SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
Amendment No. 2
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities and Exchange Act of 1934
ACCUFACTS PRE-EMPLOYMENT SCREENING INC.
(Name of Small Business Issuer and Its Charter)
Delaware 13-4056901
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
6 Green Street, New York, NY 10013
(Address of Principal Executive Offices)
(Zip Code)
(212) 966-0666
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Common Stock, par value $.01 Over the Counter Bulletin Board
(Title of each Class to be so Registered) Name of Each Exchange on which
Each Class to be Registered
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FORWARD LOOKING STATEMENTS
Accufacts Pre-Employment Screening Inc. (the "Company" or the "Registrant")
cautions readers that certain important factors may affect the Company's actual
results and could cause such results to differ materially from any
forward-looking statements that may be deemed to have been made in this Form
10-SB or that are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in the Form 10-SB that are not statements of
historical fact may be deemed to be forward-looking statements. These statements
include, without limitation, statements relating to AccuFacts's growth and
business strategies, regulatory matters affecting AccuFacts, other plans and
objectives of AccuFacts, management for future operations and activities,
expansion and growth of AccuFacts's operations and other such matters. The words
"believes," "expects," "intends," "strategy," "considers" or "anticipates" and
similar expressions identify forward-looking statements. The Company does not
undertake to update, revise or correct any of the forward-looking information.
PART I
Item 1. Description of the Business.
Background.
The Company was originally incorporated in Florida as Southern Cargo
Company, Inc. ("Southern Cargo") in 1993, but did not commence doing business
until mid-1998. In August 1998, the Company acquired all the assets and assumed
all liabilities of a New York corporation named AccuFacts Pre-Employment
Screening, Inc. (the "Predecessor"). Such assets and liabilities related to the
information service bureau business of verifying job applicant background
information for employers (the "Business") of the Predecessor which it started
in 1994. Simultaneously with such acquisition, the Company changed its name to
AccuFacts Pre-Employment Screening, Inc., and shortly thereafter reincorporated
under the same name in the State of Delaware. As used in this Registration
Statement, the names "AccuFacts Pre-Employment Screening Inc.," "Accufacts" and
the "Company" all refer to the existing Delaware corporation and the name
"Business" refers to the business started in 1994 by the Predecessor and
acquired by Southern Cargo in August 1998, and now continued by the company.
Description of Business
Background checks by the Business are made through the use of databases and
a national network of agents (engaged on an independent contractor basis)
developed by the Company. The background information products and services
currently provided by the Company consist of: criminal history; pre-employment
credit reports; social security number verification; driving record history;
employment verification; education verification; professional reference
verification; professional license verification; federal criminal/civil search;
sex offender registration; and nation fugitive search.
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The Company believes that employers increasingly are realizing the benefits
of background checking of employees and verification of employment applications,
not only because of the desire to help assure a better quality employee, but
also, in some industries, the concern with negligent hiring lawsuits. The
Company has approximately 250 customers located throughout the United States.
During 1997 sales were made in 50 states, with approximately 40% of total sales
having been made in New York State. The Company's business strategy is to
accelerate market presence throughout the United States. The Company also
intends to enhance its existing products, develop new ones and pursue
acquisitions of other companies, assets and/or product lines that either
complement or expand its existing business. See "Business."
Markets
The Company markets its employment background checking products and
services throughout the United States. Although any company with employees is a
potential customer of AccuFacts, the Company believes that companies or
businesses with one or more of the following characteristics benefit most from
background checking:
o High risk of liability for negligent hiring lawsuits relating to the action
or inaction of employees;
o Physically demanding jobs;
o Employees with access to goods and cash of employers;
o High employee turnover; and
o Desire for better quality employees, not only with respect to competence,
but also integrity.
Industries in which one or more of these characteristics exist include:
construction; retail; manufacturing; property management, including commercial
office buildings, apartments and hotels; medical, including nursing homes,
hospitals and in-home health care providers; and
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city and county governments, including schools, gaming, temporary and permanent
placement agencies, and accounting firms.
Products and Services
General.
The Company's products and services are designed to verify job applicant
background information for employers and consist of database searches through
the use of the Company's in-house computer system and manual retrieval and
copying of public records by AccuFacts's network courier system. AccuFacts
customers may request and receive records by telephone, mail or by facsimile, or
by using proprietary software developed by AccuFacts or a modem-equipped
personal computer or terminal to access the Company's on-line order placing
network. This network is available 24 hours per day, seven days a week.
AccuFacts licenses its software to its customers free of charge.
The prices to AccuFacts's customers of the reports prepared by the Company
vary in price from $5.00 to $75.00 per report depending upon the type and
location of background check requested by the customer. The reports may be
viewed on screen or printed in either AccuFacts's or the customer's offices. The
reports remain in a computer file in AccuFacts's host computer system for two
years and are available to the customer at no additional cost during that
period.
The Company's in-house computer host system consists of automated,
networked PCs running Window NT, using SQL data bases which automatically read
orders out to the Company's agents and/or to third party data bases for
automatic processing. In addition, the Company operates its Internet-based
consumer order entry system with the same automatic computer system, thereby
reducing turnaround time and operating costs as compared to the Company's
computers.
The Company's network agent system consists currently of individuals and
small companies located throughout the United States. The agents are engaged as
independent contractors by written agreements which provide for payment of a fee
on a per document, per day or monthly basis. The number of agents in each state
or locality depends on the size, population density, numbers of counties, and
the organization of the court systems within the state or locality.
The Company currently offers the following products and services:
Criminal Histories--Searches selected geographical areas for the presence
of a criminal record. This background information is available statewide from 32
states or from all 3,300 counties in the United States on a county-by-county
basis. The remaining 18 states do not have an accessible statewide depository
for this type of information. This information is retrieved by AccuFacts through
its network agent system, computer access directly into the states and certain
counties or, in some instances, by facsimile, mail, and telephone.
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Motor Vehicle Driving Reports--Confirms driving records. This background
information is retrieved by AccuFacts through a non affiliated third party and
is available from all 50 states, the District of Columbia, and Puerto Rico. This
same information could be obtained directly by the Company from the source or
from other non affiliated third parties. These reports and the credit reports
discussed below are the only two products for which AccuFacts serves as a
broker.
Credit Information. This background information is a special form of a
common "credit report" designed for employment purposes only. The report
complies with current provisions of the Fair Credit Reporting Act, as amended
("FCRA"). See "Government Regulation" below. AccuFacts serves as a broker for
this information for all three of the major credit bureaus (Equifax, TRW and
TransUnion) and retrieves the information from these credit bureaus through
software developed and owned by AccuFacts . AccuFacts customers may order any
combination of the three credit bureaus.
Social Security Number. This report will verify the issue date, number and
name associated with the number. It will also indicate if the number has been
reported deceased or not-issued as of a certain date. The report may also reveal
other names (AKA's or Maiden names) and/or addresses previously or currently
used by the applicant.
Employment Verifications. Pursuant to the client's requirements, this
report can include a complete verification of all previous employers, or a
review of the most recent two or three positions held.
Education Verifications. This report contains the applicant's academic
history including: name of institution, dates of attendance, major course of
study and the type of degree(s) received by the individual.
Professional License Verification. Professional licenses in most states may
be verified to include physicians, registered nurses, dentists, chiropractors,
physical therapists, attorneys, certified public accountants, etc.
Professional/Personal Reference Verification. This report is based on an
interview of a co-worker or personal reference as provided by the applicant. The
co-worker or personal reference is questioned as to the length and nature of
their relationship with the applicant and the applicant's skills and work ethic.
Federal Search. This search consists of a check for criminal and civil
filings in a Federal District identified by the client, or the district of
residence as identified by AccuFacts. This search will reveal criminal and civil
information that has not been purged, sealed or expunged by the court and
generally involves a two to four-year time frame from the date of the search.
New York State Sex Offender Registry Search. This is a statewide search of
the New York State Sex Offender Registry Database. New York State sex offenders
are categorized by the risk that they pose to public safety. For a sex offender
to be included in the Registry, he or
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she must be under the supervision of the New York State Criminal Justice System
to include probation, parole or incarceration.
Nationwide Search for Outstanding Warrants. This search is conducted
through a law-enforcement entity and includes a search of the NCIC database for
wanted persons. It should be noted that for a subject to be listed on the NCIC
database, a State, Local or Federal Law Enforcement Agency must have entered the
subject into the database as a wanted person.
Accelerated Market Presence.
AccuFacts intends to continue the acceleration of its market presence
throughout the United States by further expanding and refining sales and
marketing techniques used by it over the past several years, including: (1)
face-to-face selling with prospective customers, primarily larger companies; (2)
in-house telemarketing to existing customers and to prospective customers who
have shown an interest in purchasing AccuFacts's products and services; (3)
independent resellers; (4) public relations; (5) participation in trade shows
and seminars; (6) AccuFacts advertising in trade publications; (7) maintaining a
web page on the Internet; and (8) mailing of news releases to existing customers
and to prospective customers.
Acquisitions of Other Companies and/or Product Lines.
The Company is pursuing the acquisition of other companies, assets and/or
product lines that either complement or expand AccuFacts's existing business.
Target companies are regional or state background checking companies or
companies with complementary products including but not limited to drug testing,
skills testing or safety and security products. The Company may use cash or
stock or a combination of stock and cash to affect any such acquisitions. The
Company has had, and will continue to have, discussions from time-to-time with
potential acquisition candidates, but no acquisition has been made nor is any
considered probable as of the date of this Registration Statement. No assurance
can be given that the Company will be successful in these efforts.
Long-term Customer Relationships.
The Company is committed to providing quality products and services to its
customers. Management believes that the Company's emphasis on building long-term
relationships with its customers has played a significant role in AccuFacts's
success. Management further believes that these relationships are important not
only to generate additional sales from existing customers, but also for customer
referrals. A large percentage of the Company's sales has been generated by
referrals from customers. The Company intends to continue to (1) send monthly
newsletters to existing customers, (2) monitor its larger customers daily and
(3) contact each of its customers on a regular basis through telesales.
Quality Customer Service and Support.
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In order to offer customers quality service and support, AccuFacts has
developed and will continue to enhance a client service and support program
which includes: (1) the availability of a customer service representative twelve
hours a day Monday through Friday; (2) in-house training of all customer service
representatives on AccuFacts products; (3) quality control checks for AccuFacts
products; and (4) minimum acceptable performance guidelines for employees. In
addition, AccuFacts realizes the importance of long-term employees to the
success of its operations and, therefore, strives to provide a positive work
environment and benefits package for employees.
Marketing and Sales
The Company's marketing program consists of direct marketing activities,
exhibitions at trade shows, the Internet, public relations activities and
in-house telemarketing. All of the leads generated by these marketing activities
are referred to new customer telesales representatives for follow-up and, if
applicable, obtaining the documentation (including executed User Agreements)
needed to open new customer accounts.
There are four employees at the company's headquarters in New York, who are
involved in marketing activities, one of whom is the Director of Marketing.
Customers
The Company currently has approximately 250 customers located throughout
the United States. During 1998, sales were made in 50 states, with approximately
40% of total sales having been made in New York State. No single customer of
AccuFacts accounted for more than 15% of total AccuFacts sales during 1998.
Historically, the Company experiences 35% of sale in its business in the
fourth quarter due to increased hiring by retailers, starting in mid-October and
continuing through the holiday season.
Government Regulation
The Company is a "consumer reporting agency" within the meaning of that
term as used in, and therefore is subject to, the provisions of the Fair Credit
Reporting Act (the "FCRA"), and is regulated by the Federal Trade Commission
("FTC") under the Federal Trade Commission Act. Under the provisions of the
FCRA, a consumer reporting agency may furnish a "consumer report" to a customer
(other than a consumer or in response to a court order) only if such agency has
reason to believe that, among other matters, the customer intends to use the
information for a permissible purpose, including in connection with a credit
transaction involving the consumer on whom the information is to be furnished or
the review or collection of an account of the consumer or the customer otherwise
has a legitimate need for the information in connection with a business
transaction concerning the consumer. The background checking reports of
AccuFacts are consumer reports for purposes of the FCRA. In addition, certain of
AccuFacts' consumer reports are "investigative consumer reports" within the
meaning of that term under
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the FCRA. The FCRA also prohibits disclosure of obsolete information concerning
a consumer. Obsolete information generally means information which is more than
seven years old.
The FCRA requires a consumer reporting agency to maintain reasonable
procedures designed to ensure that the proscriptions on the use of obsolete
information are not violated, and that the information contained in a consumer
credit report is used for a proper purpose. In addition, a consumer reporting
agency must follow reasonable procedures to assure maximum accuracy of the
information concerning the consumer about whom the report relates. See sub
caption "Legal Considerations" below. The FCRA also requires a consumer
reporting agency, upon request from a consumer, to disclose all information
about that consumer in a consumer report, together with the source and the
recipients of the information. In some cases, this information must be delivered
to the consumer at no cost, and, in others, the agency may charge a reasonable
fee. AccuFacts historically has not charged such a fee.
The Consumer Credit Reporting Reform Act (CCRRA) of 1996 amended the FCRA
and added new requirements on consumer reporting agencies providing consumer
reports for employment purposes. The requirements include: providing customers
with a notification of their responsibilities under the FCRA, obtaining
certifications from customers that they are performing certain specific actions
as required by the FCRA, providing the subject of the report with a free copy of
the report if adverse action is taken by an employer based on information in the
consumer report, and providing a copy of a Summary of Your Rights under the Fair
Credit Reporting Act with each consumer report.
The CCRRA also placed new requirements on the resale of consumer reports. A
consumer reporting agency providing consumer reports to a reseller must now
obtain the identify of the end user of the information for each report. In
addition, the consumer reporting agency must receive certifications from
resellers that their customers are performing the same specific actions as are
required of the consumer reporting agency's direct customers, and ensure that
reports are being resold only for permissible purposes.
The FCRA provides that an investigative consumer report may not be prepared
on any consumer unless such consumer receives notice thereof in writing not
later than three days after the date on which the report was first requested,
which must include a statement, among others, that the consumer has the right to
request complete disclosure of the nature and scope of the investigation
requested. The FCRA further provides that if the consumer requests disclosure of
the information, the consumer reporting agency must make such disclosure in
writing not later than five days after the date on which the request for
disclosure was received. A consumer reporting agency may not be held liable for
any violation of the FCRA provisions relating to investigative consumer reports
if that agency shows by preponderance of the evidence that at the time of the
violation such agency maintained reasonable procedures to assure compliance with
those provisions. Of the Company's current products, education/credential
confirmations and reference checks are investigative consumer reports for
purposes of the FCRA.
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The FCRA provides for civil liability sanctions against a consumer
reporting agency by a consumer for willful or negligent noncompliance with the
FCRA and criminal sanctions against officers and directors thereof who knowingly
and willfully disclose information in a report to a person not authorized to
receive the information.
State laws also impact the Company's business. There are a number of states
which have laws similar to the FCRA, and some states which have human rights
laws more strict than the Americans with Disabilitites Act ("ADA"). A large
number of states also regulate the type of information which can be made
available to the public and/or impose conditions to the release of the
information. For example, some state laws prohibit access to certain types of
information, such as workers' compensation histories or criminal histories,
while others restrict access without a signed release from the subject of the
report. In addition, many privacy and consumer advocates and federal regulators
have become increasingly concerned with the use of personal information,
particularly credit reports. Attempts have been made and will continue to be
made by these groups to adopt new or additional federal and state legislation to
regulate the use of personal information. Federal and/or state laws relating to
consumer reporting agencies and/or access and use of personal information, in
particular, and privacy and civil rights, in general, amended or enacted in the
future could materially adversely impact AccuFacts's operations.
Legal Considerations
Under general legal concepts and, in some instances, by specific state and
federal statute, the Company could be held liable to customers and/or to the
subjects of background checking reports prepared by the Company for inaccurate
information or misuse of the information. The FCRA contains civil liability
provisions for willful and negligent noncompliance with its requirements. The
FCRA further provides in effect that, except for liability for willful or
negligent noncompliance with the FCRA and false information furnished with
malice or willful intent to injure a consumer, neither a consumer reporting
agency, any user of information nor any person who furnishes information to a
consumer reporting agency will be liable to the consumer for defamation,
invasion of privacy or negligence based on information disclosed to such
consumer under the provisions of the FCRA.
The Company has developed and implemented internal policies designed to
help ensure that background information retrieved by it concerning a consumer is
accurate and that it otherwise complies with the provisions of the FCRA. In
addition, each customer of AccuFacts is required to sign a User Agreement,
wherein such customer agrees, among other matters, to accept responsibility for
using information provided by AccuFacts in accordance with the provisions of the
FCRA, the ADA, and all other applicable federal and state laws and regulations
including federal and state equal opportunity laws and regulations. AccuFacts
also has internal checks in place regarding access and release of such
information. Additionally, AccuFacts requires that all employees sign a written
acknowledgment covering the proper procedures for handling confidential
information.
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AccuFacts carries errors and omissions insurance with $5,000,000 coverage
to cover claims by customers or by the subjects of reports for alleged
inaccuracy or misuse of information.
Competition
The background checking industry is highly fragmented. The Company faces
both direct and indirect competition for its products and services. In addition,
many companies perform employee background checking in-house.
Direct Competition.
