Registration No.________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FUNDS AMERICA FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
65-0847728 Florida 1026002
(IRS EMPLOYER (State or other jurisdiction of (Primary Standard Industrial
(Identification No). incorporation or organization) Classification Code)
(Address, including zip code and telephone number, including area code
of registrant's principal executive offices)
Kim A. Naimoli
Chairman, President and Chief Executive Officer
2501 East Commercial Boulevard, Suite 210
Ft. Lauderdale, Florida 33308
(954) 202-3344
(Name, address, including zip code and
telephone number, including area code of agent for service)
Copies to:
Jeffrey G. Klein, Esq.
23123 State Road 7, Suite 350-B
Boca Raton, Florida 33428
Approximate date of commencement of proposed sale to public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering:____
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: _____
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: ____
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
Proposed Max Proposed Max
Title of Securities Amount to be Offering Price Aggregate Offering Amount
of Common Stock
Be Registered Registered Per Share (1) Price (2)
Registration Fee
Common Stock, no par
value per share 456,111 $ 0.021 $9,578.33 $2.68
</TABLE>
(1)(2) Based upon an agreement between the Registrant and the holders of the
securities to be registered, pro rata, which calls for the common stock to be
valued at an aggregate of 10.62% of the Registrant's stockholder's equity.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (SEC) NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. The date of this Prospectus is September 23, 1999.
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TABLE OF CONTENTS
Page
Summary 4
The Offering 5
Summary Financial Information 6
Risk Factors 6
Dilution 10
Use of Proceeds 10
Capitalization 10
Dividend Policy 10
Market for the Common Equity and Related Stockholder Matters 10
Plan of Operation 11
Proposed Business 12
Management's Discussion and Analysis of Financial Condition
and Results of Operation and Plan of Operation 14
Directors, Officers, Promoters, and Control Persons 15
Executive Compensation 17
Security Ownership of Certain Beneficial Owners and
Management 20
Description of Capital Stock 22
Certain Relationships and Related Transactions 23
Recent Sale of Unregistered Securities 25
Changes in and Disagreements with Accountants 25
Indemnification of Officers and Directors 25
Plan of Distribution 26
Legal Matters 27
Experts 27
Index to Financial Statements F
Financial Statements F-1
Undertakings 40
Signatures 40
Index to Exhibits 41
This Prospectus contains certain "forward-looking statements" concerning Funds
America Finance Corporation (the "Company"), its operations, performance, and
financial conditions, including future economic performance, plans, and
objectives, and the likelihood of success in developing its business. These
statements are based upon a number of assumptions and estimates, which are
subject to significant uncertainties, many of which are beyond the control of
the Company. The words "may", "would", "could", "will", "expect", "anticipate",
"believe", "intend", "plan", and "estimate", as well as similar expressions, are
meant to identify such forward-looking statements. Actual results may differ
materially from those expressed or implied by such forward-looking statements.
Factors that could cause actual results to differ materially include, but are
not limited to, those set forth in "Risk Factors".
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PROSPECTUS SUMMARY
The following summarizes certain information in this Prospectus. The more
detailed description elsewhere in the Prospectus governs the matters discussed
in this Summary.
The Company
We are a Florida corporation (the "Company") and we were organized in June 1998
and began business in April 1999.
We are engaged in the retail consumer credit business with emphasis on first
lien loans on mobile homes. We intend to expand our portfolio of loans by
offering for sale to prospective clients, including other retail credit
businesses, banks, insurance companies, and, subject to and with all appropriate
legal safeguards, including the filing of required registration statements, use
of approved indentures and other types of debt instruments. Other sources of
funds may involve credit arrangements with banks, insurance companies, finance
companies, and other similar financial industry entities, where there are
pre-arranged terms and based upon pre-arranged criteria. Operating exclusively
in South Florida, and for the period from 1994 to the present, Mr. Mark Sand (a
Vice President and Director of the Company), who is a key employee of the
Company, and his immediate family have consummated more than 300 loans that are
secured by liens on mobile homes. It is our intent to provide first position
financing on mobile homes and to expand our loan portfolio by making new loans
and our geographical reach to include all of Florida and, subject to the
availability of additional financing and similar laws on lending for consumer
homes, we would like to expand into Georgia and Alabama. Subject to the
availability of funds we plan to offer mobile homeowners optional insurance
premium financing on property damage coverage for their mobile homes. We intend
to obtain all necessary and required licensing for finance companies in all
states in which we may operate if, and to the extent, so required.
The Company has had very limited operations. The consumer finance industry has
inherent risks (see "Risk Factors") including, but not limited to, a high cost
of collection should a loan go into default and we are required to hold the
underlying mobile home property for any extended period of time while being
responsible for paying the land rent. In May 1999, we issued 2,000,000 shares of
our previously unissued, no par value, common stock, to Mr. Sand, in exchange
for a series of secured third party notes having a face value of $86,640. Except
for servicing these notes we presently have no other operations.
In May 1999 we entered into a consulting agreement with Amerinet Group.com, Inc.
[f/k/a Equity Growth Systems, Inc. ("Equity")] to provide advice and services to
aid the Company in becoming a reporting company under the provisions of the
Securities Exchange Act of 1934, as amended (Exchange Act), in exchange for the
issuance of the Company's common stock in payment for such services. Pursuant to
that agreement we are required to issue in the names of each of the Equity
shareholders of record as of the close of business on June 30, 1999 (2,231
shareholders), pro-rata, an amount of shares equal to 10% of the Company's
common stock outstanding immediately following such issuance, subject to
anti-dilutive rights, and for a period of one year following the date of
issuance (431,111) shares. The Company is further required to register the
shares issued to Equity shareholders and is doing so pursuant to this
Registration Statement. The Company will have no further role or involvement in
any subsequent sales of any of such shares. No commissions or other compensation
is being paid in conjunction with the distribution, however, material transfer
agency, printing, and mailing costs may be involved. In May 1999, the Company
also issued to both Steven Naimoli, the husband of our chief executive officer,
and Arthur Schnur, directors of the Company, options to purchase 50,000 shares
each of the Company's common stock at a price of $.25 per share.
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The Consumer Finance Industry
The Company may conduct credit risk analysis and also rely primarily on the
ability to foreclose on a defaulted loan. The Company relies heavily upon the
experience of Mr. Sand, its vice president, in matters concerning mobile home
financing. Financing to owners of mobile homes is intended to be made only to
those who hold clear title, are current in rent payments to their mobile home
park and whose mobile home is covered by a disaster insurance policy where we
are named as a loss payee. Loan proceeds may be used to bring current any rent
then owing. Generally, loans can be funded within 24 hours. Service and
competitive rates are essential to a successful consumer loan financing business
as well as the management of the loan portfolio so that performance is not
materially affected by defaults.
The Company intends to initially concentrate its efforts in South Florida,
particularly in Miami-Dade, Broward, and Palm Beach Counties where there are
more than 60,000 mobile homes. Under Florida law we may charge up to a 30%
interest rate on the first $2,000 principal amount of a loan, 24% on the next
$1,000 loaned, and 18% on the next $3,000 to $25,000 of each loan. We have
established a current policy of not loaning an amount greater than 50% of the
value of the mobile home. Loans are secured by filed liens and typical real
estate foreclosure procedures are not applicable since the mobile homes are
considered much like automobiles and not real property, making repossession
available as a remedy for a defaulted loan.
THE OFFERING
Common Stock to be registered by
the Company 456,111 shares
Common stock outstanding prior to issuance of
the shares to be registered 3,880,000 shares
Common stock to be outstanding after issuance
of the shares to be registered 4,311,111 shares
Offering price per share None
Use of Proceeds All shares offered hereby are
being offered in payment for
services rendered and the
company will not realize any
monetary funds. Accordingly, we
will not receive any proceeds.
Risk Factors An investment in the shares of
common stock offered hereby
involves a high degree of risk
Terms of Offering The shares issued pursuant to
this registration will be
issued in payment for services
rendered in accordance with the
terms of consulting agreements
between the Company and Equity
and legal and other services
rendered in the preparation of
this Registration Statement. No
shares will be issued to Equity
Shareholders unless and until
this Registration Statement
becomes effective.
Plan of Distribution No sale of shares will take
place and the shares registered
hereby are not being offered
for sale. Accordingly, no fees
or commissions will be paid to,
or received by, anyone.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY
BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE 8.
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SUMMARY FINANCIAL INFORMATION
The summary financial data contained in this section has been selected from our
Financial Statements and should be read together with our audited Financial
Statements, including the notes accompanying these statements and any pro forma
financial statements included elsewhere in this Prospectus. This information is
qualified in its entirety by reference to the Financial Statements and the
accompanying notes thereto.
Statement of Operations Data:
Year Ended June 30,1999
Net Revenues $ 3,260
Loss from Operations 7,428
Net Loss 7,428
Net Loss per share $.00
Investors should review our complete audited financial statements which are
included elsewhere in this Prospectus.
RISK FACTORS
An investment in the common stock registered hereby involves a high degree of
risk. You should carefully consider the following factors, in addition to the
other information included in this Prospectus, before purchasing any of the
shares registered hereby.
New Enterprise
Our success depends on our ability to operate a recently acquired consumer
credit portfolio consisting solely of mobile home loans as well as the raising
of capital in order to make new loans and pay operating expenses. We began
operations in April 1999 and thus have a very limited operating history.
Accordingly, we are subject to the risks of any relatively new business and the
likelihood of success must be considered in light of the problems, expenses,
difficulties, and complications of the consumer credit, finance, and loan
business and the competitive environment in which we operate. As a result, you
could lose all or a substantial part of your investment.
Salaries, office equipment, marketing expenses, presentation materials, and
costs related to SEC filings will require substantial funding. There can be no
assurance that we will be successful in raising such capital or that the capital
will be available, or available when needed and at competitive rates. There is
also no assurance that raising needed funds would not reduce the value of the
shares of common stock now being registered. Prior to our purchase of the mobile
home notes we had conducted no business operations. Accordingly, our future
success is totally dependent upon our ability to operate the credit/loan service
business profitably and successfully.
Future profitable operations are dependent upon our ability to increase and
organize sales efforts and to constantly expand the number of loan originations
and services offered. The consumer credit mobile home financing service business
is an early stage business and there can be no assurance that it will operate
successfully. Our success in these areas depends upon our ability to
successfully raise marketing dollars necessary for us to begin these efforts in
order to reach the desired level of success. You should consider this factor in
light of the risks, expenses and difficulties that are associated with our early
stage of development, particularly because we operate in the new and rapidly
evolving financial markets. These risks include, but are not limited to, an
evolving and unpredictable business model, the difficulty in managing our growth
and the uncertainties regarding future revenues. We cannot assure that we will
be successful in addressing these risks, and the failure to do so could have a
material adverse effect on our business, prospects, financial condition and
results of operations. As the consumer loan business is known to have a high
rate of failure and because other companies may have greater operational and
financial resources than us, there can be no assurance that we will be able to
compete successfully. See, "Financial Statements".
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Dependence on Key Employees
We are highly dependent upon Kim Naimoli and Mark Sand, our President/Chairman
and Vice-president, respectively. Both Naimoli and Sand have employment
contracts with us. See, "Directors, officers, Promoters, and Control Persons".
We intend to purchase key-person insurance on the lives of both officers
however, whether funds will be available for such purposes cannot be assured and
will depend upon our success in raising capital. Even if insurance benefits are
received there can be no assurance that replacement personnel could be found or
if found, available at affordable rates. Accordingly, the loss of the services
of either officer may adversely affect our business and affairs. Further, the
inability to add quality personnel to our staff could have an adverse effect on
our expansion and growth plans.
Offering Price Arbitrarily Determined
The exchange transaction between the Company and Mr. Sand whereby Mr. Sand
received common stock for notes receivable was not at arm's length. The
consulting agreement between the Company and Equity whereby the Company is to
pay for the consulting services by the issuance of such number of shares of the
common stock as shall equal 10% of the Company's issued and outstanding shares
immediately following such issuance (431,111)was an arm's length transaction.
The Equity agreement also provides that the common stock so issued, for
accounting or Securities and Exchange Commission (SEC) filing purposes, shall
have an agreed upon reasonable market value which is the lesser of $50,000 or
10% of our stockholders' equity. Accordingly, in each instance the price of our
common stock was arbitrarily determined and bears no relationship to the assets,
book value, earnings, net worth, or its fair market value or any value.
Economic Conditions and Limited Resources
We may not be able to effectively market our service because of our limited
personnel and limited financial and other resources to undertake the extensive
marketing activities necessary to market our loan and financing services. Our
ability to generate revenue from consumer financing will be dependent upon,
among other things, the ability to raise funds in order to make loans and our
ability to manage an effective sales organization. We will need to develop a
sales force and a marketing group with knowledge of mobile home parks and the
resale value of mobile homes to coordinate marketing efforts. We cannot assure
that we will be able to market our services effectively through:
an in-house sales force;
independent sales representatives;
arrangements with an outside sales force; or
strategic partners.
Competition
If we are unable to respond to rapid financial market changes, we may lose our
market share. To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our marketing efforts.
Our success will depend, in part, on our ability to:
enhance existing services;
develop new services that address the increasingly varied needs of
prospective customers; and
respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
We are gearing our operations with a view toward geographic growth by attracting
capital on a secured basis, increases in the sales, marketing and support staff,
and the addition of related services that are marketable along with our existing
service offerings. Such expansion programs will require substantial additional
funds. There can be no assurance that intended expansion, even if capital were
available, will result in increased success and profitability.
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Supervision and Regulation
The consumer finance industry is heavily regulated and there are significant
debtor and creditor rights. Our success depends not only on competitive factors
but also on state and federal regulations affecting lenders and creditors. These
regulations are designed to protect debtors and not shareholders. Changes in the
regulation of the consumer credit industry continue to occur, and the ultimate
effect of these regulatory changes cannot be predicted. Except for the
foregoing, we do not anticipate unusual consequences to its business as a result
of governmental regulation, other than the fact that, like all other businesses,
we are forced to incur expenses and delays in complying with the many laws and
regulations applicable to all businesses in the United States. In addition, the
SEC may preclude us from making favorable acquisitions because the acquisition
target is unable to provide financial statements meeting standards imposed. To
the best of management's knowledge, we will not be required to directly incur
material expenses in conjunction with environmental regulations. However, like
all other companies, there are many (but incalculable) indirect expenses
associated with compliance by other entities that affect the prices paid by the
Company for goods and services.
Absence of Trading Market
Although it is the Company's objective to have our common stock quoted on the
OTC Bulletin Board as soon as practicable there is presently no public market
for the common stock. There is no assurance that a trading market will develop
or be sustained. Accordingly, you may have to hold your securities indefinitely
and may have difficulty in selling such securities if an active trading market
does not develop. We have not paid, nor do we presently contemplate the payment
of, any cash dividends on our common stock. You may not be able to freely trade
your shares of common stock. Our common stock is not listed on a national
securities exchange and is not quoted on the NASD's Electronic Bulletin Board.
Accordingly, there is a limited public market for our securities, and there can
be no assurance that a more liquid market will develop in the future. You must
be prepared to bear the economic risk of your investment for an indefinite
period of time.
Indemnification of Officers and Directors
Our Articles of Incorporation and Bylaws provide for the indemnification of
officers and directors to the fullest extent permitted by Florida Law. It is
possible that we may be required to pay certain judgments, fines, and expenses
incurred by an officer or director, including reasonable attorney's fees, as a
result of the actions or proceedings in which such officers and directors are
involved by reason of being or having been an officer or director of the
Company, provided that such officers and directors acted in good faith.
Control of Company; Purchase by Organizers
After completion of this registration, and issuance of the shares to be
registered to Equity shareholders, and to others, the current stockholders will
continue to own over 50% of the common stock giving them voting control over the
Company. Since the common stock does not have cumulative voting rights, they
will be able to continue to determine and direct our affairs and policies. See,
"Security Ownership of Certain Beneficial Owners and Management" and "Recent
sales of Unregistered Securities". You will not be able to control matters
requiring approval by stockholders. Kim Naimoli and Mark Sand beneficially own
82.46% before or 74.23% after the offering of the stock (without giving effect
to the exercise of outstanding stock options). As a result, they will
effectively control virtually all matters requiring approval by our
stockholders, including:
amendments of the Articles of Incorporation;
the approval of mergers or similar transactions; and
election of directors.
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No Protection of Proprietary Rights
We do not currently have any issued patents or registered copyrights, and others
may misappropriate our technology if and to the extent such technology now or
later may exist. There can be no assurance that any steps we take will be
adequate to prevent misappropriation of our technology or other proprietary
rights. There can be no assurance that our trademark applications, when and if
made, will result in any trademark registrations, or that, if registered, any
registered trademark will be held valid and enforceable if challenged". We do
not have trademark protection for the name "Funds America Finance and we cannot
assure that such a name would be granted a trademark because of the generic
nature of those words.
Substantial Near and Long Term Needs; Uncertainty of Additional Funding
We currently estimate that the Company will require between $ 100,000 and
$200,000 in operating capital over the next 12 months including capital
expenditures. We expect to obtain this funding from the sales of equity and/or
convertible debt securities in the private and/or public markets and/or obtain
bank financing. Our capital requirements will depend largely on how aggressive
we are in expanding our loan portfolio and the exercise of other available
financial products, opportunities, and markets. If additional funds are raised
through the issuance of equity securities, the percentage ownership of our
current shareholders will be reduced and such equity securities may have rights,
preferences, and privileges senior to those of the holders of our common stock.
There can be no assurance that additional capital will be available on terms
favorable to us or our shareholders, if at all. If adequate funds are not
available, we may be required to curtail operations significantly or to obtain
funds through entering into collaboration agreements on unattractive terms that
may require us to relinquish certain rights. Our inability to raise capital
would have a material adverse effect on the business, financial condition, and
results of operations. See Also, "New Enterprise" and "Economic Conditions and
Limited Resources" above as well as "Plan of Operation".
Year 2000 Compliance Risk
We currently do not own a computer system. However, we rely on the computer
systems of Funding USA, an entity who subleases office space to us. Computer
programs have traditionally been written using two digits rather than four to
define the applicable year. As a consequence, unless modified, computer systems
will not be able to differentiate between the year 2000 and 1900. Failure to
address this problem could result in system failures and the generation of
erroneous data. To the extent that these software applications contain code that
are unable to appropriately interpret upcoming calendar year 2000, some level of
modification of such source code or applications will be necessary. We maintain
hard copies of all loan files and do not believe if there is a systems failure
due to year 2000, there will be an adverse affect on our operations.
Forward Looking Statements
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The words "anticipate," "believe," "estimate,"
"anticipate," "expect," "will," "could," "may," "intend" and similar words are
intended to identify forward-looking statements. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks described above and elsewhere in
this Prospectus.
Current Prospectus and State Blue Sky Registration Required
The purchasers of any securities registered hereby will be able to resell such
securities in the public market only if the securities are qualified for sale or
exempt from qualification under applicable state securities laws of the
jurisdictions in which the proposed purchasers reside. Although we intend to
seek to qualify for sale of the securities registered hereby in those states in
which the securities may be offered, no assurance can be given that such
qualifications will occur. The securities may be deprived of any value and the
market for the securities may be limited if the securities are not qualified or
exempt from qualification in the jurisdictions in which any prospective
purchaser of the securities then reside.
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DILUTION
There are no shares of common stock that are being sold hereby, accordingly, no
additional shares are being issued at this time, other than those being
registered for and on behalf of the Equity shareholders and certain service
providers. Therefore no dilution will occur. This does not take into account the
exercise of future stock options given to directors or employees by existing
agreements. See, "Directors, Officers, Promoters, and Control Persons". The
shares issued to existing shareholders were issued in connection with the
organization of the Company, acquisition of assets and the preparation of this
Registration Statement and underlying Prospectus, and include shares issued to
founders, employees, consultants, service providers, and others that assisted in
the organization of the Company. This does not include additional shares, which
may be issued after the date hereof in connection with organization activities.
See, Security Ownership of Certain Beneficial Owners and Management".
USE OF PROCEEDS
All shares of common stock registered hereby are offered for registration
purposes only and no offer to sell or sale thereof is intended or made.
Accordingly, the Company will not receive any proceeds as a result of the
registration of the shares so registered.
CAPITALIZATION
AS OF JUNE 30, 1999
Actual
Total Liabilities $ 8,336
Stockholders' equity
Common stock, no par value
Authorized 25,000,000 shares;
issued and outstanding 3,880,000. $106,150
Accumulated deficit (7,428 )
Stock Subscription Receivable (1,380)
Total stockholders' equity $ 97,342
Total Liabilities and Stockholders' Equity $ 105,678
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock since our
inception and no cash dividends are contemplated to be paid in the foreseeable
future. The decision to declare dividends is subject to legal restraints imposed
under the laws of the State of Florida designed to prevent impairment of capital
and will probably be subject to contractual restrictions imposed by entities
that may provide credit to the Company in the future.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Absence of Market for Common Stock
Our common stock has never traded on any recognized securities exchange, is not
currently traded on the National Association of Securities Dealers Automated
Quotation System Over the Counter Bulletin Board ("OTCBB"), in the National
Quotations Bureau Pink Sheets or on any other quote board. We hope to establish
a market for our shares. However, there can be no assurance that any recognized
public market will develop for the company's common stock. Holders of our common
stock may not be readily able to dispose of their interests in our common
shares. Even if a market develops for our shares, there can be no assurance as
to the price that our common shares will be traded.
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Absence of Trading Market
Neither our common stock nor any other securities issued by us are listed or
traded on any stock exchange and are not listed on the NASD's Electronic
Bulletin Board, on the NASDAQ Automated Quotation System, or otherwise.
Accordingly, there are no known markets for the Company's common stock nor is it
likely that any will develop.
Penny Stock Rules
The Securities and Exchange Act of 1934, as amended, ("Exchange Act") Section
15(g) requires broker dealers to make risk disclosures to customers before
effecting any transactions in "penny stocks". It also directs the Securities and
Exchange Commission ("SEC") to adopt rules setting forth additional standards
for disclosure of information concerning transactions in penny stocks.
In summary, penny stocks are low-priced, over-the-counter securities that are
prone to manipulation because of their price and a lack of reliable market
information regarding them. Under Section 3(a)(51)(A) of the Exchange Act, any
equity security is considered to be a "penny stock", unless that security is:
(i) registered and traded on a national securities exchange meeting specified
SEC criteria; (ii) authorized for quotation on the National Association of
Securities Dealers, Inc.'s automated inter-dealer quotation system ("NASDAQ");
(iii) issued by a registered investment company; (iv) excluded, on the basis of
price of the issuer's net tangible assets, from the definition of the term by
SEC rule; or, (v) excluded from the definition by the SEC.
As of June 30,1999, the latest practicable date for which information is
available, we had approximately 8 registered holders of our common stock;
however, after issuance of the shares registered hereby to the stockholders of
Equity and Messrs. Klein and Schechterman, the Company will have in excess of
2,239 stockholders of record.
PLAN OF OPERATION
We intend to operate a retail credit business specializing in first lien, loans
on mobile homes, which, as part of our source of funds for loans, intends to
develop pools of loans which we will resell, either to other retail credit
businesses, banks, insurance companies, and, under appropriate legal safeguards,
including filing or required registration statements, use of approved indentures
and trustees, to the public. Other sources of funds may involve credit
arrangements with banks, insurance companies, finance companies, and the like,
permitting loan approvals on pre-arranged terms and based on pre-arranged
criteria. Appropriate licensing for finance companies is intended to be acquired
in all states requiring such licensing. Initially, we intend to concentrate our
efforts in Dade, Broward, and Palm Beach Counties, Florida where there are
estimated to be more than 60,000 mobile homes. We intend to provide financing to
owners of insured mobile homes who can demonstrate that they hold clear and
unencumbered title to their mobile homes and are either current on their ground
rent at their mobile home park or, with the loan proceeds, such rent will be
brought current. If appraisals and other factors meet our established policies a
loan can be fully processed within 24 hours of the application.
