiary of Purchaser,
with and into Company in a reorganization pursuant to Code Section 368(a)(1)(A)
by reason of Code Section 368(a)(2)(D) in which Company will become a
wholly-owned subsidiary of the Purchaser (the "Merger"). The Shareholders will
receive cash and capital stock in the Purchaser in exchange for their capital
stock in the Company.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations promulgated under the Exchange Act, as in
effect on the date hereof.
"Closing" has the meaning set forth in Section 2.2 below.
"Closing Date" has the meaning set forth in Section 2.2 below.
"Company" has the meaning set forth in the preface above.
"Company Common Stock" means the shares of common stock, $1.00 par
value per share, of the Company.
"Company Share" means any share of Company's capital stock.
<PAGE> 6
"Company Shareholder" means any Person who or which holds any Company
Shares.
"Company's Knowledge" means the actual knowledge after reasonable
investigation of any Shareholder or Michael Pollis.
"Constituent Corporations" has the meaning set forth in Section 2.3
below.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment
agreement, license, instrument, purchase and sales order, commitment,
undertaking or obligation, in each case, whether written or oral,
express or implied.
"Effective Time" has the meaning set forth in Section 2.1 below.
"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings and ordinances, and changes or judicial or
administrative interpretations thereof, or similar laws of foreign
jurisdictions where the Company or Purchaser, as the case may be,
conducts business, whether currently in existence or hereafter enacted
or promulgated, any of which govern (or purport to govern) or relate to
pollution, protection of the environment, public health and safety, air
emissions, water discharges, hazardous or toxic substances, solid or
hazardous waste or occupational health and safety, as any of these
terms are or may be defined in such statutes, laws, rules, regulations,
codes, orders, plans, injunctions, decrees, rulings and ordinances, or
changes or judicial or administrative interpretations thereof,
including, without limitation: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. Section
9601, et seq. (collectively "CERCLA"); the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and
subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
Section 6901 et seq. (collectively "RCRA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Section 1801, et seq.; the
Clean Water Act, as amended, 33 U.S.C. Section 1311, et seq.; the Clean
Air Act, as amended (42 U.S.C. Section 7401-7642); the Toxic Substances
Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C.
Section 136-136y ("FIFRA"); the Emergency Planning and Community
Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et seq.
(Title III of SARA) ("EPCRA"); and the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA").
"Familial Affiliate" shall mean any person related by blood or marriage
to any officer, director or shareholder of any of the Company and any
entity in which any officer, director or shareholder or such person
owns any beneficial interest.
2
<PAGE> 7
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity
or official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, but not limited to, any conditional
sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction
in connection with such mortgage, pledge, security interest,
encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect) in
financial condition, properties, assets, liabilities, rights,
obligations, operations or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations,
operations, business or prospects.
"Merger" has the meaning set forth in the recitals above.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"Purchaser Common Stock" means the shares of common stock, par value
$.001 per share, of the Purchaser.
"Purchaser's Knowledge" means the actual knowledge after reasonable
investigation of Nelson A. Locke.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiaries" means any corporation, partnership, joint venture or
other business entity in which the Purchaser or the Company, as the
context requires, owns, directly or indirectly, or is bound by an
agreement to acquire any outstanding securities or other interests in,
or control thereof.
"Sub" has the meaning set forth in the preface above.
3
<PAGE> 8
"Sub Common Stock" means any share of the Common Stock par value $.01
per share of Sub.
"Surviving Corporation" has the meaning set forth in Section 2.3 below.
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form or other document or
information filed with or submitted to or required to be filed with or
submitted to any Governmental Authority in connection with or with
respect to the determination, assessment, collection or payment of any
Taxes.
"Taxes" means all taxes, including, but not limited to, income, excise,
property, sales, franchise, intangible, withholding, social security
and unemployment taxes, levy, assessment, tariff, duty (including
customs duties), deficiency or other fee, imposed, assessed or
collected by or under the authority of any Governmental Authority, or
payable pursuant to any tax sharing agreement or other contract
relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty (including customs duties), deficiency or other fee, and
any related charge or amount, including, but not limited to, any fine,
penalty, interest or additional tax.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
(e) Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
4
<PAGE> 9
ARTICLE II
MERGER
2.1 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective
upon the filing of Articles of Merger with the Secretary of State of the State
of Florida, in the form attached hereto as EXHIBIT A, (the "Effective Time").
Such filing shall occur as soon as practicable on or after the Closing Date (as
defined in Section 2.2).
2.2 CLOSING. The closing of the Merger (the "Closing") will take place
at 9:30 a.m. on January 29, 1999, or such other date as the parties may specify
in writing (the "Closing Date"), at the offices of the Purchaser at 15544 N.W.
77 Court, Miami Lakes, Florida 33016, unless another date or place is agreed to
in writing by the parties hereto.
2.3 EFFECTS OF THE MERGER. At the Effective Time (i) the separate
existence of Sub shall cease and Sub shall be merged with and into the Company
(Sub and the Company are sometimes referred to herein as the "Constituent
Corporations" and the Company is sometimes referred to herein as the "Surviving
Corporation"), (ii) the Articles of Incorporation of the Company in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation, and (iii) the By-laws of the Sub as in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation.
2.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of the Surviving Corporation after the Effective Time shall be as
follows:
Nelson A. Locke -- Director, Chairman of the Board and
Chief Executive Officer
Thomas Sherman -- Director
Elly Shea -- Director
George Pollis -- Director and President
Michael Pollis -- Director and Executive
Vice President
These directors and officers will hold office until their successors
shall have been duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Articles of Incorporation and By-laws.
2.5 CONVERSION OF CAPITAL STOCK. (a) At the Effective Time, each share
of capital stock of Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any further action on
the part of the holders thereof, be automatically converted into one share of
common stock of the Surviving Corporation.
(b) At the Effective Time, each Company Share outstanding
immediately prior to the Effective Time, shall, by virtue of the Merger and
without any further action on
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the part of the holders thereof be automatically converted into the right to
receive (i) 110.832 shares of Purchaser Common Stock and (ii) $150 dollars
(collectively, the "Merger Consideration").
2.6 EXCHANGE SHARES. The aggregate number of shares of Purchaser Common
Stock issuable to the Shareholders pursuant to Section 2.5(b)(i) above shall be
221,664 (the "Exchange Shares") The aggregate amount of cash payable pursuant to
Section 2.5(b)(ii) shall be $300,000 (the "Cash Amount").
2.7 MANNER OF PAYMENT OF MERGER CONSIDERATION. At the Effective Time,
Purchaser shall pay the Merger Consideration to the Shareholders as follows: (i)
payment of the Cash Amount by wire transfer of immediately available funds to an
account or accounts designated by the Shareholders and (ii) delivery to the
Shareholders of certificate(s) issued in the name of the Shareholders
representing the Exchange Shares.
2.8 INITIAL ADJUSTMENT. If, at the end of the first year anniversary of
the Closing (the "Adjustment Date"), the average closing price of the Purchaser
Common Stock for the twenty trailing business days prior to the Adjustment Date
(the "Current Per-Share Price") is LESS than the Exchange Price, the Purchaser
shall, within 10 days following the Adjustment Date, issue additional shares of
Purchaser Common Stock (the "Additional Shares") to the Shareholders in such
amount so that the PRODUCT of the number of Exchange Shares held by the
Shareholders (and its assignees) on the Adjustment Date plus the number of
Additional Shares TIMES the Current Per-Share Price is equal to the PRODUCT of
the number of Exchange Shares held by the Shareholders (and their assignees) on
the Adjustment Date TIMES the Exchange Price. The aggregate number of Additional
Shares issued pursuant to this Section 2.8 shall be divided pro rata among the
Shareholders based upon the percentage of the aggregate Exchange Shares issued
to each Shareholder.
By way of example and not limitation, if (1) the number of Exchange
Shares originally issued to the Shareholders is 10, (2) the Exchange Price is
$5, (3) the Current Per-Share Price is $3.00, and (4) the number of Exchange
Shares owned by the Shareholders and their assignees is 6 on the Adjustment
Date, THEN the aggregate number of Additional Shares to be issued by Purchaser
to the Shareholders would be determined as follows:
(a) 6 x $5.00 = $30
(b) 6 x $3.00 = $18
(c) Deficiency Amount = $12
(d) Additional Shares = 4 (6 Exchange Shares + 4
Additional Shares x $3
(Current Per-Share Price) = $30)
The number of shares and the share price used in the calculations required to be
made in this Section 2.8 shall be proportionately adjusted to reflect any
division, combination or other reclassification of the Purchaser Common Stock
occurring on or prior to the Adjustment Date.
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For purposes of this Section 2.8, the average closing price of the
Purchaser Common Stock shall be determined by reference to the closing prices
reported by (i) The NASDAQ Stock Market or a national securities exchange, if
the Purchaser Common Stock is listed for trading therein or (ii) Nasdaq, if the
Purchaser Common Stock is traded in the over-the-counter market. If no prices
are reported for the twenty trailing business days prior to the Adjustment Date,
then the price used to make the calculations required in this Section 2.8 shall
be the reported closing price on the first preceding day on which so reported.
If the Purchaser Common Stock is not traded in the mediums described in (i) or
(ii) above, no adjustment shall be required to be made pursuant to this Section
2.8.
2.9 SECOND ADJUSTMENT. If, at the earlier of (x) the second year
anniversary of the Closing or (y) the one year anniversary of the expiration of
any lock-up restrictions imposed upon the Shareholders by the underwriter of the
first Public Offering (as hereafter defined) occurring after the Closing (the
"Second Adjustment Date"), the PRODUCT of the number of Exchange Shares held by
the Shareholders on the Second Adjustment Date plus any additional shares of
Purchaser Common Stock received by the Shareholders pursuant to Section 2.8 of
this Agreement TIMES the average closing price of the Purchaser Common Stock for
the twenty trailing business days prior to the Second Adjustment Date is LESS
than the Residual Purchase Price (as hereafter defined), the Purchaser shall
cause the Company, within 10 days following the Second Adjustment Date, to issue
to the Shareholders a promissory note (the "Promissory Note") in the principal
amount of such deficiency (the "Deficiency Amount"). The Promissory Note shall
be in the form attached as EXHIBIT B hereto. In connection with the issuance of
the Promissory Note, the Company and the Shareholders shall execute and deliver
the Security Agreement attached as EXHIBIT C hereto. Notwithstanding anything
herein to the contrary, in lieu of issuing the Promissory Note, Purchaser, in
its sole discretion, may pay, or cause the Company to pay, the Deficiency Amount
to the Shareholders by wire transfer of immediately available funds or certified
check delivered within 10 days after the Second Adjustment Date. The "Residual
Purchase Price" shall be equal to the difference of $1,425,000 less the gross
proceeds received by the Shareholders from the sale of any of the Exchange
Shares or any additional shares of Purchaser Common Stock received by the
Shareholders pursuant to Section 2.8 of this Agreement.