There are a large number of companies engaged in the sale of one or more of
the background checking products sold by the Company, and the Company believes
that this number will increase. A significant number of these competitors are
small companies operating on a local or regional basis; while some are large
companies operating on a national scale. To the Company's knowledge, the
background checking portion of the business of its larger direct competitors is
currently a small portion of their overall operation. Unlike many of its direct
competitors, the Company serves as a broker for only two if its products --
credit reports and motor vehicle driving records -- and obtains the data for the
remainder of its products from the source. The Company believes that this helps
to give it a competitive advantage as to price. The Company also believes that
it has a competitive advantage over many of its competitors because of the wide
variety of products that it can offer to customers, and because of it's newly
developed order entry and report retrieval system. Many of the Company's
competitors, however, have substantially greater financial and personnel
resources than the Company. In addition, it is possible that one or more of the
Company's larger direct competitors could expand their background checking
product line in the future.
Indirect Competition.
The Company faces indirect competition from a number of companies engaged
in, among others, drug, aptitude and attitude testing, handwriting analysis and
on-the-job trial employment (employee leasing). These procedures, though often
used with background checking, compete with AccuFacts's products and services.
Most of these competitors operate on a national scale and have substantially
greater financial and personnel resources than the Company. In addition, it is
possible that one or more of these competitors could expand their product lines
in the future to include background checking products and services.
Employees
The Company has a total of nine full-time employees, four of whom are
involved in marketing, one in finance and four in data processing and customer
service. There is one part-time employee in the verfication department. None of
the Company's employees is represented by labor unions or is subject to
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collective bargaining arrangements. AccuFacts considers its relations with its
employees to be good.
Item 2. Management's Discussion and Analysis or Plan of Operation Plan of
Operation
The Company had revenue of $1,598,772 for the year ended December 31, 1998 as
compared to $1,416,572 for the year ended December 31, 1997 an increase of
$182,200. Total general, administrative expenses were $552,474 for the 1998
Period in comparison to $413,568 for the 1997 Period, an increase of $138,906.
The increases in all three categories represent increased volume of business and
commensurates increases in the cost of Personnel to service said business.
Net cash (used in) provided by operating activities for the years ended December
31, 1998 and 1997 was ($106,214) and $91,375, respectively. The change in cash
from operating activities was $197,589.
Days outstanding in receivables in 1998 and 1997 was 59 and 46 days respectively
for a difference of 13 days reflecting on the gain of larger new clients with
longer payment terms.
Net cash used in investing activities was $44,233 and $60,232 for the years
ended December 31, 1998 and 1997 respectively, reflecting a change of $15,999.
This was a result of marketing lists purchased in 1997 for a usage period for
1997 and 1998.
The Company's financing activities included borrowing from a bank, stockholders'
loans and private placement offering. The Company's financing activities
resulted in net cash provided by (used in) financing activities of $199,289 and
($30,879) for the year ended December 31, 1998 and 1997, respectively. The
Company believes it will be able to fund its short-term cash needs through funds
from operations and additional capital raising efforts.
Net income decreased from an income of $109,626 for the year ended December 31,
1997, to a net loss of $124,881 for the year ended December 31, 1998, a change
of $234,507. The increase in losses from December 31, 1997 to December 31, 1998
was the introduction of 4 new service lines (Education Verifications, Employment
Verifications, Sex Offender Status, OIG Government Checks). The start up costs
of the additional services, which were approximately $65,000, were
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incurred in the third and fourth quarter of 1998 and reflect as part of the
increase in cost of sales and general and administrative expenses. Additional
software programs were built by outside consultants for fees of less than
$20,000 to simplify and automate the new additional services to seamlessly blend
into the current operation and with this focused effort the new services will
begin to profit in 1999. The company feels there is a tremendous opportunity in
these new services. Also, there was an increase in marketing expenses from
$5,000 in 1997 to $37,000 in 1998, an increase of $32,000. The additional funds
spend in marketing were incurred through the Company's flier mailing program
which has been successful. The average cost per new client has a break-even
point of 4 months. The Company has increased its client base through these
marketing efforts by 12% in the 4th quarter. The effects of the flier-mailing
program is anticipated to be realized during 1999.
Selling of Shares.
On December 18, 1998 the Company successfully completed an offering of its
common stock pursuant to Rule 504 of Regulation D of the Securities Act of 1933
(the "Offering"). In the offering, 500,000 shares of common stock were sold or
subscribed at $2 per share. Three hundred seventy-five thousand shares of common
stock were subscribed for at December 18, 1998 for an aggregate purchase price
of $750,000. At August 23, 1999, an aggregate of $191,600 of such subscription
purchase price has been paid, leaving $558,400 due pursuant to promissory notes
which mature on September 15, 1999.
Liquidity and Capital Resources.
The Company intends to finance the increase its business through the use of
operating profits, borrowings, the recently concluded offering and additional
capital raising. The Company believes that its anticipated cash flow operations
as well as availability of funds from existing bank facilities and proceeds of
the offering of $1,000,000 will provide the liquidity to meet its current
foreseeable cash needs for at least a year.
At December 31, 1998, the Company had total assets $447,210, and at December 31,
1997, the Company had total assets of $301,136, an increase of $146,074. At
December 31, 1997, the Company had total liabilities of $240,069, and at
December 31, 1998 the Company had total liabilities of $300,904, an increase of
$60,835.
The Company had a working capital of $90,748 as of December 31, 1998, as
compared to working capital deficit of $7,534 as of December 31, 1997, an
increase of $98,252.
The company currently has a bank source of funding:
(1) Line of credit in the amount of $75,000 ($63,000 outstanding as
of December 31, 1998 with an annual percentage rate of 7.75
percent.)
(2) An overdraft protection on Business Checking Account of $25,000
($0 outstanding as of December 31, 1998 with an annual percentage
rate of 13.75 percent.)
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Year 2000 Issue.
The worldwide challenge facing organizations commonly referred to as the Year
2000 (Y2K) issue is a result of problems that may be encountered with
date-related transactions on computer systems that have historically recognized
years using two digits versus four digits (i.e., 98 rather than 1998). These
systems will potentially recognize "00" as the year 1900 instead of 2000. On the
surface the Y2K problem sounds simple enough; however, the implications of this
problem are far reaching and could impact a broad range of business services and
activities.
The Company's in house systems and Software have been tested for year 2000
issues and all necessary changes have been made to achieve year 2000 compliance.
To the best of the Company's knowledge and belief none of its operating systems
will be effected by the year 2000 problem.
An assessment of the preparedness of external entities that interface with the
Company is also ongoing. The Company's computers interface with only two outside
vendors whose compliance with the Y2K issue could have an impact on the
operations of the Company and the Company has been assured by such parties that
they have achieved Y2K compliance. There can be no assurance, however, that
there will not be a material adverse effect on the Partnership if its actions
and/or those of related parties fail to address all significant issues in a
timely manner.
Item 3. Description of Property
The Company's offcies are located at 6 Greene Street, New York, NY 10013. The
Company occupies approximately 4,200 square feet of leased space. The lease is
for a five year term expiring March of 2003 at a monthly rental of $2,200
including heat, but excluding electrical charge. The Company believes that there
facilities are adequate for its current needs.
Item 4. Security Ownership of Certain Beneficial Owners and Management
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the beneficial owners
of the Company's outstanding common stock as of August 3 with respect to
the beneficial ownership of shares of Common Stock by (i) each person known by
the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock, (ii) each of the Company's directors and
(iii) all executive officers and directors as a group. Unless otherwise
indicated below, to the knowledge of Advanced Knowledge all persons listed below
have sole voting and investment power with respect to their shares of Common
Stock except to the extent that authority is shared by spouses under applicable
law.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial
Name and Address of Beneficial Owner(1) Ownership (2) Percentage of Class
- ------------------------------------ ------------------------------- -------------------
<S> <C> <C>
Philip Luizzo. 3,750,000 58.14%
All executive officers and directors as a 3,750,000 58.14%
group (five persons including Philip Luizzo).
</TABLE>
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- ----------
(1) The address for each of such individuals is in care of the Company, 6
Greene Street, New York, New York 10013
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Registration
Statement upon the exercise of options or warrants. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days of the date of this Registration
Statement have been exercised. Unless otherwise indicated, the Company
believes that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock beneficially
owned by them.
Item 5. Directors, Executive Officers, Promoters and Control Persons
The following table sets forth the Directors and Officers of the Company:
The directors and executive officers of the Company, and significant
employees of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
Phillip Luizzo 33 Chief Executive Officer, 1998
President and Chairman
of the Board
John C. Svedese 38 Vice President and Director 1998
Frank Luizzo 49 Director 1998
Joseph W. Slattery 61 Director 1998
Anthony J. Luizzo 55 Corporate Secretary and Director 1998
</TABLE>
All directors were elected upon the acquistion by the Company of the assets
of its predecessor in September, 1998, and will serve until the next annual
meeting of Shareholders, which is anticipated to occur by October, 1999.
Philip Luizzo
Mr. P. Luizzo is the President/Chief Executive Officer of AccuFacts and has
held such position at the Company or its predecessor since 1994. For more than
two years prior thereto he was an employee of L.C. Security were he was a
manager.
Mr. Luizzo earned an in Finance from The University of Nevada, Las Vegas,
and has authored a number of articles on background screening for major
magazines and professional journals including Security Management Magazine and
The Internal Auditing Alert.
13
<PAGE>
Mr. Luizzo has lectured to numerous companies and Professional
organizations on aspects of conducting background investigations for perspective
employees.
Mr. Luizzo is a son of Anthony Luizzo and a nephew of Frank Luizzo.
Anthony J. Luizzo, CFE, CST, DABFE
Anthony J. Luizzo has been an owner and principal employee of L.C.
Consulting Group, Inc. for more than five years. That company offers services as
a security consultant.
Mr. Luizzo has over 35 years of law enforcement and security management
experience as a former detective with the New York City Police Department and as
a senior security administrator with the New York City Mayor's Office of
Economic Development and Business Services and the NYC Health & Hospitals
Corporation. Mr. Luizzo earned a graduate degree in criminology and
undergraduate degree in security management from Pacific Western University and
held adjunct faculty positions at John Jay College of Criminal Justice Studies
and New York University. Mr. Luizzo is presently an adjunct faculty member at
Long Island University.
Mr. Luizzo is a certified fraud examiner, certified security trainer,
certified police instructor, and a board certified forensic examiner. He has
written over 25 articles addressing aspects of "security and loss prevention
management" for a wide variety of magazines and professional trade journals
including The CPA Journal, Security Management Magazine, The Journal of Health
Care Protection Management, and The White Paper. He is the author of "Play it
Safe" - a retail fraud prevention brochure and coauthor of Fraud Auditing: A
Complete Guide -- a workbook for accountants and auditors on conducting fraud
audits and investigations published by the Foundation for Accounting Education.
Mr. Luizzo has lectured on security management issues to corporations, municipal
agencies and professional organizations nationwide. He has conducted over 5000
security surveys for corporations, hospitals, commercial, institutional and
residential complexes, and often testifies as a security expert in litigation
involving deficient security.
Mr. Luizzo is the President of the New York Chapter of Certified Fraud
Examiners. He serves or has served on the Board of Directors of The Associated
Licensed Detectives of New York State, The Society of Professional
Investigators, and The Academy of Security Educators and Trainers.
Mr. Luizzo is the father of Phillipp Luizzo and the brother of Frank
Luizzo.
Joseph W. Slattery, CFE
For more than the past five years, Mr. Slattery has been a manager with
L.C. Security where he conducts the security board training division.
Mr. Slattery has over 40 years of law enforcement and security management
experience as a former Deputy Inspector with the New York City Police Department
and as private security consultant/trainer. Mr. Slattery earned an
undergraduate/graduate degree in security management from John Jay College of
Criminal Justice Studies.
14
<PAGE>
Mr. Slattery is a certified fraud examiner and a certified security guard
instructor in New York State. Mr. Slattery is a former treasurer for The
Captain's Endowment Association - New York City Police Department and a current
board member of The New York Chapter of Certified Fraud Examiners.
Mr. Slattery has lectured on various aspects of security, loss prevention
and fraud prevention management to corporations, municipal agencies and
professional organizations nationwide. Throughout his career, he has conducted
numerous security surveys of corporate facilities, hospitals, and
commercial/industrial entities.
Frank Luizzo, CFE
Mr. Frank Luizzo has, for more than the past two years, been the Director
of Operations of several security-related departments at the Hard Rock Hotel and
Casino in Las Vegas, Nevada. For more than three years prior thereto, he was the
General Manager of United Coin Machine Co., in Las Vegas Nevada, which is in the
business of managing slot machine route operations.
Mr. Luizzo has over 30 years of law enforcement and security management
experience as a former Nevada State Trooper and Gaming Agent/Supervisor - Gaming
Control Board State of Nevada. Mr. Fl. Luizzo is presently the Director of
Security for The Hard Rock Hotel and Casino, Las Vegas, Nevada and formerly held
positions as General Manager, United Coin Machine Company and Assistant to the
Chairman, Aladdin Hotel and Casino.
Mr. Luizzo coauthored an article on "Casino Fraud" featured in Security
Management Magazine and was prominently featured in television documentaries on
"Gaming Security" for The Discovery Channel and "E" Entertainment.
Mr. Luizzo is a member and past president of the Las Vegas Security Chief's
Association, a member of the International Association of Financial Crime
Investigators, and current president of the Harmon Avenue Business Association.
Mr. Luizzo is a brother of Anthony Luizzo and an uncle of Phillip Luizzo.
John C. Svedese
Mr. Svedese has over 12 years experience as a senior investigative auditor
for the New York City District Council of Carpenters.
Mr. Svedese has been with the Company or its predecessor since 1994 and is
familiar with all aspects of the company's growth and development. Mr. Svedese
monitors the day-to-day operations of AccuFacts in the New York City office. In
order to maintain AccuFacts' high level of personal as well as professional
services, he also acts as the business liaison between AccuFacts and its clients
Mr. Svedese assists the Board of Education of the City of New York by
providing seminars regarding Pre-Employment screening by corporations to its
faculty and students.
15
<PAGE>
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified, subject to death,
resignation or removal from office prior to such time.
Item 6. Executive Compensation
The following table sets forth the total renumeration to be paid to the
President and Vice President of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation
(a) (b) (c) (d) (e)
Name Other
and Annual
Principal Compen-
Position Year Salary Bonus sation
($) ($) ($)
Phillip Luizzo (1) 1998 $ 52,000 -- --
President
John Svedese (2) 1998 $ 39,000 -- --
Vice President
a) Represents fiscal years ended September 30.
(1) Mr. Philip Luizzo was paid $52,000 in total compensation by the Company
and the Predecessor in 1998. Commencing on January 1, 1999 Mr. Luizzo is being
paid salary at the rate of $150,000 per year in his capacity as President
pursuant to a five-year employment contract which will terminate on September 1,
2003. In addition, under the terms of such employment agreement Mr. Philip
Luizzo will be paid an annual bonus equal to 10% of the Company's annual profit
in excess of $500,000.
(2) Mr. John Svedese was paid $39,000 in total compensation by the Company
and its predecessor in 1998. Commencing on January 1, 1999 Mr. Svedese is being
paid salary at the rate of $50,000 per year under the terms of five-year
employment contract which will terminate on September 1, 2003.
There is not at present any compensation paid to directors of the Company
in their capacity as such.
The Company does not at this time have a stock option plan or other
incentive compensation plan.
Item 7. Certain Relationships and Related Transactions
Not Applicable
Item 8. Description of Securities.
General
As of the date of this Registration Statement, the authorized capital stock
of the Company consists of 50,000,000 shares of Common Stock, $.01 par value, of
which 6,450,000 shares are outstanding, and 5,000,000 shares of Preferred Stock,
$.01 par value, of which no shares are outstanding. The following description of
the securities of the Company and certain provisions of the Company's
Certificate of Incorporation and By-Laws, each as amended, is a summary and is
qualified in its entirety by the provisions of the Certificate of Incorporation
and By-Laws as currently in effect.
Common Stock
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of shareholders, including the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election if they choose to do so. The Certificate of Incorporation
does not provide for cumulative voting for the election of directors. Holders of
Common Stock will be entitled to receive ratably such dividends, if any, as may
be declared from time to time by the Board of Directors out of funds legally
available therefor, and will be entitled to receive, pro rata, all assets of the
Company available for distribution to such holders upon liquidation. Holders of
Common Stock have no preemptive, subscription or redemption rights. All
16
<PAGE>
outstanding shares of Common Stock are, and the shares offered hereby, upon
issuance, will be, fully paid and non assessable.
Preferred Stock
Pursuant to the Certificate of Incorporation, the Company is authorized to
issue "blank check" preferred stock, which may be issued from time to time in
one or more series upon authorization by the Company's Board of Directors. The
Board of Directors, without further approval of the shareholders, is authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each series of preferred
stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Company's Common Stock at a
premium or otherwise adversely affect the market price of the Common Stock.
Potential Impact of Penny Stock Rules
It is possible that trading the Common Stock may become subject to the
Penny Stock Rules adopted pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Generally, Penny Stock is defined as a security
that is priced under $5; is not traded on a national securities exchange or on
NASDAQ (the NASD's automated quotation system for actively traded stocks); and
is issued by a company that has less than $2,000,000 in net tangible assets and
has been in business less than 3 years, or by a company that has revenues of
less than $6,000,000 for 3 years. To the extent that the trading price of the
Common Stock falls below $5, the Common Stock is not traded on NASDAQ and the
Company has net tangible assets of less than $2,000,000, trading in the
Company's Common Stock would be subject to the Penny a Stock Rules. The Penny
Stock Rules require that any broker-dealer effecting transaction in penny stock
verify that purchasers are suitable for the investment and that such purchasers
receive a detailed statement as to the risks of investing in penny stock. The
broker-dealer must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. By virtue of the fact
that potential purchasers must be pre-qualified to purchase penny stock and that
special disclosure rules regarding investment of penny stock must be satisfied,
the potential market for the Company's Common Stock would be reduced and it may
be more difficult to sell the Preferred Stock on a timely basis which may
further impact the ultimate trading price. The Company cannot predict whether
the Company will become subject to the Penny Stock rules.