Our average mobile home loan is $4,000. Under current Florida law we are
permitted to charge interest on loaned funds as follows: Up to 30% interest on
the first $2,000 of the loan principal; 24% on the next $1,000; and 18% on the
next $3,000-$25,000 of loan principal. Our current policy is not to loan an
amount greater than 50% of the fair market value of the mobile home. The loan is
secured by the filing of a lien with the State of Florida in the County where
the mobile home is located. We further secure the principal of the loan by
taking actual possession of the title to the mobile home. This can be likened to
a bank holding title to an automobile until the car loan is paid in full or the
home is sold in which case the balance of the loan together with accrued
interest would then become due and payable. We do not intend to maintain any
reserves for bad debt.
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To further secure our position we require borrowers to carry homeowner's
insurance where we are named as loss payee. Loans are not made until this
coverage is in place. There are circumstances where a mobile homeowner does not
carry such insurance. In such circumstances it is our intention to offer as an
option to the borrower eight-month insurance premium financing so that the
necessary insurance coverage can be purchased. We presently do not have the
financial ability to implement such a premium financing program and will have to
limit our loans to circumstances where such overage is already in place.
Financing of such premiums can carry rates anywhere between 26% to 50% of the
amount loaned under Florida Law.
We intend to expand geographically into other Florida Counties beside those
above-mentioned and eventually into other States. Whether such expansion will be
feasible depends upon many factors including, but limited to, available capital,
favorable legislation, and the continued popularity of mobile homes as a viable
housing alternative. Over the past five years, the mobile home finance industry
has experienced a relatively low default rate. In the event of default we
believe we are adequately protected by our loan to value ratio requirements. The
50% loan to value ratio allows the Company, in the event of default, to sell the
mobile home at a significant discount to value, thereby quickly converting the
mobile home into cash, and covering the loan amount and related expenses
including any ground rents which become due and the cost of repossession or
foreclosure. Since timely payment of rent is a term of all loans the Company
does not believe that the need to pay back-rent will pose any material financial
problem.
PROPOSED BUSINESS
Funds America Finance Corporation, a Florida corporation, was organized in June
1998. We began to do business in April 1999 when we acquired a small portfolio
of mobile home loans in exchange for the common stock of the Company from one of
our officer/directors, Mr. Mark Sand.(See Management). Our sole present business
is management of the loan portfolio. The Company provides highly collateralized
loans with a known low default rate while yielding high interest rates and
intends to expand geographically.
Marketing and Sales
We believe the company has identified a profitable niche in the financial
marketplace that allows it to provide highly collateralized loans with a
relatively low default rate while charging interest rates greater than the
current financial environment standards. In light of the average mobile home
loan being between $4,000 and $5,000, and that many mobile homes were built
prior to 1985, most traditional lending institutions have little or no interest
in servicing these clients. Further, due to the geographic concentration of
these mobile homeowners in mobile home parks, the Company can utilize direct
marketing to solicit potential business. This will also permit advertising to be
targeted and at lower cost than mass advertising alone. It is very important, in
the context of us being able to induce third parties to re-purchase loans that
appropriate checks be conducted.
Management is not aware of any competing companies in the United States whose
sole business is the financing of mobile homes. One possible comparable company
is Greentree Financial Acceptance Corp. ("Greentree"), one of the larger
consumer loan companies servicing the manufactured home community. We believe,
however, that our business philosophy differs. Our concern is primarily with
resale value, insurability and clear title. Greentree requires a good credit
rating and history. We believe a credit check is not imperative given the level
of security that we intend to obtain and our loan-to-value policies. We believe
that everyone meeting our criteria will be given a loan. Factors important to us
are: clear and unencumbered title; we hold title and are named first lienholder;
the mobile home must be located in a mobile home park; the borrower must be
current with their park rent or part of the proceeds of the loan necessary to
bring the rent current must be paid; and, adequate property damage insurance
must be in place naming us as loss payee.
Seventy (70%) of the current portfolio of loans acquired in the exchange
transaction with Mr. Sand do not have existing property damage insurance. We
intend to offer to finance the requisite loan premiums but presently cannot do
so without raising further capital. It is anticipated that the average loan will
be approximately $490 and financed at 30% over an eight-month period. Aside from
the need for capital, projected profit margins are critical for our financial
success. Within the mobile home market we believe that a realistic objective is
to develop an organization that maintains approximately a 20% net profit margin
and continues to develop new business services that are essential to business
operations as they may arise. We have current manpower sufficient to service 80
to 100 loans per month. Additional manpower, and therefore additional capital
necessary to attract and maintain such manpower, will be necessary to achieve
the Company's goals of consummating averages of 80 loans per month in the first
year of operations, 120 loans per month for the second, and 160 in the third
year.
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Employees
Except for those officers and directors disclosed in "Management" the Company
has no other employees. Without additional capitalization the Company will not
likely be in a position to hire needed employees and the burden of business of
the Company must be borne by existing employees. In the interim, to the extent
that administrative or support services are required, we rely on staffing
provided by Funding USA, a company owned and controlled by Mark Sand.
The part time employees are provided as part of a sublease agreement effective
August 1, 1999.
Properties
The Company owns no real estate and subleases nominal space from Funding USA., a
company owned and controlled by Mark Sand. The Company pays a monthly rental of
$500 and the sublease is on a month-to-month basis effective August 1, 1999.
Legal Proceedings
There is no current, pending or threatened litigation in which the Company is or
may be a party to the best knowledge of management.
Additional Information
Subsequent to the effectiveness of this offering the Company will be subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and in accordance therewith intends to file
reports, proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, NW,
Room 1024, Washington, D. C. 20549; at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and at Seven World Trade Center, 13th
Floor, New York, New York 10048. In addition, the Company is required to file
electronic versions of these documents through the Securities and Exchange
Commissions' Electronic Data Gathering, Analysis and Retrieval System (EDGAR).
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Securities and Exchange
Commission. Copies of such material may also be obtained at prescribed rates
from the Public Reference Section of the Securities and Exchange Commission at
Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, D. C. 20549.
Funds America Finance Corporation has filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2, as amended (the "Registration
Statement"), under the Securities Act with respect to the securities being
registered by this Prospectus. As permitted by the rules and regulations of the
Securities and Exchange Commission, this Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
For further information with respect to the Company and the registration of the
securities, reference is made to the Registration Statement and the exhibits
thereto. Statements contained in this Prospectus concerning the provisions of
documents filed with the Registration Statement as exhibits are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Securities and Exchange Commission. The Registration Statement may be inspected
without charge at the Public Reference Section of the Securities and Exchange
Commission at Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, D.
C. 20549, and copies of all or any part thereof may be obtained from the
Securities and Exchange Commission at prescribed rates.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERA
TIONS AND PLAN OF OPERATION
Liquidity and Capital Resources
We were incorporated in June 1998 but did not commence operations until April
1999. During our first full quarter of operations we generated gross revenues of
$5,300 from our mobile home portfolio. We are currently investigating means to
expand our loan portfolio and develop other sources of revenues. We may be able
to secure additional financing through a private placement of our securities. We
may offer shares of our common stock. There can be no assurances that we will be
successful in securing this financing or that it can be obtained at a
commercially reasonable cost. If we are successful in securing additional
financing, we will use the proceeds thereof for operating expenses, working
capital and to register the corporate notes, stock or debt instruments. If we
are successful in obtaining secured debt financing, where the loans are
collateralized by the mobile homes, we anticipate that all monies received from
debt financing will be used to expand the company's loan portfolio and not for
working capital.
If we are successful in securing the additional financing, we intend to expand
our loan portfolio by making new loans and extending our geographical reach
beyond the south Florida geographical area. We also may offer insurance premium
financing on property damage for mobile homes. We intend to carefully control
our growth in order to minimize operating expenses and to utilize facilities and
equipment available from our stockholders at below market costs until such time
as income from operations provides a reliable flow of operating capital; and to
thereafter carefully monitor our growth so that expansion related expenses do
not result in operating losses. We also intend to use proceeds from the sale of
securities only for capital expenditures, principally involving the use of
capital for loans. Until such time as we have secured the additional financing
and our profitable, our officers will continue to defer their salaries. Based on
the foregoing, we believe that the Company will be able to sustain its current
operations until additional sources of financing are identified.
Our operations began in April 1999 when Mr. Mark Sand exchanged a portfolio of
notes receivable in the amount of $86,640 to the Company which in turn has
generated interest and other fees of $5,300. We have also relied upon loans from
stockholders and subscriptions received for shares of common stock.
Our operating expenses for the year ended June 30, 1999, totaled $10,688, of
which $10,520 represented fees for professional services. These fees were
incurred primarily in connection with the filing of this Registration Statement
and we do not expect that ongoing professional fees will continue at their
current level. Nevertheless, because of our professional fees, we incurred a
loss of $7,428.
As of June 30, 1999, we had a total of $105,678 in total assets which consisted
primarily of our loan portfolio totaling $81,602 less an allowance of $2,040 for
credit losses, a mobile home with a value of $5,250, and cash and cash
equivalents totaling $4,620. Total current liabilities as of June 30, 1999 were
$8,336. We did not have any long- term debt. Our stockholders' equity was
$97,342.
We have recovered two mobile homes from borrowers. In one transaction, as a
result of a foreclosure we repossessed the mobile home and have since sold the
home. In the other, we recently took title in lieu of foreclosure and
subsequently sold the home.
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YEAR 2000 CONCERNS
The Y2K compliance issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer programs
that have time sensitive software may recognize a date using "00" as the year
1900 rather than 2000. This could result in a systems failure or miscalculation
causing disruption of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. We currently do not own any computer systems nor are we
reliant on any key suppliers. We do however utilize the office equipment of
Funding USA, an entity controlled by our vice president and chief operating
officer, Mark Sand, from whom we sublease space. Any computer equipment
purchased in the future will be inspected to insure that the equipment is Y2K
compliant.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The following sets forth the names and ages of all of the Directors and
Executive Officers of the Company, positions held by such person, length of
service, when first elected or appointed, and the term of office.
Name and Age First Elected Term of Position
to Office Office
Kim A. Naimoli (40) May 2, 1999 (1)(2) Chairman of the Board of
Directors, President and Chief
Executive Officer
Mark Sand (45) July 1, 1998 (1)(2) Vice President and Director
Chief Operating Officer
Janis M. Dorony (46) May 2, 1999 (1)(2) Secretary, Director
Arthur Schnur(39) May 2, 1999 (1) Director
Steven P. Naimoli(50)May 2, 1999 (1) Director
- ---------------------
(1) Officers serve pursuant to employment agreements entered into with the
Company
(2) Each of these Directors was appointed on an interim basis until the next
annual meeting of shareholders or until duly elected and qualified. The
Company currently intends to hold its next annual meeting during December
1999.
All directors are to serve until their successors assume office after election
at the Company's next annual meeting of stockholders.
The Company's Board of Directors sets corporate policies, which are implemented
by the Company's management. In the event that the Company's Board of Directors
determines that a member faces a conflict of interest, for any reason, it is
expected that the subject director will abstain from voting on the matter, which
raised the issue of conflict.
Kim A. Naimoli. Ms. Naimoli has been a director of the Company since May 2, 1999
when she was also appointed President and Chief Executive Officer and Chairman
of the Board of Directors. Since March 1996 Ms. Naimoli has served as president
of Coral Mortgage, Inc., a correspondent mortgage lender, of which she is the
founder. From October 1994 to April 1998, Ms. Naimoli served as vice president
of Credit Bureau Services, Inc.; from 1989 to May 1994 she was the manager of
Credit Bureau Affiliates, Inc. where she supervised 23 employees in the credit
reporting and mortgage reporting divisions. Ms. Naimoli is affiliated with many
related financial industry organizations including, but not limited to, New York
Association of Mortgage Brokers and Mortgage Bankers Association of CNY where
she served as vice president. Ms. Naimoli is also the exclusive retail
originator in Florida for Apartment Lending Corp., a commercial mortgage lender
licensed in all fifty states.
Mark Sand. Mr. Sand has been a director of the Company since its inception and
also its Vice President. Mr. Sand served as President and principal mortgage
broker for Funding USA, f/k/a Citivest Financial Services, a mortgage brokerage
firm from March 1989 to the present. Prior to that he was a mortgage broker for
ASAP Mortgage Corporation from December 1988 to March 1989. From September 1983
until October 1988 Mr. Sand owned and operated the Sands Group, Ltd., a
commercial real estate firm in New York City. In March 1998, Mr. Sand filed for
protection under Chapter 13 of the US bankruptcy laws. The bankruptcy plan was
confirmed in September 1998. Funding USA, a company in which Mr. Sand is a
principal, was subject to professional disciplinary proceedings brought in 1993
by the Florida Department of Banking. As a result of the foregoing, Funding USA
was placed on probation for a period of six months.
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Janis M. Dorony. Ms. Dorony has been with the Company since May 2, 1999. Prior
to coming to the Company she held various administrative positions and was a
director of Foreclosure Arbitrations a company engaged in the business of
assisting mortgagees in foreclosure cases in restructuring their finances and
restore all of their property rights where she served from March 1998 to January
1999.
Steven P. Naimoli. Mr. Naimoli recently joined the Company in May 1999. He is
the husband of Kim Naimoli. From 1979 through May 1994 he served as President of
SPN Holdings, Inc. a real estate investment company. In October 1994 he joined
as President of Credit Bureau Services, Inc., also a credit reporting agency,
leaving in April 1998. From April 1999 to the present he has served as Vice
President of Coral Mortgage, Inc. a commercial mortgage lender and since May
1998 he has also served as Manager of Quick Credit Corp. of Fort Lauderdale,
Florida, a credit reporting agency.
Arthur Schnur. Mr. Schnur joined the Company in May 1999. From 1987 to the
present Mr. Schnur has worked as a mortgage broker at ASAP Mortgage Corp. He
serves as an outside director and provides management with a valuable contact in
the mortgage brokerage and financing business.
Family Relationships
Except for the relationship of Kim Naimoli and Steven Naimoli, who are husband
and wife, there are no family relationships among directors, executive officers
or persons chosen by the Company to be nominated as a director or appointed as
an executive officer of the Company or any affiliate of the Company.
Involvement in Certain Legal Proceedings
To the best knowledge and belief of the Company, except as disclosed above,
during the past five (5) years no present or former director, executive officer,
or person nominated as a director or appointed as an executive officer of the
Company or any of its affiliated subsidiaries, has been involved in :
Any bankruptcy petition by or against any business of which such
person was a general partner or executive either at the time of the
bankruptcy or within two years prior to that time;
Any conviction in criminal proceedings or subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily, barring, suspending, or otherwise limiting
his/her involvement in any type of business, securities, or banking
activities; and
Being found by any court of competent jurisdiction (in a civil
action), the SEC, or the Commodities Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended, or vacated.
Material Employees and Consultants
The following persons are not executive officers or directors of the Company;
however, they play a material role in the operations of its affiliates.
The Yankee Companies, Inc. a Florida corporation (Yankee"), has been engaged by
the Company to provide strategic planning advice; Equity, a publicly held
Delaware corporation, provides the Company and its management with assistance in
the process of registering with the SEC and developing policies and procedures
for regulatory compliance; and, Liberty Group, Inc., a Florida corporation
("Liberty"), which organization provides the Company with management consulting
advice and management services.
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Compensation of Directors
Current directors serve in such capacity without cash compensation.
Audit and Compensation Committees
The Board of Directors has a standing Audit and Compensation Committees,
comprised of Ms. Naimoli and Mr. Sand. The Audit Committee assists the Board of
Directors in exercising its fiduciary responsibilities for oversight of audit
and related matters, including corporate accounting, reporting and control
practices. The Compensation Committee is responsible for overseeing the
Company's executive compensation programs. It administers certain compensation
and benefit plans and approves annual compensation and recommends to the Board
of Directors long-term incentive compensation to be granted to executive
officers, directors and consultants of the Company.
Remuneration of Executive Officers-Summary Compensation Table
The following table shows the contracted compensation of the President/Chief
Executive Officer, Vice President/Treasurer, and Secretary. The Company has no
other executive officers. To date, only nominal salaries have been paid to any
officers or directors. Kim N Naimoli , Janis Dorony and Mark Sand have
employment agreements each having an initial term of two years and commenced on
June 1, 1999, and renew themselves automatically unless notice is given by
either party on or before the 180th day prior to termination of the then current
term.
EXECUTIVE COMPENSATION
Summary Compensation Schedule
Annual
Compensation (1) Long Term Compensation
Number of
Name and Principal Securities All Other
Positions Year Salary Underlying Compensation
Options
Kim A. Naimoli 1999 None Annual bonus based on
pre-tax profits (2)
Chairman, President
and Chief Executive
Officer
Mark Sand 1999 None Annual bonus based on
Vice President/ treasurer pre-tax profits (2)
Janis M. Dorony 1999 None Annual bonus based on
Secretary pre-tax profits (2)
Arthur Schnur 1999 None (3)
Director
Steven Naimoli 1999 None (3)
Director
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17
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(1) These amounts are agreed upon but no bonus or other annual
compensation was paid during the past fiscal year.
(2) Subject to the Company's common stock having been actively and
publicly traded on a public market within the United States for a period of
six months, an annual bonus payable in shares of the Company's common stock
determined by dividing 3.84% of the Company's , pre-tax profits for the
then subject year by the average bid price for the Company's common stock
during the last five trading days prior to the end of the last day of each
year and the initial five days of the new year. In addition, Mr. Sand, Ms.
Naimoli, and Ms. Dorony are entitled to an annual cash bonus equal to 3.84%
of the Company's, pre-tax profits for the then subject year after the
agreement has been in effect for at least six months. Any compensation
earned which is not taken as a result of cash flow considerations is
forever waived
(3)Each has been granted an option to purchase 50,000 shares of the
Company's common stock at an exercise price of $.25 per share.
Compensation Under Plans
Except as disclosed above or below, none of the Company's executive officers
have received or became entitled to any cash or non-cash compensation under any
Company plans (as the term "plan" is defined in Instruction 3 to Item 402 of
Regulation S-B promulgated by the SEC) during the last calendar year, nor have
they been awarded any stock options or other forms of indirect compensation by
the Company.
In each of the foregoing cases, the securities issued were restricted securities
(that is, not registered under applicable securities laws and thus not eligible
for public resale), thus, they were issued at a discount reflecting their
legally imposed lack of liquidity.
Manner of Determining Executive Compensation
Whenever reasonably feasible, the Company has used compensation formulas in its
employment agreements with executive officers on a basis that rewards them for
success of the areas under their responsibilities through stock and cash
bonuses. However, recruitment of qualified personnel, in most instances,
requires that they be provided with a guaranteed base draw or salary. Specific
details of such compensation agreements are summarized above.
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<PAGE>
Arrangements with Directors
Other than as indicated above and below there are no arrangements or
understandings regarding compensation for services provided as a director,
including any additional amounts payable for committee participation or special
assignments. Each of the executive officers and directors of the Company has
understandings with the Company regarding duties to be performed and
compensation to be received as an employee of the Company ( because certain of
the Company's current directors are also executive officers, all relevant
disclosure concerning their compensation arrangements is discussed above).
Key Employees
The executive officers and directors above-described are essential for the
operation of the Company's business and therefore constitute key employees.
Stock Option Plans
The stock options granted to the Company's two directors are as set forth above
under "Executive Compensation". The Company has not instituted any type of stock
option plan.
Limitation of Liability and Indemnification
The Company's Articles of Incorporation limit, to the maximum extent permitted
by the Florida Statutes, the personal liability of directors of monetary damages
for breach of their fiduciary duties as directors, and provides that the Company
shall indemnify its officers and directors and may indemnify its employees and
other agents to the fullest extent permitted by Florida Law. Florida Law
provides that a corporation may indemnify a director, officer, employee or agent
made or threatened to be made a party to an action by reason of the fact that he
was a director, officer, employee or agent of the corporation or was serving at
the request of the corporation against expenses actually and reasonably incurred
in connection with such action if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful. Florida Law does not
permit a corporation to eliminate a director's duty of care, and the provisions
of the Company's Articles of Incorporation have no effect on the availability of
equitable remedies, such as injunction or rescission, for a director's breach of
the duty of care.
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The Company may enter into indemnification agreements with its directors and
officers which may require the Company, among other things, to indemnify such
directors and officers against liabilities that may arise by reason of their
status or service as directors and officers against liabilities (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance, if
available on reasonable terms. Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted for
directors, officers and controlling persons of then Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's common
stock as of June 30,1999 by:
1. each person or entity known by the Company to beneficially own
5% or more of the outstanding shares of common stock;
2. each of the Company's directors and officers; and
3. all directors and executive officers of the Company as a group.
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<TABLE>
<S> <C> <C> <C>
NAME AND TITLE OF AMOUNT AND NATURE PERCENTAGE OF CLASS
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1)(2) Before Issuance of After Issuance
Shares to be Of shares to be
Registered Registered
Kim Naimoli, President, CEO, Chairman 1,200,000 30.92% 27.84%
Mark Sand, Vice President, Director 2,000,000 51.54% 46.39%
Janis M. Dorony, Secretary 200,000 5.15% 4.64%
Arthur Schnur, Director -0- * -0-
Steven P. Naimoli, Director -0- * -0-
(*Does not include options to purchase up to 50,000 shares each of common
stock at an exercise price of $.25 per share.)
All Other Owners of 5% or more of
the Company's Common Equity NONE
All Directors and Officers as a Group
(5 persons) 3,400,000 87.63% 78.87%
- ---------------------------------
</TABLE>
(1)Record and beneficial owner based on 3,880,000 shares of common
stock as of June 30, 1999.
(2)There are outstanding options to purchase an aggregate of 100,000
shares to two directors and when issued, these shares in the hands of the
directors will be less than 5% of the then issued and outstanding shares.
These options may be exercised at any time on or prior to March 31, 2004 at
a price of $.25 per share. We have also granted to Yankee an option for
shares of common stock equal to 5% of our outstanding or reserved common
stock immediately following complete exercise of the option, but not less
than 250,000 shares. The option is good for one year from and after August
1, 1999, at an agreed upon aggregate price of $10,000 pro rated by formula
based on the total number of our shares then outstanding.
21
<PAGE>
(3)Upon the effectiveness of this Registration Statement there will be
issued to Equity 431,111 shares of common stock of the Company, all of
which shares are accounted for in this percentage.
To the best knowledge and belief of the Company, there are no arrangements,
understandings, or agreements relative to the disposition of the Company's
securities, the operation of which would at a subsequent date result in a change
in control of the Company.
The shares being registered hereby are being registered to permit public
secondary trading, and the stockholders may offer all or part of the shares for
resale from time to time. However, such stockholders are under no obligation to
sell all or any portion of such shares or are such stockholders obligated to
sell any shares immediately under this prospectus, and should not for any
purpose be considered selling shareholders.
DESCRIPTION OF CAPITAL STOCK
Common Stock
As of the date of this Prospectus, there were 3,880,000 shares of common stock
outstanding. There are 350,000 shares of common stock issuable pursuant to
outstanding options and warrants, and 431,111 shares of common stock reserved
for issuance pursuant to payment to Equity. The holders of common stock are
entitled to one vote per share on all matters to be voted upon by the
stockholders. The holders of common stock are 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 for that purpose. In the event of
liquidation, dissolution or winding up of the Company, holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of preferred stock, if any,
then authorized and outstanding. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption
provisions applicable to the common stock.