By way of example and not limitation, if (1) the number of Exchange
Shares is 9, (and 11 shares of Purchaser Common Stock were issued pursuant to
Section 2.8 and none of the Exchange Shares or such additional 11 shares has
been sold, transferred, or otherwise disposed of by the Shareholders), (2) the
average closing price of the Purchaser Common Stock for the twenty trailing
business days prior to the Second Adjustment Date is $3.00, and (3) the Adjusted
Residual Purchase Price is $80, THEN the aggregate Deficiency Amount would be
determined as follows:
(a) 20 x $3.00 = $60
(b) $80 - $60 = $20
(c) Deficiency Amount = $20
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The number of shares and the share price used in the calculations required to be
made in this Section 2.9 shall be proportionately adjusted to reflect any
division, combination or other reclassification of the Purchaser Common Stock
occurring on or prior to the Second Adjustment Date.
For purposes of this Section 2.9, the average closing price of the
Purchaser Common Stock shall be determined by reference to the closing prices
reported by (i) The NASDAQ Stock Market or a national securities exchange, if
the Purchaser Common Stock is listed for trading therein or (ii) Nasdaq, if the
Purchaser Common Stock is traded in the over-the-counter market. If no prices
are reported for the twenty trailing business days prior to the Second
Adjustment Date, then the price used to make the calculations required in this
Section 2.8(ii) shall be the reported closing price on the first preceding day
on which so reported. If the Purchaser Common Stock is not traded in the mediums
described in (i) or (ii) above, no adjustment shall be required to be made
pursuant to this Section 2.9.
For purposes of this Section 2.9 the term "Public Offering"
means a public offering of Purchaser Common Stock effected by or on behalf of
the Purchaser pursuant to a Registration Statement declared effective by the
SEC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereby, Purchaser
represents and warrants to the Shareholders that:
3.1 CORPORATE STATUS. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida and
has the requisite power and authority to own or lease its properties and to
carry on its business as now being conducted. Each of the Purchaser and its
Subsidiaries is legally qualified to transact business as a foreign corporation,
and is in good standing as such, in each jurisdiction in which the nature of its
respective properties and/or the conduct of its respective business requires
such qualification. There is no pending or, to the Purchaser's Knowledge,
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of the Purchaser, or its Subsidiaries.
3.2 POWER AND AUTHORITY. The Purchaser has the corporate power and
authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
The Purchaser has taken all action necessary to authorize the execution and
delivery of this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby.
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3.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Purchaser, and constitutes the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3.4 CAPITALIZATION. SCHEDULE 3.4 sets forth, with respect to the
Purchaser, (a) the number of authorized shares of each class of its capital
stock, (b) the number of issued and outstanding shares of each class of its
capital stock, and (c) the number of shares of each class of its capital stock
which are held in treasury. All of the issued and outstanding shares of capital
stock of the Purchaser (i) have been duly authorized and validly issued and are
fully paid and non-assessable, (ii) were issued in compliance with all
applicable state and federal securities laws, and (iii) were not issued in
violation of any preemptive rights or rights of first refusal. Except as set
forth on SCHEDULE 3.4, no preemptive rights or rights of first refusal exist
with respect to the shares of capital stock of the Company, and no such rights
arise by virtue of or in connection with the transactions contemplated hereby.
Except as set forth on SCHEDULE 3.4, there are no outstanding or authorized
rights, options, warrants, convertible securities, subscription rights,
conversion rights, exchange rights or other agreements or commitments of any
kind that could require the Purchaser to issue or sell any shares of its capital
stock (or securities convertible into or exchangeable for shares of its capital
stock). Except as set forth on SCHEDULE 3.4, there are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to the Purchaser. Except as set forth on SCHEDULE 3.4, there are no
proxies, voting rights or other agreements or understandings with respect to the
voting or transfer of the capital stock of the Purchaser. The Purchaser is not
obligated to redeem or otherwise acquire any of its outstanding shares of
capital stock.
3.5 PURCHASER COMMON STOCK. The shares of Purchaser Common Stock to be
issued to the Shareholders pursuant to Section 2.5(b)(i) hereof shall be fully
paid and non-assessable shares.
3.6 NO VIOLATION. Except as set forth in SCHEDULE 3.6, neither the
execution or delivery of this Agreement by the Purchaser or the performance by
the Purchaser of its obligations hereunder or the consummation by the Purchaser
of the transactions contemplated by this Agreement will (i) contravene any
provision of the Articles of Incorporation or Bylaws of the Purchaser, or any of
its Subsidiaries, (ii) violate or conflict with any law, statute, ordinance,
rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against the Purchaser, or any of its
Subsidiaries, (iii) conflict with, result in any breach of, or constitute a
default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any material Contract which is
applicable to, binding upon or enforceable against the Purchaser or any of its
Subsidiaries, (iv) result
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in or require the creation or imposition of any Lien upon or with respect to any
of the property or assets of the Purchaser or any of its Subsidiaries or (v)
require the consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or any other
Person, except any SEC and other filings required to be made by Purchaser, if
any.
3.7 RECORDS OF THE PURCHASER. The copies of the Articles of
Incorporation and Bylaws of the Purchaser which were provided to the
Shareholders are true, accurate and complete and reflect all amendments made
through the date of this Agreement. The minute books (containing records of
meetings of shareholders, the board of directors, and any committees of the
board of directors), the stock certificate books and the stock record books of
each of the Purchaser and its Subsidiaries are correct and complete. All
material corporate actions taken by Purchasers have been duly authorized or
ratified. All accounts, books, ledgers and official and other records of the
Purchaser have been fully, properly and accurately kept and completed in all
respects, and there are no material inaccuracies or discrepancies of any kind
contained therein.
3.8 SUBSIDIARIES. Except as set forth on SCHEDULE 3.8, neither the
Purchaser nor any of its Subsidiaries owns, directly or indirectly, any
outstanding voting securities of or other interests in, or controls, any
corporation, partnership, joint venture or other business entity.
3.9 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 3.9 are (i) the
unaudited financial statements of the Purchaser and each of its Subsidiaries, in
each case, for the seven months ended July 31, 1998, including the notes thereto
(collectively, the "Purchaser's Interim Financial Statements"), and (ii) the
audited financial statements of the Purchaser and its Subsidiaries for the years
ended December 31, 1996 and December 31, 1997, including the notes thereto,
(collectively, the "Purchaser's Annual Financial Statements"), (collectively,
the Purchaser's Annual Financial Statements and the Purchaser's Interim
Financial Statements, the "Purchaser's Financial Statements"). The balance
sheets of the Purchaser and each of its Subsidiaries dated as of July 31, 1998
included in the Purchaser's Financial Statements are hereinafter sometimes
referred to as the "Purchaser's Current Balance Sheets." The Purchaser's
Financial Statements fairly present the financial position of the Purchaser and
each of its Subsidiaries at the balance sheet date and the results of operations
for the periods covered thereby, and have been prepared in accordance with GAAP
consistently applied throughout the periods indicated. The books and records of
the Purchaser and each of its Subsidiaries fully and fairly reflect all of their
respective transactions, properties, assets and liabilities. Except as reflected
on the Purchaser's Financial Statements, there are no extraordinary or
non-recurring items of income or expense during the periods covered by the
Purchaser's Financial Statements and the balance sheets included in the
Purchaser's Financial Statements do not reflect any writeup or revaluation
increasing the book value of any assets, except as specifically disclosed in the
notes thereto. The Purchaser's Financial Statements reflect all adjustments
necessary for a fair presentation of the financial information contained
therein.
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3.10 CHANGES SINCE THE PURCHASER'S CURRENT BALANCE SHEET DATE. Except
as set forth on SCHEDULE 3.10, since the date of the Purchaser's Current Balance
Sheets, neither the Purchaser, nor each of its Subsidiaries has entered into any
transaction or been subject to any event which has a Material Adverse Effect on
the Purchaser or its Subsidiaries.
3.11 LIABILITIES OF THE PURCHASER AND ITS SUBSIDIARIES. Except as
disclosed on SCHEDULE 3.11 hereto, neither of the Purchaser nor its Subsidiaries
has any material liabilities or obligations, whether accrued, absolute,
contingent or otherwise, except (a) to the extent reflected on the Purchaser's
Current Balance Sheet and not heretofore paid or discharged, (b) liabilities
incurred in the ordinary course of business consistent with past practice since
the date of the Purchaser's Current Balance Sheet (none of which relates to
breach of contract, breach of warranty, tort, infringement or violation of law,
or which arose out of any action, suit, claim, governmental investigation or
arbitration proceeding), and (c) liabilities which were incurred in the ordinary
course of business prior to the date of the Purchaser's Current Balance Sheet
and which, in accordance with GAAP consistently applied, were not required to be
recorded thereon.
3.12 LITIGATION. Except as disclosed on SCHEDULE 3.12 hereto, there is
no action, suit, or other legal or administrative proceeding or governmental
investigation pending, or to Purchaser's Knowledge, threatened, anticipated or
contemplated against, by or affecting the Purchaser or any of its Subsidiaries
or any of their respective properties or assets, which relates to or affects the
validity or enforceability of this Agreement or the transactions contemplated
hereby, and there is no basis for any of the foregoing. There are no outstanding
orders, decrees or stipulations issued by any Governmental Authority in any
proceeding to which the Purchaser or any of its Subsidiaries is or was a party
which have not been complied with or which continue to impose any obligations on
the Purchaser or any of its Subsidiaries.
3.13 ENVIRONMENTAL MATTERS.
(a) Each of the Purchaser and its Subsidiaries is and have at
all times been in compliance in all material respects with all Environmental
Laws governing its respective business, operations, properties and assets.