17
<PAGE>
PART II
Item 1. Market Price of and Dividends On the Registrant's Common Equity and
Other Shareholder Matters
Market Price
The Company's Common Stock has been quoted on the Over-the Counter Bulletin
Board since October 1998 under the symbol "APES". The following table set forth,
the high and low bid prices for the Common Stock for the quarters indicated. The
quotations represent bid between dealers and do not incuded retail mark-up,
mark-down or commissions, and do not represent actual transactions.
Fourth Quarter First Quarter Second Quarter
1998 1999 1999
---- ---- ----
High 3 5/16 4 1/8 4 7/8
Low 1 3/4 1 1/2 1 1/8
At the date of this Registration Statement there are 19 holders of record
of 6,450,000 shares of Common Stock, including holders which maintain their
ownership in street name.
Dividends
The Company anticipates that for the forseeable future, earnings will be
retained for the development of is business. Accordingly, the Company does not
anticipate paying dividends on the Preferred Stock or Common Stock in the
foreseeable future. The payment of future dividends will be at the sole
discretion of the Company's Board of Directors and will depend upon among other
of the Company and general business conditions.
Item 2. Legal Proceedings
None.
Item 3. Changes in the Disagreements with Accountants
None
Item 4 Recent Sales of Unregistered Securities
(i) Sales upon the consummation of the merger in August 1998, the
transaction described in Part I, Item 1 of this report. At the
effective date of such transaction, August 20, 1998, unregistered
shares of common stock were issued to four individuals or entities
described below.
A. Philip Luizzo
Mr. Luizzo was issued 3,750,000 shares of common stock in his
capacity as the sole shareholder of AccuFacts Pre-Employment
Screening, Inc., the New York corporation ("AccuFacts of New
York") which entered into a transaction with the public company
Southern Cargo Company, Inc. ("Southern") which resulted in the
business of AccuFacts of New York becoming the business of
Southern. Mr. Philip Luizzo was the president, sole shareholder
and a member of the Board of Directors of AccuFacts of New York
and became president, controlling shareholder and a member of the
Board of Directors of Southern. By reason of his status as an
officer, Mr. Luizzo is an accredited investor. Registrant regards
the transaction as an issuance of securities exempt under Section
4(2) of the Securities Act of 1933 (the "Act").
B. Robert DePalo
Robert DePalo was issued 500,000 shares of common stock on August
26, 1998 for providing financial consulting services to AccuFacts
of New York for the period of approximately 18 months prior to
the transaction with Southern. His services involved his learning
and analyzing the business of AccuFacts of New York and finding a
suitable partner to achieve the financial restructuring of
AccuFacts of New York for the purpose of attracting additional
funding. Mr. DePalo had all necessary information to make an
informed investment decision. Mr. DePalo was issued the 500,000
shares for such services as of the August 26, 1998 effective date
of the transaction with Southern. The consideration for such
shares was the services he rendered to such date. Mr. DePalo is
an accredited investor by reason of his personal wealth. The
issuance of shares to Mr. DePalo is, accordingly, exempt under
Section 4(2) of the Act.
C. Old Oak Fund, Inc.
Old Oak Fund, Inc. was issued 500,000 shares of common stock for
providing financial consulting services to AccuFacts of New York
for the period of approximately 18 months prior to the
transaction with Southern in conjunction with Mr. DePalo. Its
services also involved learning and analyzing the business of
AccuFacts of New York and finding a suitable partner to achieve
the financial restructuring of AccuFacts of New York for the
purpose of attracting additional funding. Old Oak Fund, Inc. was
issued 500,000 shares for such services as of the August 26, 1998
effective date of the transaction of Southern. The consideration
for such shares was the services he rendered to such date. Old
Oak Fund, Inc. is a sophisticated investor having had access to
all information necessary to make an informed investment
decision. Accordingly, the issuance of shares to Old Oak Fund,
Inc. is exempt under Section 4(2) of the Act.
D. Tammy Perrotta
Ms. Perrotta was issued 200,000 shares of common stock on August
26, 1998 for business and, to a lesser degree, financial advisory
services to AccuFacts of New York with respect to its
development. Such services were rendered without compensation
other than an oral understanding that Ms. Perrotta would be
compensated by the issuance of shares upon a successful financial
restructuring or merger. By reason of her familiarity with the
business of AccuFacts of New York and the financial
circumstances, Ms. Perrotta is a sophisticated investor having
had access to all information necessary to make an informed
investment decision. Accordingly, the issuance of her shares is
exempt under Section 4(2) of the Act.
(ii) Sales Pursuant to an Offering Under Section 504 of Regulation D.
Commencing on September 15, 1998 and terminating on December 18, 1998,
the registrant offered for sale 500,000 shares of its common stock for
a purchase price of $2 per share. Offers and sales in connection with
this offering were carried out by the registrant. The registrant
effected three sales under the offering aggregating 500,000 shares.
The aggregate offering price for the sales of all securities under
this offering did not exceed $1,000,000. No other securities were sold
within the 12 months before the start of and during this offering.
Pursuant to the provisions of 504D, such sales were exempt from the
registration requirement of the Securities Act of 1933. Such sales
were as follows:
A. On October 15, 1998, Canadian Advantage LP ("Canadian")
subscribed for 125,000 shares of common stock for a purchase
price of $250,000 and paid the full subscription price prior to
subscribing for such shares. Representatives of Canadian reviewed
the business and financial condition of the registrant and had
access to the registrant's executive officers with respect to
inquiries they might have had.
B. By subscription made on December 18, 1998, Avalon Financial
Services LLC ("Avalon") subscribed for an aggregate of 187,500
shares of common stock. Simultaneously with such subscription,
Avalon executed a promissory note for $375,000 due June 30, 1999.
The maturity date of this promissory note has been extended to
September 15, 1999. At the date hereof, an aggregate of $62,800
has been received from Avalon for the shares. Prior to Avalon's
making the subscription for these shares, representatives of
Avalon reviewed the business and financial condition of
registrant and had access to the executive officers with respect
to inquiries they might have had.
C. By subscription made on December 18, 1998, Todd Grama ("Grama")
subscribed for an aggregate of 187,500 shares of common stock.
Simultaneously with such subscription, Grama executed a
promissory note for $375,000 due June 30, 1999. The maturity date
of this promissory note has been extended to September 15, 1999.
At the date hereof, an aggregate of $66,000 has been received
from Grama for the shares. Prior to making the subscription,
representatives of Grama reviewed the business and financial
condition of the registrant and had access to the executive
officers of registrant with respect to inquiries they might have
had.
Item 5. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may affect
a director's liability with respect to any of the following: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not made in good faith or which involve intentional misconduct of
knowing violations of law; (iii) liability for dividends paid or stock
repurchased or redeemed in violation of the Delaware General Corporation Law; or
(iv) any transaction from which the director derived an improper personal
benefit. Section
18
<PAGE>
102(b)(7) does not authorize any limitation on the ability of the corporation or
its stockholders to obtain injunctive relief, specific performance or other
equitable relief against directors.
Article Ten of the Company's Certificate of Incorporation and the Company's
By-laws provide that all persons who the Company is empowered to indemnify
pursuant to the provisions of Section 145 of the General Corporation law of the
State of Delaware (or any similar provision or provisions of applicable law at
the time in effect), shall be indemnified by the Company to the full extent
permitted thereby. The foregoing right of indemnification is not deemed to be
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise.
Signatures
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Accufacts Pre-Exnployment, Inc
Date: August 30, 1999
By: /s/ Philip Luizzo
---------------------------------
Philip Luizzo
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange act of 1934, this
registration statement has been signed below by the followings persons on behalf
of the registrant and in the capacities and on the dates indicated.
Dated: August 30, 1999 By: /s/ Philip Luizzo
---------------------------------
Philip Luizzo
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 30, 1999 By: /s/John C. Svedese
---------------------------------
John Svedese
Vice President and Director
Dated: August 30, 19999 By: /s/ Frank Luizzo
---------------------------------
Frank Luizzo
Director
Dated: August 30, 1999 By: /s/ Joseph W. Slattery
---------------------------------
Joseph W. Slattery
Director
Dated: August 30, 1999 By: /s/ Anthony Luizzo
---------------------------------
Anthony Luizzo
Director
19
<PAGE>
PART F/S
Financial Statements
For the Years Ended
December 31, 1997 and 1998
and Accountants' Reports
20
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
FINANCIAL STATEMENTS
For the Years Ended December 31, 1998 and 1997 and the period
ended March 31, 1999
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2-3
Statements of Operations 4
Statements of Changes in Stockholders' Equity 5
Statements of Cash Flows 6-7
NOTES TO FINANCIAL STATEMENTS 8-13
UNAUDITED FINANCIAL STATEMENTS
Unaudited Balance Sheet 14
Unaudited Statements of Operation 15
Unaudited Statements of Cash Flows 16
NOTES TO UNAUDITED FINANCIAL STATEMENTS 17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Accufacts Pre-Employment Screening, Inc.
We have audited the accompanying balance sheet of Accufacts Pre-Employment
Screening, Inc. as of December 31, 1998, and the related statements of
operations, changes in stockholders' equity and cash flows for the two 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 Accufacts Pre-Employment
Screening, Inc. as of December 31, 1998, and the results of its operations and
its cash flows for the two years then ended, in conformity with generally
accepted accounting principles.
Marcum & Kliegman LLP
February 19, 1999
New York, New York
-1-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
BALANCE SHEET
December 31, 1998
ASSETS
CURRENT ASSETS
Cash $ 52,497
Accounts receivable, net of allowable for
doubtful account of $4,948 289,395
--------
Total Current Assets $341,892
PROPERTY AND EQUIPMENT, Net 85,827
OTHER ASSETS
Security deposits 2,708
Intangible asset 16,783
--------
Total Other Assets 19,491
--------
TOTAL ASSETS $447,210
========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
BALANCE SHEET
December 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 152,350
Current maturities of capital lease obligations 9,179
Note payable, bank 63,335
Loans payable, stockholder 26,280
---------
Total Current Liabilities $ 251,144
OTHER LIABILITIES
Deferred income taxes payable 40,000
Capital lease obligations, less current maturities 9,760
---------
Total Other Liabilities 49,760
---------
TOTAL LIABILITIES 300,904
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued and outstanding -0-
Common stock, $0.01 par value, 50,000,000 authorized,
6,075,000 issued and outstanding 60,750
Common stock subscribed, 375,000 shares 3,750
Additional paid in capital 944,470
Stock subscription receivable (750,000)
Accumulated deficit (112,664)
---------
TOTAL STOCKHOLDERS' EQUITY 146,306
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 447,210
=========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998 and 1997
1998 1997
---------- ----------
REVENUES $1,598,772 $1,416,579
---------- ----------
COST OF SALES 1,119,043 885,002
---------- ----------
GROSS PROFIT 479,729 531,577
GENERAL AND ADMINISTRATIVE EXPENSES 552,474 413,568
---------- ----------
OPERATING (LOSS) INCOME (72,745) 118,009
OTHER EXPENSE
Interest expense, net (10,031) (7,340)
---------- ----------
(LOSS) INCOME BEFORE INCOME TAXES (82,776) 110,669
INCOME TAXES 42,105 1,043
---------- ----------
NET (LOSS) INCOME $ (124,881) $ 109,626
========== ==========
Net (Loss) Income Per Share, Basic and Diluted $ (0.02) $ 0.03
========== ==========
Weighted average number of common shares outstanding 5,181,096 3,750,000
========== ==========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common
Preferred Stock Common Stock Stock
Shares Amount Shares Amount Subscribed
------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE - January 1, 1997 -0- $ -0- 200 $ 5,380 $ -0-
Net income
--------- --------- --------- --------- ------
BALANCE - December 31, 1997 -0- -0- 200 5,380 -0-
Issuance of shares resulting from merger 3,750,000 37,500
Recapitalization resulting from merger 999,800 4,620
Issuance of shares for consulting services 1,200,000 12,000
Issuance of shares in connection with the
Offering, net of offering costs 125,000 1,250
Common stock subscribed in connection with
the Offering 3,750
Stock subscription receivable in connection
with the Offering
Net loss
--------- --------- --------- --------- ------
BALANCE - December 31, 1998 -0- $ -0- 6,075,000 $ 60,750 $3,750
========= ========= ========= ========= ======
<CAPTION>
Additional Stock
Paid in Subscription Accumulated
Capital Receivable Deficit Total
------- ---------- ------- -----
<S> <C> <C> <C> <C>
BALANCE - January 1, 1997 $ -0- $ -0- $(53,939) $(48,559)
Net income 109,626 109,626
--------- --------- --------- ---------
BALANCE - December 31, 1997 -0- -0- 55,687 61,067
Issuance of shares resulting from merger (37,500) -0-
Recapitalization resulting from merger (5,970) (1,350)
Issuance of shares for consulting services 12,000
Issuance of shares in connection with the
Offering, net of offering costs 198,220 199,470
Common stock subscribed in connection with
the Offering 746,250 750,000
Stock subscription receivable in connection
with the Offering (750,000) (750,000)
Net loss (124,881) (124,881)
--------- --------- --------- ---------
BALANCE - December 31, 1998 $ 944,470 $(750,000) $(112,664) $ 146,306
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998 and 1997
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(124,881) $ 109,626
--------- ---------
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 33,358 20,945
Increase in accounts receivable (60,515) (35,500)
Increase in unbilled receivable -0- (64,549)
Increase in security deposits (508) (300)
Increase in accounts payable and accrued expenses 6,332 61,153
Increase in deferred income taxes payable 40,000 -0-
--------- ---------
TOTAL ADJUSTMENTS 18,667 (18,251)
--------- ---------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (106,214) 91,375
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (25,233) (60,232)
Purchase of intangible asset (19,000) -0-
--------- ----------
NET CASH USED IN INVESTING ACTIVITIES (44,233) (60,232)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on capital lease obligations (6,395) -0-
Net repayments of note payable, bank (5,786) (879)
Repayments on stockholder's loans -0- (30,000)
Proceeds from issuance of common stock 250,000 -0-
Payments for the offering costs (38,530) -0-
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 199,289 (30,879)
--------- ---------
NET INCREASE IN CASH 48,842 264
CASH - Beginning 3,655 3,391
--------- ---------
CASH - Ending $ 52,497 $ 3,655
========= =========
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENTS OF CASH FLOWS, Continued
For the Years Ended December 31, 1998 and 1997
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Cash paid during the years for:
1998 1997
-------- ------
<S> <C> <C>
Interest $ 10,066 $7,350
Income taxes $ 1,034 $ 634
Non-cash investment and financing activities:
Additions to capital leases $ 25,334 $ -0-
Subscription receivable for common stock subscribed in
connection with the Offering $750,000 $ -0-
Issuance of shares resulting from merger $ 37,500 $ -0-
Issuance of shares for consulting services $ 12,000 $ -0-
Accounts payable acquired in connection with the merger $ 1,350 $ -0-
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies
Description of Business
Accufacts Pre-Employment Screening, Inc. ("Accufacts") was incorporated on
October 6, 1994 in the State of New York. On August 31, 1998 Accufacts
consummated a merger with a public shell, Southern Cargo Company
("Southern"), a Florida corporation. Southern simultaneously with this
merger changed its name to Accufacts Pre-Employment Screening Inc. (the
"Company") and shortly thereafter re-incorporated in the State of Delaware.
Under the terms of the merger all of the outstanding shares of Accufacts
were acquired by Southern in exchange for 3,750,000 shares of Southern's
$.01 par value common stock. This transaction was accounted for as a
reverse acquisition whereby Accufacts was the acquirer for accounting
purposes. The historical financial statements prior to August 31, 1998 are
those of Accufacts.
The Company acts as an information service bureau and is engaged primarily
in the business of verifying job applicant background information for
employers using databases and a national network of agents throughout the
United States.
Property and Equipment and Depreciation
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the expected useful lives of the assets. Upon
retirement or other disposition of depreciable assets, the cost and related
accumulated depreciation are eliminated from the accounts, and any gain or
loss on disposal is credited to or charged against income. In the event of
a trade in, the undepreciated cost of the trade-in is included in the cost
of the newly acquired asset.
Revenue Recognition
Revenues are recorded at the time of performance of service.
Advertising Cost
Advertising costs are expensed as incurred.
Income Taxes
The Company's method of accounting for income taxes is the liability method
required by FASB Statement No. 109 "Accounting for Income Taxes".
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due and deferred
taxes.
Computer Software
The Company adopted Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use". SOP
98-1 establishes the accounting for costs of software products developed or
purchased for internal use, including when such costs should be
capitalized. In accordance with SOP 98-1, payroll and payroll-related costs
incurred directly associated with the internal-use software project were
capitalized by the Company and such capitalized costs are amortized on a
straight-line basis over three years.
-8-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies, continued
Net Income (Loss) Per Share
Net income (loss) per share is computed based on the weighted average
number of shares of common stock outstanding during the year ended December
31, 1998. For the year ended December 31, 1997, net income (loss) per share
of common stock is based on the share issued by Southern as a result of the
merger (see above).
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, AEarnings Per Share"
(ASFAS 128"), which is required to be adopted beginning with the quarter
ended December 31, 1997. At December 31, 1997, the Company adopted SFAS 128
which eliminates the presentation of primary and fully diluted earnings per
share (EPS) and requires the presentation of basic and diluted EPS.