The authorization and issuance of preferred stock by the Board of Directors
could adversely affect the rights of holders of shares of common stock by, among
other things, establishing preferential dividends, liquidation rights or voting
power. The issuance of such preferred stock could be used to discourage or
prevent efforts to acquire control of the Company through the acquisition of
shares of common stock.
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Transfer Agent and Registrar
The transfer agent for the Company's common stock is Florida Atlantic Stock
Transfer, Inc., whose address is 7130 Knob Hill Road, Tamarac, Florida 33321,
telephone number (954) 726-4954.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Transactions
The following transactions are transactions to which the Company is or was a
party since inception and in which either an officer, director, nominee for
election as director, 5% or more holder of the Company's securities, or member
of the immediate family of the foregoing, had an interest.
The valuation of the consideration exchanged was not based on objective
ascertainable criteria, such as comparison of the relative operations and net
worth of the entities involved, since at such time, the Company was a relatively
inactive private company without material earnings or assets, rather, they were
based on the quantity of common stock which the Company's management, at that
time, was willing to provide based on management's fiduciary obligations to the
Company's stockholders; and, the willingness of then existing shareholders to
suffer a dilution in the book value of their investment in exchange for the
potential liquidity that would eventually be available as a result of owning
equity in a publicly traded corporation.
Each of the officers and directors acquired the shares they respectively hold
for investment purposes, and not with a view to further resale or distribution,
except as permitted under exemptions from registration requirements under
applicable securities laws. That means that they may not sell such securities
unless they are either registered with the SEC and comparable agencies in the
states or other jurisdictions where the purchasers reside, or they are
transferred pursuant to applicable exemptions provided in Section 4 of the
Securities Act or rules promulgated by the SEC under authority of Sections 3 and
4 of the Securities Act. The most widely used exemption from registration
requirements is provided by SEC Rule 144, which requires a one year holding
period prior to resale, and limits the quantities of securities that can be sold
during floating 90 day periods. In addition to restrictions on resale, the
shareholders holding the restricted securities are subject to the short term
profit provisions of the Exchange Act, Section 16(b), which provides in
essential part that profits on securities transactions effected within six
months of an inverse transaction (that is, purchases and sales are inverse
transactions), whether or not involving specifically identifiable shares, must
be paid to the Company.
23
<PAGE>
Each certificate issued in connection therewith was issued with the restrictive
legend required with respect to issuance of securities pursuant to exemptions
from registration requirements under the Securities Act and each recipient
acknowledged their understanding that the shares were restricted from resale
unless they were either registered under Section 5 of the Securities Act and
comparable state laws, or the transaction was effected in compliance with
available exemptions from such registration requirements.
In April 1999, the Company issued 2,000,000 shares of its theretofore-unissued
common stock no par value, to Mr. Mark Sand, a Vice President, Treasurer and
Director of the Company in exchange for a portfolio of secured third party
consumer notes. The notes had a face value of $86,640. In addition, the Company
received a mobile home which was part of a foreclsoure and a loan receivable
from Mr. Sand. The agreed upon market value of the notes, mobile home and loan
receivable was $100,000, which latter value was used in determining the number
of shares to be exchanged. The exchange was made in reliance upon a tax-free
exchange for federal income tax purposes. The exchange agreement may not be
deemed to have been negotiated at arm's length.
In or about April 1999 the Company entered into a consulting agreement with
Equity to provide advice and related services to aide the Company in becoming a
reporting company under the Exchange Act in exchange for the issuance of shares
of the Company's common stock to Equity, and in addition, an option to purchase
shares of our common stock to Yankee for providing strategic planning advice and
to certain other service providers acting under or pursuant to that agreement or
as otherwise stated in elsewhere in this Prospectus. The Company is required to
issue in the name of the Equity shareholders an amount of shares equal to 10% of
the Company's common stock outstanding immediately following such issuance,
subject to anti-dilutive rights and for a period of one year following the date
of issuance or 431,111. The Company has also issued 25,000 shares each to
Jeffrey G. Klein, Esq. and Lawrence Schechterman for services rendered which
shares are issued and outstanding. The Company is further obligated, at its own
cost and expense, to register all such shares except 12,500 shares of the total
shares held each by Messrs. Klein and Schechterman. Those shares are being
registered hereby. The option given to Yankee is for that number of shares of
common stock equal to 5% of our outstanding or reserved common stock immediately
following complete exercise of the option, but not less than 250,000 shares. The
option is good for one year from and after August 1999, at an agreed upon
aggregate price of $10,000 pro rated by formula based on the total number of
shares then outstanding. These shares are not being registered hereby, however,
they do carry piggy-back registration rights for any later registered offering
of our securities.
Related Party Transactions
There are no other related party transactions that the Company is aware of
except as set forth above under "Certain Transactions".
Transactions with Promoters
See, "Certain Transactions" above.
24
<PAGE>
PART II RECENT SALES OF UNREGISTERED SECURITIES
During 1999, we issued 3,880,000 shares of our common stock in transactions more
particularly described below.
In April 1999 the Company issued 2,000,000 shares of common stock to Mr. Mark
Sand in an exchange transaction whereby the Company acquired a portfolio of
consumer notes. Also in May 1999, the Company entered into a consulting
agreement with Amerinet Group.com, Inc. [f/k/a Equity Growth Systems, Inc.]
whose payment for services rendered will be in the Company's common stock in the
amount of 431,111 shares, which shares are being registered hereby and in
accordance with the agreement between the parties. An additional 1,200,000
shares were issued to the Company's President, Kim M. Naimoli and 200,000 shares
were issued to Janis M. Dorony, the Company's Secretary. The Company also issued
options to purchase up to 50,000 shares each to Messrs. Schnur and Naimoli. We
have also issued 480,000 shares of our common stock to various persons or
entities in consideration for services provided as more particularly described
below:
Name Date of Issuance Shares
Bell Enterprises April 1, 1999 180,000
Liberty Group April 1, 1999 200,000
Jeffrey G. Klein May 1, 1999 25,000
Lawrence Schecterman May 1, 1999 25,000
Roman Fischer April 1, 1999 50,000
All shares issued to date our restricted securities and bear
appropriate restrictive legends.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Prior to retaining the independent accounting firm of Dohan and Company, CPA's,
we did not have an independent accounting firm. There are no disagreements on
any accounting issues with the accounting firm.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation limit, to the maximum extent permitted
by the Florida Statutes ("Florida Law"), the personal liability of directors of
monetary damages for breach of their fiduciary duties as directors, and provides
that the Company shall indemnify its officers and directors and may indemnify
its employees and other agents to the fullest extent permitted by Florida law.
Florida law provides that a corporation may indemnify a director, officer,
employee or agent made or threatened to be made a party to an action by reason
of the fact that he was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation against expenses
actually and reasonably incurred in connection with such action if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe his conduct was unlawful.
Florida law does not permit a corporation to eliminate a director's duty of
care, and the provisions of the Company's Articles of Incorporation have no
effect on the availability of equitable remedies, such as injunction or
rescission, for a director's breach of the duty of care.
25
<PAGE>
The Company may enter into indemnification agreements with its directors and
officers which may require the Company, among other things, to indemnify such
directors and officers against liabilities that may arise by reason of their
status or service as directors and officers against liabilities (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance, if
available on reasonable terms.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted for directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
It is the opinion of the Company's current management as to each transaction
described above that the terms of transactions involving the Company's officers
and directors were materially more favorable to the Company than it could have
obtained from unrelated sources.
PLAN OF DISTRIBUTION
The shares registered hereby may be sold or distributed from time to time by the
stockholders or by pledgees, donees or transferees of, or successors in interest
to, the stockholders directly to one or more purchasers, including pledgees, or
through brokers, dealers or underwriters who may act solely as agents or may
acquire shares as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, at negotiated prices or at
fixed prices, which may be changed. The shares registered are being issued to
the shareholders of Equity pursuant to agreement in exchange for consulting and
other services, and to Jeffrey G. Klein, Esq. and Lawrence Schechterman for
their assistance in the preparation of this Registration Statement. The stock
will not be issued to Equity unless and until this Registration Statement is
declared effective.
The distribution of the shares registered may be effected in one or more of the
following methods:
ordinary brokers transactions, which may include long or short sales,
purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus,
"at the market" to or through market makers or into an existing market for
the common stock,
in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
through transactions in options, swaps or other derivatives, whether
exchange listed or otherwise, or
any combination of the foregoing, or by any other legally available means.
In addition, the stockholders or their successors in interest may enter into
hedging transactions with broker-dealers who may engage in short sales of shares
of common stock in the course of hedging the positions they assume with the
stockholders. The stockholders or their successors in interest may also enter
into option or other transactions with broker-dealers that require the delivery
by such broker-dealers of the shares, which shares may be resold thereafter
pursuant to this Prospectus.
26
<PAGE>
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in the form of discounts, concessions or
commissions from the stockholders and/or the purchasers of shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both.
Such compensation as to a particular broker-dealer may be in excess of customary
commissions. The selling stockholders and any broker-dealers acting in
connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit realized by them on the resale of
shares as principals may be deemed underwriting compensation under the
Securities Act. Neither the Company nor any stockholder can presently estimate
the amount of such compensation. The Company knows of no existing arrangements
between any stockholder and any broker, dealer, underwriter or agent relating to
the sale or distribution of the shares.
Each stockholder and any other person participating in a distribution of
securities will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including, without limitation, Regulation M,
which may restrict certain activities of, and limit the timing of purchases and
sales of securities by stockholders and other persons participating in a
distribution of securities. Furthermore, under Regulation M, persons engaged in
a distribution of securities are prohibited from simultaneously engaging in
market making and certain other activities with respect to such securities for a
specified period of time prior to the commencement of such distributions,
subject to specified exceptions or exemptions. All of the foregoing may affect
the marketability of the securities registered hereby.
Any securities covered by this Prospectus that qualify for sale pursuant to Rule
144 under the Securities Act may be sold under that Rule rather than pursuant to
this Prospectus.
There can be no assurance that the stockholders will sell any or all of the
shares of common stock being registered for them hereunder.
LEGAL MATTERS
The validity of the common stock registered hereby and certain other matters
will be passed on for the Company by Jeffrey G. Klein, Esq., 23123 State Road 7,
Suite 350-B, Boca Raton, Florida 33428. Mr. Klein will receive 50,000 shares of
the common stock of the Company in partial payment for his services, 25,000
shares of which will be issued to Lawrence Schecterman a service provider to Mr.
Klein.
EXPERTS
The financial statements of the Company as of and for the year ended June 30,
1999, included in this Prospectus have been so included in reliance on the
report of Dohan and Company, CPA's, independent auditors, given on the authority
of said firm as experts in auditing and accounting.
27
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
FINANCIAL STATEMENTS
June 30, 1999
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS
Balance Sheet F-2
Statement of Operations F-3
Statement of Cash Flows F-4
Statement of Stockholders' Equity F-5
NOTES TO FINANCIAL STATEMENTS F-6-11
F
<PAGE>
Independent Auditor's Report
Stockholders and Board of Directors
Funds America Finance Corporation
Fort Lauderdale, Florida
We have audited the accompanying balance sheet of Funds America Finance
Corporation, as of June 30, 1999, and the related statements of operations, cash
flows, and stockholders' equity for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Funds America Finance
Corporation at June 30, 1999, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
/s/ Dohan and Company, CPA's
August 12, 1999
Miami, Florida
F-1
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
BALANCE SHEET
June 30, 1999
ASSETS
Cash and cash equivalents $ 4,620
Notes receivable secured by mobile homes,
less allowance for credit losses of $2,040 79,562
Mobile home held for resale 5,250
Loan receivable 300
Deferred offering costs 15,250
Organization costs, less accumulated
amortization of $54 696
------------
TOTAL ASSETS $ 105,678
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accrued liabilities $ 7,250
Due to stockholder, on demand, non-interest bearing 1,086
-------------
TOTAL LIABILITIES 8,336
-------------
COMMITMENTS AND CONTINGENCIES (NOTES 4, 6, and 7)
STOCKHOLDERS' EQUITY
Common stock, no par value, 25,000,000 shares authorized,
3,880,000 shares issued and outstanding 106,150
Accumulated deficit (7,428)
Stock subscription receivable (1,380)
-------------
TOTAL STOCKHOLDERS' EQUITY 97,342
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 105,678
See accompanying notes. -------------
F-2
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
INTEREST AND FEES ON LOANS
Interest income $ 5,300
Provision for credit losses (2,040)
-------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
3,260
-------------
OPERATING EXPENSES
Amortization 54
General and administrative 114
Professional fees 10,520
-------------
TOTAL OPERATING EXPENSES 10,688
-------------
NET LOSS BEFORE INCOME TAX BENEFIT (7,428)
INCOME TAX BENEFIT -
NET LOSS $ (7,428)
-------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (BASIC AND
DILUTED) 2,452,747
NET LOSS PER SHARE (BASIC AND DILUTED) $ (0.00)
See accompanying notes.
F-3
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
STATEMENT OF CASH FLOWS
For the Year Ended June 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,428)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization 54
Professional fees (paid by issuance of common
stock) 4,750
Provision for loan losses 2,040
Changes in assets and liabilities:
Loan receivable (300)
Deferred offering costs (15,250)
Accrued liabilities 7,250
------------
NET CASH USED BY OPERATING ACTIVITIES (8,884)
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of notes receivable 5,528
------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 5,528
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from stockholder 44,000
Repayment of advances from stockholder (35,294)
Receipt of subscription receivable 20
Organization costs (750)
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,976
------------
NET INCREASE IN CASH AND EQUIVALENTS 4,620
CASH AND CASH EQUIVALENTS - BEGINNING -
CASH AND CASH EQUIVALENTS - ENDING $ 4,620
------------
------------
SUPPLEMENTAL DISCLOSURES
Interest and fees received $ 5,300
Interest paid $ -
Taxes paid $ -
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING TRANSACTIONS:
Common stock issued for purchase of
mobile home held for resale $ 5,250
Common stock issued for investment in
mobile home notes receivable $ 86,640
Common stock issued for loan receivable
from stockholder $ 8,110
Common stock issued for subscription receivable $ 1,400
See accompanying notes.
F-4
<PAGE>
FUNDS AMERICA FINANCE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
For the Year Ended June 30, 1999
<TABLE>
<S> <C> <C> <C> <C>
Stock
Common Stock Accumulated Subscription
Description Shares Amount Deficit Receivable Total
Issuance of common stock for mobile
home and notes receivable 2,000,000 $ 100,000 $ - $ - $100,000
Issuance of common stock for
consulting services 430,000 4,500 - - 4,500
Issuance of common stock for
subcription receivable 1,400,000 1,400 - (1,400) -
Payments on subcription receivable - - - 20 20
Issuance of common stock for
legal services 50,000 250 - - 250
Net loss for the year ended
June 30, 1999 - - (7,428) - (7,428)
Balance, June 30, 1999 3,880,000 $ 106,150 $(7,428) $ (1,380) $ 97,342
See accompanying notes.
</TABLE>
F-5
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Funds America Finance Corporation (the Company) is a Florida corporation formed
in June 1998, primarily to provide collateralized consumer financing to mobile
home owners in the South Florida area initially, and throughout the state once
sufficient funding is attained. Other than the formation, there were no
transactions in June 1998. The first transactions occurred in April 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Notes Receivable
Notes receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding
unpaid principal balances reduced by any chargeoff.
The Company calculates its provision for credit losses based on changes in the
present value of the expected future cash flows of its loans discounted at the
loan's effective interest rate in accordance with Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards No. 114. Periodic
evaluation of the adequacy of the allowance is based on the management's past
loan loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated value
of any underlying collateral and current economic conditions.
Revenue Recognition
Interest income is accrued monthly based on the terms of each note using the
interest (actuarial) method. Accrual of interest income on notes receivable is
suspended when a loan is contractually delinquent for thirty-one days or more.
The accrual is resumed when the loan becomes contractually current at which time
past-due interest income is recognized.
Income Taxes
Income taxes are computed under the provisions of the Financial Accounting
Standards Board (FASB) Statement No. 109 (SFAS No. 109), "Accounting for Income
Taxes".
Property and Equipment
Property and equipment, consisting of furnishings and equipment will be stated
at cost, less accumulated depreciation. Depreciation will begin when the assets
are placed in service and will be computed using the straight-line method over
the estimated useful lives of the assets, which are expected to range from five
to ten years.
Organization costs
Organization costs are amortized over fifteen years on a straight-line basis
F-6
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Advertising
Advertising costs will be expensed as incurred.
Concentrations of Credit Risk
The Company offers no income / no credit check loans to mobile home owners and
extends credit based on the appraised fair market value of the mobile home. The
Company takes a first lien position on the mobile home and requires that the
mobile home be insured, with the Company named as loss payee. Loan conditions
also require that the borrower must be current with the lot rent and remain so
for the term of the loan. Exposure to losses on receivables is principally
dependent on the value of the collateral in the event it is repossessed. The
Company monitors its exposure for credit losses and maintains allowances for
anticipated losses.
Deferred Offering Costs
Deferred offering costs consist of legal and filing fees incurred in the
registration related to the public offering of the Company's stock. These costs
will be charged against stockholders' equity upon completion of the
registration.
Impairment of Long-Lived Assets
The Company follows FASB Statement No. 121 (SFAS No. 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
SFAS No. 121 requires that impairment losses are to be recorded when long-lived
assets to be held and used are reviewed for impairment whenever events or
changes in circumstances indicate that the related carrying amount may not be
recoverable. When required, impairment losses on assets to be held and used are
recognized based on the fair value of the asset. Long-lived assets to be
disposed of, if any, are reported at the lower of carrying amount or fair value
less cost to sell. Following SFAS No. 121 did not result in a material impact on
the Company's financial position and results of operations.
Basic Net Loss Per Common Share
The Company follows the provisions of FASB Statement No. 128 (SFAS No. 128),
"Earnings Per Share". SFAS No. 128 requires companies to present basic earnings
per share (EPS) and diluted EPS, instead of primary and fully diluted EPS
presentations that were formerly required by Accounting Principles Board Opinion
No. 15, "Earnings Per Share". Basic EPS is computed by dividing net income or
loss by the weighted average number of common shares outstanding during each
year.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Fair Value of Financial Instruments
Cash, notes receivable, debt, accrued expenses and other liabilities are carried
at amounts which reasonably approximate their fair value due to the short-term
nature of these amounts or the relatively high rates of interest charged on the
notes receivable which are consistent with current market rates for such debt.
F-7
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Comprehensive Income
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components (revenue, expenses, gains and losses) in a separate
full set of general-purpose financial statements. The provisions of this
statement were effective for fiscal years beginning after December 15, 1997.
Management believes that the Company does not have items of a material nature
that would require presentation in a separate statement of comprehensive income.
NOTE 2. NOTES RECEIVABLE SECURED BY MOBILE HOMES
Notes receivable secured by mobile homes consisted of thirty-two consumer notes,
collateralized by mobile homes. The notes provide for repayment over terms
ranging from twenty-four to eighty-four months, with annual interest rates
generally between 24% and 30% (one is at 14%).
Principal payments pursuant to the terms of the notes, for the year ended June
30, are as follows:
2000 $ 19,708
2001 19,344
2002 18,669
2003 13,068
2004 and thereafter 10,813
-------------
81,602
Estimated allowance for credit losses (2,040)
-------------
Notes receivable secured by mobile homes, net $79,562
-------------
-------------
NOTE 3. MOBILE HOME HELD FOR RESALE
The mobile home, acquired through repossession by the Company's Vice-President
before the portfolio acquisition and stock exchange, is a 1972 Mercury,
singlewide, with two bedrooms and bathrooms. It is currently available for sale.
NOTE 4. RELATED PARTY TRANSACTIONS
In March 1999, the Company and its Vice-President entered into a transaction in
which two million shares of the Company's common stock, valued at $100,000, were
issued in exchange for:
1. Loans receivable secured by mobile homes and a mobile home, valued at $86,640
and $5,250 respectively, and
2. A loan receivable from the Vice-President in the amount of $8,110.
The Company is affiliated with various other entities through common ownership
and control with its Vice-President who is also a shareholder. The Company
neither owns nor leases any real or personal property. The Vice-President,
through his wholly owned company, Funding U.S.A., provides office services,
including office supplies, telephone, and facilities without charge. Such costs
are immaterial to the financial statements and, accordingly, have not been
reflected herein.
Beginning August 1, 1999, the Company has agreed to pay a fee of $500 monthly
to Funding U.S.A. for general office facilities and services.
F-8
<PAGE>
NOTE 4. RELATED PARTY TRANSACTIONS (Continued)
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy of the resolution of
such conflicts.
The Board of Directors authorized the issuance of 1.4 million restricted shares
to the President and Secretary of the Company on June 29, 1999. These shares
were issued at a value of $.005 per share. A stock subscription receivable of
$1,400 was recorded at the date of issuance.
In May 1999, the Company entered into an employment agreement with its
Vice-President and in June 1999, the Company entered into an employment
agreement with its President and Secretary to provide executive services to the
Company. The agreements provide for annual compensation to each executive of
both a cash bonus and a bonus payable in shares. The bonus payable in shares of
the Company's common stock is determined by dividing 3.84% of the Company's
pre-tax profits for each calendar year by the average bid price during the last
five trading days prior to the end of the last day of each year and the initial
five days of the new year. However, the agreement must be in effect for at least
one half of the subject year and the Company's common stock must be actively
trading on a public market. The cash bonus shall equal 3.84% of the Company's
pre-tax profits for each calendar year after the agreement has been in effect
for at least six months. The officers are guaranteed minimum weekly draws
against the bonus, in a sum equal to 1/52 of the preceding year's bonus, but not
less than $500, unless the Company has not generated pre-tax profits to make
such payments, in which case the payments will be waived.
NOTE 5. INCOME TAXES
At June 30, 1999, the Company had a net operating loss carryforward of
approximately $7,400. This loss may be carried forward to offset federal income
taxes in future years through the year 2019. However, if subsequently there are
ownership changes in the Company, as defined in Section 382 of the Internal
Revenue Code, the Company's ability to utilize net operating losses available
before the ownership change may be restricted to a percentage of the market
value of the Company at the time of the ownership change. Therefore, substantial
net operating loss carryforwards could, in all likelihood, be limited or
eliminated in future years due to a change in ownership as defined in the Code.
The utilization of the remaining carryforwards is dependent on the Company's
ability to generate sufficient taxable income during the carryforward periods
and no further significant changes in ownership.
The Company computes deferred income taxes under the provisions of FASB
Statement No. 109 (SFAS 109), which requires the use of an asset and liability
method of accounting for income taxes. SFAS No. 109 provides for the recognition
and measurement of deferred income tax benefits based on the likelihood of their
realization in future years. A valuation allowance must be established to reduce
deferred income tax benefits if it is more likely than not that, a portion of
the deferred income tax benefits will not be realized. It is Management's
opinion that the entire deferred tax benefit resulting from the net operating
loss carryforward may not be recognized in future years. Therefore, a valuation
allowance equal to the deferred tax benefit has been established, resulting in
no deferred tax benefits as of the balance sheet date.