(b) There are no (and there is no basis for any)
non-compliance orders, warning letters, notices of violation, claims, suits,
actions, judgments, penalties, fines, or administrative or judicial
investigations or proceedings pending or, to Purchaser's Knowledge, threatened
against or involving the Purchaser, or its Subsidiaries, or their respective
businesses, operations, properties, or assets, issued by any Governmental
Authority or third party with respect to any Environmental Laws in connection
with, related to or arising out of the ownership by the Purchaser, or its
Subsidiaries of their respective properties or assets or the operation of their
respective businesses, which have not been resolved to the satisfaction of the
issuing Governmental Authority or third party in a manner that would not impose
any obligation, burden or continuing liability on Purchaser in the
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event that the transactions contemplated by this Agreement are consummated, or
which could have a Material Adverse Effect on Purchaser or its Subsidiaries.
3.14 REAL ESTATE.
(a) Neither the Purchaser nor its Subsidiaries owns any real
property or any interest therein.
(b) With respect to the principal improvements and buildings
on the properties leased by Purchaser or its Subsidiaries (the "Purchaser's
Leased Premises"):
(i) The Purchaser and each of its Subsidiaries has
valid leasehold interests in the Purchaser's Leased Premises, free and
clear of any Liens, covenants and easements or title defects of any
nature whatsoever; and
(ii) The portions of the buildings located on the
Purchaser's Leased Premises that are used in the business of the
Purchaser or any of its Subsidiaries is each in good repair and
condition, normal wear and tear excepted, and are in the aggregate
sufficient to satisfy the current and reasonably anticipated normal
business activities of the Purchaser and its Subsidiaries as conducted
thereat.
3.15 GOOD TITLE TO AND CONDITION OF ASSETS. Except as set forth on
SCHEDULE 3.15, the Purchaser and each of its Subsidiaries has good and
marketable title to all of the Purchaser's Assets (as hereinafter defined), free
and clear of any Liens or restrictions on use. For purposes of this Agreement,
the term "Purchaser's Assets" means all of the material properties and assets of
the Purchaser and its Subsidiaries (other than the Purchaser's Leased Premises)
whether personal or mixed, tangible or intangible, wherever located.
3.16 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 3.16: (i)
the Purchaser and each of its Subsidiaries is and has been in material
compliance with all laws, regulations and orders applicable to it, its
properties and assets (in each case, owned or used by it now or in the past) and
its business and operations (as conducted by it now and in the past); (ii)
neither the Purchaser nor its Subsidiaries has been cited, fined or otherwise
notified of any asserted past or present failure to comply with any laws,
regulations or orders and no proceeding with respect to any such violation is
pending or, to the Purchaser's Knowledge, threatened; and (iii) neither the
Purchaser nor its Subsidiaries, nor any of their respective employees or agents,
had made any payment of funds in connection with the business of the Purchaser,
or any of its Subsidiaries, which is prohibited by law, and no funds have been
set aside to be used in connection with the business of the Purchaser or any of
its Subsidiaries for any payment prohibited by law.
3.17 LABOR AND EMPLOYMENT MATTERS. Neither the Purchaser nor any of its
Subsidiaries is a party to or bound by any collective bargaining agreement or
any other agreement with a labor union, and there has been no effort by any
labor union during the 24
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<PAGE> 17
months prior to the date hereof to organize any employees of the Purchaser or
any of its Subsidiaries into one or more collective bargaining units; and there
is no pending or, or to the Purchaser's Knowledge, threatened labor dispute,
strike or work stoppage which affects or which may affect the business of the
Purchaser or any of its Subsidiaries or which may interfere with its continued
operations. The Purchaser has been in compliance, in all material respects, with
applicable laws, rules and regulations relating to employment, civil rights and
equal employment opportunities.
3.18 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.18 contains a list setting
forth, with respect to the Purchaser and each of its Subsidiaries, each employee
benefit plan or arrangement, including but not limited to employee pension
benefit plans, as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), multi-employer plans, as defined in
Section 3(37) of ERISA, employee welfare benefit plans, as defined in Section
3(1) of ERISA, deferred compensation plans, stock option plans, bonus plans,
stock purchase plans, hospitalization, disability and other insurance plans,
severance or termination pay plans and policies, whether or not described in
Section 3(3) of ERISA, in which employees, their spouses or dependents
participate ("Employee Benefit Plans").
3.19 TAX MATTERS. (i) Except as set forth on SCHEDULE 3.19, all Tax
Returns required to be filed on or prior to the date hereof with respect to the
Purchaser and each of its Subsidiaries or any of their respective income,
properties, franchises or operations, have been timely filed where required to
be filed, each such Tax Return has been prepared in compliance with all
applicable laws and regulations, and all such Tax Returns are true and accurate
in all respects; and (ii) all Taxes due and payable by or with respect to the
Purchaser and any of its Subsidiaries, have been fully and timely paid and
adequate reserves or accruals for Taxes have been provided in the Purchaser's
Current Balance Sheets with respect to any period for which Tax Returns have not
yet been filed or for which Taxes are not due and payable.
3.20 INSURANCE. The Purchaser and each of its Subsidiaries is covered
by valid, outstanding and enforceable policies of insurance covering its
respective properties, assets and business against risks of the nature normally
insured against by corporations in the same or similar lines of business and in
coverage amounts typically and reasonably carried by such corporations.
3.21 [INTENTIONALLY DELETED]
3.22 LICENSES AND PERMITS. The Purchaser and each of its Subsidiaries
possesses all material licenses and required governmental or official approvals,
permits or authorizations, necessary for the conduct of its businesses.
3.23 ADEQUACY OF THE ASSETS. The Purchaser's Assets and Purchaser's
Leased Premises constitute, in the aggregate, all of the assets and properties
necessary for the
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conduct of the business of the Purchaser and each of its Subsidiaries in the
manner in which and to the extent to which such business is currently being
conducted.
3.24 [INTENTIONALLY DELETED]
3.25 CONTRACTS. Neither the Purchaser nor any of its Subsidiaries has
violated any of the material terms or conditions of any material Contract to
which it or its properties is bound or subject.
3.26 INVESTOR STATUS. The shares of Company Common Stock being acquired
by the Purchaser pursuant to this Agreement are being acquired for the
Purchaser's own account for investment and not with a view to, or for the sale
in connection with, any distribution thereof. The Purchaser has had the
opportunity to discuss the transactions contemplated hereby with the
Shareholders and has had the opportunity to obtain such information pertaining
to the Company as has been requested, and to ask all questions of Shareholders
as it deems advisable, all of which have been answered to its satisfaction. The
Purchaser is a sophisticated investor and has such knowledge and experience in
business or financial matters that it is capable of evaluating the merits and
risks of an investment in the Company Common Stock.
3.27 NO COMMISSIONS. Neither the Purchaser or its Subsidiaries, has
incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby, other than fees which will be paid by, and are the sole
obligation of, Purchaser, including any fee payable to ViStra Growth Partners,
Inc. and $15,000 to First Fidelity Capital Markets, Inc.
3.28 ACCURACY OF INFORMATION FURNISHED BY THE COMPANY, OR THE
SHAREHOLDER. No representation, warranty, covenant, agreement, or statement by
the Purchaser in this Agreement and the various Schedules attached hereto,
contains or shall contain any untrue statement of a material fact or omits or
shall omit any material fact necessary to make the information contained therein
not misleading. The Purchaser has provided the Company and the Shareholder with
true, accurate and complete copies of all documents listed or described in the
various Schedules attached hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS AND THE COMPANY
As a material inducement to Purchaser to enter into this Agreement and
to consummate the transactions contemplated hereby, each of the Shareholders,
and the Company, jointly and severally, represent and warrant to Purchaser that:
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4.1 CORPORATE STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has the requisite corporate power and authority to own or
lease its respective properties and to carry on its respective businesses as now
being conducted. The Company is legally qualified to transact business as a
foreign corporation, and is in good standing as such, in each jurisdiction in
which the nature of its respective properties and/or the conduct of its
respective business requires such qualification. SCHEDULE 4.1 sets forth, with
respect to the Company the jurisdiction in which it is incorporated and, all
jurisdictions in which it is qualified to conduct business as a foreign
corporation. SCHEDULE 4.1 sets forth, with respect to the Company a list of all
names under which it has at any time done business. There is no pending or, to
the Company's Knowledge, threatened proceeding for the dissolution, liquidation,
insolvency or rehabilitation of the Company.
4.2 POWER AND AUTHORITY. The Company has the corporate power and
authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
The Company has taken all action necessary to authorize the execution and
delivery of this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby. Each Shareholder is an
individual United States citizen residing in the State of Florida, and has the
requisite competence and authority to execute and deliver this Agreement, to
perform his or her obligations hereunder and to consummate the transactions
contemplated hereby. Except as provided in SCHEDULE 4.2, no Shareholder is bound
by any contractual or legal restriction from selling his or her Company Shares
pursuant to the terms of this Agreement.
4.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Company, and the Shareholders, and constitutes the legal, valid and
binding obligation of each of them, enforceable against each of them in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
4.4 CAPITALIZATION. SCHEDULE 4.4 sets forth, with respect to the
Company, (a) the number of authorized shares of each class of its capital stock,
(b) the number of issued and outstanding shares of each class of its capital
stock, and (c) the number of shares of each class of its capital stock which are
held in treasury. All of the issued and outstanding shares of capital stock of
the Company (i) have been duly authorized and validly issued and are fully paid
and non-assessable, (ii) were issued in compliance with all applicable state and
federal securities laws, and (iii) were not issued in violation of any
preemptive rights or rights of first refusal. Except as set forth on SCHEDULE
4.4, no preemptive rights or rights of first refusal exist with respect to the
shares of capital stock of the Company, and no such rights arise by virtue of or
in connection with the transactions contemplated hereby. There are no
outstanding or authorized rights, options, warrants, convertible securities,
subscription rights, conversion rights, exchange rights or other agreements or
commitments of any kind
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that could require the Company to issue or sell any shares of its capital stock
(or securities convertible into or exchangeable for shares of its capital
stock). There are no outstanding stock appreciation, phantom stock, profit
participation or other similar rights with respect to the Company. Except as set
forth on SCHEDULE 4.4, there are no proxies, voting rights or other agreements
or understandings with respect to the voting or transfer of the capital stock of
the Company. The Company is not obligated to redeem or otherwise acquire any of
its outstanding shares of capital stock.
4.5 SHAREHOLDERS. SCHEDULE 4.5 sets forth, with respect to the Company,
the name, address and federal taxpayer identification number of, and the number
of outstanding shares of each class of its capital stock owned of record and/or
beneficially by, the shareholder(s) of the Company as of the close of business
on the date of this Agreement. As of the date hereof, the Shareholders are the
sole holders of all of the issued and outstanding shares of capital stock of the
Company and except as provided in SCHEDULE 4.5, all such shares are owned by the
Shareholders free and clear of all Liens, restrictions and claims of any kind.