Comprehensive Income
During the year ended December 31,1998 the Company adopted FASB Statement
No. (SFAS) 130, "Reporting Comprehensive Income". SFAS 130 requires the
reporting of comprehensive income in addition to net income from
operations. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income. The
adoption of SFAS 130 and the related required disclosures have no effects
on the financial statements for the year ended December 31, 1998.
Use of Estimates in the Financial Statements
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.
Fair Value of Financial Instruments
The Company's financial instruments include cash, accounts receivable and
accounts payable. Due to the short-term nature of these instruments, the
fair value of these instruments approximate their recorded value. The
Company has other liabilities which it believes is stated at estimated fair
market value.
NOTE 2 - Property and Equipment
Property and equipment is comprised of the following at December 31, 1998:
-9-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - Property and Equipment, continued
Estimated
Useful
Amount Lives
------- ---------
Furniture $21,354 7 years
Equipment 74,786 5 years
Computer software 62,612 3 years
-------
158,752
Less: accumulated depreciation 72,925
-------
Property and equipment, net $85,827
=======
Depreciation expense for the years ended December 31, 1998 and 1997
amounted to $31,141 and $20,945, respectively.
NOTE 3 - Intangible Assets
During the year ended December 31,1998, the Company acquired customer lists
from a related entity in the amount of $19,000.
Intangible assets at December 31, 1998 consists of the following:
Estimated
Useful
Amount Lives
------- ---------
Customer lists $19,000 5 years
Less: accumulated amortization 2,217
-------
Intangible assets, net $16,783
=======
Amortization expense for the years ended December 31, 1998 and 1997
amounted to $2,217 and $-0-, respectively.
NOTE 4 - Note Payable, Bank
The Company has a $75,000 line of credit with a bank through June 30, 1999.
The line bears interest at prime plus 2%, is secured by substantially all
of the assets of the Company and is personally guaranteed by a stockholder
of the Company.
The Company also has a $25,000 business checking line of credit with a
bank. The credit line bears interest at prime plus 6% and is secured by
substantially all of the assets of the Company. There is no outstanding
balance under this line at December 31, 1998.
-10-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - Loans Payable, Stockholder
Loans payable, stockholder represents advances made by a stockholder of the
Company through the normal course of business. Such advances are
noninterest-bearing with no definitive repayment terms.
NOTE 6 - Stockholders' Equity
At inception, Accufacts authorized and issued 200 shares of no par value
common stock for $5,380. On August 31, 1998, the Company issued 3,750,000
shares of its, $.01 par value, common stock in connection with the merger
between Accufacts and Southern which has been accounted for as a
recapitalization. In addition, historical stockholders' equity of Accufacts
prior to the merger was retroactively restated for the equivalent number of
shares received in the merger after giving effect to the difference in par
value of Accufacts and Southern. As a result, 999,800 shares of common
stock were recapitalized by the Company for the restorative effects of the
recapitalization. The Company also issued 1,200,000 of the Company's common
stock, par value $.01 per share, for consulting services provided.
On September 15, 1998, the Company offered to sell as part of the placement
offering pursuant to Rule 504 of Regulation D of the Securities Act of 1933
a minimum of 25,000 shares and a maximum of 500,000 shares of the Company's
$.01 par value common stock at an offering price of $2.00 per share (the
"Offering"). The Offering was completed on December 18, 1998 whereby
125,000 shares were sold and 375,000 shares were subscribed for. The net
proceeds from the sale of the common stock at December 31, 1998 was
$199,470, net of direct related costs of $50,530. Stock subscription
receivable relating to the stock subscribed at December 31, 1998 amounted
to $750,000.
NOTE 7 - Income Taxes
Prior to the merger, the Company elected to be taxed as an S corporation
for federal and state income tax purposes. Pursuant to this election,
earnings or losses were subject to tax at the stockholder's level rather
than the corporate level. Therefore, no provision was made for the federal
income tax on earning or losses of the Company in the 1997 financial
statements except certain minimum state taxes. In conjunction with the
merger, the S corporation status was terminated after August 31, 1998. The
Company prepares its tax returns on the cash basis and the financial
statements on the accrual basis which resulting temporary differences.
The income tax expense for the years ended December 31, 1998 and 1997
consists of the following:
1998 1997
------- -------
Current:
Federal $ -0- $ -0-
State 2,105 1,043
Deferred:
Federal 30,000 -0-
State 10,000 -0-
$42,105 $ 1,043
======= =======
The components of deferred tax assets (liabilities) at December 31, 1998 consist
of the following:
Net operating loss carryforward $ 9,850
Cash basis accounting adjustment (49,850)
--------
Net deferred tax liabilities $ 40,000
========
The following is a reconciliation of income tax computed at the Federal
Statutory rate to the provision for taxes:
1998 1997
--------- ---------
Federal tax (benefit) computed at statutory rate $(42,460) $32,273
State and local taxes net of federal benefit 1,389 1,043
Cash basis adjustments and tax implications
resulting from termination of S corporation status 83,176 (32,273)
-------- --------
$ 42,105 $ 1,043
======== ========
-11-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - Commitments
Capitalized Lease Obligation
During the year ended December 31, 1998, the Company obtained equipment
under two capital leases expiring through the year 2001. The assets and
liabilities under capital leases are recorded at the lower of the present
value of the minimum lease payments or the fair values of the asset. The
assets are included in property and equipment and are being depreciated
over the assets estimated useful lives.
Minimum future lease payments under capital leases as of December 31, 1998
for each of the next three years, and in aggregate, are as follows:
For the Year Ending
December 31, Principal Interest Total
------------------- --------- -------- -------
1999 $ 9,179 $2,001 $11,180
2000 8,295 721 9,016
2001 1,465 32 1,497
------- ------ -------
Total $18,939 $2,754 $21,693
======= ====== =======
Interest rate on these two capitalized leases is 13.1% and 14.2%,
respectively, and is imputed based on the lessor's implicit rate of return.
Monthly payments of $499 and $433 are payable through March 2001 and July
2000, respectively.
Operating Lease Agreement
The Company leases its premises under a noncancelable operating lease which
expires March 31, 2000 with monthly rental of $2,200. Rent expense for the
years ended December 31, 1998 and 1997 was $26,400 and $29,950,
respectively.
Further minimum rental payments under the above noncancelable operating
lease as of December 31, 1998 are as follows:
-12-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - Commitments, continued
Operating Lease Agreement, continued
For the Year Ending
December 31, Amount
------------------- -------
1999 $26,400
2000 6,600
-------
Total $33,000
=======
Employment Agreements
On September 1, 1998, the Company entered into two five-year employment
agreements with two officers of the Company whereby the Company will pay a
total salary of $200,000 per annum. At December 31, 1998, total future
minimum commitments under these two agreements are $950,000.
-13-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
BALANCE SHEET
(Unaudited)
March 31, 1999
ASSETS
CURRENT ASSETS
Cash $ 2,626
Accounts receivable 285,053
Prepaid expenses 4,472
--------
Total Current Assets $292,151
PROPERTY AND EQUIPMENT, net 77,950
OTHER ASSETS
Security deposits 2,708
Intangible asset 15,833
--------
Total Other Assets 18,541
--------
TOTAL ASSETS $388,642
========
-14-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
BALANCE SHEET
(Unaudited)
March 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accrued expenses $ 113,279
Current maturities of capital lease obligations 9,179
Note payable, bank 57,645
Loans payable, stockholder 26,280
---------
Total Current Liabilities $ 206,383
OTHER LIABILITIES
Deferred income taxes payable 40,000
Capital lease obligations, less current maturities 8,337
Total Other Liabilities 48,337
---------
TOTAL LIABILITIES 254,720
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none issued and outstanding -0-
Common stock, $0.01 par value, 50,000,000 authorized,
6,075,000 issued and outstanding 60,750
Common stock subscribed, 375,000 shares 3,750
Additional paid in capital 944,470
Stock subscription receivable (750,000)
Accumulated deficit (125,048)
---------
TOTAL STOCKHOLDERS' EQUITY 133,922
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 388,642
=========
</TABLE>
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31, 1999 and 1998
1999 1998
--------- ---------
REVENUES $ 395,678 $ 364,588
COST OF SALES 261,868 286,629
--------- ---------
GROSS PROFIT 133,810 77,959
GENERAL AND ADMINISTRATIVE EXPENSES 144,161 101,189
--------- ---------
OPERATING LOSS (10,351) (23,230)
OTHER EXPENSE
Interest expense, net (1,663) (1,683)
--------- ---------
LOSS BEFORE INCOME TAXES (12,014) (24,913)
INCOME TAXES 370 526
--------- ---------
NET LOSS $ (12,384) $ (25,439)
========= =========
-15-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31, 1999 and 1998
1999 1998
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(12,384) $(25,439)
-------- --------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 8,827 6,071
Decrease in accounts receivable 4,342 31,587
Increase in prepaid expenses (4,472) (2,782)
Increase in cash overdraft -0- 179
Decrease in accounts payable and accrued expenses (39,071) (22,332)
-------- --------
TOTAL ADJUSTMENTS (30,374) 12,723
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (42,758) (12,716)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on capital lease obligations (1,423) -0-
Net repayments of note payable, bank (5,690) -0-
Net proceeds of note payable, bank -0- 9,061
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (7,113) 9,061
-------- --------
NET DECREASE IN CASH (49,871) (3,655)
CASH - Beginning 52,497 3,655
-------- --------
CASH - Ending $ 2,626 $ -0-
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the periods for:
Interest $ 1,670 $ 1,690
Income taxes $ 1,305 $ 1,034
-16-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1
In the opinion of management, the balance sheet at March 31, 1999, the
statements of operations and the statements of cash flows for the three
months ended March 31, 1999 and 1998 have been prepared by management
without audit. In the opinion of management, all necessary adjustments
(which include only normal recurring adjustments) have been made in order
to present fairly the financial position at March 31, 1999. The results of
operations for the three months ended March 31, 1999 and 1998 are not
necessarily an indication of the operating results for the entire year.
NOTE 2
Accufacts Pre-Employment Screening, Inc. ("Accufacts") was incorporated on
October 6, 1994 in the State of New York. On August 31, 1998 Accufacts
consummated a merger with a public shell, Southern Cargo Company
("Southern"), a Florida corporation. Southern simultaneously with this
merger changed its name to Accufacts Pre-Employment Screening Inc. (the
"Company") and shortly thereafter re-incorporated in the State of Delaware.
Under the terms of the merger all of the outstanding shares of Accufacts
were acquired by Southern in exchange for 3,750,000 shares of Southern's
$.01 par value common stock. This transaction was accounted for as a
reverse acquisition whereby Accufacts was the acquirer for accounting
purposes. The historical financial statements prior to August 31, 1998 are
those of Accufacts.
-17-
<PAGE>
PART III
Index to and Description of Exhibits
3.1 Articles of Incorporation of the Company and Certificate of Merger.
3.2 By-laws of the Company.
4.1 Specimen of Common Stock Certificate.
4.2 Asset Purchase agreement, dated August 26, 1998.
10.1 Promissory note and security agreement executed by Todd Gama in favor
of registrant dated December 18, 1998, together with extension of
maturity date of such note to September 15, 1999.
10.2 Promissory note and security agreement executed by Hunter Adams,
President of Avalon Financial Services, LLC in favor of registrant
dated December 18, 1998, together with extension of maturity date of
such note to September 15, 1999.
10.4 Employment Agreement, dated September 1, 1998, between the Registrant
and Philip Luizzo.
10.4-1 Employment Agreement, dated Septmenber 1, 1998, between the Registrant
and John Svedese.
27 Financial Data Schedule
Financial Statement Schedules
State of Delaware
Office of the Secretary of State
PAGE 1
----------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER,
WHICH MERGES:
"ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.", A FLORIDA CORPORATION, WITH AND
INTO "ACCUFACTS PRE-EMPLOYMENT SCREENING, INC." UNDER THE NAME OF "ACCUFACTS
PRE-EMPLOYMENT SCREENING, INC.", A CORPORATION ORGANIZED AND EXISTING UNDER THE
LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE
THIRTIETH DAY OF SEPTEMBER, A.D. 1998, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SEAL]
/s/ EDWARD J. FREEL
----------------------------------------
Edward J. Freel, Secretary of State
2945487 8100M AUTHENTICATION: 9338995
9814385107 DATE: 10-06-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/30/1998
981385107 - 2945487
CERTIFICATE OF MERGER
OF
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
AND
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
It is hereby certified that:
1. The constituent business corporations participating in the merger herein
certified are:
(i) ACCUFACTS PRE-EMPLOYMENT SCREENING, INC., which is incorporated under
the laws of the State of Florida ("ACCUFACTS FLORIDA"); and
(ii) ACCUFACTS PRE-EMPLOYMENT SCREENING, INC., which is incorporated under
the laws of the State of Delaware ("ACCUFACTS DELAWARE").
2. A Plan and Agreement of Merger has been approved, adopted, certified,
executed, and acknowledged by each of the aforesaid constituent corporations in
accordance wit the provisions of subsection (c) of Section 252 of the General
Corporation Law of the State of Delaware, to wit, by ACCUFACTS FLORIDA, in
accordance with the laws of the State of its incorporation, and by ACCUFACTS
DELAWARE, in the same manner as is provided in Section 251 of the General
Corporation Law of the State of Delaware.
3. The Certificate of Incorporation of ACCUFACTS DELAWARE shall be its
Certificate of Incorporation.
4. The Plan and Agreement of Merger is on file at ACCUFACTS DELAWARE, at 6
Greene Street, New York, New York 10013, and will be provided upon request.
5. The authorized shares of ACCUFACTS FLORIDA are 25,000,000 shares, with a
par value of $.00l each.
<PAGE>
3. The name of the surviving corporation in the merger herein certified
is ACCUFACTS PRE-EMPLOYMENT SCREENING, INC., which will continue its
existence as said surviving corporation under its present name.
Dated: September 23, 1998 ACCUFACTS PRE-EMPLOYMENT
SCREENING, INC. (A Florida Corporation)
By: /s/ PHILIP LUIZZO
------------------------------------
Philip Luizzo
Capacity: President
Dated: September 23, 1998 ACCUFACTS PRE-EMPLOYMENT
SCREENING, INC. (A Florida Corporation)
By: /s/ PHILIP LUIZZO
------------------------------------
Philip Luizzo
Capacity: President
-2-
Exhibit 3.1
State of Delaware
Office of the Secretary of State
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.", FILED IN THIS
OFFICE ON THE SIXTEENTH DAY OF SEPTEMBER, A.D. 1998, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SEAL]
/s/ EDWARD J. FREEL
----------------------------------------
Edward J. Freel, Secretary of State
2945487 8100 AUTHENTICATION: 9308496
981361241 DATE: 09-18-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/26/2998
981361241 - 2945487
Certificate of Incorporation
of
Accufacts Pre-Employment Screening, Inc.
The undersigned incorporator, in order to form a corporation under the
General Corporation Law of the State of Delaware, certifies as follows:
1. Name. The name of the corporation is AccuFacts Pre-Employment Screening
Inc. (hereinafter called the "Corporation").
2. Address; Registered Agent. The address of the Corporation's registered
office is c/o The Prentice-Hall Corporation System, Inc., 1013 Centre Road, New
Castle County, City of Wilmington, State of Delaware 19805; and its registered
agent at such address is The Prentice-Hall Corporation System, Inc.
3. Nature of Business; Purposes. The nature of the business and purposes to
be conducted or promoted by the Corporation are to engage in, carry on and
conduct any lawful act or activity for which corporations may be organized under
the General Corporation Law of Delaware.
4. Number of Shares. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is fifty-five million
(55,000,000), of which fifty million (50,000,000) shares are to be Common Stock,
with a par value of $.01 per share ("Common Stock"), and five million
(5,000,000) shares are to be Preferred Stock, with a par value $.01 per share
("Preferred Stock").
Preferred Stock. A. Authority is hereby expressly granted to the Board of
Directors from time to time to issue the Preferred Stock, for such consideration
and on such
<PAGE>
terms as it may determine, as Preferred Stock of one or more series and in
connection with the creation of any such series to fix by the resolution or
resolutions providing for the issue of shares thereof the designation, powers
and relative participating, optional, or other special rights of such series,
and the qualifications, limitations or restrictions thereof. Such authority of
the Board of Directions with respect to each such series shall include, but not
be limited to, the determination of the following:
(i) the distinctive designation of, and the number of shares
comprising, such series, which number may be increased (except where
otherwise provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares thereof then outstanding)
from time to time by like action of the Board of Directors;
(ii) the dividend rate or amount for such series, the conditions and
dates upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or classes
or any other series of any class or classes of stock and whether such
dividends shall be cumulative, and if so, from which date or dates for such
series;
(iii) whether or not the shares of such series shall be subject to
redemption by the corporation and the times, prices, and other terms and
conditions of such redemption;
(iv) whether or not the shares of such series shall be subject to the
operation of a sinking fund or purchase fund to be applied to the
redemption or purchase of such shares and if such a fund be established,
the amount thereof and the terms and provisions relative no the application
thereof;
(v) whether or not the shares of such series shall be convertible into
or exchangeable for shares of any other class or classes, or of any other
series of any class or
-2-
<PAGE>
classes, of the stock of the corporation and if provision be made for
conversion or exchange, the times, prices, rates, adjustments, and other
terms and conditions of such conversion or exchange;
(vi) whether or not the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and if they are
to have such additional voting rights, the extent thereof;
(vii) the rights of the shares of such series in the event of any
liquidation, dissolution, or winding up of the corporation or upon any
distribution of its assets; and
(viii) any other powers, preferences, and relative, participating,
optional, or other special rights of the shares of such series, and the
qualifications, limitations, or restrictions thereof, to the full extent
now or hereafter permitted by law and not inconsistent with the provisions
hereof.