F-9
<PAGE>
NOTE 6. GOING CONCERN AND MANAGEMENT'S PLANS
The financial statements have been prepared assuming that the Company will
continue as a going concern. Management's plans in regard to these matters are
as follows:
Raise additional financing through a private placement of securities, which
is currently in the discussion and planning stage, the proceeds of which
will be used for operating expenses, working capital, and to register
corporate notes or other debt instruments in order to raise the requisite
capital for expansion of the Company's services
Expand the loan portfolio by making new loans and extend the Company's
geographical reach to include all of Florida
Offer insurance premium financing on property damage insurance for mobile
homes (once the requisite licenses are obtained)
The Company expects to operate without additional staffing prior to
completion of the private placement described above, and once fully
operational, no more than two additional staff are expected to be added to
process and service new loans
While there is no assurance that the Company will be able to accomplish its
plans, management believes that it has an acceptable time frame. Since officers'
compensation is deferred subject to profitability, Management expects that the
Company can subsist for at least twelve months based on the cash flow derived
from current revenues, or until such time as its plan for expansion can be
implemented.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE 7. COMMITMENTS AND CONTIGENCIES
Year 2000
The year 2000 issue results from certain computer systems and software
applications that use only two digits (rather than four) to define the
applicable year. As a result, such systems and applications may recognize a date
of "00" as 1900 instead of the intended year 2000, which could result in data
miscalculations and software failures. The Company does not own any computer
systems as of year-end and does not have any key suppliers. Thus, the Year 2000
issue is not expected to have a material impact on the Company's financial
position or results of operations.
Consulting Agreement
In May 1999, the Company entered into a consulting agreement with Amerinet
Group.com, Inc. f/k/a Equity Growth Systems, Inc. (Equity) to provide advice and
services to aide the Company with registration of its common stock with the
Securities and Exchange Commission. Pursuant to the agreement, the Company is
required to issue in the names of each of Amerinet's shareholders of record, as
of the close of business on June 30, 1999, an amount of shares equal to 10% of
the Company's common stock outstanding, immediately following such issuance and
registration, subject to anti-dilutive rights for a period of twelve months
following the original date of issuance.
In August 1999, the Company entered into a consulting agreement with The Yankee
Companies, Inc. (Yankee) to provide strategic planning advice. Pursuant to the
agreement, the Company has granted the consultant stock options to purchase up
to 5% of the Company's outstanding or reserved common stock, immediately
following complete exercise of such options. These options are exercisable
beginning 60 days after the effective date of the agreement and shall end 365
days following the effective date of the agreement.
F-10
<PAGE>
NOTE 8. COMMON STOCK
The 480,00 shares of common stock issued for consulting services were valued at
$4,750 as stated in the various consulting agreements.
NOTE 9. STOCK OPTIONS
The Company granted stock options to two Directors elected in May 1999, in
return for services to the Company. At June 30, 1999, there were outstanding
options for 100,000 shares with an exercise price of $.25 per share. These
options expire in April 2004.
NOTE 10. SUBSEQUENT EVENT
The Company is in the process of registering certain shares of its common stock
with the Securities and Exchange Commission.
F-11
<PAGE>
UNDERTAKINGS
Funds America Finance Corporation will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b), if, in the aggregate, the changes
in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
REGISTRANT:
FUNDS AMERICA FINANCE CORPORATION
DATE: October 6, 1999 BY: /s/ Kim A. Naimoli
KIM A. NAIMOLI, President
40
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EXHIBITS
Index to Exhibits
Designation Page Description
of Exhibit Number
(2) 42 Articles of Incorporation
(2.1) 46 Amendment to Articles of Incorporation
(3) 49 By-Laws
(4) * Specimen Common Stock Certificate
(5) * Form of Opinion re: legality
(10) Material Contracts
60 .1 Employment agreement between the Company and Mark
Sand
69 .2 Employment agreement between the Company and
Kim Naimoli
78 .3 Employment agreement between the Company and Janis
Dorony
87 .4 Consulting agreement between the Company and Equity
Growth Systems
99 .5 Consulting agreement between the Company and
Liberty Group
(11) * Statements Regarding Computation of Per Share Earnings
(23.2) 106 Consent of Jeffrey G. Klein, Esq.
(23.3) 107 Consent of Dohan and Company, CPA's
(27) 108 Financial Data Schedule.
* To be filed by amendment
41
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
July 2, 1998
MARK SAND
2501 E. COMMERCIAL BLVD SUITE 210
FORT LAUDERDALE, FL 33308
The Articles of Incorporation for FUNDS AMERICA FINANCE CORPORATION were filed
on June 30, 1998 and assigned document number P98000058806. Please refer to this
number whenever corresponding with this office regarding the above corporation.
The certification you requested is enclosed.
PLEASE NOTE: COMPLIANCE WITH THE FOLLOWING PROCEDURES IS ESSENTIAL TO
MAINTAINING YOUR CORPORATE STATUS. FAILURE TO DO SO MAY RESULT IN DISSOLUTION
OF YOUR CORPORATION.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THIS OFFICE BETWEEN JANUARY 1 AND
MAY 1 OF EACH YEAR BEGINNING WITH THE CALENDAR YEAR FOLLOWING THE YEAR OF THE
FILING DATE NOTED ABOVE AND EACH YEAR THEREAFTER. FAILURE TO FILE THE ANNUAL
REPORT ON TIME MAY RESULT IN ADMINISTRATIVE DISSOLUTION OF YOUR CORPORATION.
A FEDERAL EMPLOYER IDENTIFICATION (FEI) NUMBER MUST BE SHOWN ON THE ANNUAL
REPORT FORM PRIOR TO ITS FILING WITH THIS OFFICE. CONTACT THE INTERNAL REVENUE
SERVICE TO RECEIVE THE FEI NUMBER IN TIME TO FILE THE ANNUAL REPORT AT
1-800-829-3676 AND REQUEST FORM SS-4.
SHOULD YOUR CORPORATE MAILING ADDRESS CHANGE, YOU MUST NOTIFY THIS OFFICE IN
WRITING, TO INSURE IMPORTANT MAILINGS SUCH AS THE ANNUAL REPORT NOTICES REACH
YOU.
Should you have any questions regarding corporations, please contact this office
at the address given below.
Dana Calloway, Document Specialist
New Filings Section Letter Number: 898AO0035836
Division of Corporations - P.O. BOX 6327 -Tallahassee, Florida 32314
42
<PAGE>
STATE OF FLORIDA
Department of State
I certify the attached is a true and correct copy of the Articles of
Incorporation of FUNDS AMERICA FINANCE CORPORATION, a Florida corporation, filed
on June 30, 1998, as shown by the records of this office.
The document number of this corporation is P98000058806.
Given under my hand and the Great Seal of the State of Florida at Tallahassee,
the Capitol, this the Second day of July, 1998
/s/ Sandra B. Mortham
Secretary of State
43
<PAGE>
ARTICLES OF INCORPORATION
OF
FUNDS AMERICA FINANCE CORPORATION
The undersigned subscriber to these Articles of Incorporation, a natural person
competent to contract, hereby forms a corporation under the laws of the state of
Florida.
ARTICLE I-NAME
The name of the corporation shall be: Funds America Finance Corporation.
ARTICLE II-NATURE OF BUSINESS
This corporation may engage or transact in any or all lawful activities or
business permitted under the laws of the United States, the state of Florida or
any other state, country, territory or nation.
ARTICLE III - CAPITAL STOCK
The maximum number of shares of stock that this corporation is authorized to
have outstanding at any time one time is 500 shares of common stock having a par
value of $1.00 per share.
ARTICLE V-ADDRESS
The street address of the initial corporate address of the corporation shall
be: 2501 E. Commercial Blvd, Ste. 210, Fort Lauderdale, FL 33308.
ARTICLE V- REGISTERED AGENT
The Registered Agent for the corporation shall be: Mark Sand, whose address
is: 2501 E. Commercial Blvd., Ste 210, Fort Lauderdale, FL 33308.
ARTICLE VI-TERM OF EXISTENCE This corporation is to exist perpetually.
44
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ARTICLE VII-OFFICERS AND DIRECTORS
This corporation shall have one officer initially. The name and street
address of the officer who shall hold office for the first year of the
corporation or until successors are elected or appointed is : Mark Sand whose
address is 2501 E. Commercial Blvd, Ste. 210, Ft. Lauderdale, FL 33308.
ARTICLE VIII-SUBSCRIBER
The name of the subscriber to these Articles of Incorporation is : Mark Sand,
2501 E. Commercial Blvd, Ste. 210, Ft. Lauderdale, FL 33308.
IN WITNESS WHEREOF, THE UNDERSIGNED HAS HEREUNTO SET HIS HAND SEAL ON THE
26 DAY OF JUNE, 1998.
STATE OF FLORIDA-COUNTY OF BROWARD
The foregoing instrument was acknowledged before me this 26th day of June,
1998 by Arthur Schnur, Notary Public, state of Florida at Large.
My commission expires on: December 20, 1999.
FILED 98 JUN 30 AM 8:32
SECRETARY OF STATE
TALLAHASSEE FLORIDA
(STAMPED ON THE FIRST PAGE)
45
STATE OF FLORIDA
Department of State
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on March 26, 1999, to Articles of Incorporation for FUNDS AMERICA FINANCE
CORPORATION, a Florida corporation, as shown by the records of this office.
The document number of this corporation is P98000058806.
Given under my hand and the Great Seal of the State of Florida at Tallahassee,
the Capitol, this the Twenty-sixth day of March, 1999.
/s/ Katherine Harris
Secretary of State
46
<PAGE>
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF
FUNDS AMERICA FINANCE CORPORATION
(present name)
Pursuant to the provisions of section 607 10% Florida Statutes, this Florida
profit corporation adopts the following articles of amendment to its Articles of
incorporation:
FIRST: Amendment(s) adopted: (indicate article number(s) being amended, added
or deleted)
Please amend authorized shares from 500 shares to 25,000,000 shares, no par
value.
SECOND: If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the amendment if
not contained in the amendment itself, are as follows:
THIRD:The date of each amendment's adoption: March 23, 1999
FOURTH: Adoption of Amendment(s) (CHECK ONE) *
47
<PAGE>
[ ] The amendment(s) was/were approved by the shareholders. The number of votes
cast for the amendment(s) was/were sufficient for approval.
[ ]The amendment(s) was/were approved by the shareholders through voting groups.
The following statement must be separately provided for each voting group
entitled to vote separately on the amendment(s):
"The number of votes cast for the amendment(s) was/were sufficient
for approval by ______________________________(voting group)."
[ ]The amendment(s) was/were adopted by the board of directors without
shareholder action and shareholder action was not required.
[X ]The amendment(s) was/were adopted by the incorporators without shareholder
action and shareholder action was not required.
Signed this 23 day of March, 1999.
Signature: /s/ Mark Sand
(By the Chairman or Vice Chairman of the Board of Directors, President or other
officer if adopted by the shareholders) OR (By a director if adopted by the
directors) OR (By an incorporator if adopted by the incorporators)
Mark Sand
Incorporator
48
FUNDS AMERICA FINANCE CORPORATION
CORPORATE BYLAWS
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual shareholder meeting of the above
named corporation will be held on the 30th day of December of each year or at
such other time and place as designated by the Board of Directors of the above
named corporation provided that if said day falls on a Sunday or legal holiday,
then the meeting will be held on the first business day thereafter. Business
transacted at said meeting will include the election of directors of the above
named corporation.
Section 2. Special Meetings. Special meetings of the shareholders will be
held when directed by the President, Board of Directors, or the holders of not
less than 10 percent of all the shares entitled to be cast on any issue proposed
to be considered at the proposed special meeting; provided that said persons
sign, date and deliver to the above named corporation one or more written
demands for the meeting describing the purposes(s) for which it is to be held. A
meeting requested by shareholders of the above named corporation will be called
for a date not less than 10 nor more than 60 days after the request is made,
unless the shareholders requesting the meeting designate a later date. The call
for the meeting will be issued by the Secretary, unless the President, Board of
Directors or shareholders requesting the meeting designate another person to do
so.
Section 3. Place. Meetings of shareholders will be held at the principal
place of business of the above named corporation or at such other place as is
designated by the Board of Directors.
Section 4. Record Date and List of Shareholders. The Board of Directors of
the above named corporation shall fix the record date; however, in no event may
a record date fixed by the Board of Directors be a date prior to the date on
which the resolution fixing the record date is adopted.
After fixing a record date for a meeting, the Secretary shall prepare an
alphabetical list of the names of all the above named corporation's shareholders
who are entitled to notice of a shareholders' meeting, arranged by voting group
with the address of and the number and class and series, if any, of shares held
by each. Said list shall be available for inspection in accordance with Florida
Law.
49
<PAGE>
Section 5. Notice. Written notice stating the place, day and hour of the
meeting, and the purpose(s) for which said special meeting is called, will be
delivered not less than 10 nor more than 60 days before the meeting, either
personally or by first class mail, by or at the direction of the President, the
Secretary or the officer or persons galling the meeting to each shareholder of
record entitled to vote at such meeting. If mailed, such notice will be deemed
to be effective when deposited in the United States mail and addressed to the
shareholder at the shareholder's address as it appears on the stock transfer
books of the above named corporation, with postage thereon prepaid.
The above named corporation shall notify each shareholder, entitled to a
vote at the meeting, of the date, time and place of each annual and special
shareholders, meeting no fewer than 10 or more than 60 days before the meeting
date. Notice of a special meeting shall describe the purpose(s) for which the
meeting is called. A shareholder may waive any notice required hereunder either
before or after the date and time stated in the notice; however, the waiver must
be in writing, signed by the shareholder entitled to the notice and be delivered
to the above named corporation for inclusion in the minutes or filing in the
corporate records.
Section 6. Notice of Adjourned Meeting. When a meeting is adjourned to
another time or place, it will not be necessary to give any notice of the
adjourned meeting provided that the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken. At
such an adjourned meeting, any business may be transacted that might have been
transacted on the original date of the meeting. If, however, a new record date
for the adjourned meeting is made or is required, then, a notice of the
adjourned meeting will be given on the new record date as provided in this
Article to each shareholder of record entitled to notice of such meeting.
Section 7. Shareholder Quorum and Voting. A majority of the shares entitled
to vote, represented in person or by proxy, will constitute a quorum at a
meeting of shareholders.
If a quorum, as herein defined, is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter thereof will be the act of the shareholders unless otherwise
provided by law.
50
<PAGE>
Section 8. Voting of Shares. Each outstanding share will be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders.
Section 9. Proxies. A shareholder may vote in person or by proxy provided
that any and all proxies are executed in writing by the shareholder or his duly
authorized attorney-in-fact. No proxy will be valid after the duration of 11
months from the date thereof unless otherwise provided by the proxy.
Section 10. Action by Shareholders Without a Meeting. Any action required
or permitted by law, these bylaws, or the articles of Incorporation of the above
named corporation to be taken at any annual or special meeting of shareholders
may be taken without a meeting, without prior notice and without a vote,
provided the action is taken by the holders of outstanding stock of each voting
group entitled to vote thereon having not less than the minimum number of votes
with respect to each voting group that would be necessary to authorize or take
such action at a meeting at which all voting groups are and shares entitled to
vote thereon were present and voted, as provided by law. The foregoing action(s)
shall be evidence by written consents describing the action taken, dated and
signed by approving shareholders having the requisite number of votes of each
voting group entitled to vote. Said notice shall fairly summarize the material
features of the authorized action and if the action requires the providing of
dissenters' rights, said notice will comply with the disclosure requirements
pertaining to dissenters' of Florida Law.
ARTICLE II. DIRECTORS
Section 1. Function. All corporate powers, business and affairs will be
exercised, managed and directed under the authority of the Board of Directors.
Section 2. Qualification. Directors must be natural persons of 18 years of
age or older but need not be residents of this state and need not br
shareholders of the above named corporation.
51
<PAGE>
Section 3. Compensation. The Board of Directors will have authority to fix
the compensation for directors of the above named corporation.
Section 4. Presumption of Assent. A director of the above named corporation
who is present at a meeting of the Board of Directors at which any action on any
corporate matter is taken will be presumed to have assented to the action taken
unless such director votes against such action or abstains from voting in
respect thereto because of an asserted conflict of interest.
Section 5. Number. The above named corporation will have up to 5
directors(s).
Section 6. Election an Term. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors will hold office
until said directors will have been qualified and elected at the first annual
meeting of shareholders, or until said directors earlier resignation, removal
from office or death. At the first annual meeting of shareholders and at each
annual meeting thereafter, the shareholders will elect directors to hold office
until the next annual meeting. Each director will hold office for a term for
which said director is elected until said director's successor will have been
qualified and elected, said directors prior resignation, and directors removal
from office or said director's death.
Section 7. Vacancies. Any vacancy occurring in the Board of Directors will
be filled by the affirmative vote of a majority of the shareholders or of the
remaining directors even though less that a quorum of the Board of Directors. A
director elected to fill a vacancy will hold office only until the next election
of directors by the shareholders.
Section 8. Removal and Resignation of Directors. At a meeting of
shareholders called expressly for that purpose, any director or the entire Board
of Directors may be removed, with or without cause, by a vote of the holders of
a majority of the shares then entitled to vote at an election of directors.
A director may resign at any time by delivering written notice to the Board
of Directors or its chairman or to the above named corporation by and through
one of its officers. Such a resignation is effective when the notice is
delivered unless a later effective date is specified in said notice.
52
<PAGE>
Section 9. Quorum and Voting. A majority of the number of directors fixed
by these Bylaws shall constitute a quorum for the transaction of business. The
act of a majority of the directors present at a meeting at which a quorum is
present will be the act of the Board of Directors.
Section 10.Executive and Other Committees. A resolution adopted by by a
majority of the full Board of Directors, may designate from among its members an
executive committee and/or other committee(s) which may have and exercise all
the authority of the Board of Directors to the extent provided by law. Each
committee must have two or more members who serve at the pleasure of the Board
of Directors. The board may, by resolution adopted by a majority of the full
Board of Directors, designate one or more directors as alternate members of any
such committee who may act in the place and instead of any absent member or
members at any meeting of such committee.
Section 11. Place of Meeting. Special or regular meetings of the Board of
Directors will be held within or without the State of Florida.
Section 12. Notice, Time and Call of Meetings. Regular meetings of the
Board of Directors will be held without notice on such dates as are designated
by the Board of Directors. Written notice of the time and place of special
meetings of the Board of Directors will be given to each director by either
personal delivery, telegram or cablegram at least two (2) days before the
meeting or by notice mailed to the director at least five (5) days before the
meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting will constitute a waiver of notice of such
meeting and waiver of any and all objections to the place of the meeting, the
time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted nor the purpose of, regular or
special meetings of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
53
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A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting will be given to the directors who were not
present at the time of the adjournment.
Meetings of the Board of Directors may be called by the chairman of the
Board, the President of the above named corporation or any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 13. Action Without a Meeting. Any action required to be taken at a
meeting of the Board of Directors, or any action which may be taken at a meeting
of the Board of Directors or a committee thereof, may be taken without a meeting
if a consent in writing, setting forth the action to be so taken, signed by all
the directors, or all the members of the committee, as the case may be, is filed
in the minutes of the proceedings of the board or of the committee. Such consent
will have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
Section 1. Officers. The officers of the above named corporation will
consist of a president, a vice president, a secretary and a treasurer, each of
whom will be elected by the Board of Directors. Such other officers and
assistant officers and agents as may be deemed necessary may be elected or
appointed by the Board of Directors from time to time. Any two or more offices
may be held by the same person.
Section 2. Duties. The officers of the above named corporation will have
the following duties:
The President will be the chief executive officer of the above named
corporation, who generally and actively manages the business and affairs of the
above named corporation subject to the directions of the Board of Directors.
Said officer will preside at all meetings of the shareholders and Board of
Directors.
The Vice President will, in the event of the absence or inability of the
President to exercise his office, become acting president of the organization
with all the rights, privileges and powers as if said person had been duly
elected president.
54
<PAGE>
The Secretary will have custody of, and maintain all of the corporate
records except the financial records. Furthermore, said person will record the
minutes of all meetings of the shareholders and Board of Directors, send all
notices of meetings and perform such other duties as may be prescribed by the
Board of Directors or the President. Furthermore, said officer shall be
responsible for authenticating records of the above named corporation.
The Treasurer shall retain custody of all corporate funds and financial
records, maintain full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of shareholders and whenever else
required by the Board of Directors or the President, and perform such other
duties as may be prescribed by the Board of Directors or the President.
Section 3. Removal and Resignation of officers. An officer or agent elected
or appointed by the Board of Directors may be removed by the Board of Directors
whenever in the Board's judgment the best interests of the above named
corporation will be served thereby.
Any officer may resign at any time by delivering notice to the above named
corporation. Said resignation is effective upon delivery unless the notice
specifies a later effective date.
Any vacancy in any office may be filled by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
Section 1. Issuance. Every holder of share(s) in the above named
corporation will be entitled to have a certificate representing all share(s) to
which he is holder. No certificate representing share(s) will be issued until
such share(s) is/are fully paid.
Section 2. Form. Certificates representing share(s) in the above named
corporation will be signed by the President or Vice President and the Secretary
or an Assistant Secretary and will be sealed with the seal of the above named
corporation.
Section 3. Transfer of Stock. The above named corporation will register a
stock certificate presented for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized agent.
Section 4. Lost, Stolen, or Destroyed Certificates. If a shareholder claims
55
<PAGE>
that a stock certificate representing shares issued and recorded by the above
named corporation has been lost or destroyed, a new certificate will be issued
to said shareholder, provided that said shareholder presents an affidavit
claiming the certificate of stock to be lost, stolen or destroyed. At the
discretion of the Board of Directors, said shareholder may be required to
deposit a bond or other indemnity in such amount and with such sureties, if any,
as the board may require.
ARTICLE V. BOOKS AND RECORDS
Section 1. Books and Records. The above named corporation shall keep as
permanent records minutes of all meetings of its shareholders and Board of
Directors, a record of all actions taken by the shareholders or Board of
Directors without a meeting, and a record of all actions taken by a committee of
the Board of Directors in place of the Board of Directors on behalf of the above
named corporation. Furthermore, the above named corporation shall maintain
accurate accounting records. Furthermore, the above named corporation shall
maintain the following:
(i) a record of its shareholders in a form that permits preparation of a
list of the names and addresses of all shareholders in alphabetical order
by class of shares showing the number and series of shares held by each;
(ii) The above named corporation's Articles or Restated Articles of
Incorporation and all amendments thereto currently in effect;
(iii) The above named corporation's Bylaws or Restated Bylaws and all
amendments thereto currently in effect;
(iv) Resolutions adopted by the Board of Directors creating one or more
classes or series of shares and fixing their relative rights, preferences
and limitations if shares issued pursuant to those resolutions are
outstanding;
(v) The minutes of all shareholders, meetings and records of all actions
taken by shareholders without a meeting for the past 3 years;
(vi) Written communications to all shareholders generally or all
shareholders of a class or series within the past 3 years including the
financial statements furnished for the past 3 years to shareholders as may
be required under Florida Law;
(vii) A list of the names and business street addresses of the above named
corporation's current directors and officers; and
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(viii) A copy of the above named corporation's most recent annual report
delivered to the Department of State.
Any books, records and minutes may be in written form or in any other form
capable of being converted into written form.
Section 2. Shareholder's Inspection Rights. A shareholder of the above
named corporation (including a beneficial owner whose shares are held in a
voting trust or a nominee on behalf of a beneficial owner) may inspect and copy,
during regular business hours at the above named corporation's, principal
office, any of the corporate records required to be kept pursuant to Section 1,
of this Article of these Bylaws, if said shareholder gives the above named
corporation written notice of such demand at least 5 business days before the
date on which the shareholder wishes to inspect and copy. The foregoing right of
inspection is subject however to such other restrictions as are applicable under
Florida Law, including, but not limited to, the inspection of certain records
being permitted only if the demand for inspection is made in good faith and for
a proper purpose (as well as the shareholder describing with reasonable
particularity the purpose and records desired to be inspected and such records
are directly connected with the purpose).