4.6 NO VIOLATION. Except as set forth in SCHEDULE 4.6, neither the
execution or delivery of this Agreement by the Company or the Shareholders, or
the performance by any of them of their respective obligations hereunder or the
consummation by any of them of the transactions contemplated by this Agreement
will (i) contravene any provision of the Articles of Incorporation or Bylaws of
the Company, (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment or order of any Governmental
Authority or of any arbitration award which is either applicable to, binding
upon or enforceable against the Company or the Shareholders, (iii) conflict
with, result in any breach of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default)
under, or give rise to a right to terminate, amend, modify, abandon or
accelerate, any material Contract which is applicable to, binding upon or
enforceable against the Company or the Shareholders, (iv) result in or require
the creation or imposition of any Lien upon or with respect to any of the
property or assets of the Company or the Shareholders or (v) require the
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, any court or tribunal or any other Person,
except any SEC and other filings required to be made by Purchaser, if any.
4.7 RECORDS OF THE COMPANY. The copies of the Articles of Incorporation
and Bylaws of the Company which were provided to Purchaser are true, accurate
and complete and reflect all amendments made through the date of this Agreement.
The minute books (containing records of meetings of shareholders, the board of
directors, and any committees of the board of director), the stock certificate
books and the stock record books of the Company are correct and complete. All
material corporate action taken by the Company has been duly authorized and
ratified. All accounts, books, ledgers and official and other records of the
Company have been fully, properly and accurately kept and completed in all
respects, and there are no material inaccuracies or discrepancies of any kind
contained therein.
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4.8 NO SUBSIDIARIES. The Company does have any Subsidiaries.
4.9 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 4.9 are (i) the
unaudited financial statements of the Company for the year ended December 31,
1998, including the notes thereto (collectively, the "Interim Financial
Statements"), and (ii) the audited financial statements of the Company for the
years ended December 31, 1996 and December 31, 1997, including the notes
thereto, (collectively, the "Annual Financial Statements"), (collectively, the
Company's Annual Financial Statements and the Interim Financial Statements, the
"Financial Statements"). The balance sheets of the Company dated as of December
31, 1998 included in the Financial Statements are hereinafter sometimes referred
to as the "Current Balance Sheets." The Financial Statements fairly present the
financial position of the Company at the balance sheet date and the results of
operations for the periods covered thereby, and have been prepared in accordance
with GAAP consistently applied throughout the periods indicated. The books and
records of the Company fully and fairly reflect all of their respective
transactions, properties, assets and liabilities. Except as reflected on the
Financial Statements, there are no extraordinary or non-recurring items of
income or expense during the periods covered by the Financial Statements and the
balance sheets included in the Financial Statements do not reflect any writeup
or revaluation increasing the book value of any assets, except as specifically
disclosed in the notes thereto. The Financial Statements reflect all adjustments
necessary for a fair presentation of the financial information contained
therein.
4.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as set forth
on SCHEDULE 4.10, since the date of the Current Balance Sheets the Company has
not (i) issued any capital stock or other securities; (ii) made any distribution
of or with respect to its capital stock or other securities, or purchased or
redeemed any of its securities; (iii) paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees or amended any other
terms of employment of such persons; (iv) sold, leased or transferred any of its
properties or assets other than in the ordinary course of business consistent
with past practice; (v) made or obligated itself to make capital expenditures
out of the ordinary course of business consistent with past practice; (vi) made
any payment in respect of its liabilities other than in the ordinary course of
business consistent with past practice; (vii) incurred any obligations or
liabilities (including any indebtedness) or entered into any transaction or
series of transactions involving in excess of $5,000 in the aggregate out of the
ordinary course of business, except for this Agreement and the transactions
contemplated hereby; (viii) suffered any theft, damage, destruction or casualty
loss, not covered by insurance and for which a timely claim was filed, in excess
of $5,000 in the aggregate; (ix) suffered any extraordinary losses (whether or
not covered by insurance); (x) waived, canceled, compromised or released any
rights having a value in excess of $5,000 in the aggregate; (xi) made or adopted
any change in its accounting practice or policies; (xii) made any adjustment to
its books or records other than in respect of the conduct of its business
activities in the ordinary course consistent with past practice; (xiii) entered
into any transaction with any Affiliate or Familial Affiliate; (xiv) entered
into any employment agreement; (xv) terminated, amended or modified any
agreement involving an amount in excess of $5,000; (xvi) imposed any security
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interest or other Lien on any of its assets other than in the ordinary course of
business consistent with past practice; (xvii) delayed paying any accounts
payable which are due and payable except to the extent being contested in good
faith; (xviii) made or pledged any charitable contribution in excess of $1,000;
(xix) entered into any other transaction or been subject to any event which has
or may have a Material Adverse Effect on the Company; or (xx) agreed to do or
authorized any of the foregoing.
4.11 LIABILITIES OF THE COMPANY. Except as disclosed on SCHEDULE 4.11
hereto, the Company does not have any liabilities or obligations, whether
accrued, absolute, contingent or otherwise, except (a) to the extent reflected
on the Current Balance Sheet and not heretofore paid or discharged, (b)
liabilities incurred in the ordinary course of business consistent with past
practice since the date of the Current Balance Sheet (none of which relates to
breach of contract, breach of warranty, tort, infringement or violation of law,
or which arose out of any action, suit, claim, governmental investigation or
arbitration proceeding), and (c) liabilities which were incurred in the ordinary
course of business prior to the date of the Current Balance Sheet and which, in
accordance with GAAP, consistently applied, were not required to be recorded
thereon.
4.12 LITIGATION. Except as disclosed on SCHEDULE 4.12 hereto, there is
no action, suit, or other legal or administrative proceeding or governmental
investigation pending, or to the Company's Knowledge, threatened, anticipated or
contemplated against, by or affecting the Company or the Shareholders which
relates to or affects the validity or enforceability of this Agreement or the
transactions contemplated hereby, and there is no basis for any of the
foregoing. There are no outstanding orders, decrees or stipulations issued by
any Governmental Authority in any proceeding to which the Company is or was a
party which have not been complied with in all respects or which continue to
impose any obligations on the Company. The Shareholders are not, and have not at
any time in the past, been a party to any bankruptcy or other insolvency
proceedings.
4.13 ENVIRONMENTAL MATTERS.
(a) The Company is and has at all times been in compliance in
all material respects with all Environmental Laws governing its respective
business, operations, properties and assets.
(b) There are no (and there is no basis for any)
non-compliance orders, warning letters, notices of violation, claims, suits,
actions, judgments, penalties, fines, or administrative or judicial
investigations or proceedings pending or, to the Company's Knowledge, threatened
against or involving the Company or its businesses, operations, properties, or
assets, issued by any Governmental Authority or third party with respect to any
Environmental Laws in connection with, related to or arising out of the
ownership by the Company of its properties or assets or the operation of its
business, which have not been resolved to the satisfaction of the issuing
Governmental Authority or third party in a manner that would not impose any
obligation, burden or continuing liability on Purchaser, or the
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Company in the event that the transactions contemplated by this Agreement are
consummated, or which could have a Material Adverse Effect on Purchaser or the
Company.
4.14 REAL ESTATE.
(a) The Company does not own any real property or any interest
therein.
(b) SCHEDULE 4.14(b) sets forth a list of all material leases
(collectively, "Leases") to which the Company is a party (copies of which have
previously been furnished to Purchaser), in each case setting forth (A) the
lessor and lessee thereof and the date and term of each of the Leases, (B) the
legal description, including street address, of each property covered thereby,
and (C) a summary of the principal terms thereof, including, without limitation,
the term, any renewal options, the current rental and any rent escalations.
There is no breach or anticipated breach by any other party to any Lease. With
respect to each of the Leased Premises:
(i) The Company has valid leasehold interests in the
Leased Premises, free and clear of any Liens, covenants and easements
or title defects of any nature whatsoever; and
(ii) The portions of the buildings located on the
Leased Premises that are used in the business of the Company are each
in good repair and condition, normal wear and tear excepted, and are in
the aggregate sufficient to satisfy the current and reasonably
anticipated normal business activities of the Company as conducted
thereat.
4.15 GOOD TITLE TO AND CONDITION OF ASSETS. Except as set forth on
SCHEDULE 4.15, (a) the Company has good and marketable title to all of its
Assets (as hereinafter defined), free and clear of any Liens or restrictions on
use. For purposes of this Agreement, the term "Assets" means all of the material
properties and assets of the Company (other than the Leased Premises) whether
personal or mixed, tangible or intangible, wherever located.
4.16 COMPLIANCE WITH LAWS.
Except as set forth on SCHEDULE 4.16, (i) the Company is and
has been in compliance, in all material respects, with all laws, regulations and
orders applicable to it, its properties and assets (in each case, owned or used
by it now or in the past) and its business and operations (as conducted by it
now and in the past); (ii) the Company has not been cited, fined or otherwise
notified of any asserted past or present failure to comply with any laws,
regulations or orders and no proceeding with respect to any such violation is
pending or, to the Company's Knowledge, threatened; and (iii) neither the
Company or the Shareholders, nor any of their respective employees or agents,
had made any payment of funds in connection with the business of the Company
which is prohibited by law, and no funds have been set aside to be used in
connection with the business of the Company for any payment prohibited by law.
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4.17 LABOR AND EMPLOYMENT MATTERS. George and Michael Pollis are the
sole employees of the Company. SCHEDULE 4.17 sets forth, with respect to the
Company, the name, address, social security number and current rate of
compensation of each individual independent contractor that provides mortgage
brokerage services to the Company. The Company is not a party to or bound by any
collective bargaining agreement or any other agreement with a labor union, and
there has been no effort by any labor union during the 24 months prior to the
date hereof to organize any employees of the Company into one or more collective
bargaining units. There is no pending or, to the Company's Knowledge, threatened
labor dispute, strike or work stoppage which affects or which may affect the
business of the Company or which may interfere with its continued operations.
The Company is and has been in compliance, in all material respects, with
applicable laws, rules and regulations relating to employment, civil rights and
equal employment opportunities.
4.18 EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 4.18 contains a list
setting forth, with respect to the Company, each employee benefit plan or
arrangement, including but not limited to employee pension benefit plans, as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), multi-employer plans, as defined in Section 3(37) of
ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA,
deferred compensation plans, stock option plans, bonus plans, stock purchase
plans, hospitalization, disability and other insurance plans, severance or
termination pay plans and policies, whether or not described in Section 3(3) of
ERISA, in which employees, their spouses or dependents participate ("Employee
Benefit Plans").