B. All shares of any one series of Preferred Stock shall be identical
in all respects except as to the dates from which dividends thereon may be
cumulative. All series of the Preferred Stock shall rank equally and be
identical in all respects except as otherwise provided in the resolution or
resolutions providing for the issue of any series of Preferred Stock.
5. Name and Address of Incorporator. The name and mailing address of the
incorporator are: Gary A. Schonwald, Esq., Frankfurt, Garbus, Klein & Selz,
P.C., 488 Madison Avenue, New York, NY 10022.
6. Election of Directors. Members of the Board of Directors may be elected
either by written ballot or by voice vote.
7. Adoption, Amendment and/or Repeal of By-Laws. The Board of Directors may
from time to time (after adoption by the undersigned of the original by-laws
of the Corporation) make, alter or repeal the by-laws of the Corporation;
provided, that any by-laws
-3-
<PAGE>
made or amended by the Board of Directors may be amended or repealed, and any
by-laws may be made, by the stockholders of the Corporation.
8. Compromise and Arrangements. Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receivers appointed for this
Corporation under the provisions of section 279 of Title 8 of the Delaware Code
order a meeting of the creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement at the said reorganization shall, if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
9. Liability of Directors. The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by paragraph
(7) of sub-section (b) of Section 102 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented.
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<PAGE>
10. Indemnification. The Corporation shall, to the fullest extent permitted
by Section 145 of the General Corporation Law, as amended, indemnify all persons
whom it may indemnify pursuant thereto.
IN WITNESS WHEREOF, this Certificate has been signed on this 16th day of
September, 1998 and the signature of the undersigned shall constitute the
affirmation and acknowledgment of the undersigned, under penalties of perjury,
that the Certificate is the act and deed of the undersigned and that the facts
stated in the Certificate are true.
/s/ GARY A. SCHONWALD
------------------------------------------
Gary A. Schonwald, Esq., Sole Incorporator
-5-
Exhibit 3.2
By-Laws
of
AccuFacts Pre-Employment Screening, Inc.
(a Delaware Corporation)
ARTICLE I - OFFICES
The principal office of the Corporation shall be 6 Greene Street, New York,
New York 10013. The registered office of the Corporation in the State of
Delaware shall be c/o The Prentice Hall Corporation Systems, Inc., 1013 Centre
Road, City of Wilmington, New Castle County, State of Delaware 19805. The
Corporation may also have offices at such other places within or without the
State of Delaware as the Board of Directors may from time to time determine, or
the business of the Corporation may require.
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meetings. Meetings of Shareholders shall be held at the
principal office of the Corporation or at such places within or without the
State of Delaware as set forth in the Notice of Meeting or in a duly executed
Waiver of Notice thereof.
Section 2. Annual Meeting. The annual meeting of the Shareholders shall be
held at 10:00 A.M. on the last day of September in each year if not a Saturday,
Sunday or legal holiday, and if a Saturday, Sunday or legal holiday, then on the
next business day following at the same hour. At such meeting the Shareholders
shall elect a Board of Directors and transact such other business as may
properly come before the meeting. If the Annual Meeting of Shareholders is not
held as herein prescribed, the election of Directors may be held at any meeting
thereafter called.
Section 3. Special Meetings. Special Meetings of the Shareholders may be
called, at any time, by the Board of Directors or the President, and must be
called by the President or Secretary at the request, in writing, of a majority
of the Board of Directors or at the request, in writing, by ten percent (10%) of
the outstanding shares entitled to vote at such special meeting.
Section 4. Fixing Record Date. For the purpose of determining the
Shareholders entitled to notice of or to vote at any meeting of Shareholders, or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting or for the purpose of determining Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors shall fix, in advance, a
date as the record date for any such determination of Shareholders. Such date
shall not be more than fifty (50) nor less than ten (10) days before the date of
such meeting nor more than fifty (50) days
<PAGE>
prior to any other action. If no record date is fixed, it shall be determined in
accordance with the provisions of law.
Section 5. Notice of Meetings of Shareholders. Written notice of meetings
of Shareholders shall be given either personally or by mail to each Shareholder
entitled to vote at such meeting, not less than ten (10) nor more than fifty
(50) days before the date of the meeting. Such notice shall state the place,
date and hour of the meeting and, unless it is the Annual Meeting, shall state
the purpose or purposes for which it is called and that it is being issued by,
or at the direction of the person or persons calling the Meeting. No business
other than that specified in the Notice of Meeting shall be transacted at any
such Special Meeting. If action is proposed to be taken that might entitle
Shareholders to payment for their Shares, the notice shall include a statement
of that purpose and to that effect. If mailed, the notice shall be deemed given
when deposited in the United States mail, postage prepaid and directed to the
Shareholder at the address which appears on the record of Shareholders.
Section 6. Waivers. Notice of meetings need not be given to any Shareholder
who signs a Waiver of Notice, in person or by proxy, whether before or after the
meeting. The attendance of any Shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack of notice of
such meeting, shall constitute a waiver of notice by him.
Section 7. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at a meeting of Shareholders for the transaction of any
business. When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any Shareholders, and the Shareholders present
may adjourn the meeting despite the absence of a quorum.
Section 8. Proxies. Every Shareholder entitled to vote at a meeting of
Shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy. Every proxy must be signed by
the Shareholder or his attorney-in-fact and be duly notarized. No proxy shall be
valid after expiration of eleven (11) months from the date thereof unless
otherwise expressly so provided in the proxy. Every proxy shall be revocable at
the pleasure of the Shareholder executing it except where an irrevocable proxy
is permitted by law.
Section 9. Qualifications of Voters. Every Shareholder of record shall be
entitled at every meeting of Shareholders to one (1) vote for every share
standing in his name on the record of Shareholders, unless otherwise provided in
the Certificate of Incorporation.
Section 10. Vote of Shareholders. Except as otherwise provided by law or
the Certificate of Incorporation:
(a) all corporate action shall require the affirmative vote of a
majority of shares entitled to vote thereon; and
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<PAGE>
(b) voting at all meetings of Shareholders shall be viva voce, but any
qualified voter may demand a vote by ballot, each of which shall state the
name of the Shareholder voting and the number of shares voted by him. If
such ballot be cast by a proxy, it shall also state the name of such proxy.
If a vote by ballot is demanded as aforesaid, two inspectors of election
shall be appointed by the presiding officer of the meeting.
Section 11. Written Consent of Shareholders. Whenever by a provision of
statute or of the Certificate of Incorporation or by these By-Laws, the vote of
Shareholders is required or permitted to be taken at a meeting thereof in
connection with any corporation action, the meeting and the vote of Shareholders
may be dispensed with if all of the Shareholders who would have been entitled to
vote upon the action if such meeting were held shall expressly consent in
writing to such corporate action being taken.
ARTICLE III - DIRECTORS
Section 1. Board of Directors. The business of the Corporation shall be
managed by its Board of Directors, each of whom shall be at least twenty-one
(21) years of age and need not be Shareholders.
Section 2. Number of Directors. When there are less than three (3)
Shareholders, the number of Directors shall be not less than such number; if
there are three (3) or more Shareholders, then there shall be not less than
three (3) Directors. The number of Directors may, at any time, be increased or
decreased to the extent permitted by law, by vote of a majority of the Shares
entitled to vote at any Annual or Special Meeting of Shareholders, if the notice
of such meeting or the waiver thereof contains a statement of the proposed
increase or decrease. The initial number of Directors of the Corporation shall
be three (3).
Section 3. Election and Term of Directors. At each Annual Meeting of
Shareholders, the Shareholders shall elect Directors to hold office until the
next Annual Meeting. Each Director shall hold office until the expiration of the
term for which he is elected and until his successor has been elected and
qualified or until his prior resignation or removal.
Section 4. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of Directors and
vacancies occurring in the Board of Directors for any reason except the removal
of Directors without cause may be filled by a vote of a majority of the
Directors then in office, even though less than a quorum exists. Vacancies
occurring by reason of the removal of Directors without cause shall be filled by
a vote of the Shareholders. A Director elected to fill a vacancy caused by
resignation, death or removal, shall be elected to hold office for the unexpired
term of his predecessor.
Section 5. Removal of Directors. Any or all of the Directors may be removed
for cause by majority vote of the Shareholders or by action of the Board of
Directors. Directors may be removed at any time and without cause by a vote of
the Shareholders.
-3-
<PAGE>
Section 6. Resignation. A Director may resign at any time by giving written
notice to the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in the notice, the resignation shall
take effect upon receipt thereof by the Board of Directors or such officer, and
acceptance of the resignation shall not be necessary to make it effective.
Section 7. Quorum of Directors. A majority of the Directors shall
constitute a quorum for the transaction of business or of any specified item of
business by the Board of Directors.
Section 8. Action of the Board of Directors; Validity of Contracts. The
vote of a majority of the Directors present at the time of the vote, if a quorum
is present at such time, shall be the act of the Board of Directors. Each
Director present shall have one (1) vote, regardless of the number of Shares, if
any, which he may hold. No contract or other transaction between this
Corporation and any other Corporation shall be impaired, affected or
invalidated, nor shall any Directors be liable in any way by reason of the fact
that any one or more of the Directors of this Corporation is or are interested
in, or is a director or officer, or are directors or officers of such other
Corporation, provided that such facts are disclosed or made known to the Board
of Directors. Any Director, personally and individually, may be a party to or
may be interested in any contract or transaction of this Corporation, and no
Director shall be liable in any way by reason of such interest, provided that
the fact of such interest be disclosed or made known to the Board of Directors,
and provided that the Board of Directors shall authorize, approve or ratify such
contract or transaction by the vote (not counting the vote of any such Director)
of a majority of a quorum, notwithstanding the presence of any such Director at
the meeting at which such action is taken. Such Director or Directors may be
counted in determining the presence of a quorum at such meeting. This Section
shall not be construed to impair or invalidate or in any way affect any contract
or other transaction which would otherwise be valid under the law applicable
thereto.
Section 9. Place and Time of Meetings. The Board of Directors may hold its
meetings at the office of the Corporation or at such other places, either within
or without the State of Delaware, as it may from time to time determine.
Section 10. Annual Meeting. An Annual Meeting of the Board of Directors
shall be held immediately following the Annual Meeting of Shareholders at the
place of such Annual Meeting of Shareholders, and no notice of such meeting
shall be necessary.
Section 11. Notice of Meetings of the Board of Directors; Adjournment.
(a) Regular meetings of the Board of Directors may be held without
notice at such time and place as it shall, from time to time, determine.
Special meetings of the Board of Directors shall be held upon notice to the
Directors and may be called by the President upon three (3) days notice to
each Director, either personally or by mail or by wire; special meetings
shall be called by the President or by the Secretary in a like manner on
written request of one (1) Director. Notice of a meeting need not be given
to any Director who submits a waiver of notice
-4-
<PAGE>
whether before or after the meeting or who attends the meeting without
protesting prior thereto, or at its commencement, the lack of notice to
him.
(b) A majority of the Directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of the
adjournment shall be given to all Directors who were absent at the time of
the adjournment, and, unless such time and place are announced at the
meeting, to the other Directors.
Section 12. Chairman. At all meetings of the Board of Directors, the
President, or, in his absence, a Chairman chosen by the Board of Directors shall
preside.
Section 13. Compensation. No compensation shall be paid to Directors or
members of any committee, as such, for their services, but by resolution of the
Board of Directors a fixed sum and expenses for attendance, at each regular or
special meeting of the Board of Directors or of any such committee, may be
authorized. Nothing herein contained shall be construed to preclude any Director
or committee member from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 14. Directors' Annual Report. The Board of Directors shall present
at each Annual Meeting of Shareholders a full and clear statement of the
business and condition of the Corporation.
Section 15. Written Consent of Directors. Whenever, by provision of statute
or of the Certificate of Incorporation or by these By-Laws, the vote of the
Board of Directors or any committee thereof is required or permitted to be taken
at a meeting thereof in connection with any corporate action, the meeting and
the vote of the Board of Directors or any committee thereof may be dispensed
with if all of the members of the Board of Directors or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consent thereto by the members of the Board of Directors or the
committee shall be filed with the minutes of the proceedings of the Board of
Directors or committee.
Section 16. Participation of Directors by Conference Telephone. Any one or
more members of the Board of Directors or any committee thereof may participate
in a meeting by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
Section 17. Committees. The Board of Directors, by resolution adopted by a
majority of the entire Board, may designate from among its members one or more
committees, each consisting of one or more Directors, and each of which, to the
extent provided in such resolution, shall have all the authority of the Board.
However, no such committee shall have authority as to any of the following
matters:
(a) the submission to Shareholders of any action as to which
Shareholders' authorization is required by law;
-5-
<PAGE>
(b) the filling of vacancies on the Board of Directors or on any
committee;
(c) the fixing of compensation of any Director for serving on the
Board or on any committee;
(d) the amendment or repeal of these By-Laws, or the adoption of new
By-Laws; or
(e) the amendment or repeal of any resolution of the Board of
Directors which, by its terms, shall not be so amendable or repealable.
The Board of Directors may designate one or more Directors as alternate members
of any such committee who may replace any absent member or members at any
meeting of such committee. Each such committee shall serve at the pleasure of
the Board of Directors and shall keep minutes of its meetings and report the
same to the Board of Directors.
ARTICLE IV - OFFICERS
Section 1. Offices, Election, Term.
(a) The Board of Directors may elect or appoint a President, one or
more Vice Presidents, a Secretary and a Treasurer, and such other officers
as it may determine, who shall have such duties, powers and functions as
hereinafter provided.
(b) All officers shall be elected or appointed to hold office until
the meeting of the Board of Directors immediately following the Annual
Meeting of Shareholders.
(c) Each officer shall hold office for the term for which he is
elected or appointed and until his successor has been elected or appointed
and qualified.
Section 2. Removal, Resignation, and Salary.
(a) Any officer elected or appointed by the Board of Directors may be
removed by the Board at any time, with or without cause.
(b) In the event of the death, resignation or removal of an officer,
the Board of Directors, in its discretion, may elect or appoint a successor
to fill the unexpired term.
(c) Any two or more offices may be held by the same person except, if
there are two or more Shareholders, the offices of President and Secretary.
(d) The salaries of all officers shall be fixed by the Board of
Directors.
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<PAGE>
(e) The Directors may require any officer to give security for the
faithful performance of his duties.
Section 3. Duties of the President. The President shall:
(a) be the chief executive officer of the Corporation and he shall
preside at all meetings of the Shareholders and of the Board of Directors;
(b) be responsible for the general and active management of the
business of the Corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect; and
(c) be ex officio a member of all committees.
Section 4. Duties of a Vice President. During the absence or disability of
the President, the Vice President or, if there are more than one, the Executive
Vice President, shall have all of the powers and functions of the President.
Each Vice President shall perform such other duties as the Board of Directors
shall prescribe.
Section 5. Duties of the Secretary. The Secretary shall:
(a) attend all meetings of the Board of Directors and of the
Shareholders;
(b) record all votes and minutes of all proceedings in a book kept for
that purpose;
(c) give or cause to be given notice of all meetings of Shareholders
and of special meetings of the Board of Directors;
(d) keep in safe custody the seal of the Corporation and affix it to
any instrument when authorized by the Board of Directors or the President;
(e) when required, prepare or cause to be prepared and available at
each meeting of Shareholders a certified list, in alphabetical order, of
the names of Shareholders entitled to vote thereat, indicating the number
of shares of each respective class held by each;
(f) keep all the documents and records of the Corporation, as required
by law or otherwise, in the proper and safe manner; and
(g) perform such other duties as may be prescribed by the Board of
Directors or the President.
-7-
<PAGE>
Section 6. Duties of an Assistant Secretary. During the absence or
disability of the Secretary, the Assistant Secretary or, if there be more than
one, the one so designated by the President or by the Board of Directors, shall
have all the powers and functions of the Secretary.
Section 7. Duties of the Treasurer. The Treasurer shall:
(a) have the custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and disbursements in
the corporate books;
(c) deposit all money and other valuables in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors;
(d) disburse the funds of the Corporation as may be ordered or
authorized by the Board of Directors and preserve proper vouchers for such
disbursements;
(e) render to the President and the Board of Directors, at the regular
meetings of the Board of Directors, or whenever they require it, an account
of all his transactions as Treasurer and of the financial condition of the
Corporation;
(f) render a full financial report at the Annual Meeting of the
Shareholders, if so requested;
(g) be furnished by all corporate officers and agents, at his request,
with such reports and statements as he may require as to all financial
transactions of the Corporation; and
(h) perform such other duties as are given to him by these By-Laws or
from time to time, are assigned to him by the Board of Directors or the
President.
Section 8. Delegation of Duties. In the case of the absence of any officer
of the Corporation, or for any other reason that the Board of Directors deems
sufficient, the Board of Directors may delegate, for any designated period of
time, the powers or duties, or any of these, of such officer to any other
officer, or to any Director, provided that one person is not given the powers
and duties of both the President and Secretary.
Section 9. Shares of Other Corporations. Whenever the Corporation is the
holder of shares of any other corporation, any right or power of the Corporation
as such shareholder (including the attendance, acting and voting at
shareholders' meetings and execution of waivers, consents, proxies or other
instruments) may be exercised on behalf of the Corporation by the President, any
Vice President, or such other person as the Board of Directors may authorize.