Section 3. Financial Information. Unless modified by resolution of the
shareholders within 120 days of the close of each fiscal year, the above named
corporation shall furnish the shareholders annual financial statements which may
be consolidated or combined statements of the above named corporation and one or
more of its subsidiaries as appropriate, that include a balance sheet as of the
end of the fiscal year, an income statement for that year, and a statement of
cash flow for that year. If financial statements are prepared on the basis of
generally accepted accounting principles, the annual financial statements must
also be prepared on that basis. If the annual financial statements are reported
on by a public accountant, said accountant's report shall accompany said
statements. If said annual financial statements are not reported on by a public
accountant, then the statements shall be accompanied by a statement of the
president or the person responsible for the above named corporation's accounting
records (a) stating his reasonable belief whether the statements were prepared
on the basis of generally accepted accounting principles and if not, describing
the basis of preparation; and (b) describing any respects in which the
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statements were not prepared on a basis of accounting consistent with the
statements prepared for the preceding year. The annual financial statements
shall be mailed to each shareholder of the above named corporation within 120
days after the close of each fiscal year or within such additional time as is
reasonably necessary to enable the above named corporation to prepare same, if,
for reasons beyond the above named corporation's control, said annual financial
statement cannot be prepared within the prescribed period.
Section 4. other Reports to Shareholders. The above named corporation shall
report any indemnification or advanced expenses to any director, officer,
employee, or agent (for indemnification relating to litigation or- threatened
litigation) in writing to the shareholders with or before the notice of the next
shareholders, meeting, or prior to such meeting if the indemnification or
advance occurs after the giving of such notice but prior to the time such
meeting is held, which report shall include a statement specifying the persons
paid, the amounts paid, and the nature and status, at the time of such payment,
of the litigation or threatened litigation.
Additionally, if the corporation issues or authorizes the issuance of
shares for promises to render services in the future of the above named
corporation shall report in writing to the shareholders the number of shares
authorized or issued and the consideration received by the above named
corporation, with or before the notice of the next shareholders, meeting.
ARTICLE VI. DIVIDENDS
The Board of Directors of the above named corporation may, from time to
time declare dividends on its shares in cash, property or its own shares, except
when the above named corporation is insolvent or when the payment thereof would
render the above named corporation insolvent, subject to Florida Law.
ARTICLE VII. CORPORATE SEAL
The Board of Directors will provide a corporate seal which will be in
circular form embossing in nature and stating "Corporate Seal", "Florida", year
of above named incorporation and name of said above named corporation.
ARTICLE VIII. AMENDMENT
These Bylaws may be altered, amended or repealed, and altered amended or
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new Bylaws may be adopted by a majority vote of the full Board of Directors.
ARTICLE IX.CORPORATE INDEMNIFICATION PLAN
The above named corporation shall indemnify ant person:
(1) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by, or in the
right of, the above named corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against such costs and expenses, and to the
extent and in the manor provided under Florida Law.
(2) Who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right of the above
named corporation to procure a judgement in its favor by reason of the fact that
he is or was a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against such costs and
expenses, and to the extent and in the manner provided under Florida Law.
The extent, amount, and eligibility for the indemnification provided herein
will be made by the Board of Directors. Said determinations will be made by a
majority vote to a quorum consisting of directors who were not parties to such
action, suit, or proceeding or by the shareholders by a majority vote of a
quorum consisting of shareholders who were not parties to such action, suit, or
proceeding.
The above named corporation will have the power to make further
indemnification as provided under Florida Law except to indemnify any person
against gross negligence or willful misconduct.
The above named corporation is further authorized to purchase and maintain
insurance for indemnification of any person as provided herein and to the extent
provided under Florida Law.
59
Employment Agreement
This Employment Agreement (the "Agreement") is entered into by and among
Mark Sand, an individual residing in the State of Florida (the "Employed
Executive") and Funds America Finance Corporation, a Delaware corporation (the
"Company"), the Employed Executive and the Company being collectively referred
to as the "Parties" and generically as a "Party".
Preamble:
WHEREAS, the Company's Board of Directors is of the opinion that in
conjunction with development of the Company's future plans, it must assure
itself of the services of an experienced chief operating officer on a long term
basis and in conjunction therewith, desires to assure itself of the services of
the Employed Executive, who currently serves as its vice president, treasurer,
director, chief financial officer and chief operating officer; and
WHEREAS, the Employed Executive is thoroughly knowledgeable with all
aspects of the Company's operations and plans; and
WHEREAS, the Employed Executive is agreeable to serving as the senior vice
president and chief operating officer, on the terms and conditions hereinafter
set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten Dollars and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
This Agreement shall be for an initial term of two years, commencing on the
1st day of May, 1999.
1.2 Renewals.
This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with written notice of its
election not to renew ("Termination Election Notice") on or before the 180th day
prior to termination of the then current term.
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1.3 Earlier Termination.
The Company shall have the right to terminate this Agreement prior to the
expiration of its Term, or of any renewals thereof, subject to the provisions of
Section 1.4:
(a) For Cause:
(1)The Company may terminate the Employed Executive's employment under this
Agreement at any time for cause.
(2)Such termination shall be evidenced by written notice thereof to the
Employed Executive, which notice shall specify the cause for termination.
(3)For purposes hereof, the term "cause" shall mean the inability of the
Employed Executive, through sickness or other incapacity, to perform his duties
under this Agreement for a period in excess of one month, the refusal of the
Employed Executive Designee to follow the directions of the Company's Board of
Directors; dishonesty; theft; or conviction of a crime.
(b) Discontinuance of Business:
In the event that the Company discontinues operating its business, this
Agreement shall terminate as of the last day of the month on which the Company
ceases operation with the same force and effect as if such last day of the month
were originally set as the termination date hereof.
(c) Death:
This Agreement shall terminate immediately on the death of the Employed
Executive.
1.4 Final Settlement.
Upon termination of this Agreement and payment to the Employed Executive of
all amounts due him hereunder, the Employed Executive or his representative
shall execute and deliver to the Company on a form prepared by the Company a
receipt for such sums and a release of all claims, except such claims as may
have been submitted pursuant to the terms of this Agreement and which remain
unpaid, and, shall forthwith tender to the Company all records, manuals and
written procedures, as may be desired by the Company for the continued conduct
of its business.
Article Two
Scope of Employment
2.1 Retention.
The Company hereby hires the Employed Executive and the Employed Executive
hereby accepts such employment, in accordance with the terms, provisions and
conditions of this Agreement.
2.2 General Description of Duties.
(a)The Employed Executive shall perform the duties generally associated with the
position of a member of a corporation's board of directors and as a
corporation's chief operating officer.
(b)Without limiting the generality of the foregoing, the Employed Executive
shall supervise all of the Company's day to day business operations and the
Company's other executive officers (other than the President), subject only to
compliance with the directions of the Company's President and board of
directors, applicable laws and fiduciary obligations to the Company.
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2.3 Status.
(a)Throughout the term of this Agreement, the Employed Executive shall serve as
a member of the Company's board of directors and as the Company's senior vice
president and chief operating officer.
(b)In the event that he is not elected to such position, then, at the option of
the Employed Executive, this Agreement will be deemed terminated, effective as
of the earliest time that it can be reasonably determined that such election
will not take place. 2.4 Exclusivity.
The Employed Executive shall, unless specifically otherwise authorized by
the Company's Chairman, on a case by case basis, devote his business time
exclusively to the affairs of the Company.
Article Three
Compensation
3.1 Compensation.
As consideration for the Employed Executive's future services to the
Company and for his entry into this Agreement, the Company hereby grants the
Employed Executive the following compensation:
(a)An annual bonus payable in shares of the Company's common stock, determined
by dividing 3.84% of the Company's net, pre-tax profits for the subject calendar
year by the average bid price for the Company's common stock at during the last
five trading days prior to the end of the last day of each year and the initial
five days of the new year, provided, however, that this Agreement shall have
been in effect for at least one half of the subject year and that the Company's
common stock shall have been actively trading on a public market within the
United states for a period of at least six months.
(b)An annual cash bonus equal to 3.84% of the Company's pre-tax profits for the
subject calendar year, provided, however, that this Agreement shall have been in
effect for at least one half of the subject year.
(c)A guaranteed minimum weekly draw against the annual bonus described above, in
a sum equal to 1/52 of the bonus that would have been payable during the
preceding 365 days, had this Agreement then been in effect; provided, however,
that the minimum weekly draw shall not be less that $500 unless the Company has
not generated net, pre-tax profits adequate to make such payment and comparable
payments due to the Company's other executive officers, in which case the
payment will be waived.
3.2 Exchange of Assets for Common Stock with the Employed Executive
(a)The Company hereby exchanges 2,000,000 shares of its authorized but
heretofore unissued common stock, $0.001 per share par value, with the Employed
Executive pursuant to the tax free reorganization provisions of Section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the "IRC Code"),
for the series of secured third party notes more particularly described in
exhibit 3.2 annexed hereto and made a part hereof (the "Notes"), which the
Employed Executive hereby conveys to the Company.
(b)The Parties hereby agree that the reasonable current value of the Notes is
$100,000 and the Company hereby represents and warrants to the Employed
Executive that the shares being issued will, upon issuance, constitute in excess
of 80% of the Company's outstanding common stock.
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(c)In the event that this Employment Agreement is terminated by the Company
without the Employed Executive's prior written consent, or, by the Employed
Executive as a result of the failure of the Company to continue to elect him as
a member of its Board of Directors and as its senior vice president and chief
operating officer, then the Employed Executive shall have the right to exchange
the common stock issued by the Company in exchange for the Notes (or an
equivalent amount of the Company's common stock) with the Company for the sum of
$100,000 plus interest from the date of the original exchange, compounded
annually, at the annual rate of 7%.
3.3 Exemption From Registration
(a)The Employed Executive hereby represents, warrants, covenants and
acknowledges that:
(1)The stock to be issued as compensation under Section 3.1 and in exchange
for the Notes pursuant to Section 3.2 of this Agreement (the "Stock") will be
issued without registration under the provisions of Section 5 of the Securities
Act of 1933, as amended (the "Act") or the securities regulatory laws and
regulations of the State of Florida (the "Florida Securities Act") pursuant to
exemptions provided pursuant to Section 4(2) of the Act and comparable
provisions of the Florida Securities Act, including, without limitation, Section
517.061(11), Florida Statutes;
(2)The Employed Executive shall be responsible, at the Company's expense,
for preparing and filing any required reports concerning this transaction with
the Florida Securities Division and payment of any required filing fee;
(3)All of the Stock will bear legends restricting its transfer, sale,
conveyance or hypothecation unless such Stock is either registered under the
provisions of Section 5 of the Act and under the Florida Securities Act, or an
opinion of legal counsel, in form and substance satisfactory to legal counsel to
the Company is provided by the Employed Executive to the effect that such
registration is not required as a result of applicable exemptions therefrom;
(4)The Company's transfer agent shall be instructed not to transfer any of
the Stock unless the Company advises it that such transfer is in compliance with
all applicable laws;
(5)The Employed Executive is acquiring the Stock for his own account, for
investment purposes only, and not with a view to further sale or distribution;
and
(6)The Employed Executive or his advisors have examined the Company's books
and records and have questioned the Company's officers and directors as to such
matters involving the Company as the Employed Executive deemed appropriate.
(b)Notwithstanding the provisions of Section 3.3(a), the Stock shall, to the
extent legally possible based on the Company's ability to meet applicable legal
requirements, be listed with any stock exchange or securities market on which
the Company's common stock is admitted to trading.
3.4 Benefits
The Employed Executive shall be entitled to a benefit package equal to the
most favorable benefit package provided by the Company or its subsidiaries to
any of its employees, officers, directors, consultants or agents.
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3.5 Indemnification
The Company will defend, indemnify and hold the Employed Executive harmless
from liabilities, suits, judgments, fines, penalties or disabilities, including
expenses associated directly, therewith (e.g. legal fees, court costs,
investigative costs, witness fees, etc.) resulting from any reasonable actions
in good faith on behalf of the Company, to the fullest extent legally permitted,
and in conjunction therewith, shall assure that all required expenditures are
made by the Company in a manner making it unnecessary for the Employed Executive
to incur any out of pocket expenses; provided, however, that the Employed
Executive permits the Company to select and supervise all personnel involved in
such defense and that the Employed Executive waive any conflicts of interest
that such personnel may have as a result of also representing the Company or
other Company personnel and agrees to hold them harmless from any matters
involving such representation, except such as involve fraud or bad faith.
Article Four
Special Covenants
4.1 Confidentiality.
(a)The Employed Executive acknowledges that, in and as a result of his
employment hereunder, he will be developing for the Company, making use of,
acquiring and/or adding to, confidential information of special and unique
nature and value relating to such matters as the Company's trade secrets,
systems, procedures, manuals, confidential reports and lists of clients and
lenders; consequently, as material inducement to the entry into this Agreement
by the Company, the Employed Executive hereby covenants and agrees that he shall
not, at anytime during or following the terms of his employment hereunder,
directly or indirectly, personally use, divulge or disclose, for any purpose
whatsoever, any of such confidential information which has been obtained by or
disclosed to him as a result of his employment by the Company, or the Company's
affiliates.
(b)In the event of a breach or threatened breach by the Employed Executive of
any of the provisions of this Section 4.1, the Company, in addition to and not
in limitation of any other rights, remedies or damages available to the Company,
whether at law or in equity, shall be entitled to a permanent injunction in
order to prevent or to restrain any such breach by the Employed Executive, or by
the Employed Executive's partners, agents, representatives, servants, employers,
employees, affiliates and/or any and all persons directly or indirectly acting
for or with him.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
the Company as a result of a breach by the Employed Executive of the covenants
or agreements contained in this Article Four, and in view of the lack of an
adequate remedy at law to protect the Company's interests, the Employed
Executive hereby covenants and agrees that the Company shall have the following
additional rights and remedies in the event of a breach hereof:
(a)The Employed Executive hereby consents to the issuance of a permanent
injunction enjoining him from any violations of the covenants set forth in
Section 4.1 hereof; and
(b)Because it is impossible to ascertain or estimate the entire or exact cost,
damage or injury which the Company may sustain prior to the effective
enforcement of such injunction, the Employed Executive hereby covenants and
agrees to pay over to the Company, in the event he violates the covenants and
agreements contained in Section 4.2 hereof, the greater of:
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(i)Any payment or compensation of any kind received by him because of
such violation before the issuance of such injunction, or
(ii)The sum of One Thousand ($1,000.00) Dollars per violation, which sum
shall be liquidated damages, and not a penalty, for the injuries suffered by the
Company as a result of such violation, the Parties hereto agreeing that such
liquidated damages are not intended as the exclusive remedy available to the
Company for any breach of the covenants and agreements contained in this Article
Four, prior to the issuance of such injunction, the Parties recognizing that the
only adequate remedy to protect the Company from the injury caused by such
breaches would be injunctive relief.
4.3 Cumulative Remedies.
The Employed Executive hereby irrevocably agrees that the remedies
described in Section 4.3 hereof shall be in addition to, and not in limitation
of, any of the rights or remedies to which the Company is or may be entitled to,
whether at law or in equity, under or pursuant to this Agreement.
4.4 Acknowledgment of Reasonableness.
(a)The Employed Executive hereby represents, warrants and acknowledges that he
has carefully read and considered the provisions of this Article Four and,
having done so, agrees that the restrictions set forth herein are fair and
reasonable and are reasonably required for the protection of the interests of
the Company, its officers, directors and other employees; consequently, in the
event that any of the above-described restrictions shall be held unenforceable
by any court of competent jurisdiction, the Employed Executive hereby covenants,
agrees and directs such court to substitute a reasonable judicially enforceable
limitation in place of any limitation deemed unenforceable and, the Employed
Executive hereby covenants and agrees that if so modified, the covenants
contained in this Article Four shall be as fully enforceable as if they had been
set forth herein directly by the Parties.
(b)In determining the nature of this limitation, the Employed Executive hereby
acknowledges, covenants and agrees that it is the intent of the Parties that a
court adjudicating a dispute arising hereunder recognize that the Parties desire
that this covenant not to compete be imposed and maintained to the greatest
extent possible.
4.5 Unauthorized Acts.
The Employed Executive hereby covenants and agrees that he will not do any
act or incur any obligation on behalf of the Company of any kind whatsoever,
except as authorized by the Company's Board of Directors.
Article Five
Miscellaneous
5.1 Notices.
(a)All notices, demands or other communications hereunder shall be in writing,
and unless otherwise provided, shall be deemed to have been duly given on the
first business day after mailing by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
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To the Employed Executive:
Mark Sand
5555 North Ocean Boulevard; Fort Lauderdale, Florida 33308
To the Company:
Charles Scheuerman, President
Funds America Finance Corporation
2501 East Commercial Boulevard, Suite 210; Fort Lauderdale, Florida 33308 with a
copy by facsimile transmission and e-mail directed to (954) 489-0500 and
[email protected], respectively or to such other addresses, fax numbers or e-mail
addresses as may be reflected from time to time in Company filings displayed on
the Securities and Exchange Commission's EDGAR web site.
or to such other address or to such other person as any party shall designate to
the other for such purpose in the manner hereinafter set forth.
(b)The Parties acknowledge that The Yankee Companies, Inc., a Florida
corporation which serves as a consultant to the Company ("Yankees") has acted as
scrivener for the Parties in this transaction using forms developed for it by
its own legal counsel and business advisors and that because it is neither a law
firm nor a regulated entity and because of the inherent conflict of interests
involved, it has required as a condition to the use of this form that all of the
Parties retain independent counsel to review this Agreement on their behalf.
5.2 Amendment.
No modification, waiver, amendment, discharge or change of this Agreement
shall be valid unless the same is in writing and signed by the Party against
which the enforcement of said modification, waiver, amendment, discharge or
change is sought.
5.3 Merger.
(a)This instrument contains all of the understandings and agreements of the
Parties with respect to the subject matter discussed herein.
(b)All prior agreements whether written or oral, are merged herein and shall be
of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or the
application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the State
of Florida and any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Broward County, Florida.
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5.7 Litigation.
(a)In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the prevailing Party
shall be entitled to recover its costs and expenses, including reasonable
attorneys' fees up to and including all negotiations, trials and appeals,
whether or not any formal proceedings are initiated.
(b)In the event of any dispute arising under this Agreement, or the negotiation
thereof or inducements to enter into the Agreement, the dispute shall, at the
request of any Party, be exclusively resolved through the following procedures:
(1)(A)First, the issue shall be submitted to mediation before a mediation
service in Broward County, Florida to be selected by lot from six alternatives
to be provided, three by the Company and three by the Employed Executive.
(B)The mediation efforts shall be concluded within ten business days
after their initiation unless the Parties unanimously agree to an extended
mediation period;
(2)In the event that mediation does not lead to a resolution of the dispute
then at the request of any Party, the Parties shall submit the dispute to
binding arbitration before an arbitration service located in Broward County,
Florida to be selected by lot, from six alternatives to be provided, three by
the Company and three by the Employed Executive.
(3)(A)1.Expenses of mediation shall be borne by the Company, if
successful.
2.Expenses of mediation, if unsuccessful and of arbitration shall
be borne by the Party or Parties against whom the arbitration decision is
rendered.
(B)If the terms of the arbitral award do not establish a prevailing
Party, then the expenses of unsuccessful mediation and arbitration shall be
borne equally by the Parties.
5.8 Benefit of Agreement.
(a)This Agreement may not be assigned by the Employed Executive without the
prior written consent of the Company.
(b)Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or the
intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
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5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or cause
to be done, executed or acknowledged or delivered and to perform all such acts
and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in the Company,
with privity as to the Company strictly limited to the Company.
5.13 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b)Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for aesthetic
purposes, prepare a fully executed original version of this Agreement, which
shall be the document eventually filed with the Securities and Exchange
Commission if the Company's plan to become a public company are ever
effectuated.
5.14 License.
(a) This Agreement is the property of Yankees (as that term has been
hereinbefore defined).
(b)The use hereof by the Parties is authorized hereby solely for purposes of
this transaction and, the use of this form of agreement or of any derivation
thereof without Yankees's prior written permission is prohibited.
* * *
In Witness Whereof, the Parties have executed this Agreement, effective as
of the 12 day of April, 1999.
Signed, Sealed & Delivered
In Our Presence
Funds America Finance Corporation
- --------------------------
/s/ Charles Scheuerman
__________________________ By: ________________________
Charles Scheuerman, President
(CORPORATE SEAL) /s/ Janet Leyva
Attest: __________________________
Janet Leyva, Secretary
Employed Executive
- --------------------------
/s/ Mark Sand
- -------------------------- ------------------------
Mark Sand
68
Employment Agreement
This Employment Agreement (the "Agreement") is entered into by and among
Kim A. Naimoli, an individual residing in the State of Florida (the "Employed
Executive") and Funds America Finance Corporation, a Florida corporation (the
"Company"), the Employed Executive and the Company being collectively referred
to as the "Parties" and generically as a "Party".
Preamble:
WHEREAS, the Company's Board of Directors is of the opinion that in
conjunction with development of the Company's future plans, it must assure
itself of the services of an experienced chief executive officer on a long term
basis and in conjunction therewith, desires to assure itself of the services of
the Employed Executive, who currently serves as its president, director and
chief executive officer, and
WHEREAS, the Employed Executive is thoroughly knowledgeable with all
aspects of the Company's operations and plans; and
WHEREAS, the Employed Executive is agreeable to serving as the Company's
president and chief executive officer, on the terms and conditions hereinafter
set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten Dollars and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
This Agreement shall be for an initial term of two years, commencing on the
1st day of June, 1999.
1.2 Renewals.
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This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with written notice of its
election not to renew ("Termination Election Notice") on or before the 180th day
prior to termination of the then current term.
1.3 Earlier Termination.
The Company shall have the right to terminate this Agreement prior to the
expiration of its Term, or of any renewals thereof, subject to the provisions of
Section 1.4:
(a) For Cause:
(1)The Company may terminate the Employed Executive's employment under this
Agreement at any time for cause.
(2)Such termination shall be evidenced by written notice thereof to the
Employed Executive, which notice shall specify the cause for termination.
(3)For purposes hereof, the term "cause" shall mean the inability of the
Employed Executive, through sickness or other incapacity, to perform her duties
under this Agreement for a period in excess of one month, the refusal of the
Employed Executive Designee to follow the directions of the Company's Board of
Directors; dishonesty; theft; or conviction of a crime.
(b) Discontinuance of Business:
In the event that the Company discontinues operating its business, this
Agreement shall terminate as of the last day of the month on which the Company
ceases operation with the same force and effect as if such last day of the month
were originally set as the termination date hereof.
(c) Death:
This Agreement shall terminate immediately on the death of the Employed
Executive.
1.4 Final Settlement.
Upon termination of this Agreement and payment to the Employed Executive of
all amounts due her hereunder, the Employed Executive or her representative
shall execute and deliver to the Company on a form prepared by the Company a
receipt for such sums and a release of all claims, except such claims as may
have been submitted pursuant to the terms of this Agreement and which remain
unpaid, and, shall forthwith tender to the Company all records, manuals and
written procedures, as may be desired by the Company for the continued conduct
of its business.
Article Two
Scope of Employment
2.1 Retention.
The Company hereby hires the Employed Executive and the Employed Executive
hereby accepts such employment, in accordance with the terms, provisions and
conditions of this Agreement.
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2.2 General Description of Duties.
(a)The Employed Executive shall perform the duties generally associated with the
position of a member of a corporation's board of directors and as a
corporation's chief executive officer.
(b)Without limiting the generality of the foregoing, the Employed Executive
shall supervise all other executive officers of the Company, subject only to
compliance with the directions of the Company's board of directors, applicable
laws and fiduciary obligations to the Company.
2.3 Status.
(a)Throughout the term of this Agreement, the Employed Executive shall serve as
a member of the Company's board of directors and as the Company's president and
chief executive officer.
(b)In the event that she is not elected to such position, then, at the option of
the Employed Executive, this Agreement will be deemed terminated, effective as
of the earliest time that it can be reasonably determined that such election
will not take place.