(b) COMPLIANCE WITH LAW. With respect to each Employee Benefit
Plan, (i) each has been administered in all material respects in compliance with
its terms and with all applicable laws, including, but not limited to, ERISA and
the Internal Revenue Code of 1986, as amended (the "Code"); (ii) no actions,
suits, claims or disputes are pending, or, to the Company's Knowledge,
threatened; (iii) no audits, inquiries, reviews, proceedings, claims, or demands
are pending with any governmental or regulatory agency; (iv) there are no facts
which could give rise to any liability in the event of any such investigation,
claim, action, suit, audit, review, or other proceeding; (v) all material
reports, returns, and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly or
timely filed or distributed; and (vi) no "prohibited transaction" has occurred
within the meaning of the applicable provisions of ERISA or the Code.
4.19 TAX MATTERS. Except as set forth on SCHEDULE 4.19: (i) all Tax
Returns required to be filed on or prior to the date hereof with respect to the
Company or any of its income, properties, franchises or operations, have been
timely filed where required to be filed, (ii) each such Tax Return has been
prepared in compliance with all applicable laws and regulations, and all such
Tax Returns are true and accurate in all respects; and (iii) all Taxes due and
payable by or with respect to the Company have been fully and timely paid and
adequate reserves or accruals for Taxes have been provided in the Current
Balance Sheets
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with respect to any period for which Tax Returns have not yet been filed or for
which Taxes are not due and payable. Except as set forth on SCHEDULE 4.19, the
Company has not received any notices of additional Tax liability, or an intent
to inspect prior years Tax Returns from any Governmental Authority. Except as
set forth on SCHEDULE 4.19, the Company does not have any tax deficiencies for
any open years and has not extended the statute of limitations for any years
that would otherwise be closed by the statute of limitations.
4.20 INSURANCE. SCHEDULE 4.20 contains a complete and correct list of
all of the Company's valid, outstanding and enforceable policies of insurance
covering its properties, assets and business against risks of the nature
normally insured against by corporations in the same or similar lines of
business (the "Insurance Policies").
4.21 INTENTIONALLY DELETED.
4.22 LICENSES AND PERMITS. The Company possesses all material licenses
and required governmental or official approvals, permits or authorizations,
necessary for the conduct of its business, including without limitation as
required by the State of Florida, HUD, VA and Fannie Mae for the operation of a
mortgage lending business and with respect to the operation of each of the
Leased Premises (the "Permits"), and SCHEDULE 4.22 contains a true and complete
list of all such Permits. All such Permits are valid and in full force and
effect, and the Company is in compliance in all material respects with its
requirements thereof and no proceeding is pending or threatened to revoke or
amend any of them. None of the Permits is or will be impaired or in any way
affected by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
4.23 ADEQUACY OF THE ASSETS. The Assets and Leased Premises constitute,
in the aggregate, all of the assets and properties necessary for the conduct of
the business of the Company in the manner in which and to the extent to which
such business is currently being conducted.
4.24 PIPELINE APPLICATIONS. SCHEDULE 4.24 sets forth all of the
mortgage loan applications that are currently being processed by the Company.
4.25 CONTRACTS. SCHEDULE 4.25 sets forth, with respect to the Company a
list of each Contract to which it is a party or by which it or its properties
and assets are bound or which is material to its business, assets, properties or
prospects (the "Designated Contracts"). The Company has not violated any of the
material terms or conditions of any Designated Contract or any term or condition
which would permit termination or material modification of any Designated
Contract.
4.26 ACCURACY OF INFORMATION FURNISHED BY THE COMPANY, OR THE
SHAREHOLDERS. No representation, warranty, covenant, agreement, or statement by
the Company, or the Shareholders in this Agreement and the various Schedules
attached hereto, contains or shall
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contain any untrue statement of a material fact or omits or shall omit any
material fact necessary to make the information contained therein not
misleading. The Company, and the Shareholders have provided Purchaser with true,
accurate and complete copies of all documents listed or described in the various
Schedules attached hereto.
4.27 INVESTMENT INTENT; SOPHISTICATED INVESTOR STATUS; MARKET FOR
PURCHASER COMMON STOCK. The Shareholders are acquiring all of the shares of
Purchaser Common Stock issued, or to be issued, hereunder for their own account
for investment and not with a view to, or for the sale in connection with, any
distribution thereof. The Shareholders have had the opportunity to discuss the
transactions contemplated hereby with Purchaser and have had the opportunity to
obtain such information pertaining to Purchaser as has been requested, and to
ask all questions of Purchaser as they deem advisable, all of which have been
answered to their satisfaction. Each of the Shareholders is a sophisticated
investor and has such knowledge and experience in business or financial matters
that he or she is capable of evaluating the merits and risks of an investment in
the Purchaser Common Stock. The Shareholders acknowledges that the Purchaser
Common Stock is traded in the over-the-counter market and that bid and ask price
information for the Purchaser Common Stock is reported by Nasdaq. The
Shareholders further acknowledge that they are familiar with the
over-the-counter market and understand that this is not a securities exchange or
a recognized inter-dealer quotation system and that, as such, there is limited
liquidity for the Purchaser Common Stock. The Shareholders also acknowledge that
the Purchaser is not a "reporting company" within the meaning of the Federal
securities laws and that it is therefore not required to file with the SEC or
distribute to its shareholders the financial and other information and reports
required to prepared and distributed by many public companies (e.g. Annual
Reports of Form 10-K, Quarterly Reports on Form 10-Q, Proxy Statements etc.).
4.28 BANK ACCOUNTS. SCHEDULE 4.28 sets forth all accounts of the
Company with any bank, broker or other depository institution, and the names of
all persons authorized to withdraw funds from each such account.
4.29 NO COMMISSIONS. Neither the Company or the Shareholders has
incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby except for the fees and expenses due to First Fidelity
Capital Markets, Inc. and/or Elliot Jacobs pursuant to an agreement dated
September 1, 1998, a copy of which is attached to SCHEDULE 4.29.
4.30 YEAR 2000. The Company has assessed, evaluated and reviewed all
areas of its business and operations that could be adversely affected by date
sensitive functions and has taken all necessary action to assess, evaluate and
correct all of the hardware, software, embedded microchips and other processing
capabilities and capacities, directly or indirectly involving date sensitive
functions, to ensure that its business and operations will continue accurately
and without interruption or ambiguity using date information before, during and
after January 1, 2000.
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4.31 OTHER BUSINESS INTERESTS. Except for the Company, no Shareholder,
directly or indirectly, has an ownership interest in any business entity that is
engaged in the mortgage business nor does any Shareholder serve as an employee
or director of any such entity.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
5.2 COOPERATION-GENERAL. Each of the parties agrees to use its
commercially reasonable efforts to cooperate with the other in the preparation
and filing of all forms, notifications, reports and information, if any,
required or deemed advisable pursuant to any law, rule or regulation in
connection with the transactions contemplated by this Agreement, and to agree
jointly on a method to overcome any objections by any Governmental Authority to
any such transactions.
5.3 NOTIFICATION OF CERTAIN MATTERS. Each party hereto shall give
prompt notice to the other party of the occurrence or non-occurrence of any
event of which the notifying party has knowledge which would likely cause any
representation or warranty contained herein to be untrue or inaccurate, or any
covenant, condition, or agreement contained herein applicable to it not to be
complied with or satisfied in any material respect.
5.4 CONFIDENTIALITY; PUBLICITY. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be directly or indirectly issued by the Shareholders or the Company.
Purchaser may, without prior approval of or notice to any other party, make such
public disclosures which it believes in good faith to be required by law or by
the terms of any listing agreement with or requirements of a securities exchange
upon which its securities may be listed or traded. Notwithstanding the
foregoing, Purchaser shall have the right to disclose in any registration
statements prepared in connection with any securities offering or registration
of securities, information concerning the Company and the Shareholders,
including without limitation the Financial Statements and other financial
information, that it in good faith believes is required to be disclosed pursuant
to the Securities Act and the rules promulgated thereunder, the rules of Nasdaq
and applicable state securities laws or is advised by the Underwriter is
necessary or advisable.
5.5 SHAREHOLDER DELIVERIES. Purchaser hereby acknowledges delivery of
the following documents and instruments from the Shareholders:
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(a) certificates evidencing all issued shares of capital stock
of the Company duly endorsed for transfer to Purchaser;
(b) a release from the Shareholders, in such form as is
reasonably satisfactory to Purchaser, releasing all claims of any nature, if
any, against the Company, provided that such release shall not cover any direct
or indirect rights of the Shareholders against Purchaser under this Agreement;
(c) a legal opinion from counsel to the Company and the
Shareholders; and
(d) an employment agreement and agreement not to compete from
Mr. George M. Pollis and Mr. Michael Pollis.
(e) A Secretary's Certificate of the Company.
5.6 PURCHASER'S DELIVERIES. the Shareholders hereby acknowledges
delivery of the following documents and instruments from the Purchaser:
(a) certificates issued in the name of the Shareholders
evidencing the Exchange Shares;
(b) a legal opinion from counsel to the Purchaser;
(c) an employment agreement and agreement not to compete with
Mr. George M. Pollis and Mr. Michael Pollis;
(d) The $300,000 cash payment due pursuant to Section
2.5(b)(ii); and
(e) A Secretary's Certificate of the Purchaser and Sub.
5.7 RELEASE OF GUARANTEES. The Purchaser shall use its best efforts to
obtain, within 90 days following the Closing Date, a release of the personal
guarantees of the Shareholders and their family members of the obligations of
the Company under its existing credit facilities with First Bank of Indiantown
and NationsBank (the "Credit Facilities"). Although the Purchaser will use its
best efforts, the Shareholders acknowledge that there can be no guarantee that
the Purchaser will be successful in obtaining such releases.
5.8 TAXES. The Shareholders agree to file, or cause to be filed, by
March 31, 1999, federal income tax returns for the Company for the years ended
December 31, 1997 and 1998 and for the period from December 31, 1998 through the
Closing Date. The Shareholders further agree that they shall be solely
responsible for payment of all federal income taxes (including any fines,
penalties, interest, or other assessments thereon) relating to the Company
operations for all periods prior to the Closing Date.