-8-
<PAGE>
ARTICLE V - CERTIFICATES FOR SHARES
Section 1. Certificates. The shares of the Corporation shall be represented
by certificates prepared in such form as the Board of Directors may, from time
to time, prescribe and shall be signed by the President or Vice President, and
by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, and sealed with the seal of the Corporation or a facsimile. If the
certificates are signed by a transfer agent acting on behalf of the Corporation,
and a registrar, the signatures of the officers of the Corporation may be
facsimile. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on any such certificate or certificates,
shall cease to be such officer or officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates have
been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates, or whose
facsimile signature or signatures have been used thereon, had not ceased to be
such officer or officers of the Corporation.
Section 2. Transfer of Shares.
(a) Upon surrender to the Corporation or the transfer agent of the
Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the Corporation to issue a new certificate; every such
transfer shall be entered on the transfer book of the Corporation which
shall be kept at its principal office. No transfer shall be made within ten
(10) days next preceding the Annual Meeting of Shareholders.
(b) The Corporation shall be entitled to treat the holders of record
of any share as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not it shall have express
or other notice thereof, except as expressly provided by law.
Section 3. Lost or Destroyed Certificates. The Board may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate to be lost or destroyed. When authorizing such issue of a new
certificate or certificates, the Board may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the Corporation a bond in such
sum and with such surety or sureties as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost or destroyed.
-9-
<PAGE>
ARTICLE VI - CORPORATE SEAL
The seal of the Corporation shall be circular in form and bear the name of
the Corporation, the year of its organization and the words "Corporate Seal
1998, Delaware". The seal may be used by causing it to be impressed directly on
the instrument or writing to be sealed, or upon adhesive substance affixed
thereto. The seal on the certificates for shares or on any corporate obligation
for the payment of money may be facsimile, engraved or printed.
ARTICLE VII - EXECUTION OF INSTRUMENTS
All corporate checks, demands for money, notes of the Corporation,
instruments and documents, shall be signed or countersigned, executed, verified
or acknowledged by such officer or officers or other person or persons as the
Board may, from time to time, designate.
ARTICLE VIII - DIVIDENDS
Subject to the provisions of the Certificate of Incorporation relating
thereto, if any, dividends may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in cash,
bonds, property, or in the shares of the capital stock subject to any provisions
of the Certificate of Incorporation. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends, such
sum or sums as the Directors, from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation or
for such other purpose as the Directors shall think conducive to the interest of
the Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE IX - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of Directors
from time to time.
ARTICLE X - BY-LAW CHANGES
The By-Laws may be amended, repealed or adopted, by vote of the holders of
a majority of the shares at the time entitled to vote in the election of any
Directors. By-Laws may also, subject to the provisions of the General Corporate
Law, be amended, repealed or adopted by the Board of Directors in the manner
required for the authorization by the Board of Directors of any corporate
action. If any By-Law regulating an impending election of Directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of Shareholders for the election of Directors, the
By-Laws so adopted, amended or repealed, together with a concise statement of
the changes made.
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<PAGE>
____ * ____
The undersigned Incorporator certifies that the foregoing by-laws have been
adopted as the first by-laws of the Corporation, in accordance with the
requirements of the General Corporation Law of the State of Delaware on this
17th day of September, 1998.
/s/ Gary A. Schonwald
-----------------------------------
Gary A. Schonwald, Incorporator
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Exhibit 4.1
[STOCK CERTIFICATE]
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
================================================================================
---------------------
CUSIP NO. 00437U 10 6
---------------------
NUMBER SHARES
---------- ----------
--------- ACCUFACTS ----------
PRE-EMPLOYMENT SCREENING, INC.
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.01
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of ACCUFACTS PRE-EMPLOYMENT SCREENING, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
[SEAL]
------------------------ ------------------------
SECRETARY PRESIDENT
================================================================================
[LOGO] INTERWEST TRANSFER CO. INC. P.O. BOX 17136 / SALT LAKE CITY, UTAH 84117
(c) CARIBBEAN SECURITY PLC (801) 533 8500
COUNTERSIGNED & REGISTERED
-----------------------------------------------------
COUNTERSIGNED Transfer Agent-Authorized Signature
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in
the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - .....Custodian......
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of
survivorship and not as tenants Act .........................
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ____________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ____________________________
_____________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER
Exhibit 4.2
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), NOR REGISTERED UNDER ANY
STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN
RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933
ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
ASSET PURCHASE AGREEMENT
AGREEMENT made this 26th day of August, 1998, by and between Southern Cargo
Company, Inc. a Florida corporation, (the "ISSUER") and AccuFacts,
Pre-Employment Screening, Inc. ("APS")
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. PURCHASE OF ASSETS AND ISSUANCE OF STOCK. Subject to the terms and
conditions of this Agreement, the ISSUER agrees to issue to APS or its assigns,
8,800,000 shares of the common stock of ISSUER, $0.01 par value (the "Shares"),
in exchange for 100% of the assets and liablitities of APS.
2. REPRESENTATIONS AND WARRANTIES. ISSUER represents and warrants to APS
the following:
i. Organization. ISSUER is a corporation duly organized, validly
existing, and in good standing under the laws of Florida, and has all
necessary corporate powers to own properties and carry on a business, and
is duly qualified to do business and is in good standing in Florida. All
actions taken by the Incorporators, directors and shareholders of ISSUER
have been valid and in accordance with the laws of the State of Florida.
ii. Capital. The authorized capital stock of ISSUER consists of
50,000,000 shares of common stock, $0.001 par value, of which 1,000,000 are
issued and outstanding. All outstanding shares are fully paid and non
assessable, free of liens, encumbrances, options, restrictions and legal or
equitable rights of others not a party to this Agreement. At closing, there
will be no outstanding subscriptions, options, rights, warrants,
convertible securities, or other agreements or commitments obligating
ISSUER to issue or to transfer from treasury any additional shares of its
capital stock. None of the outstanding shares of ISSUER are subject to any
stock restriction
1
<PAGE>
agreements. All of the shareholders of ISSUER have valid title to such
shares and acquired their shares in a lawful transaction and in accordance
with the laws of Florida.
iii. Financial Statements. Exhibit B to this Agreement includes the
balance sheet of ISSUER as of June 10, 1998, and the related statements of
income and retained earnings for the period then ended. The financial
statements have been prepared in accordance with generally accepted
accounting principles consistently followed by ISSUER throughout the
periods indicated, and fairly present the financial position of ISSUER as
of the date of the balance sheet in the financial statements, and the
results of its operations for the periods indicated.
iv. Absence of Changes. Since the date of the financial statements,
there has not been any change in the financial condition or operations of
ISSUER, except changes in the ordinary course of business, which changes
have not in the aggregate been materially adverse.
v. Liabilities. ISSUER does not have any debt, liability, or
obligation of any nature, whether accrued, absolute, contingent, or
otherwise, and whether due or to become due, that is not reflected on the
ISSUERS' financial statement. ISSUER is not aware of any pending,
threatened or asserted claims, lawsuits or contingencies involving ISSUER
or its common stock. There is no dispute of any kind between ISSUER and any
third party, and no such dispute will exist at the closing of this
Agreement. At closing, ISSUER will be free from any and all liabilities,
liens, claims and/or commitments.
vi. Ability to Carry Out Obligations. ISSUER has the right, power, and
authority to enter into and perform its obligations under this Agreement.
The execution and delivery of this Agreement by ISSUER and the performance
by ISSUER of its obligations hereunder will not cause, constitute, or
conflict with or result in (a) any breach or violation or any of the
provisions of or constitute a default under any license, indenture,
mortgage, charter, instrument, articles of incorporation, bylaw, or other
agreement or instrument to which ISSUER or its shareholders are a party, or
by which they may be bound, nor will any consents or authorizations of any
party other than those hereto be required, (b) an event that would cause
ISSUER to be liable to any party, or (c) an event that would result in the
creation or imposition or any lien, charge or encumbrance on any asset of
ISSUER or upon the securities of ISSUER to be acquired by SHAREHOLDERS.
vii. Full Disclosure. None of representations and warranties made by
the ISSUER, or in any certificate or memorandum furnished or to be
furnished by the ISSUER, contains or will contain any untrue statement of a
material fact, or omit any material fact the omission of which would be
misleading.
viii. Contract and Leases. ISSUER is not currently carrying on any
business and is not a party to any contract, agreement or lease. No person
holds a power of attorney from ISSUER.
ix. Compliance with Laws. ISSUER has complied with, and is not in
violation of any federal, state, or local statute, law, and/or regulation
pertaining to ISSUER. ISSUER
2
<PAGE>
has complied with all federal and state securities laws in connection with
the issuance, sale and distribution of its securities.
x. Litigation. ISSUER is not (and has not been) a party to any suit,
action, arbitration, or legal, administrative, or other proceeding, or
pending governmental investigation. To the best knowledge of the ISSUER,
there is no basis for any such action or proceeding and no such action or
proceeding is threatened against ISSUER and ISSUER is not subject to or in
default with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department, agency, or
instrumentality.
xi. Conduct of Business. Prior to the closing, ISSUER shall conduct
its business in the normal course, and shall not (1) sell, pledge, or
assign any assets (2) amend its Articles of Incorporation or Bylaws, (3)
declare dividends, redeem or sell stock or other securities, (4) incur any
liabilities, (5) acquire or dispose of any assets, entefc
xii. Title. The Shares to be issued to APS will be, at closing, free
and clear of all liens, security interests, pledges, charges, claims,
encumbrances and restrictions of any kind. None of such Shares are or will
be subject to any voting trust or agreement. No person holds or has the
right to receive any proxy or similar instrument with respect to such
shares, except as provided in this Agreement, the ISSUER is not a party to
any agreement which offers or grants to any person the right to purchase or
acquire any of the securities to be issued to APS. There is no applicable
local, state or federal law, rule, regulation, or decree which would, as a
result of the issuance of the Shares to APS, impair, restrict or delay APS
voting rights with respect to the Shares.
3. APS represents and warrant to ISSUER the following:
i. Organization. APS is a corporation duly organized, validly
existing, and in good standing under the laws of New York, has all
necessary corporate powers to own properties and carry on a business, and
is duly qualified to do business and is in good standing in New York. All
actions taken by the Incorporators, directors and shareholders of APS have
been valid and in accordance with the laws of New York.
ii. Counsel. APS and its shareholders represents and warrants that
prior to Closing, that it represented by independent counsel or have had
the opportunity to retain independent counsel to represent them in this
transaction and that prior to Closing, the law offices of Eric P. Littman,
P.A. has acted as exclusive counsel to the ISSUER and has not represented
either APS or its shareholders in any manner whatsoever.
4. INVESTMENT INTENT. APS agrees that the Shares being issued pursuant
to this Agreement may be sold, pledged, assigned, hypothecate or otherwise
transferred, with or without consideration ( a "Transfer"), only pursuant
to an effective registration statement under the Act, or pursuant to an
exemption from registration under the Act, the availability of which is to
be established to the satisfaction of ISSUER.
3
<PAGE>
5. CLOSING. The closing of this transaction shall take place at the law
offices of Eric P. Littman, 7695 S.W. 104th Street, Suite 210, Miami, Florida
33156. Unless the closing of this transaction takes place on or before August
28, 1998, then either party may terminate this Agreement.
6. DOCUMENTS TO BE DELIVERED AT CLOSING.
i.. By the ISSUER
(1) Board of Directos Minutes authorizing the issuance of a
certificate or certificates for 8,800,000 shares registered in the
names of the APS or to such persons and entities as directed by APS..
(2) The resignation of all officers of ISSUER.
(3) A Board of Directors resolution appointing such person as APS
designate as a director(s) of ISSUER.
(4) The resignation of all the directors of ISSUER, except that
of APS designee, dated subsequent to the resolution described in 3,
above.
ii.. By APS:
(1) Bill of Sale Delivery transferring all the assets and
liabilities of APS to the ISSUER.
7. REMEDIES.
i. Arbitration. Any controversy or claim arising out of, or relating
to, this Agreement, or the making, performance, or interpretation thereof,
shall be settled by arbitration in Miami, Dade County, Florida in
accordance with the Rules of the American Arbitration Association then
existing, and judgment on the arbitration award may be entered in any court
having jurisdiction over the subject matter of the controversy.
8. MISCELLANEOUS.
i. Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall
in no way be deemed to define, limit, or add to the meaning of any
provision of this Agreement.
4
<PAGE>
ii. No oral Change. This Agreement and any provision hereof, may not
be waived, changed, modified, or discharged orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
iii. Non Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the
party against whom such waiver is charged; and (I) the failure of any party
to insist in any one or more cases upon the performance of any of the
provisions, covenants, or conditions of this Agreement or to exercise any
option herein contained shall not be construed as a waiver or
relinquishment for the future of any such provisions, covenants, or
conditions, (ii) the acceptance of performance of anything required by this
Agreement to be performed with knowledge of the breach or failure of a
covenant, condition, or provision hereof shall not be deemed a waiver of
such breach or failure, and (iii) no waiver by any party of one breach by
another party shall be construed as a waiver with respect to any other or
subsequent breach.
iv. Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
v. Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings.
vi. Counterparts. This Agreement may be executed simultaneously 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.
vii. Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service if served personally on the party to whom
notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, and by fax, as follows:
ISSUER: Eric P. Littman, Esquire
7695 S.W. l04th Street
Suite 210 Floor
Miami, Florida 33156
APS: John Svedese, Senior Administrator
5 Green Street
New York, NY 11214
IN WITNESS WHEREOF, the undersigned has executed this Agreement this 26th
day of August, 1998.
5
<PAGE>
Southern Cargo Company, Inc. AccuFacts Pre-Employment
Screening, Inc.
By: /s/ ERIC P. LITTMAN By: /s/ JOHN SVEDESE
--------------------------- ---------------------------
Eric P. Littman, President Jonh Svedese
State of New York
County of New York /s/ Evan H. Berger
On August 31, 1998 before me EVAN H. BERGER
came John Svedese who attested to Notary Public, State of NY
and executed the foregoing No. 02BE5038504
agreement. Qualified in NY County
Commission Expires 1/30/99
6
SECURITY AGREEMENT
This Security Agreement is made and entered into as of December 18, 1998 by
and between Todd Grama, with a home address of 19 Burnham Avenue, Roslyn, NY
11577 (the "Subscriber"), and AccuFacts Pre-Employment Screening, Inc., with an
office at 6 Greene Street, New York, NY 10013 (the "Secured Party"); the
Subscriber and the Secured Party collectively referred to hereinafter as the
"Parties".
W I T N E S E T H:
WHEREAS, contemporaneously herewith Subscriber is purchasing from Secured
Party 187,500 shares of Common Stock par value $.01 per share of Secured Party
represented by Certificate No. 1147 (the "Shares") and in consideration therefor
has issued to the Secured Party a Secured Guaranteed Promissory Note of even
date herewith (the "Note"), for the principal amount of THREE HUNDRED
SEVENTY-FIVE THOUSAND ($375,000.00) DOLLARS plus interest; and
WHEREAS, it is a condition of the Secured Party's acceptance of the Note
that Subscriber grant a security interest to the Secured Party in the Shares.
NOW THEREFORE, the Parties agree as follows:
1. Security Interests in Collateral.
To secure the prompt payment and performance to Secured Party of the
Subscriber under the Note, (the "Obligations"), Subscriber hereby grants to
Secured Party a continuing security
<PAGE>
interest and a lien upon the Shares (the "Collateral") together with all
dividends currently or hereafter accrued thereupon.
2. Location of Collateral.
Subscriber has simultaneously with the execution of this Agreement
delivered to Secured Party the certificate representing the Shares.
3. Title.
Except for the security interest hereby granted or any other claim herein
set forth, Subscriber has full title to the Collateral, free and clear of any
lien, security interest, encumbrance, or claim, and Subscriber will, at
Subscriber's cost and expense, defend any action which may affect Secured
Party's security interest in, or Subscriber's title to, the Collateral.
4. Financing Statement.
No financing statement covering the Collateral or any part thereof or any
proceeds thereof is on file in any public office and, at Secured Party's
request, Subscriber will join in executing all necessary financing statements in
favor of Secured Party in forms satisfactory to Secured Party, will pay the cost
of filing fees for filing the same and will further execute all other
instruments deemed necessary by Secured Party and pay the cost of filing fees
for filing the same.
5. Sale or Disposition of Collateral.
Subscriber warrants and covenants that it will not, without the prior
written consent of Secured Party, sell, contract to sell, encumber, or dispose
of the Collateral or any interest therein or parties thereof until all
Obligations have been fully satisfied.
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<PAGE>
6. Term.
This Agreement shall terminate upon payment of all principal and interest
due under the Note.
7. Reimbursement of Expenses By Subscriber.
At the option of Secured Party, Secured Party may discharge taxes, liens,
interest, or perform or cause to be performed for and on behalf of Subscriber
any actions and conditions, obligations, or covenants which Subscriber has
failed or refused to perform, and may pay for the maintenance, and preservation
of the Collateral, and any sums so advanced shall be immediately payable at the
place designated in the Note and shall be secured by this Security Agreement.
8. Payment.
Subscriber will pay the Note secured by this Security Agreement and any
renewal or extension thereof and any other indebtedness hereby secured in
accordance with the terms and provisions thereof and will repay immediately all
sums expended by Secured Party in accordance with the terms and provisions of
this Security Agreement.
9. Change of Address.
Subscriber will promptly notify Secured Party of any change of Subscriber's
address.