2.4 Exclusivity.
The Employed Executive shall, unless specifically otherwise authorized by
the Company's Chairman, on a case by case basis, devote her business time
exclusively to the affairs of the Company.
Article Three
Compensation
3.1 Compensation.
As consideration for the Employed Executive's future services to the
Company and for her entry into this Agreement, the Company hereby grants the
Employed Executive the following compensation:
(a)The sum of $10.00 in consideration for entering into this Agreement
(b)An annual bonus payable in shares of the Company's common stock, determined
by dividing 3.84% of the Company's net, pre-tax profits for the subject calendar
year by the average bid price for the Company's common stock at during the last
five trading days prior to the end of the last day of each year and the initial
five days of the new year, provided, however, that this Agreement shall have
been in effect for at least one half of the subject year and that the Company's
common stock shall have been actively trading on a public market within the
United states for a period of at least six months.
(c)An annual cash bonus equal to 3.84% of the Company's pre-tax profits for the
subject calendar year, provided, however, that this Agreement shall have been in
effect for at least one half of the subject year.
(d)A guaranteed minimum weekly draw against the annual bonus described above, in
a sum equal to 1/52 of the bonus that would have been payable during the
preceding 365 days, had this Agreement then been in effect; provided, however,
that the minimum weekly draw shall not be less that $500 unless the Company has
not generated net, pre-tax profits adequate to make such payment and comparable
payments due to the Company's other executive officers, in which case the
payment will be waived.
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3.2 Exemption From Registration
(a)The Employed Executive hereby represents, warrants, covenants and
acknowledges that:
(1)The stock to be issued as compensation under Section 3.1 of this
Agreement (the "Stock") will be issued without registration under the provisions
of Section 5 of the Securities Act of 1933, as amended (the "Act") or the
securities regulatory laws and regulations of the State of Florida (the "Florida
Securities Act") pursuant to exemptions provided pursuant to Section 4(2) of the
Act and comparable provisions of the Florida Securities Act;
(2)The Employed Executive shall be responsible, at the Company's expense,
for preparing and filing any required reports concerning this transaction with
the Florida Securities Division and payment of any required filing fee;
(3)All of the Stock will bear legends restricting its transfer, sale,
conveyance or hypothecation unless such Stock is either registered under the
provisions of Section 5 of the Act and under the Florida Securities Act, or an
opinion of legal counsel, in form and substance satisfactory to legal counsel to
the Company is provided by the Employed Executive to the effect that such
registration is not required as a result of applicable exemptions therefrom;
(4)The Company's transfer agent shall be instructed not to transfer any of
the Stock unless the Company advises it that such transfer is in compliance with
all applicable laws;
(5)The Employed Executive is acquiring the Stock for her own account, for
investment purposes only, and not with a view to further sale or distribution;
and
(6)The Employed Executive or her advisors have examined the Company's books
and records and have questioned the Company's officers and directors as to such
matters involving the Company as the Employed Executive deemed appropriate.
(b)Notwithstanding the provisions of Section 3.2(a), the shares reserved for
exercise of the options described in Section 3.1 shall, to the extent legally
possible based on the Company's ability to meet applicable legal requirements,
be listed with any stock exchange or securities market on which the Company's
common stock is admitted to trading.
3.3 Benefits
The Employed Executive shall be entitled to a benefit package equal to the
most favorable benefit package provided by the Company or its subsidiaries to
any of its employees, officers, directors, consultants or agents.
3.4 Indemnification
The Company will defend, indemnify and hold the Employed Executive harmless
from liabilities, suits, judgments, fines, penalties or disabilities, including
expenses associated directly, therewith (e.g. legal fees, court costs,
investigative costs, witness fees, etc.) resulting from any reasonable actions
in good faith on behalf of the Company, to the fullest extent legally permitted,
and in conjunction therewith, shall assure that all required expenditures are
made by the Company in a manner making it unnecessary for the Employed Executive
to incur any out of pocket expenses; provided, however, that the Employed
Executive permits the Company to select and supervise all personnel involved in
such defense and that the Employed Executive waive any conflicts of interest
that such personnel may have as a result of also representing the Company or
other Company personnel and agrees to hold them harmless from any matters
involving such representation, except such as involve fraud or bad faith.
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Article Four
Special Covenants
4.1 Confidentiality.
(c)The Employed Executive acknowledges that, in and as a result of her
employment hereunder, she will be developing for the Company, making use of,
acquiring and/or adding to, confidential information of special and unique
nature and value relating to such matters as the Company's trade secrets,
systems, procedures, manuals, confidential reports and lists of clients and
lenders; consequently, as material inducement to the entry into this Agreement
by the Company, the Employed Executive hereby covenants and agrees that she
shall not, at anytime during or following the terms of her employment hereunder,
directly or indirectly, personally use, divulge or disclose, for any purpose
whatsoever, any of such confidential information which has been obtained by or
disclosed to her as a result of her employment by the Company, or the Company's
affiliates.
(d)In the event of a breach or threatened breach by the Employed Executive of
any of the provisions of this Section 4.1, the Company, in addition to and not
in limitation of any other rights, remedies or damages available to the Company,
whether at law or in equity, shall be entitled to a permanent injunction in
order to prevent or to restrain any such breach by the Employed Executive, or by
the Employed Executive's partners, agents, representatives, servants, employers,
employees, affiliates and/or any and all persons directly or indirectly acting
for or with her.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
the Company as a result of a breach by the Employed Executive of the covenants
or agreements contained in this Article Four, and in view of the lack of an
adequate remedy at law to protect the Company's interests, the Employed
Executive hereby covenants and agrees that the Company shall have the following
additional rights and remedies in the event of a breach hereof: (a)The Employed
Executive hereby consents to the issuance of a permanent injunction enjoining
her from any violations of the covenants set forth in Section 4.1 hereof; and
(b)Because it is impossible to ascertain or estimate the entire or exact cost,
damage or injury which the Company may sustain prior to the effective
enforcement of such injunction, the Employed Executive hereby covenants and
agrees to pay over to the Company, in the event she violates the covenants and
agreements contained in Section 4.2 hereof, the greater of:
(i)Any payment or compensation of any kind received by her because of
such violation before the issuance of such injunction, or
(ii)The sum of One Thousand ($1,000.00) Dollars per violation, which sum
shall be liquidated damages, and not a penalty, for the injuries suffered by the
Company as a result of such violation, the Parties hereto agreeing that such
liquidated damages are not intended as the exclusive remedy available to the
Company for any breach of the covenants and agreements contained in this Article
Four, prior to the issuance of such injunction, the Parties recognizing that the
only adequate remedy to protect the Company from the injury caused by such
breaches would be injunctive relief.
4.3 Cumulative Remedies.
The Employed Executive hereby irrevocably agrees that the remedies
described in Section 4.3 hereof shall be in addition to, and not in limitation
of, any of the rights or remedies to which the Company is or may be entitled to,
whether at law or in equity, under or pursuant to this Agreement.
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4.4 Acknowledgment of Reasonableness.
(a)The Employed Executive hereby represents, warrants and acknowledges that she
has carefully read and considered the provisions of this Article Four and,
having done so, agrees that the restrictions set forth herein are fair and
reasonable and are reasonably required for the protection of the interests of
the Company, its officers, directors and other employees; consequently, in the
event that any of the above-described restrictions shall be held unenforceable
by any court of competent jurisdiction, the Employed Executive hereby covenants,
agrees and directs such court to substitute a reasonable judicially enforceable
limitation in place of any limitation deemed unenforceable and, the Employed
Executive hereby covenants and agrees that if so modified, the covenants
contained in this Article Four shall be as fully enforceable as if they had been
set forth herein directly by the Parties.
(b)In determining the nature of this limitation, the Employed Executive hereby
acknowledges, covenants and agrees that it is the intent of the Parties that a
court adjudicating a dispute arising hereunder recognize that the Parties desire
that this covenant not to compete be imposed and maintained to the greatest
extent possible.
4.5 Unauthorized Acts.
The Employed Executive hereby covenants and agrees that she will not do any
act or incur any obligation on behalf of the Company of any kind whatsoever,
except as authorized by the Company's Board of Directors.
Article Five
Miscellaneous
5.1 Notices.
(a)All notices, demands or other communications hereunder shall be in writing,
and unless otherwise provided, shall be deemed to have been duly given on the
first business day after mailing by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
To the Employed Executive:
Kim A. Naimoli
1400 Bayview Drive; Fort Lauderdale, Florida 33304; telephone number (954)
564-1400 and social security number 268-541-1994
To the Company:
Mark Sand, Senior Vice President
Funds America Finance Corporation
2501 East Commercial Boulevard, Suite 210; Fort Lauderdale, Florida 33308 with a
copy by facsimile transmission and e-mail directed to (954) 489-0500 and
[email protected], respectively or to such other addresses, fax numbers
or e-mail addresses as may be reflected from time to time in Company filings
displayed on the Securities and Exchange Commission's EDGAR web site.
or to such other address or to such other person as any party shall designate to
the other for such purpose in the manner hereinafter set forth. (b)The Parties
acknowledge that The Yankee Companies, Inc., a Florida corporation which serves
as a consultant to the Company ("Yankees") has acted as scrivener for the
Parties in this transaction using forms developed for it by its own legal
counsel and business advisors and that because it is neither a law firm nor a
regulated entity and because of the inherent conflict of interests involved, it
has required as a condition to the use of this form that all of the Parties
retain independent counsel to review this Agreement on their behalf.
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5.2 Amendment.
No modification, waiver, amendment, discharge or change of this Agreement
shall be valid unless the same is in writing and signed by the Party against
which the enforcement of said modification, waiver, amendment, discharge or
change is sought.
5.3 Merger.
(a)This instrument contains all of the understandings and agreements of the
Parties with respect to the subject matter discussed herein.
(b)All prior agreements whether written or oral, are merged herein and shall be
of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or the
application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the State
of Florida and any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Broward County, Florida.
5.7 Litigation.
(a)In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the prevailing Party
shall be entitled to recover its costs and expenses, including reasonable
attorneys' fees up to and including all negotiations, trials and appeals,
whether or not any formal proceedings are initiated.
(b)In the event of any dispute arising under this Agreement, or the negotiation
thereof or inducements to enter into the Agreement, the dispute shall, at the
request of any Party, be exclusively resolved through the following procedures:
(1)(A)First, the issue shall be submitted to mediation before a mediation
service in Broward County, Florida to be selected by lot from six alternatives
to be provided, three by the Company and three by the Employed Executive.
(B)The mediation efforts shall be concluded within ten business days
after their initiation unless the Parties unanimously agree to an extended
mediation period;
(2)In the event that mediation does not lead to a resolution of the dispute
then at the request of any Party, the Parties shall submit the dispute to
binding arbitration before an arbitration service located in Broward County,
Florida to be selected by lot, from six alternatives to be provided, three by
the Company and three by the Employed Executive.
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(3)(A)1.Expenses of mediation shall be borne by the Company, if
successful.
2.Expenses of mediation, if unsuccessful and of arbitration shall
be borne by the Party or Parties against whom the arbitration decision is
rendered.
(B)If the terms of the arbitral award do not establish a prevailing
Party, then the expenses of unsuccessful mediation and arbitration shall be
borne equally by the Parties.
5.8 Benefit of Agreement.
(a)This Agreement may not be assigned by the Employed Executive without the
prior written consent of the Company.
(b)Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or the
intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or cause
to be done, executed or acknowledged or delivered and to perform all such acts
and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in the Company,
with privity as to the Company strictly limited to the Company.
5.13 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b)Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for aesthetic
purposes, prepare a fully executed original version of this Agreement, which
shall be the document eventually filed with the Securities and Exchange
Commission if the Company's plan to become a public company are ever
effectuated.
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5.14 License.
(a) This Agreement is the property of Yankees (as that term has been
hereinbefore defined).
(b)The use hereof by the Parties is authorized hereby solely for purposes of
this transaction and, the use of this form of agreement or of any derivation
thereof without Yankees's prior written permission is prohibited.
* * *
In Witness Whereof, the Parties have executed this Agreement, effective as
of the 7th day of July, 1999.
Signed, Sealed & Delivered
In Our Presence
Funds America Finance Corporation
- --------------------------
/s/ Mark Sand
__________________________ By: ________________________
Mark Sand, Senior Vice President
(CORPORATE SEAL)
/s/ Janis Dorony
Attest: __________________________
Janis Dorony, Secretary
Employed Executive
- --------------------------
/s/ Kim A. Namoli
- -------------------------- ------------------------
Kim A. Naimoli
77
Employment Agreement
This Employment Agreement (the "Agreement") is entered into by and among
Janis M. Dorony, an individual residing in the State of Florida (the "Employed
Executive") and Funds America Finance Corporation, a Florida corporation (the
"Company"), the Employed Executive and the Company being collectively referred
to as the "Parties" and generically as a "Party".
Preamble:
WHEREAS, the Company's Board of Directors desires to formalize its existing
arrangements with and future employment of the Employed Executive, and
WHEREAS, the Employed Executive is agreeable to serving as the Company's
secretary and chief administrative officer, on the terms and conditions
hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten Dollars and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
This Agreement shall be for an initial term of two years, commencing on the
1st day of June, 1999.
1.2 Renewals.
This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with written notice of its
election not to renew ("Termination Election Notice") on or before the 180th day
prior to termination of the then current term.
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1.3 Earlier Termination.
The Company shall have the right to terminate this Agreement prior to the
expiration of its Term, or of any renewals thereof, subject to the provisions of
Section 1.4:
(a) For Cause:
(1)The Company may terminate the Employed Executive's employment under this
Agreement at any time for cause.
(2)Such termination shall be evidenced by written notice thereof to the
Employed Executive, which notice shall specify the cause for termination.
(3)For purposes hereof, the term "cause" shall mean the inability of the
Employed Executive, through sickness or other incapacity, to perform her duties
under this Agreement for a period in excess of one month, the refusal of the
Employed Executive Designee to follow the directions of the Company's Board of
Directors; dishonesty; theft; or conviction of a crime.
(b) Discontinuance of Business:
In the event that the Company discontinues operating its business, this
Agreement shall terminate as of the last day of the month on which the Company
ceases operation with the same force and effect as if such last day of the month
were originally set as the termination date hereof.
(c) Death:
This Agreement shall terminate immediately on the death of the Employed
Executive.
1.4 Final Settlement.
Upon termination of this Agreement and payment to the Employed Executive of
all amounts due her hereunder, the Employed Executive or her representative
shall execute and deliver to the Company on a form prepared by the Company a
receipt for such sums and a release of all claims, except such claims as may
have been submitted pursuant to the terms of this Agreement and which remain
unpaid, and, shall forthwith tender to the Company all records, manuals and
written procedures, as may be desired by the Company for the continued conduct
of its business.
Article Two
Scope of Employment
2.1 Retention.
The Company hereby hires the Employed Executive and the Employed Executive
hereby accepts such employment, in accordance with the terms, provisions and
conditions of this Agreement.
2.2 General Description of Duties.
(a)The Employed Executive shall perform the duties generally associated with the
position of a corporation's chief administrative officer.
(b)Without limiting the generality of the foregoing, the Employed Executive
shall maintain all corporate records, shall be responsible for maintenance of
the Company's minute books, shall review and disseminate the Company's
correspondence, shall maintain the calendars for the Company's senior executives
and directors; shall maintain the calendar of required governmental reports and
assist the Company's senior officers and directors to comply with all federal,
state and local reporting requirements, and perform such other services,
including administrative and clerical matters as may be assigned to her by the
Company's Board of Directors, President, Senior Vice President and other
superior corporate officers.
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2.3 Status.
(a)Throughout the term of this Agreement, the Employed Executive shall serve as
the Company's secretary and chief administrative officer.
(b)In the event that she is not elected to such position, then, at the option of
the Employed Executive, this Agreement will be deemed terminated, effective as
of the earliest time that it can be reasonably determined that such election
will not take place. 2.4 Exclusivity.
The Employed Executive shall, unless specifically otherwise authorized by
the Company's Chairman, on a case by case basis, devote her business time exclus
ively to the affairs of the Company.
Article Three
Compensation
3.1 Compensation.
As consideration for the Employed Executive's future services to the
Company and for her entry into this Agreement, the Company hereby grants the
Employed Executive the following compensation:
(a) The sum of $10.00 in consideration for entering into this Agreement
(b)An annual bonus payable in shares of the Company's common stock, determined
by dividing 3.84% of the Company's net, pre-tax profits for the subject calendar
year by the average bid price for the Company's common stock at during the last
five trading days prior to the end of the last day of each year and the initial
five days of the new year, provided, however, that this Agreement shall have
been in effect for at least one half of the subject year and that the Company's
common stock shall have been actively trading on a public market within the
United states for a period of at least six months.
(c)An annual cash bonus equal to 3.84% of the Company's pre-tax profits for the
subject calendar year, provided, however, that this Agreement shall have been in
effect for at least one half of the subject year.
(d)A guaranteed minimum weekly draw against the annual bonus described above, in
a sum equal to 1/52 of the bonus that would have been payable during the
preceding 365 days, had this Agreement then been in effect; provided, however,
that the minimum weekly draw shall not be less that $500 unless the Company has
not generated net, pre-tax profits adequate to make such payment and comparable
payments due to the Company's other executive officers, in which case the
payment will be waived.
3.2 Exemption From Registration
(a)The Employed Executive hereby represents, warrants, covenants and
acknowledges that:
(1)The stock to be issued as compensation under Section 3.1 of this
Agreement (the "Stock") will be issued without registration under the provisions
of Section 5 of the Securities Act of 1933, as amended (the "Act") or the
securities regulatory laws and regulations of the State of Florida (the "Florida
Securities Act") pursuant to exemptions provided pursuant to Section 4(2) of the
Act and comparable provisions of the Florida Securities Act;
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(2)The Employed Executive shall be responsible, at the Company's expense,
for preparing and filing any required reports concerning this transaction with
the Florida Securities Division and payment of any required filing fee;
(3)All of the Stock will bear legends restricting its transfer, sale,
conveyance or hypothecation unless such Stock is either registered under the
provisions of Section 5 of the Act and under the Florida Securities Act, or an
opinion of legal counsel, in form and substance satisfactory to legal counsel to
the Company is provided by the Employed Executive to the effect that such
registration is not required as a result of applicable exemptions therefrom;
(4)The Company's transfer agent shall be instructed not to transfer any of
the Stock unless the Company advises it that such transfer is in compliance with
all applicable laws;
(5)The Employed Executive is acquiring the Stock for her own account, for
investment purposes only, and not with a view to further sale or distribution;
and
(6)The Employed Executive or her advisors have examined the Company's books
and records and have questioned the Company's officers and directors as to such
matters involving the Company as the Employed Executive deemed appropriate.
(b)Notwithstanding the provisions of Section 3.2(a), the shares reserved for
exercise of the options described in Section 3.1 shall, to the extent legally
possible based on the Company's ability to meet applicable legal requirements,
be listed with any stock exchange or securities market on which the Company's
common stock is admitted to trading.
3.3 Benefits
The Employed Executive shall be entitled to a benefit package equal to the
most favorable benefit package provided by the Company or its subsidiaries to
any of its employees, officers, directors, consultants or agents.
3.4 Indemnification
The Company will defend, indemnify and hold the Employed Executive harmless
from liabilities, suits, judgments, fines, penalties or disabilities, including
expenses associated directly, therewith (e.g. legal fees, court costs,
investigative costs, witness fees, etc.) resulting from any reasonable actions
in good faith on behalf of the Company, to the fullest extent legally permitted,
and in conjunction therewith, shall assure that all required expenditures are
made by the Company in a manner making it unnecessary for the Employed Executive
to incur any out of pocket expenses; provided, however, that the Employed
Executive permits the Company to select and supervise all personnel involved in
such defense and that the Employed Executive waive any conflicts of interest
that such personnel may have as a result of also representing the Company or
other Company personnel and agrees to hold them harmless from any matters
involving such representation, except such as involve fraud or bad faith.
Article Four
Special Covenants
4.1 Confidentiality.
(a)The Employed Executive acknowledges that, in and as a result of her
employment hereunder, she will be developing for the Company, making use of,
acquiring and/or adding to, confidential information of special and unique
nature and value relating to such matters as the Company's trade secrets,
systems, procedures, manuals, confidential reports and lists of clients and
lenders; consequently, as material inducement to the entry into this Agreement
by the Company, the Employed Executive hereby covenants and agrees that she
shall not, at anytime during or following the terms of her employment hereunder,
directly or indirectly, personally use, divulge or disclose, for any purpose
whatsoever, any of such confidential information which has been obtained by or
disclosed to her as a result of her employment by the Company, or the Company's
affiliates.
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(b)In the event of a breach or threatened breach by the Employed Executive of
any of the provisions of this Section 4.1, the Company, in addition to and not
in limitation of any other rights, remedies or damages available to the Company,
whether at law or in equity, shall be entitled to a permanent injunction in
order to prevent or to restrain any such breach by the Employed Executive, or by
the Employed Executive's partners, agents, representatives, servants, employers,
employees, affiliates and/or any and all persons directly or indirectly acting
for or with her.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
the Company as a result of a breach by the Employed Executive of the covenants
or agreements contained in this Article Four, and in view of the lack of an
adequate remedy at law to protect the Company's interests, the Employed
Executive hereby covenants and agrees that the Company shall have the following
additional rights and remedies in the event of a breach hereof:
(a)The Employed Executive hereby consents to the issuance of a permanent
injunction enjoining her from any violations of the covenants set forth in
Section 4.1 hereof; and
(b)Because it is impossible to ascertain or estimate the entire or exact cost,
damage or injury which the Company may sustain prior to the effective
enforcement of such injunction, the Employed Executive hereby covenants and
agrees to pay over to the Company, in the event she violates the covenants and
agreements contained in Section 4.2 hereof, the greater of:
(i)Any payment or compensation of any kind received by her because of
such violation before the issuance of such injunction, or
(ii)The sum of One Thousand ($1,000.00) Dollars per violation, which sum
shall be liquidated damages, and not a penalty, for the injuries suffered by the
Company as a result of such violation, the Parties hereto agreeing that such
liquidated damages are not intended as the exclusive remedy available to the
Company for any breach of the covenants and agreements contained in this Article
Four, prior to the issuance of such injunction, the Parties recognizing that the
only adequate remedy to protect the Company from the injury caused by such
breaches would be injunctive relief.
4.3 Cumulative Remedies.
The Employed Executive hereby irrevocably agrees that the remedies
described in Section 4.3 hereof shall be in addition to, and not in limitation
of, any of the rights or remedies to which the Company is or may be entitled to,
whether at law or in equity, under or pursuant to this Agreement.
4.4 Acknowledgment of Reasonableness.
(a)The Employed Executive hereby represents, warrants and acknowledges that she
has carefully read and considered the provisions of this Article Four and,
having done so, agrees that the restrictions set forth herein are fair and
reasonable and are reasonably required for the protection of the interests of
the Company, its officers, directors and other employees; consequently, in the
event that any of the above-described restrictions shall be held unenforceable
by any court of competent jurisdiction, the Employed Executive hereby covenants,
agrees and directs such court to substitute a reasonable judicially enforceable
limitation in place of any limitation deemed unenforceable and, the Employed
Executive hereby covenants and agrees that if so modified, the covenants
contained in this Article Four shall be as fully enforceable as if they had been
set forth herein directly by the Parties.
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(b)In determining the nature of this limitation, the Employed Executive hereby
acknowledges, covenants and agrees that it is the intent of the Parties that a
court adjudicating a dispute arising hereunder recognize that the Parties desire
that this covenant not to compete be imposed and maintained to the greatest
extent possible.
4.5 Unauthorized Acts.
The Employed Executive hereby covenants and agrees that she will not do any
act or incur any obligation on behalf of the Company of any kind whatsoever,
except as authorized by the Company's Board of Directors.