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ARTICLE VI
INDEMNIFICATION
6.1 AGREEMENT BY THE SHAREHOLDERS TO INDEMNIFY. Subject to the
limitations set forth in this Article VI, the Shareholders, jointly and
severally, agree to indemnify and hold Purchaser and its respective officers,
directors and Affiliates (a "Purchaser Indemnified Party" and together the
"Purchaser Indemnified Parties") harmless from and against the aggregate of all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable counsel and paralegal fees and expenses) incurred
or suffered by any of the Purchaser Indemnified Parties arising out of or
resulting from (i) any breach of a representation or warranty made by the
Company or the Shareholders in this Agreement, (ii) any breach of a covenant or
agreement made by the Company or the Shareholders in this Agreement, (iii) any
tax or other liability of the Company arising from or relating to the treating
of employees as independent contractors or any other worker classification
issues, including but not limited to the employer and the employee's portion of
social security taxes, federal unemployment taxes, state unemployment taxes,
penalties, interest and related claims from workers based on any
misclassification, (iv) any employee benefit plan liability of the Company
arising from or relating to treating employees as independent contractors,
including but not limited to required contributions to benefit plans, insurance
plans, penalties and interest and related claims from workers based on the
misclassification, (v) any claims of any third parties asserting a current or
past ownership interest or other rights in the capital stock of the Company or
(vi) any claims of any third parties arising from or related to the personal
bankruptcy of Michael Pollis (collectively, "Purchaser Indemnifiable Damages").
6.2 AGREEMENT BY PURCHASER TO INDEMNIFY. Subject to the limitations set
forth in this Article VI, the Purchaser agrees to indemnify and hold the
Shareholders and their heirs and personal representatives (a "the Shareholder
Indemnified Party" and together the "Shareholder Indemnified Parties") harmless
from and against the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including, without limitation, reasonable counsel and
paralegal fees and expenses) incurred or suffered by any of the Shareholder
Indemnified Parties directly resulting from (i) any breach of a representation
or warranty made by Purchaser in this Agreement, or (ii) any breach of a
covenant or agreement made by Purchaser in this Agreement (collectively,
"Shareholder Indemnifiable Damages").
6.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Shareholders and Purchaser in this
Agreement or pursuant hereto shall survive the closing of the transactions
contemplated hereby for a period of two (2) years following the Effective Time
except that the representations set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5,
4.1, 4.2, 4.3, 4.4, 4.5 and the first sentence of Section 4.15 shall survive
indefinitely and the representations and warranties set forth in Section 3.13,
3.18, 3.19, 4.13, 4.18 and 4.19 shall expire at the time the last applicable
statute of limitations expires for the enforcement by an applicable Governmental
Authority or any other Person of any remedy with respect to a violation of or
the subject matter covered by such representations
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and warranties. No claim for the recovery of any Purchaser Indemnifiable Damages
or Shareholder Indemnifiable Damages with respect to the representations and
warranties in this Agreement may be asserted by any of the parties after such
representations and warranties shall expire in accordance with the terms of this
Agreement; PROVIDED, HOWEVER, that claims for Purchaser Indemnifiable Damages or
Shareholder Indemnifiable Damages first asserted within the applicable period
shall not thereafter be barred. Without limiting any other provisions of this
Section 6.3, there shall be no time limitation on the time period within which a
claim for the recovery of any Purchaser Indemnifiable Damages arising under
6.1(ii), (iii), (iv), (v) or (vi) can be made; such claims can be made for an
indefinite time following the Effective Time.
6.4 THIRD PARTY ACTIONS.
(a) For purposes of this Article VI, the term "Indemnifiable
Damages" means the Purchaser Indemnifiable Damages or the Shareholder
Indemnifiable Damages, as the context requires, the term "Indemnified Party"
means the Purchaser Indemnified Parties or the Shareholder Indemnified Parties,
as the context requires, and the term "Indemnifying Party" means the party
(Purchaser, on the one hand, or any Shareholder, on the other hand) against whom
a claim for Indemnifiable Damages is to be made.
(b) With respect to any action commenced by a third party
which could give rise to Indemnifiable Damages, the Indemnifying Party shall
have the right to participate in, and, to the extent that it may wish, jointly
or individually, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party; PROVIDED, if the defendants in any action
include both the Indemnified Party and the Indemnifying Party and there is a
conflict of interest as reasonably determined by the Indemnified Party or by
counsel for the Indemnifying Party which would prevent such counsel from also
representing the Indemnified Party, then the Indemnified Party shall have the
right to select separate counsel to participate in the defense of such action on
behalf of the Indemnified Party (at the expense of the Indemnifying Party).
After notice from the Indemnifying Party to the Indemnified Party of its
election to so assume the defense thereof, the Indemnifying Party will not be
liable to the Indemnified Party pursuant to the provisions of Section 6.1 and
6.2 for the related counsel and paralegal fees and expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation, unless (i) the Indemnified Party shall
have employed counsel in accordance with the provisions of the preceding
sentence; (ii) the Indemnifying Party shall not have employed counsel
satisfactory to the Indemnified Party to represent the Indemnified Party within
a reasonable time after notice of the commencement of the action, or (iii) the
Indemnifying Party has authorized the employment of counsel for the Indemnified
Party at the expense of the Indemnifying Party. Notwithstanding anything to the
contrary in this Section 6.4(b), the Indemnifying Party shall have no right to
settle or compromise any action for which they have assumed the defense to the
extent the settlement or compromise provides for any injunctive or other
equitable relief against the Indemnified Party or otherwise provides for any
continuing obligations of any nature against the Indemnified Party or loss of
rights of the Indemnified Party, and nothing
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stated in this Section 6.4(b) shall otherwise affect the Indemnifying Party's
obligation to pay the Indemnified Party all Indemnifiable Damages (other than
such related counsel and paralegal fees and expenses that the Indemnifying Party
is not required to pay in accordance with the immediately preceding sentence)
pursuant to Section 6.1 and 6.2. With respect to any such third party action
assumed by the Indemnifying Party, the parties agree to provide each other with
all material information that they request relating to the handling of such
matter.
6.5 PAYMENT SOLELY IN PURCHASER'S COMMON STOCK; ADJUSTMENT TO MERGER
CONSIDERATION. Except for payments due pursuant to Section 6.1(iii) hereof, all
indemnification payments due hereunder shall be made solely in shares of
Purchaser's Common Stock. Notwithstanding the foregoing, if the party that is
required to make the indemnification payment does not have shares of Purchaser
Common Stock, then, subject to the limitations set forth in Section 6.6(i) and
(ii), such party must pay the indemnification payments in cash. The number of
shares of Purchaser Common Stock required to be delivered for any
indemnification payment shall be determined based upon the average closing price
of the Purchaser Common Stock for the twenty trailing business days three
business days prior to the date that the indemnification payment is made (the
"Indemnification Stock Price"). Thus, if any Indemnifiable Damages are due to
Purchaser from Shareholder hereunder, Shareholder shall deliver an amount of
shares of Purchaser's Common Stock as is equal to the Indemnifiable Damages
DIVIDED BY the Indemnification Stock Price; and VICE VERSA. If the Purchaser
Common Stock is not traded on a national securities exchange, the Nasdaq Stock
Market or in the Nasdaq over-the-counter market, then the value of the Purchaser
Common Stock shall be based on an average of the Exchange Price and the price
determined through an appraisal performed by a third party reasonably acceptable
to the party receiving the shares of Purchaser Common Stock. The cost of this
appraisal shall be borne by the party required to deliver the shares of
Purchaser Common Stock. All set offs, recoupments and payments for Purchaser
Indemnifiable Damages or Shareholder Indemnifiable Damages, as applicable, made
pursuant to this Article VI shall be treated as adjustments to the Merger
Consideration.
6.6 LIMITATIONS ON INDEMNIFICATION PAYMENTS. Except as provided in this
Section 6.6 and notwithstanding anything in this Agreement to the contrary, (i)
no indemnification payments shall be due hereunder from the Shareholders to
Purchaser after the aggregate number of shares of Purchaser Common Stock
delivered by the Shareholders to the Purchaser in payment of Indemnifiable
Damages exceeds 95% of the number of Exchange Shares plus any additional shares
of Purchaser Common Stock issued to the Shareholders pursuant to this Agreement;
(ii) no indemnification payments shall be due hereunder from Purchaser to the
Shareholders after the aggregate number of shares of Purchaser Common Stock
delivered by the Purchaser to the Shareholders in payment of Indemnifiable
Damages exceeds 95% of the number of Exchange Shares; and (iii) no party shall
be liable to the other for Indemnifiable Damages that are in the nature of lost
profits, a loss in value, lost investment or business opportunity, internal
interest, punitive damages, damages to reputation, internal costs, overhead or
any other similar costs, unless such amounts are
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reimbursement of amounts paid to third parties in connection with Indemnifiable
Damages. Any payments for Indemnifiable Damages paid in cash shall, for purposes
of including such payments in the calculation of the maximum limits under
Section 6.1 (i) and (ii), be deemed to be equal to the number of shares of
Purchaser Common Stock obtained by dividing the cash payment by Indemnification
Stock Price.
6.7 NO OTHER RIGHTS. The indemnification rights of the Purchaser and
the Shareholders under this Article VI are in lieu of all such rights and
remedies as the Purchaser or the Shareholders may otherwise have at law or in
equity or otherwise after the Effective Time for any breach of a representation
or warranty made by either party in this Agreement or the breach of a covenant
or agreement made by either party in this Agreement, other than (i) such rights
and remedies as are set forth in Article VIII, and (ii) and any act of fraud in
connection with the execution, delivery or performance of this Agreement.
ARTICLE VII
SECURITIES LAW MATTERS
The Shareholders agree as follows with respect to the sale or other
disposition of the shares of Purchaser Common Stock issued to them hereunder:
7.1 DISPOSITION OF SHARES. Each Shareholder represents and warrants
that the shares of Purchaser Common Stock being acquired by such Shareholder
hereunder will be acquired for his or her own account and will not be sold or
otherwise disposed of, except pursuant to (a) an exemption from the registration
requirements under the Securities Act, which does not require the filing by the
Shareholders or Purchaser, as applicable, with the SEC of any registration
statement, offering circular or other document, in which case, the Shareholder
shall first supply to Purchaser, an opinion of counsel (which counsel and
opinions shall be satisfactory to Purchaser) that such exception is available,
or (b) an effective registration statement filed by Purchaser or the
Shareholders, as applicable, with the SEC under the Securities Act.