10. Attorney in Fact.
Subscriber hereby irrevocably appoints Secured Party as Subscriber's
attorney in fact, effective upon any default under the Note, to do any and every
act which Subscriber is obligated by this Security Agreement to do, and to
exercise all rights of Subscriber in the Collateral and to make collections and
to prepare, execute and file, for and in Subscriber's name, any and all papers
and instruments including, without limitation, financing statements, and to do
all other things necessary
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<PAGE>
or desirable to preserve, protect, perfect, enforce and continue the Collateral
and to make collections and to protect Secured Party's security interest in said
Collateral.
11. Additional Rights of Secured Party.
In its sole discretion, the Secured Party may, at any time and from time to
time, assign, transfer or deliver to any transferee of the Notes any rights in
the Collateral, whereupon Secured Party shall be fully discharged from all
responsibility and the transferee shall be vested with all powers and rights of
the Secured Party hereunder with respect thereto, but the Secured Party shall
retain all rights and powers with respect to any Collateral not assigned,
transferred or delivered.
12. Time of Performance and Waiver.
In performing any act by Subscriber under this Security Agreement and the
Note secured hereby, time shall be of the essence. Secured Party's acceptance of
partial or delinquent payments, or the failure of Secured Party to exercise any
right or remedy shall not be a waiver of any obligation of Subscriber or right
of Secured Party or constitute a waiver of any other similar default
subsequently occurring.
13. Default.
Subscriber shall be in default under this Security Agreement on the
happening of any of the following events or conditions (each an "Event of
Default"):
(a) the Note is not paid in accordance with its terms or an acceleration
event occurs under the Note; or
(b) any warranty, representation, or statement made or furnished to Secured
Party by or on behalf of Subscriber proves to have been false in any material
respect when made or furnished; or
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<PAGE>
(c) default in payment or performance of covenants or sums due hereunder
three (3) days after notice thereof.
14. Remedies.
(a) Upon the occurrence of an Event of Default and at any time thereafter,
Secured Party may, without notice to or demand upon Subscriber, declare any and
all of the Obligations secured hereunder immediately due and payable and Secured
Party shall have all rights and remedies of a secured party under the Uniform
Commercial Code or of the Secured Party under the Obligations, all such rights
and remedies being cumulative, not exclusive and enforceable alternatively,
successively or concurrently; provided however, that the sole remedy of Secured
Party for nonpayment of the Note shall be recovery and cancellation of the
Shares.
(b) The Secured Party may appropriate, set off and apply to the payment of
the Obligations, any Collateral in or coming into the possession of the Secured
Party or its agents, without notice to Subscriber and in such manner as the
Secured Party may in its discretion determine.
15. Miscellaneous Provisions.
(a) New York Law to Apply: This Security Agreement shall be construed under
and in accordance with the Uniform Commercial Code and other applicable laws of
the State of New York and all obligations of the parties created hereunder are
performable in New York County, New York.
(b) Parties Bound: This Security Agreement shall be binding on and inure to
the benefit of the Parties and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Security Agreement.
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<PAGE>
(c) Legal Construction: In case any one or more of the provisions contained
in this Security Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof and this Security
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
(d) Prior Agreements Superseded: This Agreement constitutes the sole and
only agreement of the Parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the within subject
matter.
(e) Definitions: All terms used herein which are defined in the Uniform
Commercial Code of New York shall have the same meaning herein as in said Code.
IN WITNESS WHEREOF, the undersigned have executed this Security Agreement
as of the date first above written.
ACCUFACTS PRE-EMPLOYMENT
SCREENING, INC.
By /s/ Philip Luizzo
---------------------------------
Philip Luizzo, President
/s/ Todd Grama
-------------------------------------
Todd Grama
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<PAGE>
GUARANTEED SECURED PROMISSORY NOTE
$375,000.00 New York, New York
December 18, 1998
FOR VALUE RECEIVED, the undersigned, TODD GRAMA (the "Payor"), hereby
promises to pay to the order of AccuFacts Pre-Employment Screening, Inc. (the
"Payee"), at the option of Payee, on June 30, 1999, at such place in the State
of New York as the holder of this Note shall specify, in such coin or currency
of the United States of America as at the time shall be legal tender for the
payment of public and private debts, the principal sum of Three Hundred
Seventy-Five Thousand ($375,000.00) Dollars, together with accrued interest as
hereinafter provided.
1. Interest.
1.1 The unpaid principal amount hereof shall bear simple interest from the
date hereof at the prime rate set forth by Citibank, N.A. from time to time.
1.2 If payment of the principal amount hereof and interest accrued thereon
is not made upon maturity, then interest shall accrue on such unpaid amount from
the date of non-payment to the date of payment at the maximum rate permitted by
applicable law.
2. Security Interest; Guarantee of Performance. Payor's obligations
pursuant to this note are secured by a first priority security interest in
Payor's 187,500 shares of Common Stock par value $.01 of the Payee (the
"Shares")under the terms of a Security Agreement between Payor and Payee of even
date herewith.
3. Suits for Enforcement and Remedies. The sole remedy of Payee for non
payment of this Note is recovery of the Shares. If payment of the principal
amount hereof and interest accrued thereon is not made upon maturity, or is
accelerated under the terms of paragraph 5 hereof, the holder of this Note may
proceed to protect and enforce such holder's rights either by suit in equity or
by action at law, or both, whether for the specific performance of any covenant,
condition or agreement contained in this Note or in aid of the exercise of any
power granted in this Note, or proceed to enforce the payment of this Note or to
enforce any other legal or equitable right of the holder of this Note. By his
execution hereof, Payor agrees to submit to the jurisdiction of the Courts of
the State of New York and that any suit to enforce this Note may be brought in
the Courts of the State of New York.
4. Unconditional Obligation; Fees; Waivers, etc.
4.1 The obligations to make the payments provided for in this Note are
absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
<PAGE>
4.2 If the holder of this Note shall institute any action to enforce the
collection of this Note so as to recover the Shares, there shall be immediately
due and payable from the Payor, in addition to the Shares, all reasonable costs
and expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
4.3 No forbearance, indulgence, delay or failure to exercise any right or
remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
4.4 This Note may not be modified or discharged orally, but only in writing
duly executed by the holder hereof.
4.5 The Payor hereby waives presentment, demand, notice of dishonor,
protest and notice of protest.
5. Events of Default. In the event of and immediately upon the occurrence
of any of the following events (an "Event of Default") this Note shall become
immediately due and payable without any action by the Payee:
5.1 If Payee shall be in default of the payment provisions of this Note;
5.2 If an Event of Default shall occur under the Security Agreement
herewith between Payor and Payee of even date herewith or such Security
Agreement shall cease to be in full force and effect in accordance with its
terms;
5.3 (a) the Payor makes a general assignment for the benefit of creditors
or commences (as the debtor) a case in bankruptcy, or commences (as the debtor)
any proceeding under any other insolvency law; or
(b) a case in bankruptcy or any proceeding under any other insolvency law
is commenced by or against the Payor (as the debtor) and a court having
jurisdiction enters a decree or order for relief against the Payor as the debtor
in such case or proceeding, or such case or proceeding is consented to by the
Payor or remains undismissed for 60 days, or the Payor consents or admits the
material allegations against it in any such case or proceeding; or
(c) a trustee, receiver or agent (however named) is appointed or authorized
to take charge of substantially all of the property of the Payor for the purpose
of general administration of such property for the benefit of creditors and the
order making such appointment or granting such authorization is not vacated
within 60 days, during which period such trustee, receiver or agent shall not
have taken any action with respect to the property of the Payor which might
prejudice the interest of the Payee hereunder.
If an Event of Default occurs and is continuing, Payee may pursue any
available remedy to collect the payment of all amounts due under this Note or to
enforce the performance of any provision of this Note. No waiver of any default
hereunder shall be
-2-
<PAGE>
construed as a waiver of any subsequent default, and the failure to exercise any
right or remedy hereunder shall not waive the right to exercise such right or
remedy thereafter.
6. Miscellaneous.
6.1 Headings of the various paragraphs of this Note are for convenience of
reference only and shall in no way modify any of the terms or provisions of this
Note.
6.2 Any notice required or permitted to be given hereunder shall be deemed
to have been duly given when personally delivered or two days after being mailed
certified or registered, first class, portage prepaid, as follows:
If to the Payor: Todd Grama
19 Burnham Avenue
Roslyn, New York 11577
If to the Payee: AccuFacts Pre-Employment Screening, Inc.
6 Greene Street
New York, New York 10013
Fax: 212-966-2022
6.3 This Note and the obligations of the Payor and the rights of any holder
hereof shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be performed entirely
within such state.
PAYOR:
/s/ Todd Grama
-----------------------------
Todd Grama
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<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
6 Greene Street
New York, NY 10013
Tel: (212) 966-0666
Fax: (212) 966-2022
June 10, 1999
Todd Grama
19 Burnham Avenue
Roslyn, NY 11577
Re: 12/18/98 Note Payable in the Total principal Amount of $375,000
Dear Mr. Grama:
As discussed, this will modify the referenced Note in that the due date for
payment of its balance is extended from June 30, 1999 to September 15, 1999. No
other provisions are modified by this letter, and shall remian in full force and
effect.
Very truly yours,
Accufacts Pre-Employment Scrrening, Inc.
By: /s/ Philip Luizzo
---------------------------
Philip Luizzo, President
SECURITY AGREEMENT
This Security Agreement is made and entered into as of December 18, 1998 by
and between Avalon Financial Services, LLC, with an office at 1954 Bay
Boulevard, Atlantic Beach, NY 11505, Attn: Hunter Adams, President (the
"Subscriber"), and AccuFacts Pre-Employment Screening, Inc., with an office at 6
Greene Street, New York, NY 10013 (the "Secured Party"); the Subscriber and the
Secured Party collectively referred to hereinafter as the "Parties".
W I T N E S E T H:
WHEREAS, contemporaneously herewith Subscriber is purchasing from Secured
Party 187,500 shares of Common Stock par value $.01 per share of Secured Party
represented by Certificate No. 1146 (the "Shares") and in consideration therefor
has issued to the Secured Party a Secured Guaranteed Promissory Note of even
date herewith (the "Note"), for the principal amount of THREE HUNDRED
SEVENTY-FIVE THOUSAND ($375,000.00) DOLLARS plus interest; and
WHEREAS, it is a condition of the Secured Party's acceptance of the Note
that Subscriber grant a security interest to the Secured Party in the Shares.
NOW THEREFORE, the Parties agree as follows:
1. Security Interests in Collateral.
To secure the prompt payment and performance to Secured Party of the
Subscriber under the Note, (the "Obligations"), Subscriber hereby grants to
Secured Party a continuing security
<PAGE>
interest and a lien upon the Shares (the "Collateral") together with all
dividends currently or hereafter accrued thereupon.
2. Location of Collateral.
Subscriber has simultaneously with the execution of this Agreement
delivered to Secured Party the certificate representing the Shares.
3. Title.
Except for the security interest hereby granted or any other claim herein
set forth, Subscriber has full title to the Collateral, free and clear of any
lien, security interest, encumbrance, or claim, and Subscriber will, at
Subscriber's cost and expense, defend any action which may affect Secured
Party's security interest in, or Subscriber's title to, the Collateral.
4. Financing Statement.
No financing statement covering the Collateral or any part thereof or any
proceeds thereof is on file in any public office and, at Secured Party's
request, Subscriber will join in executing all necessary financing statements in
favor of Secured Party in forms satisfactory to Secured Party, will pay the cost
of filing fees for filing the same and will further execute all other
instruments deemed necessary by Secured Party and pay the cost of filing fees
for filing the same.
5. Sale or Disposition of Collateral.
Subscriber warrants and covenants that it will not, without the prior
written consent of Secured Party, sell, contract to sell, encumber, or dispose
of the Collateral or any interest therein or parties thereof until all
Obligations have been fully satisfied.
-2-
<PAGE>
6. Term.
This Agreement shall terminate upon payment of all principal and interest
due under the Note.
7. Reimbursement of Expenses By Subscriber.
At the option of Secured Party, Secured Party may discharge taxes, liens,
interest, or perform or cause to be performed for and on behalf of Subscriber
any actions and conditions, obligations, or covenants which Subscriber has
failed or refused to perform, and may pay for the maintenance, and preservation
of the Collateral, and any sums so advanced shall be immediately payable at the
place designated in the Note and shall be secured by this Security Agreement.
8. Payment.
Subscriber will pay the Note secured by this Security Agreement and any
renewal or extension thereof and any other indebtedness hereby secured in
accordance with the terms and provisions thereof and will repay immediately all
sums expended by Secured Party in accordance with the terms and provisions of
this Security Agreement.
9. Change of Address.
Subscriber will promptly notify Secured Party of any change of Subscriber's
address.
10. Attorney in Fact.
Subscriber hereby irrevocably appoints Secured Party as Subscriber's
attorney in fact, effective upon any default under the Note, to do any and every
act which Subscriber is obligated by this Security Agreement to do, and to
exercise all rights of Subscriber in the Collateral and to make collections and
to prepare, execute and file, for and in Subscriber's name, any and all papers
and instruments including, without limitation, financing statements, and to do
all other things necessary
-3-
<PAGE>
or desirable to preserve, protect, perfect, enforce and continue the Collateral
and to make collections and to protect Secured Party's security interest in said
Collateral.
11. Additional Rights of Secured Party.
In its sole discretion, the Secured Party may, at any time and from time to
time, assign, transfer or deliver to any transferee of the Notes any rights in
the Collateral, whereupon Secured Party shall be fully discharged from all
responsibility and the transferee shall be vested with all powers and rights of
the Secured Party hereunder with respect thereto, but the Secured Party shall
retain all rights and powers with respect to any Collateral not assigned,
transferred or delivered.
12. Time of Performance and Waiver.
In performing any act by Subscriber under this Security Agreement and the
Note secured hereby, time shall be of the essence. Secured Party's acceptance of
partial or delinquent payments, or the failure of Secured Party to exercise any
right or remedy shall not be a waiver of any obligation of Subscriber or right
of Secured Party or constitute a waiver of any other similar default
subsequently occurring.
13. Default.
Subscriber shall be in default under this Security Agreement on the
happening of any of the following events or conditions (each an "Event of
Default"):
(a) the Note is not paid in accordance with its terms or an acceleration
event occurs under the Note; or
(b) any warranty, representation, or statement made or furnished to Secured
Party by or on behalf of Subscriber proves to have been false in any material
respect when made or furnished; or
-4-
<PAGE>
(c) default in payment or performance of covenants or sums due hereunder
three (3) days after notice thereof.
14. Remedies.
(a) Upon the occurrence of an Event of Default and at any time thereafter,
Secured Party may, without notice to or demand upon Subscriber, declare any and
all of the Obligations secured hereunder immediately due and payable and Secured
Party shall have all rights and remedies of a secured party under the Uniform
Commercial Code or of the Secured Party under the Obligations, all such rights
and remedies being cumulative, not exclusive and enforceable alternatively,
successively or concurrently; provided however, that the sole remedy of Secured
Party for nonpayment of the Note shall be recovery and cancellation of the
Shares.
(b) The Secured Party may appropriate, set off and apply to the payment of
the Obligations, any Collateral in or coming into the possession of the Secured
Party or its agents, without notice to Subscriber and in such manner as the
Secured Party may in its discretion determine.
15. Miscellaneous Provisions.
(a) New York Law to Apply: This Security Agreement shall be construed under
and in accordance with the Uniform Commercial Code and other applicable laws of
the State of New York and all obligations of the parties created hereunder are
performable in New York County, New York.
(b) Parties Bound: This Security Agreement shall be binding on and inure to
the benefit of the Parties and their respective heirs, executors,
administrators, legal representatives, successors, and assigns where permitted
by this Security Agreement.
-5-
<PAGE>
(c) Legal Construction: In case any one or more of the provisions contained
in this Security Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof and this Security
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
(d) Prior Agreements Superseded: This Agreement constitutes the sole and
only agreement of the Parties hereto and supersedes any prior understandings or
written or oral agreements between the parties respecting the within subject
matter.
(e) Definitions: All terms used herein which are defined in the Uniform
Commercial Code of New York shall have the same meaning herein as in said Code.
IN WITNESS WHEREOF, the undersigned have executed this Security Agreement
as of the date first above written.
ACCUFACTS PRE-EMPLOYMENT
SCREENING, INC.
By /s/ Philip Luizzo
----------------------------------
Philip Luizzo, President
AVALON FINANCIAL SERVICES, LLC
By /s/ Hunter Adams
----------------------------------
Hunter Adams, President
-6-
<PAGE>
GUARANTEED SECURED PROMISSORY NOTE
$375,000.00 New York, New York
December 18, 1998
FOR VALUE RECEIVED, the undersigned, AVALON FINANCIAL SERVICES, LLC (the
"Payor"), hereby promises to pay to the order of AccuFacts Pre-Employment
Screening, Inc. (the "Payee"), at the option of Payee, on June 30, 1999, at such
place in the State of New York as the holder of this Note shall specify, in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts, the principal sum of Three
Hundred Seventy-Five Thousand ($375,000.00) Dollars, together with accrued
interest as hereinafter provided.
1. Interest.
1.1 The unpaid principal amount hereof shall bear simple interest from the
date hereof at the prime rate set forth by Citibank, N.A. from time to time.
1.2 If payment of the principal amount hereof and interest accrued thereon
is not made upon maturity, then interest shall accrue on such unpaid amount from
the date of non-payment to the date of payment at the maximum rate permitted by
applicable law.
2. Security Interest; Guarantee of Performance. Payor's obligations
pursuant to this note are secured by a first priority security interest in
Payor's 187,500 shares of Common Stock par value $.01 of the Payee (the
"Shares")under the terms of a Security Agreement between Payor and Payee of even
date herewith.