Article Five
Miscellaneous
5.1 Notices.
(a)All notices, demands or other communications hereunder shall be in writing,
and unless otherwise provided, shall be deemed to have been duly given on the
first business day after mailing by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
To the Employed Executive:
Janis M. Dorony
555 N. Ocean Boulevard; Fort Lauderdale, Florida 33308 Telephone number (954)
942-5339;Social security number ###-##-####
To the Company:
Kim A Naimoli, President
Funds America Finance Corporation
2501 East Commercial Boulevard, Suite 210; Fort Lauderdale, Florida 33308 with a
copy by facsimile transmission and e-mail directed to (954) 489-0500 and
[email protected], respectively or to such other addresses, fax numbers
or e-mail addresses as may be reflected from time to time in Company filings
displayed on the Securities and Exchange Commission's EDGAR web site.
or to such other address or to such other person as any party shall designate to
the other for such purpose in the manner hereinafter set forth.
(b)The Parties acknowledge that The Yankee Companies, Inc., a Florida
corporation which serves as a consultant to the Company ("Yankees") has acted as
scrivener for the Parties in this transaction using forms developed for it by
its own legal counsel and business advisors and that because it is neither a law
firm nor a regulated entity and because of the inherent conflict of intere sts
involved, it has required as a condition to the use of this form that all of the
Parties retain independent counsel to review this Agreement on their behalf.
5.2 Amendment.
No modification, waiver, amendment, discharge or change of this Agreement
shall be valid unless the same is in writing and signed by the Party against
which the enforcement of said modification, waiver, amendment, discharge or
change is sought.
5.3 Merger.
(a)This instrument contains all of the understandings and agreements of the
Parties with respect to the subject matter discussed herein.
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(b)All prior agreements whether written or oral, are merged herein and shall be
of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or the
application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the State
of Florida and any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Broward County, Florida.
5.7 Litigation.
(a)In any action between the Parties to enforce any of the terms of this Agreeme
nt or any other matter arising from this Agreement, the prevailing Party shall
be entitled to recover its costs and expenses, including reasonable attorneys'
fees up to and including all negotiations, trials and appeals, whether or not
any formal proceedings are initiated.
(b)In the event of any dispute arising under this Agreement, or the negotiation
thereof or inducements to enter into the Agreement, the dispute shall, at the
request of any Party, be exclusively resolved through the following procedures:
(1)(A)First, the issue shall be submitted to mediation before a mediation
service in Broward County, Florida to be selected by lot from six alternatives
to be provided, three by the Company and three by the Employed Executive.
(B)The mediation efforts shall be concluded within ten business days
after their initiation unless the Parties unanimously agree to an extended
mediation period;
(2)In the event that mediation does not lead to a resolution of the dispute
then at the request of any Party, the Parties shall submit the dispute to
binding arbitration before an arbitration service located in Broward County,
Florida to be selected by lot, from six alternatives to be provided, three by
the Company and three by the Employed Executive.
(3)(A)1.Expenses of mediation shall be borne by the Company, if
successful.
2.Expenses of mediation, if unsuccessful and of arbitration shall
be borne by the Party or Parties against whom the arbitration decision is
rendered.
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(B)If the terms of the arbitral award do not establish a prevailing
Party, then the expenses of unsuccessful mediation and arbitration shall be
borne equally by the Parties.
5.8 Benefit of Agreement.
(a)This Agreement may not be assigned by the Employed Executive without the
prior written consent of the Company.
(b)Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or the
intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or cause
to be done, executed or acknowledged or delivered and to perform all such acts
and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in the Company,
with privity as to the Company strictly limited to the Company.
5.13 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b)Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for aesthetic
purposes, prepare a fully executed original version of this Agreement, which
shall be the document eventually filed with the Securities and Exchange
Commission if the Company's plan to become a public company are ever
effectuated.
5.14 License.
(a) This Agreement is the property of Yankees (as that term has been
hereinbefore defined).
(b)The use hereof by the Parties is authorized hereby solely for purposes of
this transaction and, the use of this form of agreement or of any derivation
thereof without Yankees's prior written permission is prohibited.
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* * *
In Witness Whereof, the Parties have executed this Agreement, effective as
of the 7th day of July, 1999.
Signed, Sealed & Delivered
In Our Presence
Funds America Finance Corporation
- --------------------------
/s/ Kim A. Naimoli
__________________________ By: ________________________
Kim A. Naimoli, President
(CORPORATE SEAL)
/s/ Janis M. Dorony
Attest: __________________________
Janis M. Dorony, Secretary
Employed Executive
- --------------------------
/s/ Janis M. Dorony
- -------------------------- ------------------------
Janis M. Dorony
86
Consulting Agreement
This Consulting Agreement (the "Agreement") is made and entered into by and
between Funds America Finance Corporation, a Florida corporation (the "Client")
and Equity Growth Systems, inc., a publicly held Delaware corporation with a
class of equity securities registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act" and "Equity," respectively;
the Client and Equity being hereinafter collectively referred to as the
"Parties" and generically as a "Party").
Preamble :
WHEREAS, Client is engaged in the consumer finance industry, as more
particularly described in the materials annexed hereto and made a part hereof as
composite exhibit 0.1; and
WHEREAS, the Client desires to become a reporting company under federal
securities laws with a publicly traded class of securities; and
WHEREAS, Equity personnel have substantial experience with law, accounting
and the regulatory obligations imposed under federal securities laws and
regulations, and provide assistance to companies that desire to attain reporting
status under Section 12(g) of the Exchange Act; and
WHEREAS, Equity is agreeable to making its services available to the
Client, on the terms and subject to the conditions hereinafter set forth:
NOW, THEREFORE, in consideration for Equity's agreement to render the
hereinafter described services as well as of the premises, the sum of $10 and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
ARTICLE ONE
OBLIGATIONS OF THE PARTIES
1.1 Description of Services
(A)Equity will assist the Client's legal counsel, or, as set forth below,
provide its own legal counsel, to register its securities with the Securities
and Exchange Commission (the "SEC"), and thereafter, will assist the Client to
make arrangements required to permit trading of the Client's securities on the
OTC Bulletin Board operated by the National Association of Securities Dealers,
Inc., including introductions to one or more potential market makers and
assistance in the preparation, filing and management of the SEC and NASD Rule
15c2-11 compliance filings which will be required by any broker dealers
publishing quotes in the Client's securities.
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(B)Equity will assist the Client to obtain a CUSIP number for its securities, to
obtain a stock trading symbol and to list the Client in a Standard & Poors or
comparable securities manual complying with the manual exemption from Blue Sky
registration in 15 or more states.
(C)Because of the Client's anticipated status under federal securities laws, in
any circumstances where Equity is describing the securities of to a third Party,
Equity shall disclose to such person the compensation received from the Client
to the extent required under any applicable laws, including, without limitation,
Section 17(b) of the Securities Act of 1933, as amended (the "Securities Act");
however, the Parties acknowledge they do not contemplate that Equity shall be
involved in any activities on behalf of the Client requiring such descriptions
or disclosures, or that the Services involve any activities subject to
regulation under federal or state securities laws, except for the introduction
of the Client and its principals to licensed broker dealers in securities,
securities analysts and appropriate corporate information and stockholder
relations specialists.
1.2 Fiduciary Obligation to Client
In rendering its services, Equity shall not disclose to any third party any
confidential non-public information furnished by the Client or otherwise
obtained by it with respect to the Client.
1.3 Limitations on Services
(A)The Parties recognize that certain responsibilities and obligations are
imposed by federal and state securities laws and by the applicable rules and
regulations of stock exchanges, the National Association of Securities Dealers,
Inc. (collectively with its subsidiaries being hereinafter referred to as the
"NASD"), in-house "due diligence" or "compliance" departments of licensed
securities firms, etc.; accordingly, Equity agrees that it will not release any
information or data about the Client to any selected or limited person(s),
entity, or group if Equity is aware that such information or data has not been
generally released or promulgated.
(B)Equity shall restrict or cease, as directed by the Client, all efforts on
behalf of the Client, including all dissemination of information regarding the
Client, immediately upon receipt of instructions (in writing by fax or letter)
to that effect from the Client.
1.4 Equity's Compensation
(A)(1)The Client shall issue directly to Equity's stockholders of record on the
30th day following the date of this agreement, pro rata based on their ownership
of common stock in Equity, a quantity of the Client's common stock equal to 10%
of the Client's total capital stock outstanding immediately following such
issuance, subject to anti-dilutive rights for a period of 12 months following
the original date of issuance (the "Public Shares").
(2)The Public Shares shall be issued pursuant to a registration statement
on SEC Form SB-1 or SB-2, or a notification statement pursuant to SEC Regulation
A and Equity will assist the Client to prepare and file required documentation
associated therewith, at the Client's expense.
(3)Prior to the issuance of the Public Shares Equity will assist the Client
to comply with any obligations under SEC Rule 10b-17 pertaining to dividends.
(4)The Parties hereby agree that for auditing, tax or SEC filing fee
purposes the reasonable market value of the Public Shares is the lesser of
$50,000 or 10% of the Client's stockholders equity.
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(B)(1)A.In the event that the Client desires to avail itself of the legal
services of Equity's general counsel to prepare and file the required SEC
registration statements, it will pay such legal counsel directly the sum of
$15,000, plus out of pocket costs and expenses, provided that not more than four
amendments thereto are required, and that the Client provides timely and
complete assistance in responding to SEC comment letters (additional costs
resulting from failure of such assumptions being billed at such counsel's normal
hourly fees for securities related filings, such fees currently being $200 per
hour).
B.Notwithstanding the foregoing, the Parties currently anticipate that
the Client will retain and use its own securities counsel for such purposes.
(2)Equity believes that the Client will have to pay the following
additional costs in conjunction with the projects contemplated by this
Agreement:
A.Auditing costs, the amount of which the Client is not competent to
determine;
B.The costs of obtaining a CUSIP number and listing with Standard &
Poors or another comparable manual, which is estimated to be $4,000;
C.(i)Transfer agent set up and certificate distribution costs which
will vary, based on the agency selected and the initial services required, but
should not exceed $10,000 for physical delivery of certificates to each
stockholder, assuming that such delivery can be structured over several months.
(b)In the event that book entry recording in lieu of physical
delivery is a legally available alternative and the costs of certificates are
born by stockholders requesting them, then the costs can be cut dramatically (in
the $5,000 range);
D.Filing fees to the SEC and State regulatory authorities, not
expected to exceed $5,000;
E.Travel, long distance telephone, overnight postage and mailing
expenses, not expected to exceed $2,500.
(C)In addition to the compensation described above with reference to services
during the Initial Term of this Agreement and whether or not the following
services are rendered during such Initial Term (it being the understanding of
the Parties that the Client is not obliged to use Equity for such purposes or
that Equity is required to make such services available):
(1)In the event that Equity arranges or provides funding for the Client on
terms more beneficial than those reflected in Client's current principal
financing agreements, Equity shall be entitled, at its election, to either:
A.A fee equal to 25% of such savings, on a continuing basis; or
B.If equity funding is provided though Equity or any affiliates
thereof, a discount of 10% from the bid price for the subject equity securities,
if they are issuable as free trading securities, or, a discount of 50% from the
bid price for the subject equity securities, if they are issuable as restricted
securities (as the term restricted is used for purposes of SEC Rule 144); or
C.If funding is provided by any person or group of persons introduced
to the Client by Equity or persons associated with Equity, directly or
indirectly, but is not provided by Equity or its principals as described in the
preceding sub section, then Equity shall be entitled to an introduction fee
equal to 5% of the aggregate proceeds so obtained; and
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(2)In the event that Equity generates business for the Client, then, on any
sales resulting therefrom, Equity shall be entitled to a commission equal to 10%
of the gross income derived by the Client therefrom, on a continuing basis.
(3)In the event that Equity or any affiliate thereof arranges for an
acquisition of or by the Client, then Equity shall be entitled to compensation
equal to 10% of the compensation paid for such acquisition payable, at the
Client's option, in cash or common stock of the surviving or parent publicly
held entity, in addition to any compensation negotiated and received from the
acquired entity or its affiliates.
(D)The Client will assure that its legal counsel promptly prepares all reports
which then existing holders of the Client's securities (including Equity, its
affiliates and successors in interest) are required to file with the Securities
and Exchange Commission as a result of the Client's reporting status, including
Securities and Exchange Commission Forms 3, 4 and 5, Schedules 13(d) and
Schedules 13(g), and shall submit all such reports to the subject stockholders
for prompt execution and timely filing with the Securities and Exchange
Commission.
(E) (1)In addition to payment of fees, the Client will, provided that it has
requested Equity to provide services for which costs are incurred, be
responsible for payment of all costs and disbursements associated with Equity's
services either:
(a)Involving less than $50 per item and $200 in the aggregate during
the preceding 30 day period; or
(b)Reflected in an operating budget approved by the Client; or
(c)Approved in writing by the Client;
provided, however, that the refusal by the Client to approve expenditures
required for the proper performance of Equity's services will excuse performance
of such services.
(2)All of Equity's statements will be paid within 10 days after receipt.
(3)In the event additional time for payment is required, Equity will have
the option of selling the account receivable and the Client agrees to pay
interest thereon at the monthly rate of 1%.
(4)In the event collection activities are required, the Client agrees to
pay all of Equity's reasonable out of pocket costs associated therewith.
(5)There will be no change or waiver of the provisions contained herein,
unless such charge is in writing and signed by the Client and Equity.
1.5 Client's Commitments
(A). (1)All work requiring legal review will be submitted for approval by
the Client to the Client's legal counsel prior to its use.
(2)Final drafts of any matters prepared for use by Equity in conjunction
with the provision of the Services will be reviewed by the Client and, if
legally required, by the Client's legal counsel, to assure that:
A.All required information has been provided;
B.All materials are presented accurately; and,
C.That no materials required to render information provided "not
misleading" are omitted.
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(2)Only after such review and approval by the Client and, if required, the
Client's legal counsel, will any documents be filed with regulatory agencies or
provided to Equity or third parties.
(3)A.Financial data will be reviewed by competent, independent, certified
public accountants experienced and qualified in securities related accounting
and who are members in good standing of the AICPA's Securities Practice Section,
to be separately retained by the Client.
B.Such accountants will be required to review and approve all
financially related filings, prior to release to Equity, other third parties or
submission to the appropriate regulatory authorities.
(B) (1)The Client shall supply Equity on a regular and timely basis with all
approved data and information about the Client, its management, its products,
and its operations and the Client shall be responsible for advising Equity of
any fact which would affect the accuracy of any prior data and information
supplied to Equity.
(2)The Client shall use its best efforts to promptly supply Equity with
full and complete copies of all filings with all federal and state securities
agencies; with full and complete copies of all shareholder reports and
communications whether or not prepared with Equity's assistance, with all data
and information supplied to any analyst, broker-dealer, market maker, or other
member of the financial community; and with all product/services brochures,
sales materials, etc.
(3)The Client shall promptly notify Equity of the filing of any
registration statement for the sale of securities and/or of any other event
which triggers any restrictions on disclosure.
(4)The Client shall be deemed to make a continuing representation of the
accuracy of any and all material facts, material, information, and data which it
supplies to Equity and the Client acknowledges its awareness that Equity will
rely on such continuing representation in performing its functions under this
Agreement.
(5)Equity, in the absence of notice in writing from the Client, may rely on
the continuing accuracy of material, information and data supplied by the
Client.
ARTICLE TWO
TERM, RENEWALS & EARLIER TERMINATION
2.1 Term.
This Agreement shall be for an initial term of 180 days, commencing on the
date of its complete execution by all Parties, as evinced in the execution page
hereof, but shall be extended, as required to permit completion of the projects
contemplated hereby (attaining trading status for the Client's securities as an
issuer filing reports with the SEC pursuant to Section 12[g] of the Exchange Act
(the "Initial Term").
2.2 Renewals.
Subject to prior agreement as to additional compensation payable to Equity,
this Agreement shall be renewed automatically, after expiration of the original
term, on a continuing annual basis, unless the Party wishing not to renew this
Agreement provides the other Party with written notice of its election not to
renew ("Termination Election Notice") on or before the 30th day prior to
termination of the then current term. 2.3 Final Settlement.
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(A)Upon termination of this Agreement and payment to Equity of all amounts due
it hereunder, Equity or its representative shall execute and deliver to the
Client a receipt for such sums and a release of all claims, except such claims
as may have been submitted pursuant to the terms of this Agreement and which
remain unpaid, and, shall forthwith tender to the Client all records, manuals
and written procedures, as may be desired by the Client for the continued
conduct of its business; and
(B)The Client or its representative shall execute and deliver to Equity a
receipt for all materials returned and a release of all claims, except such
claims as may have been submitted pursuant to the terms of this Agreement and
which remain unpaid, and, shall forthwith tender to Equity all records, manuals
and written procedures, as may be desired by Equity for the continued conduct of
its business.
ARTICLE THREE
EQUITY'S CONFIDENTIALITY & COMPETITION COVENANTS
3.1 General Provisions.
(A)Equity acknowledges that, in and as a result of its entry into this
Agreement, it will be making use of confidential information of special and
unique nature and value relating to such matters as the Client's trade secrets,
systems, procedures, manuals, confidential reports; consequently, as material
inducement to the entry into this Agreement by the Client, Equity hereby
covenants and agrees that it shall not, at anytime during the term of this
Agreement, any renewals thereof and for two years following the terms of this
Agreement, directly or indirectly, use, divulge or disclose, for any purpose
whatsoever, any of such confidential information which has been obtained by or
disclosed to it as a result of its entry into this Agreement or provision of
services hereunder.
(B)In the event of a breach or threatened breach by Equity of any of the
provisions of this Article Three, the Client, in addition to and not in
limitation of any other rights, remedies or damages available to the Client,
whether at law or in equity, shall be entitled to a permanent injunction in
order to prevent or to restrain any such breach by Equity, or by its partners,
directors, officers, stockholders, agents, representatives, servants, employers,
employees, affiliates and/or any and all persons directly or indirectly acting
for or with it.
3.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
the Client and its clients as a result of a breach by Equity of the covenants or
agreements contained in this Article Three, and in view of the lack of an
adequate remedy at law to protect the Client's interests, Equity hereby
covenants and agrees that the Client shall have the following additional rights
and remedies in the event of a breach hereof:
(A)Equity hereby consents to the issuance of a permanent injunction enjoining it
from any violations of the covenants set forth in this Article Three; and
(B)Because it is impossible to ascertain or estimate the entire or exact cost,
damage or injury which the Client or its clients may sustain prior to the
effective enforcement of such injunction, Equity hereby covenants and agrees to
pay over to the Client, in the event it violates the covenants and agreements
contained in this Article Three, the greater of:
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(1)Any payment or compensation of any kind received by it because of such
violation before the issuance of such injunction, or
(2)The sum of One Thousand Dollars per violation, which sum shall be
liquidated damages, and not a penalty, for the injuries suffered by the Client
or its clients as a result of such violation, the Parties hereto agreeing that
such liquidated damages are not intended as the exclusive remedy available to
the Client for any breach of the covenants and agreements contained in this
Article Three, prior to the issuance of such injunction, the Parties recognizing
that the only adequate remedy to protect the Client and its clients from the
injury caused by such breaches would be injunctive relief.
3.3 Cumulative Remedies.
Equity hereby irrevocably agrees that the remedies described in this
Article Three shall be in addition to, and not in limitation of, any of the
rights or remedies to which the Client and its clients are or may be entitled
to, whether at law or in equity, under or pursuant to this Agreement.
3.4 Acknowledgment of Reasonableness.
(A)Equity hereby represents, warrants and acknowledges that its members or
officers and directors have carefully read and considered the provisions of this
Article Three and, having done so, agrees that the restrictions set forth herein
are fair and reasonable and are reasonably required for the protection of the
interests of the Client, its members, officers, directors, consultants, agents
and employees; consequently, in the event that any of the above-described
restrictions shall be held unenforceable by any court of competent jurisdiction,
Equity hereby covenants, agrees and directs such court to substitute a
reasonable judicially enforceable limitation in place of any limitation deemed
unenforceable and, Equity hereby covenants and agrees that if so modified, the
covenants contained in this Article Three shall be as fully enforceable as if
they had been set forth herein directly by the Parties.
(B)In determining the nature of this limitation, Equity hereby acknowledges,
covenants and agrees that it is the intent of the Parties that a court
adjudicating a dispute arising hereunder recognize that the Parties desire that
these covenants not to compete or circumvent be imposed and maintained to the
greatest extent possible.
3.5 Exclusivity.
Equity shall not be required to devote all of its business time to the
affairs of the Client, rather it shall devote such time as it is reasonably
necessary in light of its other business commitments.
ARTICLE FOUR
CLIENT'S CONFIDENTIALITY & COMPETITION COVENANTS
4.1 General Prohibitions
(A)The Client acknowledges that, in and as a result of its engagement of Equity,
the Client will be making use of confidential information of special and unique
nature and value relating to such matters as Equity's business contacts,
professional advisors, trade secrets, systems, procedures, manuals, confidential
reports, lists of clients, potential customers and funders; consequently, as
material inducement to the entry into this Agreement by Equity, the Client
hereby covenants and agrees that it shall not, at anytime during the term of
this Agreement, any renewals thereof an for two years following the terms of
this Agreement, directly or indirectly, use, divulge or disclose, for any
purpose whatsoever, any of such confidential information which has been obtained
by or disclosed to it as a result of its employment of Equity, or Equity's
affiliates.
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(B)In the event of a breach or threatened breach by the Client of any of the
provisions of this Article Four, Equity, in addition to and not in limitation of
any other rights, remedies or damages available to Equity, whether at law or in
equity, shall be entitled to a permanent injunction in order to prevent or to
restrain any such breach by the Client, or by the Client's partners, directors,
officers, stockholders, agents, representatives, servants, employers, employees,
affiliates and/or any and all persons directly or indirectly acting for or with
it.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
Equity as a result of a breach by the Client of the covenants or agreements
contained in this Article Four, and in view of the lack of an adequate remedy at
law to protect Equity's interests, the Client hereby covenants and agrees that
Equity shall have the following additional rights and remedies in the event of a
breach hereof:
(A)The Client hereby consents to the issuance of a permanent injunction
enjoining it from any violations of the covenants set forth in this Article Four
is and
(B)Because it is impossible to ascertain or estimate the entire or exact cost,
damage or injury which Equity may sustain prior to the effective enforcement of
such injunction, the Client hereby covenants and agrees to pay over to Equity,
in the event it violates the covenants and agreements contained in this Article
Four, the greater of:
(1)Any payment or compensation of any kind received by it because of such
violation before the issuance of such injunction, or
(2)The sum of One Thousand Dollars per violation, which sum shall be
liquidated damages, and not a penalty, for the injuries suffered by Equity as a
result of such violation, the Parties hereto agreeing that such liquidated
damages are not intended as the exclusive remedy available to Equity for any
breach of the covenants and agreements contained in this Article Four, prior to
the issuance of such injunction, the Parties recognizing that the only adequate
remedy to protect Equity from the injury caused by such breaches would be
injunctive relief.
4.3 Cumulative Remedies.
The Client hereby irrevocably agrees that the remedies described in this
Article Four shall be in addition to, and not in limitation of, any of the
rights or remedies to which Equity is or may be entitled to, whether at law or
in equity, under or pursuant to this Agreement.
4.4 Acknowledgment of Reasonableness.
(A)The Client hereby represents, warrants and acknowledges that its officers and
directors have carefully read and considered the provisions of this Article Four
and, having done so, agree that the restrictions set forth herein are fair and
reasonable and are reasonably required for the protection of the interests of
Equity, its members, officers, directors, consultants, agents and employees;
consequently, in the event that any of the above-described restrictions shall be
held unenforceable by any court of competent jurisdiction, the Client hereby
covenants, agrees and directs such court to substitute a reasonable judicially
enforceable limitation in place of any limitation deemed unenforceable and, the
Client hereby covenants and agrees that if so modified, the covenants contained
in this Article Four shall be as fully enforceable as if they had been set forth
herein directly by the Parties.