Notwithstanding the foregoing, Purchaser acknowledges and agrees that the
Shareholders may transfer an aggregate of five percent (5%) of the number of
Exchange Shares to First Fidelity Capital Markets, Inc. or Elliot Jacobs,
provided that the Purchaser has received from First Fidelity Capital Markets,
Inc. or Elliot Jacobs, as applicable, such representations and warranties as the
Purchaser shall reasonably require.
7.2 LEGEND. The certificates representing the Purchaser Common Stock
issued to the Shareholders pursuant hereto shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND IN COMPLIANCE WITH APPLICABLE SECURITIES
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LAWS OF ANY STATE WITH RESPECT THERETO, OR IN ACCORDANCE WITH AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Purchaser may, unless a registration statement is in effect covering such
shares, place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
If the shares of Purchaser Common Stock issued to the Shareholders
pursuant hereto become eligible for sale pursuant to Rule 144(k) promulgated
under the Securities Act, or any successor rule, the Purchaser agrees that it
shall cause the above restrictive legend to be removed from the certificates
representing such shares of Purchaser Common Stock upon receipt from the
Shareholders of an opinion of counsel in form and substance satisfactory to the
Purchaser to the effect that the removal of the restrictive legend will not
violate federal and applicable state securities laws.
ARTICLE VIII
REGISTRATION RIGHTS
The Shareholders shall have the registration rights described below
with respect to the shares of Purchaser Common Stock issued to the Shareholders
pursuant to this Agreement and any additional shares issued with respect to such
shares as a result of any stock dividend, stock split, recapitalization,
reclassification, merger, consolidation or similar transaction) (the "Shares").
If the Purchaser consents to a transfer of Shares by any Shareholder to its
family members or to a trust or other vehicle established for estate planing
purposes (the "Transferees"), the Transferee shall be entitled to the
registration rights provided by this Article VIII. For purposes of this Article
VIII the term "Shareholder(s)" shall also refer to the Transferees.
8.1 PIGGYBACK REGISTRATION RIGHTS. Purchaser agrees that if, at any
time following the Closing Date and while the provisions of this Article VIII
remain in effect, the Board of Directors of Purchaser shall authorize the filing
of a registration statement (any such registration statement being hereinafter
called a "Registration Statement") under the Securities Act (other than a
registration statement on Form S-4 or Form S-8 or other form which does not
include substantially the same information as would be required in a form for
the general registration of securities) in connection with the proposed offer of
any of its securities by Purchaser or any of its shareholders, Purchaser will
(i) promptly notify the Shareholders that such Registration Statement will be
filed and that the Shares which are then held by the Shareholders (the
"Shareholder Shares"), will, at the Shareholder's request, be included in such
Registration Statement, which notice shall specify the relevant facts relating
to the proposed filing (including without limitation (x) whether or not such
proposed offering will be an underwritten offering of securities and, if so, the
identity of the managing underwriter and whether such offering will be pursuant
to a "best efforts" or "firm commitment"
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underwriting, (y) the price, net of any underwriting commissions, discounts and
the like, at which the Shareholder Shares are reasonably expected to be sold),
(ii) upon the written request of the Shareholders within 30 days after the
giving of such notice by Purchaser, include in the securities covered by such
Registration Statement all Shareholder Shares which it has been so requested to
include, (iii) use its best efforts to cause such Registration Statement to
become effective as soon as practicable and (iv) take all other action necessary
under any Federal or state law or regulation of any governmental authority to
permit all Shareholder Shares which it has been so requested to include in such
Registration Statement to be sold or otherwise disposed of, and will maintain
such compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Shareholders to effect
the proposed sale or other disposition. Notwithstanding anything in this
Agreement to the contrary, the Shareholders, as a group, shall be entitled to
include Shareholder Shares in only one Registration Statement and all of the
Shareholders must participate in the same Registration Statement. Once
Shareholder Shares have been included in a Registration Statement that has been
declared effective by the SEC on behalf of one or more of the Shareholders, the
Purchaser's obligations under this Article VIII shall cease and no Shareholder
(whether or not he or she included Shareholder Shares in the subject
Registration Statement) shall be entitled to include Shareholder Shares in any
subsequent registration statement filed by the Purchaser.
8.2 REGISTRATION. In connection with any registration of shares of
Purchaser Common Stock undertaken pursuant to Sections 8.1 above, the following
shall apply:
(a) Whenever Purchaser is required pursuant to the provisions
of this Article VIII to include Shareholder Shares in a registration statement,
then Purchaser shall (i) furnish the Shareholders and each underwriter of such
Shareholder Shares with such copies of the prospectus, including the preliminary
prospectus, conforming to the Securities Act (and such other documents as the
Shareholders or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Shareholder Shares, (ii) use its best
efforts to register or qualify such Shareholder Shares under the blue sky laws
(to the extent applicable) of such jurisdictions or laws (to the extent
applicable) of such jurisdictions as the Shareholders and each underwriter of
Shareholder Shares being sold by the Shareholders shall reasonably request and
(iii) take such other actions as may be reasonably necessary or advisable to
enable the Shareholders and such underwriters to consummate the sale or
distribution in such jurisdictions in which the Shareholders shall have
reasonably requested that the Shareholder Shares be sold.
(b) Purchaser shall pay all expenses incurred in connection
with any Registration Statement other than underwriting discounts or fees and
applicable transfer taxes relating to the Shareholder Shares and the fees and
expenses of counsel for the Shareholders.
(c) In connection with any public offering by Purchaser
involving an underwriting of its securities effected pursuant to Section 8.1
hereof, Purchaser shall not be required to include in such registration any
Shareholder Shares held by the Shareholders
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unless the Shareholders agree to the terms of the underwriting agreement between
Purchaser and the managing underwriter of such offering, which agreement may
require that the Shareholder Shares be withheld from the market by the
Shareholders for a period of up to 180 days after the effective date of the
registration statement by which such public offering is being effected (or such
longer period as may be requested by any securities exchange upon which the
Purchaser Common Stock is then listed). Furthermore, Purchaser shall be
obligated to include in such registration only the quantity of Shareholder
Shares, if any, as will not, in the opinion of the managing underwriter,
jeopardize the success of the offering by Purchaser. If the managing underwriter
for the offering advises Purchaser in writing that the total amount of
securities sought to be registered by the Shareholders and other shareholders of
Purchaser having similar registration rights as of the date thereof
(collectively, the "Purchaser Shareholders") exceeds the amount of securities
that can be offered without adversely affecting the offering by Purchaser, then
Purchaser may reduce the number of shares to be registered by Purchaser for the
Purchaser Shareholders, including the Shareholder Shares requested to be
included therein, to a number satisfactory to such managing underwriter which
number may be zero. Any such reduction shall be pro rata, based upon the
percentage that the shares requested to be included in the Registration
Statement by each Purchaser Shareholder constitutes of the total number of
shares included therein on behalf of the Purchaser Shareholders.
(d) Purchaser will indemnify and hold harmless the
Shareholders and any person or entity engaged by the Shareholders to sell the
Shareholder's Shares, and each person, if any, who controls such persons or
entities within the meaning of the Securities Act or the Exchange Act
(collectively, a "Holder Indemnitee"), against any losses, claims, damages,
liabilities or expenses (or actions, proceedings, or settlements in respect
thereof) (joint or several) to which a Holder Indemnitee may become subject
under the Securities Act, the Exchange Act, or other federal or state law,
insofar as such losses, claims, damages, liabilities or expenses (or actions,
proceedings or settlements in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement and all documents related thereto, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto; (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
or (iii) the employment or alleged employment by Purchaser of any device, scheme
or artifice to defraud or the engagement by Purchaser or alleged engagement by
Purchaser in any act, practice or course of business which operates or would
operate as a fraud or deceit upon the purchasers of its securities pursuant to
such registration statement. Purchaser will also reimburse each Holder
Indemnitee for any legal or other expenses reasonably incurred by such Holder
Indemnitee in connection with investigating, defending and settling any such
loss, claim, damage, liability or action. The indemnity agreement contained in
this Section 8.2(d) shall not apply to amounts paid in settlement of any loss,
claim, damage, liability, or action if such settlement is effected without the
consent of Purchaser, which consent shall not be unreasonably withheld, and
Purchaser shall not be liable
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to any Holder Indemnitee of any loss, claim, damage, liability or action (i) to
the extent that it arises solely out of or is based solely upon a Violation
which occurs in reliance upon and in conformity with information furnished
expressly for use in connection with such registration by or on behalf of the
Shareholders or any agent of the Shareholders or controlling person of either;
or (ii) in the case of a sale directly by the Shareholders (including a sale of
such Shareholder Shares through any underwriter retained by the Shareholders to
engage in a distribution solely on behalf of the Shareholders), such untrue
statement or alleged untrue statement or omission or alleged omission was
contained in a preliminary prospectus and corrected in a final or amended
prospectus, and the Shareholders failed to deliver a copy of the final or
amended prospectus at or prior to the confirmation of the sale of the
Shareholder Shares to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the Securities Act.
(e) The Shareholders will indemnify and hold harmless
Purchaser, each of its employees, officers, directors or persons who control
Purchaser within the meaning of the Securities Act or the Exchange Act, and each
agent or underwriter for Purchaser or any other person or entity engaged by
Purchaser to sell Purchaser's securities offered in the registration statement,
or any of their respective directors, officers, partners, agents, employees or
control persons (collectively, a "Purchaser Indemnitee"), against any losses,
claims, damages, liabilities or expenses (or actions, proceedings or settlements
in respect thereof) (joint or several) to which Purchaser or any such Purchaser
Indemnitee may become subject under the Securities Act, the Exchange Act, or
other federal or state law, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereto) arise solely out of or are based
solely upon any Violation, in each case to the extent that such Violation occurs
in reliance upon and in conformity with information furnished by or on behalf of
the Shareholders expressly for use in connection with such registration; and the
Shareholders will reimburse any legal or other expenses reasonably incurred by a
Purchaser Indemnitee in connection with investigating, defending or settling any
such loss, claim, damage, liability, or action. The indemnity agreement
contained in this Section 8.2(e) shall not apply to amounts paid in settlement
of any loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Shareholders, which consent shall not be unreasonably
withheld, nor, in the case of a sale directly by Purchaser of its securities
(including a sale of such securities through any underwriter retained by
Purchaser to engage in a distribution solely on behalf of the Purchaser), shall
the Shareholders be liable to Purchaser in any case in which such untrue
statement or alleged untrue statement or omission or alleged omission was
contained in a preliminary prospectus and corrected in a final or amended
prospectus, and Purchaser failed to deliver a copy of the final or amended
prospectus at or prior to the confirmation of the sale of the securities to the
person asserting any such loss, claim, damage or liability in any case where
such delivery is required by the Securities Act.