3. Suits for Enforcement and Remedies. The sole remedy of Payee for non
payment of this Note is recovery of the Shares. If payment of the principal
amount hereof and interest accrued thereon is not made upon maturity, or is
accelerated under the terms of paragraph 5 hereof, the holder of this Note may
proceed to protect and enforce such holder's rights either by suit in equity or
by action at law, or both, whether for the specific performance of any covenant,
condition or agreement contained in this Note or in aid of the exercise of any
power granted in this Note, or proceed to enforce the payment of this Note or to
enforce any other legal or equitable right of the holder of this Note. By his
execution hereof, Payor agrees to submit to the jurisdiction of the Courts of
the State of New York and that any suit to enforce this Note may be brought in
the Courts of the State of New York.
4. Unconditional Obligation; Fees; Waivers, etc.
4.1 The obligations to make the payments provided for in this Note are
absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.
<PAGE>
4.2 If the holder of this Note shall institute any action to enforce the
collection of this Note so as to recover the Shares, there shall be immediately
due and payable from the Payor, in addition to the Shares, all reasonable costs
and expenses incurred by the Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
4.3 No forbearance, indulgence, delay or failure to exercise any right or
remedy with respect to this Note shall operate as a waiver, nor as an
acquiescence in any default, nor shall any single or partial exercise of any
right or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
4.4 This Note may not be modified or discharged orally, but only in writing
duly executed by the holder hereof.
4.5 The Payor hereby waives presentment, demand, notice of dishonor,
protest and notice of protest.
5. Events of Default. In the event of and immediately upon the occurrence
of any of the following events (an "Event of Default") this Note shall become
immediately due and payable without any action by the Payee:
5.1 If Payee shall be in default of the payment provisions of this Note;
5.2 If an Event of Default shall occur under the Security Agreement
herewith between Payor and Payee of even date herewith or such Security
Agreement shall cease to be in full force and effect in accordance with its
terms;
5.3 (a) the Payor makes a general assignment for the benefit of creditors
or commences (as the debtor) a case in bankruptcy, or commences (as the debtor)
any proceeding under any other insolvency law; or
(b) a case in bankruptcy or any proceeding under any other insolvency law
is commenced by or against the Payor (as the debtor) and a court having
jurisdiction enters a decree or order for relief against the Payor as the debtor
in such case or proceeding, or such case or proceeding is consented to by the
Payor or remains undismissed for 60 days, or the Payor consents or admits the
material allegations against it in any such case or proceeding; or
(c) a trustee, receiver or agent (however named) is appointed or authorized
to take charge of substantially all of the property of the Payor for the purpose
of general administration of such property for the benefit of creditors and the
order making such appointment or granting such authorization is not vacated
within 60 days, during which period such trustee, receiver or agent shall not
have taken any action with respect to the property of the Payor which might
prejudice the interest of the Payee hereunder.
If an Event of Default occurs and is continuing, Payee may pursue any
available remedy to collect the payment of all amounts due under this Note or to
enforce the performance of any provision of this Note. No waiver of any default
hereunder shall be
-2-
<PAGE>
construed as a waiver of any subsequent default, and the failure to exercise any
right or remedy hereunder shall not waive the right to exercise such right or
remedy thereafter.
6. Miscellaneous.
6.1 Headings of the various paragraphs of this Note are for convenience of
reference only and shall in no way modify any of the terms or provisions of this
Note.
6.2 Any notice required or permitted to be given hereunder shall be deemed
to have been duly given when personally delivered or two days after being mailed
certified or registered, first class, portage prepaid, as follows:
If to the Payor: Avalon Financial Services, LLC
1954 Bay Boulevard
Atlantic Beach, New York 11505
ATTN: Hunter Adams, President
If to the Payee: AccuFacts Pre-Employment Screening, Inc.
6 Greene Street
New York, New York 10013
Fax: 212-966-2022
6.3 This Note and the obligations of the Payor and the rights of any holder
hereof shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be performed entirely
within such state.
PAYOR:
Avalon Financial Services, LLC
By: /s/ Hunter Adams
-----------------------------
Hunter Adams, President
-3-
<PAGE>
ACCUFACTS PRE-EMPLOYMENT SCREENING, INC.
6 Greene Street
New York, NY 10013
Tel: (212) 966-0666
Fax: (212) 966-2022
June 10, 1999
Avalon Financial Services LLC
1954 Bay Boulevard
Atlantic Beach, NY 11509
Re: 12/18/98 Note Payable in the Total principal Amount of $375,000
Dear Sirs:
As discussed, this will modify the referenced Note in that the due date for
payment of its balance is extended from June 30, 1999 to September 15, 1999. No
other provisions are modified by this letter, and shall remian in full force and
effect.
Very truly yours,
Accufacts Pre-Employment Scrrening, Inc.
By: /s/ Philip Luizzo
---------------------------
Philip Luizzo, President
Exhibit 10.4
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is entered into as of this 1st of September,
1998, by and between ACCU FACCS PRE-EMPLOYMENT SCREENING, INC., ("ACCU FACCS"),
a New York corporation ("Corporation") with offices located at 6 Greene Street,
New York, New York 10013 and PHILIP LUIZZO ("Employee"), residing at Long Beach,
New York.
In consideration of the mutual promises of the parties and other good and
valuable consideration, the parties hereby agree:
Section 1. Services. Corporation engages Employee to provide the following
services:
o President and CEO
Employee agrees to devote his full time to the business of and the benefit
of the Corporation.
Section 2. Term. Employee shall provide such services for a five (5) year period
beginning the day above-written.
Section 3. Compensation. For such services, the Corporation shall compensate
Employee as follows:
(a) $150,000.00 per annum payable bimonthly, at annual increases of 5%.
(b) Additional Compensation: Employee shall be entitled to 10% of any
profit (EBITD) in excess of $500,000.00 determined by the Company accountants at
the end of any fiscal year and shall be paid as a bonus no later than April 15,
in the following fiscal year.
(c) The Corporation shall reimburse employee for all reasonable
out-of-pocket expenses incurred by Employee in fulfilling his duties.
Corporation shall provide Employee with suitable office facilities, equipment,
supplies and staff.
(d) The Corporation will provide monthly payments of up to a maximum of
$700.00/month for car lease payments. Any amount in excess thereof shall be the
responsibility of the Employee.
Section 4. Proprietary Rights.
A. Employee agrees that all Work Product created during the term of this
agreement while employed by the Corporation or any work product created by, its
employees, associates, or subcontractors, arising from work performed hereunder,
or previously conceived in anticipation of this employment by the Corporation's
engagement of Employee, shall be deemed "work made for hire," and Employee shall
execute any assignment, oaths, declarations, and other documents as may be
prepared by Corporation to effect the foregoing, acknowledging that all rights
thereto shall be the property of the Corporation.
B. "Work Product" shall mean all documentation, manuals, teaching
materials,
<PAGE>
creative works, know-how, and information including customer lists, created on
behalf of the Corporation, in whole or in part, by Employee, the Corporation and
all of its employees, associates, or subcontractors assisting in creating the
Work Product within the scope of this Agreement, whether or not copyrightable or
otherwise protectable, and all rights thereto shall be the property of the
Corporation.
C. Employee shall make prompt and full disclosure of such inventions to
Corporation and, at Corporation's expense, shall assist in every lawful way in
obtaining for Corporation, patents for any or all such inventions, in perfecting
in Corporation all right, title, and interest in and to such inventions and
copyrights, in protecting or enforcing Corporation's rights therein, and in
prosecuting and defending appeals, interferences, infringement suits, and
controversies relating thereto. Employee shall do all other things necessary to
effectuate the foregoing, including but not limited to executing and delivering
assignments, oaths, and disclaimers as needed.
Section 5. Confidentiality. Employee shall maintain in confidence (A) the
subject matter of this Agreement, (B) the work carried out hereunder, (C) any
inventions or ideas conceived hereunder, and (D) any business or technical
information of Corporation acquired by Employee as a result of the work carried
out pursuant to this Agreement, and Employee shall not, without Corporation's
prior authorization, directly or indirectly use, publish, or disclose to others
any information, data, designs, results, or opinions resulting from the work
carried out pursuant to this Agreement. These obligations of secrecy shall
continue throughout the duration of this Agreement and for two years thereafter.
Section 6. Records. Consultant shall keep full and accurate records of all work
performed under this Agreement. All records, sketches, drawings, prints,
computations, charts, reports, and other documentation made in the course of the
work performed hereunder, or in anticipation of the work to be performed in
regard to this Agreement, shall at all times be and remain the sole property of
Corporation. Employee shall turn over to Corporation all copies of such
documentation on request by Corporation.
Section 7. Termination.
A. Except for the provisions in section 22, in the event the Corporation
elects to terminate Employee, it shall continue to pay to Employee, the salary
at the rate in effect on the Effective Termination Date, for a period of two
years. The effective termination date shall be that date so stated in the
corporation's Notice of Termination. This provision shall also apply in the
event that the majority ownership of the corporation passes into the hands of
any person other than employee.
B. Employee held Corporation Shares. Corporation Stock shall mean shares in
the corporation obtained by the Employee pursuant to an employee profit share,
stock option or any incentive plan provided by the Corporation and shall not
mean stock purchased by the Employee outside corporation sources.
C. Redemption of Shares. In the event the corporation shall terminate the
employee without cause then in Addition to the payments provided in 7A the
corporation over a period of 6 months shall redeem employee shares at the lesser
of, market value (average bid and
-2-
<PAGE>
ask) or $1.00 per share.
Section 8. Non Compete. In the event Employee is terminated with or without
cause and provided the Corporation performs pursuant to section 7 in the case of
termination without cause, then Employee agrees not to engage in the business of
the Corporation with any other company, sole proprietorship or other entity, as
employee, consultant or otherwise for a period of two (2) years. The corporation
shall be entitled to all remedies provided by law including but not limited to
injunctive relief and the termination of any post termination payments to which
employee would be, but for this breach, be entitled.
Section 9. Notices. Any notice under this Agreement shall be in writing and
shall be effective when actually delivered in person or three days after being
deposited in the U.S. mail, registered or certified, postage prepaid and
addressed to the party at the address stated in this Agreement or such other
address as either party may designate by written notice to the other.
Section 10. Waiver. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach.
Section 11. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Section 12. Arbitration. If at any time during the term of this Agreement any
dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof.
Section 13. Attorney Fees. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
Section 14. Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
Section 15. Titles and Captions. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
Section 16. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
Section 17. Agreement Binding. This Agreement shall be binding upon the heirs,
executors,
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<PAGE>
administrators, successors and assigns of the parties hereto.
Section 18. Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of this Agreement.
Section 19. Good Faith, Cooperation and Due Diligence. The parties hereto
covenant, warrant and represent to each other good faith, complete cooperation,
due diligence and honesty in fact in the performance of all obligations of the
parties pursuant to this Agreement. All promises and covenants are mutual and
dependent.
Section 20. Counterparts. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the parties
hereto even though all the parties are not signatories to the original or the
same counterpart.
Section 21. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 22. In the event employee is discharged for cause which shall include
but not be limited to conviction of a felony or is guilty of provisions commonly
known as Moral turpitude, or is in breach of this agreement, then the
Corporation at its option may terminate this agreement, and the employee shall
not be entitled to any post termination payments as provided in paragraph 7A
hereof, or redemption of any shares as provided in paragraphs 7B & 7C hereof.
WHEREFORE, the parties have hereunder set their hand and seal on the day
above written.
ACCU FACCS PRE-EMPLOYMENT SCREENING, INC.
by: /s/ JOHN SVEDESE
-----------------------------------------
JOHN SVEDESE, Vice "President
/s/ PHILIP LUIZZO
---------------------------------------------
PHILIP LUIZZO, Employee
-4-
Exhibit 10.4-1
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is entered into as of this 1st of September,
1998, by and between ACCU FACCS PRE-EMPLOYMENT SCREENING, INC., ("ACCU FACCS"),
a New York corporation ("Corporation") with offices located at 6 Greene Street,
New York, New York 10013 and JOHN SVEDESE ("Employee"), residing at Brooklyn,
New York.
In consideration of the mutual promises of the parties and other good and
valuable consideration, the parties hereby agree:
Section 1. Services. Corporation engages Employee to provide the following
services:
o Vice President
Employee agrees to devote his full time to the business of and the benefit
of the Corporation.
Section 2. Term. Employee shall provide such services for a five (5) year period
beginning the day above-written.
Section 3. Compensation. For such services, the Corporation shall compensate
Employee as follows:
(a) $50,000.00 per annum payable bimonthly, at annual increases of 3%.
(b) The Corporation shall reimburse employee for all reasonable
out-of-pocket expenses incurred by Employee in fulfilling his duties.
Section 4. Proprietary Rights.
A. Employee agrees that all Work Product created during the term of this
agreement while employed by the Corporation or any work product created by, its
employees, associates, or subcontractors, arising from work performed hereunder,
or previously conceived in anticipation of this employment by the Corporation's
engagement of Employee, shall be deemed "work made for hire," and Employee shall
execute any assignment, oaths, declarations, and other documents as may be
prepared by Corporation to effect the foregoing, acknowledging that all rights
thereto shall be the property of the Corporation.
B. "Work Product" shall mean all documentation, manuals, teaching
materials, creative works, know-how, and information including customer lists,
created on behalf of the Corporation, in whole or in part, by Employee, the
Corporation and all of its employees, associates, or subcontractors assisting in
creating the Work Product within the scope of this Agreement, whether or not
copyrightable or otherwise protectable, and all rights thereto shall be the
property of the Corporation.
C. Employee shall make prompt and full disclosure of such inventions to
Corporation and, at Corporation's expense, shall assist in every lawful way in
obtaining for Corporation, patents for any or all such inventions, in perfecting
in Corporation all right, title, and
<PAGE>
interest in and to such inventions and copyrights, in protecting or enforcing
Corporation's rights therein, and in prosecuting and defending appeals,
interferences, infringement suits, and controversies relating thereto. Employee
shall do all other things necessary to effectuate the foregoing, including but
not limited to executing and delivering assignments, oaths, and disclaimers as
needed.
Section 5. Confidentiality. Employee shall maintain in confidence (A) the
subject matter of this Agreement, (B) the work carried out hereunder, (C) any
inventions or ideas conceived hereunder, and (D) any business or technical
information of Corporation acquired by Employee as a result of the work carried
out pursuant to this Agreement, and Employee shall not, without Corporation's
prior authorization, directly or indirectly use, publish, or disclose to others
any information, data, designs, results, or opinions resulting from the work
carried out pursuant to this Agreement. These obligations of secrecy shall
continue throughout the duration of this Agreement and for two years thereafter.
Section 6. Records. Consultant shall keep full and accurate records of all work
performed under this Agreement. All records, sketches, drawings, prints,
computations, charts, reports, and other documentation made in the course of the
work performed hereunder, or in anticipation of the work to be performed in
regard to this Agreement, shall at all times be and remain the sole property of
Corporation. Employee shall turn over to Corporation all copies of such
documentation on request by Corporation.
Section 7. Termination.
A. Except for the provisions in section 22, in the event the Corporation
elects to terminate Employee, it shall continue to pay to Employee, the salary
at the rate in effect on the Effective Termination Date, for a period of two
years the effective termination date shall be that date so stated in the
corporation's Notice of Termination. This provision shall also apply in the
event that the majority ownership of the corporation passes into the hands of
any person other than employee.
Section 8. Non Compete. In the event Employee is terminated with or without
cause and provided the Corporation performs pursuant to section 7 in the case of
termination without cause, then Employee agrees not to engage in the business of
the Corporation with any other company, sole proprietorship or other entity, as
employee, consultant or otherwise for a period of two (2) years. The corporation
shall be entitled to all remedies provided by law including but not limited to
injunctive relief and the termination of any post termination payments to which
employee would be, but for this breach, be entitled.
Section 9. Notices. Any notice under this Agreement shall be in writing and
shall be effective when actually delivered in person or three days after being
deposited in the U.S. mail, registered or certified, postage prepaid and
addressed to the party at the address stated in this Agreement or such other
address as either party may designate by written notice to the other.
Section 10. Waiver. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach.
-2-
<PAGE>
Section 11. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Section 12. Arbitration. If at any time during the term of this Agreement any
dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof.
Section 13. Attorney Fees. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
Section 14. Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
Section 15. Titles and Captions. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
Section 16. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
Section 17. Agreement Binding. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
Section 18. Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of this Agreement.
Section 19. Good Faith, Cooperation and Due Diligence. The parties hereto
covenant, warrant and represent to each other good faith, complete cooperation,
due diligence and honesty in fact in the performance of all obligations of the
parties pursuant to this Agreement. All promises and covenants are mutual and
dependent.
Section 20. Counterparts. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the parties
hereto even though all the parties are not signatories to the original or the
same counterpart.
Section 21. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
-3-
<PAGE>
Section 22. In the event consultant shall be convicted of a felony or is guilty
of provisions commonly known as Moral turpitude, or is in breach of this
agreement, then the Corporation at its option may terminate this agreement, and
no further payments for periods after such termination shall be required to be
made to the Employee as provided in Par 7A hereof.
WHEREFORE, the parties have hereunder set their hand and seal on the
day above written.
ACCU FACCS PRE-EMPLOYMENT SCREENING, INC.
by: /s/ JOHN SVEDESE
-----------------------------------------
JOHN SVEDESE, Vice "President
/s/ PHILIP LUIZZO
---------------------------------------------
PHILIP LUIZZO, Employee
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary financial information
extracted from balance sheet and income statement and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
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<PERIOD-END> Dec-31-1998
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0
0
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</TABLE>