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(B)In determining the nature of this limitation, the Client hereby acknowledges,
covenants and agrees that it is the intent of the Parties that a court
adjudicating a dispute hereunder recognize that the Parties desire that these
covenants not to compete or circumvent be imposed and maintained to the greatest
extent possible.
ARTICLE FIVE
MISCELLANEOUS
5.1 Notices.
All notices, demands or other written communications hereunder shall be in
writing, and unless otherwise provided, shall be deemed to have been duly given
on the first business day after mailing by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
To Equity:
Equity Growth Systems, inc.
8001 DeSoto Woods Drive; Sarasota, Florida 34243
Telephone (941) 358-8182; Fax (941) 358-8423
Attention: Charles J. Scimeca, President
with copies to
The Yankee Companies, Inc.
902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487
Telephone (561) 998-2025; Fax (561) 998-3425
Attention: Leonard Miles Tucker, President, and
and
The Yankee Companies, Inc.1941 Southeast 51st Terrace; Ocala, Florida 34471
Telephone (352) 694-9179; Fax (352) 694-9178
Attention: Vanessa H. Lindsey, Chief Administrative Officer
To the Client:
Funds America Finance Corporation
201 East Commercial Boulevard, Suite 210; Fort Lauderdale, Florida 33308
Telephone (954) 733-7777; Fax (954) 489-0500; and, e-mail [email protected] or at
such address, telephone and fax numbers as are reflected on the SEC's EDGAR
Internet site; Attention: Charles Scheuerman, President & Chief Executive
Officer
in each case, with copies to such other address or to such other persons as any
Party shall designate to the others for such purposes in the manner hereinabove
set forth.
5.2 Amendment.
No modification, waiver, amendment, discharge or change of this Agreement
shall be valid unless the same is in writing and signed by Parties.
5.3 Merger.
(A)This instrument, together with the instruments referred to herein, contains
all of the understandings and agreements of the Parties with respect to the
subject matter discussed herein.
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(B)All prior agreements whether written or oral are merged herein and shall be
of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, other
than a conditions precedent, if any, or the application of such provision or any
portion thereof to any person or circumstance shall be held invalid or
unenforceable, the remaining portions of such provision and the remaining
provisions of this Agreement or the application of such provision or portion of
such provision as is held invalid or unenforceable to persons or circumstances
other than those to which it is held invalid or unenforceable, shall not be
affected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the State
of Florida and any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Marion County, Florida.
5.7 Dispute Resolution in lieu of Litigation.
(A)In the event of any dispute arising under this Agreement, or the negotiation
thereof or inducements to enter into the Agreement, the dispute shall, at the
request of any Party, be exclusively resolved through the following procedures:
(1)(a)First, the issue shall be submitted to mediation before a mediation
service in Palm Beach County, Florida to be selected by lot from six
alternatives to be provided, three by Equity and three by the Client.
(b)The mediation efforts shall be concluded within ten business days
after their initiation unless the Parties unanimously agree to an extended
mediation period;
(2)In the event that mediation does not lead to a resolution of the dispute
then at the request of any Party, the Parties shall submit the dispute to
binding arbitration before an arbitration service located in Palm Beach County,
Florida, to be selected by lot, from six alternatives to be provided, in the
manner set forth above for selection of a mediator;
(3)(A)Expenses of mediation shall be borne by the Parties equally if
successful but if unsuccessful, expenses of mediation and of arbitration shall
be borne by the Party or Parties against whom the arbitration decision is
rendered.
(B)If the terms of the arbitral award do not establish a prevailing
Party, then the expenses of unsuccessful mediation and arbitration shall be
borne half; by the Client and half; by Equity.
(B)Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
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(C)In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the prevailing Party
shall be entitled to recover its costs and expenses, including reasonable
attorneys' fees up to and including all negotiations, trials and appeals,
whether or not litigation is initiated.
5.8 Benefit of Agreement.
The terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the Parties, jointly and severally, their successors, assigns,
personal representatives, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or the
intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or cause
to be done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time,
be required herein to effect the intent and purpose of this Agreement.
5.12 Status.
(A)Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, employer-employee relationship, lessor-lessee
relationship, or principal-agent relationship.
(B)Throughout the term of this Agreement, Equity shall serve an independent
contractor, as that term is defined by the United States Internal Revenue
Service, and in conjunction therewith, shall be responsible for all of his own
tax reporting and payment obligations.
(C)In amplification of the foregoing, Equity shall, subject to reasonable
reimbursement on a pre-approved budgetary basis, be responsible for providing
its own office facilities and supporting personnel.
5.13 Counterparts.
(A)This Agreement may be executed in any number of counterparts delivered
through facsimile transmission.
(B)All executed counterparts shall constitute one Agreement notwithstanding that
all signatories are not signatories to the original or the same counterpart.
5.14 License.
(A)(1)This Agreement is the property of The Yankee Companies, Inc., a Florida
corporation which serves as a strategic consultant to Equity ("Yankees").
97
<PAGE>
(2)The use hereof by the Parties is authorized hereby solely for purposes
of this transaction and, the use of this form of agreement or of any derivation
thereof without Yankees' prior written permission is prohibited.
(3)This Agreement shall not be construed more stringently or interpreted
less favorably against Equity based on authorship.
(B)The Client hereby acknowledge that neither Yankees nor Equity is a law firm
and that neither provided it with any advice, legal or otherwise, in conjunction
with this Agreement, but rather, has suggested that it rely solely on its own
experience and advisors in evaluating or interpreting this Agreement and that
the Client has confirmed that this Agreement and any forms of agreements or
legal instruments provided to the Client by Yankees or Equity shall be reviewed
by the Client's legal counsel prior to use thereof.
In Witness Whereof, the Parties have executed this Agreement, effective as
of the last date set forth below.
Signed, Sealed & Delivered
In Our Presence
Funds America Finance Corporation
- ----------------------------
- ---------------------------- /s/ Kim A. Naimoli
By: ____________________________
Kim A. Naimoli, President
Dated: 5/7/99
/s/ Janis M. Dorony
Attest:____________________________
Janis M. Dorony, Secretary
{Seal}
Equity Growth Systems, inc.
- ----------------------------
/s/ Charles J. Scimeca
By: ___________________________
- ----------------------------
Charles J. Scimeca, President
Dated: May 18, 1999
/s/ G. Richard Chamberlin
Attest:____________________________
G. Richard Chamberlin, Secretary
{Seal}
98
The Liberty Group, Inc.
3045 North Federal Highway, Suite 60
Fort Lauderdale, Florida 33306
(954) 202-0245 (Voice & Fax)
April 7, 1999
Charles Scheuerman
President
Funds America Finance Corporation
2501 East Commercial Boulevard, Suite 210
Fort Lauderdale, Florida 33308
By Facsimile Transmission to (954) 489-0500-030
Re.: Professional Engagement
Dear Mr. Scheuerman:
This letter confirms the terms pursuant to which Liberty Group, Inc, a
Florida corporation ("Liberty" or a first person plural pronoun) has been
engaged to provide the following services by Funds America Finance Corporation,
a privately held Florida corporation (the "Company"):
A. Liberty's Responsibilities:
1.Assist the Company to locate personnel (at executive, professional and
clerical levels) or organizations useful in operation of the Company or
expansion of its sales.
2.Review the Company's operating structure and assist the Company to effect
corporate restructuring designed to maximize its operational efficiency and
initiate an acquisitions program.
3.If required, train Company personnel and consultants in proper procedures for
regulatory compliance and to effect its various strategic and tactical plans,
and, develop programs to assure compliance with applicable laws, with initial
legal services to be provided through your legal counsel.
4.Assist the Company to develop programs and recruit personnel not associated
with Liberty to serve as the principal intermediaries between the Company and
its stockholders, the investment community and the financial sources.
5.(a)Explore the viability of operating as a publicly held corporation with a
class of securities registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and if appropriate assist the
Company to recruit legal counsel, certified public accountants, transfer agents
and other professionals necessary to attain and maintain such status; provided,
however, that no Liberty personnel will be involved in such roles, or as
officers, directors or control persons of the Company as a results of legal
impediments to which Guido Volante, a principal of Liberty is subject, as
described in SEC Litigation Release Number 16102, issued March 31, 1999, a copy
of which has been provided to and reviewed by Mr. Scheuerman.
(c)Provided that none of the Stock Signing Fee (as hereinafter defined)
payable to Liberty hereunder may be allocated to such services:
99
<PAGE>
(1)Introduce the Company to institutional investors (i.e., insurance
companies and other financial institutions) and accredited investors (as that
term is defined in Securities & Exchange Commission Regulation D), for purposes
of their consideration of the Company's debt and collateralized securities
(comprised of collections of the mortgages or other debt instruments generated
by the Company's business) as appropriate long term investments; provided,
however, that all parties understand and agree that in connection with such
introductions, Liberty is not acting as a securities dealer, broker or
investment advisor; all resulting arrangements to be independently negotiated
directly between the Company and the introduced persons, and that Liberty shall
have no responsibility for any of the resulting relationships;
(2)Assist the Company to develop sources for required debt or equity
capital through introductions to investment banking firms and accredited
investors; provided, however, that all parties understand and agree that in
connection with such introductions, Liberty is not acting as a securities
dealer, broker or investment advisor; all resulting arrangements will be
independently negotiated directly between the Company and the introduced
persons, and that Liberty shall have no responsibility for any of the resulting
relationships.
(d)Introduce the Company to personnel or computer programs capable of
assisting it to comply with the electronic filing requirements ("EDGAR") of
Securities and Exchange Commission Regulation ST; and the resale requirements of
Sections 13(d) and 16(b) of the Securities Exchange Act of 1934, as amended.
(e)Assist the Company to locate and implement computer programs designed to
perform a major portion of the preparation of auditing, tax and periodic reports
and proxy materials required by the Securities Exchange Act of 1934, as amended.
B. Terms of Engagement
1.Except as described below with reference to the services described above,
which are to be completed within the initial term of this engagement agreement
(one year after the date of this engagement letter) we will bill at our standard
hourly rates for all work as to which a prior written arrangement with different
terms has not been entered into, however, no hourly billable services will be
provided except at your specific request.
2.Notwithstanding the provisions of paragraph 1 above, during the initial 183
days of our representation, we will accept and you will pay to us:
(a)Immediately exercisable 365 day options to purchase up to 4.9% of the
Company's free trading common stock (such options to be valued at an aggregate
of $1,000 based on the agreed upon reasonable market value thereof prior to the
performance of our duties hereunder, the "Stock Signing Fee"), the exercise
price to be $0.05 per share subject to cashless exercise rights as described in
the form of warrant annexed hereto and made a part hereof as composite exhibit
2(a),;
(b)The options and underlying shares comprising the Stock Signing Fee shall
both be registered with the Securities and Exchange Commission on the initial
registration or notification statement filed by the Company with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act').
(e)If, for any reason (other than a stock split also affecting the
Liberty's shares issued as the Stock Signing Fee, the Company's outstanding
securities exceed 3,400,000 shares within 12 months following the date of this
engagement agreement, then additional shares in an amount equal to 10% of such
excess shall be issued to Liberty.
100
<PAGE>
(f)The foregoing compensation is in lieu of required cash payments for up
to an aggregate of 150 hours of our hourly fees during the initial six months of
this engagement agreement (but not those of our associated entities).
(g)You have been informed that a portion of the Stock Signing Fee or the
Restricted Share Compensation (collectively hereinafter referred to as the
"Stock Compensation") may be transferred by Liberty to third party independent
consultants who will assist Liberty in the performance of its duties hereunder.
(h)In addition to the foregoing, the Company shall pay the sum of $60,000
to Liberty, representing the regular minimal, non-refundable cash engagement fee
charged by Liberty to its clients, in 12 consecutive monthly installments, the
first of which shall be payable concurrently with its execution of this
engagement letter, and the subsequent installments being due on or before the
monthly anniversary of the initial payments.
3.In addition to the compensation described above with reference to services
during the initial six month term of this engagement agreement and whether or
not the following services are rendered during such initial term:
(a)In the event that Liberty arranges or provides debt funding for the
Company on terms more beneficial than those reflected in the Company's current
principal financing agreement, a copy of which is annexed hereto and made a part
hereof as composite exhibit 1(b), then Liberty shall be entitled to a fee equal
to 25% of such savings, on a continuing basis; and
(b)In the event that Liberty generates business for the Company, then, on
any sales resulting therefrom, Liberty shall be entitled to a commission equal
to 25% of the profit derived by the Company therefrom, on a continuing basis
(payments to affiliates or related parties not being considered deductions for
determination of profit).
4.Unless requested by you to the contrary, work will be performed by the person
with the lowest billing rate and requisite knowledge and experience.
5.(a)All work requiring legal review will be submitted for approval by you to
your legal counsel prior to its use, or in the alternative, we will engage legal
counsel to conduct such review on your behalf.
(b)In the latter case, matters will be referred to attorneys licensed in
the states where the services are required or as to which specific expertise is
required (.e.g., opinions pertaining to the laws of specific states).
(c)Payment of all balances due attorneys will be your responsibility
directly.
6.(a)Final drafts of any matters prepared by us will be reviewed by you and, if
legally required, by legal your counsel, to assure that:
(1) All required information has been provided;
(2) All materials are presented accurately; and,
(3) That no materials required to render information provided "not
misleading" are omitted.
(b)Only after such review and approval by you and, if required, your legal
counsel, will any documents be filed with regulatory agencies or provided to
third parties.
101
<PAGE>
(c) (1)If requested by you, Liberty will recruit legal counsel for the
Company or will make the services of legal counsel to Liberty available to the
Company.
(2)If legal counsel to Liberty is used by the Company, its principal
loyalty in the event of a conflict of interests shall be to Liberty.
(3)In either case, compensation of such legal counsel shall be the
responsibility of the Company.
7.(a)Financial data will be reviewed by competent, independent, certified public
accountants who are members of the AICPA's Securities Practice Section and have
been subjected to peer review, to be separately retained by you.
(b)If required by you, we will assist in selection and supervision
of such accountants.
(c)Such accountants will be required to review and approve all
financially related filings, prior to submission to the appropriate regulatory
authorities.
8.(a)The Company shall supply Liberty on a regular and timely basis with all
approved data and information about the Company, its management, its products,
and its operations and the Company shall be responsible for advising Liberty of
any fact which would affect the accuracy of any prior data and information
supplied to Liberty.
(b)The Company shall use its best efforts to promptly supply Liberty with
full and complete copies of all filings with all federal and state securities
agencies; with full and complete copies of all shareholder reports and
communications whether or not prepared with Liberty's assistance, with all data
and information supplied to any analyst, broker-dealer, market maker, or other
member of the financial community; and with all product/services brochures,
sales materials, etc.
(c)The Company shall promptly notify Liberty of the filing of any
registration statement for the sale of securities and/or of any other event
which triggers any restrictions on release of information.
(d)The Company shall be deemed to make a continuing representation of the
accuracy of any and all material facts, material, information, and data which it
supplies to Liberty and the Company acknowledges its awareness that Liberty will
rely on such continuing representation in disseminating such information and
otherwise performing its functions under this engagement letter.
(e)The Company shall be deemed to make a continuing representation of the
accuracy of any and all material facts, material, information, and data which it
supplies to Liberty and the Company acknowledges its awareness that Liberty will
rely on such continuing representation in disseminating such information and
otherwise performing its functions under this engagement letter.
(f)Liberty, in the absence of notice in writing from the Company, may rely
on the continuing accuracy of material, information and data supplied by the
Company.
9.(a)In addition to our hourly fees, you will be responsible for payment of all
costs and disbursements associated with our services. All statements will be
paid within 10 days after receipt.
102
<PAGE>
(b)In the event additional time for payment is required, the Firm will have
the option of selling the account receivable and you agree to pay interest
thereon at the monthly rate of 1%.
(c)In the event collection activities are required, you agree to pay all of
our out of pocket costs associated therewith.
(d)There will be no change or waiver of the provisions contained herein,
unless such charge is in writing and signed by you and the Firm.
10.(a)In the event our services are provided for the benefit of juridical
entities other than the Company, no materials for which we are responsible will
be submitted to third parties until they have been reviewed and approved as to
form and content by all executive officers, directors, partners, joint ventures
or persons performing similar roles for the subject juridical entity.
(b)The filing of materials prepared by us with any governmental agency or
provision of copies thereof to other persons shall be deemed presumptive
evidence that our materials have been reviewed and approved as heretofore
described.
11.After the Company has registered a class of its securities under Sections
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, it will
assure that its legal counsel promptly prepares all reports which then existing
holders of the Company's securities (including Liberty and its successors in
interest) are required to file with the Securities and Exchange Commission as a
result of the Company's new reporting status, including Securities and Exchange
Commission Forms 3, 4 and 5, Schedules 13(d) and Schedules 13(g), and shall
submit all such reports to the subject stockholders for prompt execution and
timely filing with the Securities and Exchange Commission.
12.We acknowledge that pursuant to Section 17(b) of the Securities Act, we must
disclose all compensation paid and received if Liberty engages in describing the
Company's securities to third parties; consequently, the Company shall, at such
time as it attains public trading status, assure that this Agreement and any
amendments or supplements to it are on file with the Securities and Exchange
Commission, and the Parties will both take such other steps as are reasonably
necessary to assure that Section 17(b) is fully complied with on a timely basis.
C. Confidentiality & Non-Circumvention Sections.
1. General Prohibitions
(a)The Company acknowledges that, in and as a result of its engagement of
Liberty, the Company will making use of confidential information of special and
unique nature and value relating to such matters as Liberty's business contacts,
professional advisors, trade secrets, systems, procedures, manuals, confidential
reports, lists of lenders, potential customers and funders; consequently, as
material inducement to the entry into this Agreement by Liberty, the Company
hereby covenants and agrees that it shall not, at anytime during the term of
this Agreement, any renewals thereof an for two years following the terms of
this Agreement, directly or indirectly, use, divulge or disclose, for any
purpose whatsoever, any of such confidential information which has been obtained
by or disclosed to it as a result of its employment of Liberty, or Liberty's
affiliates.
(b)In the event of a breach or threatened breach by the Company of any of
the provisions of these Confidentiality & Non-Circumvention Sections, Liberty,
in addition to and not in limitation of any other rights, remedies or damages
available to Liberty, whether at law or in equity, shall be entitled to a
permanent injunction in order to prevent or to restrain any such breach by the
Company, or by the Company's partners, directors, officers, stockholders,
agents, representatives, servants, employers, employees, affiliates and/or any
and all persons directly or indirectly acting for or with it.
103
<PAGE>
2. Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
Liberty as a result of a breach by the Company of the covenants or agreements
contained in these Confidentiality & Non-Circumvention Sections, and in view of
the lack of an adequate remedy at law to protect Liberty's interests, the
Company hereby covenants and agrees that Liberty shall have the following
additional rights and remedies in the event of a breach hereof:
(a)The Company hereby consents to the issuance of a permanent injunction
enjoining it from any violations of the covenants set forth in these
Confidentiality & Non-Circumvention Sections; and
(b)Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which Liberty may sustain prior to the effective
enforcement of such injunction, the Company hereby covenants and agrees to pay
over to Liberty, in the event it violates the covenants and agreements contained
in these Confidentiality & Non-Circumvention Sections, the greater of:
(i)Any payment or compensation of any kind received by it because of
such violation before the issuance of such injunction, or
(ii)The sum of One Thousand 000.00) Dollars per violation, which sum
shall be liquidated damages, and not a penalty, for the injuries suffered by
Liberty as a result of such violation, the Parties hereto agreeing that such
liquidated damages are not intended as the exclusive remedy available to Liberty
for any breach of the covenants and agreements contained in these
Confidentiality & Non-Circumvention Sections, prior to the issuance of such
injunction, the Parties recognizing that the only adequate remedy to protect
Liberty from the injury caused by such breaches would be injunctive relief.
3. Cumulative Remedies.
The Company hereby irrevocably agrees that the remedies described in these
Confidentiality & Non-Circumvention Sections shall be in addition to, and not in
limitation of, any of the rights or remedies to which Liberty is or may be
entitled to, whether at law or in equity, under or pursuant to this Agreement.
4. Acknowledgment of Reasonableness.
(a)The Company hereby represents, warrants and acknowledges that it has
carefully read and considered the provisions of these Confidentiality &
Non-Circumvention Sections and, having done so, agrees that the restrictions set
forth herein are fair and reasonable and are reasonably required for the
protection of the interests of Liberty, its members, officers, directors,
consultants, agents and employees; consequently, in the event that any of the
above-described restrictions shall be held unenforceable by any court of
competent jurisdiction, the Company hereby covenants, agrees and directs such
court to substitute a reasonable judicially enforceable limitation in place of
any limitation deemed unenforceable and, the Company hereby covenants and agrees
that if so modified, the covenants contained in these Confidentiality &
Non-Circumvention Sections shall be as fully enforceable as if they had been set
forth herein directly by the Parties.
(b)In determining the nature of this limitation, the Company hereby
acknowledges, covenants and agrees that it is the intent of the Parties that a
court adjudicating a dispute arising hereunder recognize that the Parties desire
that these covenants not to compete or circumvent be imposed and maintained to
the greatest extent possible.
5.The Company hereby acknowledges that Liberty has already introduced the
Company to Equity Growth Systems, inc., a publicly held Delaware corporation and
to the Yankee Companies, Inc., a privately held Florida corporation.
D. Due Diligence Materials
1.In any circumstances where Liberty is describing the Company's securities to a
third Party, Liberty shall disclose to such person any compensation received
from the Company, to the extent required under any applicable laws, including,
without limitation, Section 17(b) of the Securities Act, and in any dealings
with such third party, the Company shall confirm such disclosure.
2.Under separate cover, we are sending to you the following due diligence
materials. Please complete and return them to us at your earliest convenience.
(a)Officers & Directors Questionnaires to be completed by all officers,
directors and principal consultants to entities for which we perform services at
your request, and then returned to us;
104
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(b)A Company Questionnaire to be completed by a knowledgeable person or
persons designated by entities for which we perform services at your request and
then returned to us.
* * *
In the event that you desire different arrangements, either in general or
for specific projects, we will be glad to consider your proposals; however, all
contrary arrangements must be memorialized in a written instrument signed by
this firm. Please sign a copy of this transmission and return it to us by
facsimile transmission to the number set forth on this letterhead. Please also
complete and return the enclosed client data sheet.
We look forward to a pleasant and mutually profitable relationship.
Very truly yours,
Liberty Group, Inc.
/s/ Guido Volante
Guido Volante
President
The foregoing is hereby accepted, as of the date first above written.
/s/ Charles Scheuerman
Charles Scheuerman
President
Funds America Finance Corporation
105
JEFFREY G. KLEIN. P.A.
23123 STATE ROAD SEVEN, SUITE 350B
BOCA RATON, FLORIDA 33428
(561)470-9010
OCTOBER 5, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attn: Filing Desk
We hereby consent to our being designated as legal counsel to FundsAmerica
Finance Corporation the filing of this opinion as an exhibit to the Registration
Statement to the references to us in the Prospectus which is a part of the
Registration Statement.
/s/ Jeffery G. Klein, Esq.
106
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form SB-2 of our report dated August 12, 1999
/s/ Dohan and Company, P.A., CPA's
Dohan and Company, P.A., CPA's.
7700 North Kendall Drive, Suite 204
Miami, Florida 33156
July 30, 1999
107
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-END> JUN-30-1999
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<COMMON> 106,150
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<SALES> 5,300
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