(f) Promptly after receipt by an indemnified party under
Sections 8.3(d) or (e) of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party, deliver to the
indemnifying party a written notice of the commencement thereof and the
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indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume and control the defense thereof with counsel
mutually satisfactory to the indemnified and indemnifying parties, provide that
an indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests (as reasonably
determined by either party) between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
Sections 8.3 (d) or (e), respectively, to the extent of such prejudice, but the
failure to so deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under Sections 8.3 (d) or (e), respectively. The obligations of Purchaser and
the Shareholders under Sections 8.3 (d) or (e), respectively, shall survive the
completion of any offering of Shareholder Shares made pursuant to a registration
under this Agreement. The amount paid or payable by a party as a result of the
losses, claims, damages, or liabilities (or actions or proceedings in respect
thereof) referred to in Sections 8.3 (d) and (e) shall include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
(g) If the indemnification provided for in the preceding
Sections 8.3 (d) or (e) is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall be
entitled to contribution, except to the extent that contribution is not
permitted under Section 11(f) of the Securities Act. In determining the amount
of contribution to which the respective parties are entitled, there shall be
considered the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(h) Purchaser shall not be obligated to register any
Shareholder Shares pursuant to this Article VIII at any time when the resale
provisions of Rule 144 promulgated under the Securities Act are available to the
Shareholders without limitation as to volume.
(i) If Purchaser shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, Purchaser
covenants that it will timely file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder (or, if Purchaser is not required to file such reports, it
will, upon the request of any holder of Shares, make publicly available other
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information contemplated by Rule 144 under the Securities Act). From and after
such time as Purchaser is required to file reports and other documents with the
SEC pursuant to the Exchange Act, so long as any holder owns Shares that have
not been registered under the Securities Act, Purchaser shall furnish to such
holder upon request a written statement by Purchaser as to its compliance with
the reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of Purchaser,
and such other reports and documents so filed as such holder may reasonably
request in availing himself of any rule or regulation of the SEC allowing him to
sell any such Shares without registration.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) IF TO PURCHASER TO:
Mr. Nelson A. Locke
America's Senior Financial Services, Inc.
15544 NW 77 Court
Miami Lakes, Florida 33016
WITH A COPY TO:
Teresita Garcia, Esq.
Holland & Knight LLP
701 Brickell Avenue, Suite 3000
Miami, Florida 33131
Phone: 305-374-8500
Telecopy: 305-789-7799
and
Thomas Sherman, Esq.
Sherman & Castro
218 Almeira Street
Coral Gables, Florida 33134
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Phone: 305-444-4508
Telecopy: 305-445-4458
(b) IF TO THE SHAREHOLDERS TO:
Mr. George Pollis
Ms. Traci Ann Pollis
2928 N.W. Sewalls Landing
Jensen Beach, Florida 35957
Phone:_____________________
Telecopy:__________________
Ms. Paula M. Police
9245 S.E. Mystic Cove Terrace
Hobe Sound, Florida 33455
Phone: ____________________
Telecopy: _________________
WITH A COPY TO:
Richard J. Melnick, Esq.
Shulman, Rogers & Gandal
11921 Rockville Pike -- Suite 300
Rockville, MD 20852
Phone: (301) 230-5229
Fax: (301) 230-2891
Notice shall be deemed given on the date sent if sent by facsimile transmission
and on the date delivered (or the date of refusal of delivery) if sent by
overnight delivery, or certified or registered mail.
9.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto), the other documents signed by the parties which are
delivered contemporaneously herewith, and other documents delivered at the
Closing pursuant hereto, contain the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings (oral or written) between or among the parties with respect to
such subject matter including, without limitation, the letter of intent dated
November 9, 1998 entered into between the Purchaser and the Company. The
Exhibits and Schedules constitute a part hereof as though set forth in full
above.
9.3 EXPENSES. Except as otherwise provided herein, (i) the Shareholders
shall pay their own and the Company' fees and expenses, including accounting and
counsel fees, incurred in connection with this Agreement or any transaction
contemplated hereby, (ii) Purchaser shall pay its own fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby.
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9.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
9.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective heirs, executors, personal representatives, trustees, guardians,
attorneys-in-fact, successors and assigns. Nothing expressed or implied herein
shall be construed to give any other person any legal or equitable rights
hereunder. Except as expressly provided herein, the rights and obligations of
this Agreement may not be assigned or delegated by any of the parties hereto
without the prior written consent of the non-assigning or non-delegating
parties.
9.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
9.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Time shall be of the essence in this Agreement.
9.8 SEVERABILITY. If any word, phrase, sentence, clause, section,
subsection or provision of this Agreement as applied to any party or to any
circumstance is adjudged by a court to be invalid or unenforceable, the same
will in no way affect any other circumstance or the validity or enforceability
of any other word, phrase, sentence, clause, section, subsection or provision of
this Agreement. If any provision of this Agreement, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby or otherwise, the parties agree that the court making such
determination shall have the power to reduce the duration and/or area of such
provision, and/or to delete specific words or phrases, and in its reduced form,
such provision shall then be enforceable and shall be enforced.
9.9 GOVERNING LAW; MEDIATION; ARBITRATION. This Agreement shall be
construed in accordance with and governed by the laws of the State of Florida
without giving effect to
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any choice or conflict of law provision or rule (whether of the State of Florida
or any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Florida. All claims arising under this
Agreement which the parties are unable to settle shall be submitted for
mediation by a mediator mutually acceptable to the parties involved in such
claim. It shall be a condition to the right of the parties to commence an
arbitration proceeding with respect to any claim that each party shall have made
a good faith effort to resolve the dispute through a mediation proceeding as
provided in the preceding sentence. Any and all claims arising under this
Agreement which the parties are unable to settle by mutual agreement or
mediation as provided above shall be resolved by binding arbitration pursuant to
the Arbitration Rules of the American Arbitration Association as in force at the
time ("AAA").
(i) A party which desires to submit a claim to binding
arbitration under this Section 9.9 shall so notify the other parties, and if
after 30 days from the date of such notice the claim remains unsettled, any
party may petition the AAA for arbitration of the claim. Matters submitted to
arbitration shall be resolved in accordance with the decision of a panel of
three arbitrators selected by the AAA in Miami Dade County, Florida, which shall
be the place of arbitration, unless the parties agree on another location.
(ii) The three arbitrators shall investigate the facts and
shall hold hearings at which the parties may present evidence and arguments, be
represented by counsel and conduct cross-examination. In determining any
question, matter or dispute before them, the arbitrators shall apply the
provisions of this Agreement and shall not have the power to add to, modify or
change any of the provisions of this Agreement. The three arbitrators shall
render a written decision upon the matter presented to them by a majority vote
within 90 days after the date on which the hearings and presentation of evidence
are concluded, unless a longer period is provided under the rules of the AAA.
The decision rendered by the arbitrators shall be final and binding on, and
unappealable by, the parties. Except as otherwise permitted under the
Arbitration Rules, the three arbitrators shall have the power to deliver both
legal and equitable remedies. Judgment upon the decision rendered in such
arbitration may be entered by any court having jurisdiction thereof. No party to
an arbitration proceeding shall be considered in default hereunder during the
pendency of arbitration proceedings relating to a disputed default. If the three
arbitrators fail to render a timely decision, then, to the extent permitted by
law, any party shall have the right to institute an action or proceeding in such
court as shall be appropriate in the circumstances, and, upon the institution of
such action, the arbitration proceeding shall be terminated and shall be of no
further force and effect. The arbitrators shall determine in what proportion the
parties shall bear the fees and expenses of the arbitrators, and each party
shall otherwise bear its own fees and expenses, including expenses of legal
counsel and other advisors or consultants. It is the intention of the parties
that, except as otherwise specified to the contrary herein, arbitration as
described above be the sole and exclusive means available to them for the
resolution of claims arising under this Agreement, and only in the event that
the arbitrators fail to render a decision in accordance with the foregoing
provisions shall a party have the right to institute legal action with respect
to such claim. Accordingly, it shall be a complete defense to any action
instituted by a party
37
<PAGE> 42
with respect to a claim under this Agreement that such claim has not first been
submitted to arbitration in accordance with the foregoing provisions.
9.10 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly agrees that
(a) before executing this Agreement, said party has fully informed itself of the
terms, contents, conditions and effects of this Agreement; (b) said party has
relied solely and completely upon its own judgment in executing this Agreement;
(c) said party has had the opportunity to seek and has obtained the advice of
counsel before executing this Agreement; (d) said party has acted voluntarily
and of its own free will in executing this Agreement; (e) said party is not
acting under duress, whether economic or physical, in executing this Agreement;
and (f) this Agreement is the result of arm's length negotiations conducted by
and among the parties and their respective counsel.
38
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
AMERICA'S SENIOR FINANCIAL
SERVICES, INC.
By: /s/ Nelson A. Locke
------------------------------------
Nelson A. Locke
President
CAPITAL FUNDING OF SOUTH FLORIDA,
INC., a Florida corporation
By: /s/ George Pollis
-------------------------------------
George Pollis
Chairman of the Board
GEORGE M. POLLIS
/s/ George M. Pollis
----------------------------------------
TRACI ANN POLLIS
/s/ Traci Ann Pollis
----------------------------------------
PAULA M. POLICE
/s/ Paula M. Police
----------------------------------------
39
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
The following subsidiaries are owned 100%:
Dow Guarantee Corp., a Florida corporation
Capital Funding of South Florida, Inc., a Florida corporation
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 195,728
<SECURITIES> 0
<RECEIVABLES> 49,853
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 385,426
<PP&E> 337,362
<DEPRECIATION> 82,579
<TOTAL-ASSETS> 2,019,562
<CURRENT-LIABILITIES> 228,756
<BONDS> 0
0
0
<COMMON> 5,899
<OTHER-SE> 1,771,620
<TOTAL-LIABILITY-AND-EQUITY> 2,019,562
<SALES> 0
<TOTAL-REVENUES> 1,797,632
<CGS> 0
<TOTAL-COSTS> 2,058,316
<OTHER-EXPENSES> 87,843
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,041
<INCOME-PRETAX> (350,568)
<INCOME-TAX> 0
<INCOME-CONTINUING> (350,568)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (350,568)
<EPS-PRIMARY> (.072)
<EPS-DILUTED> (.072)
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