AMERICAN EQUITIES INCOME FUND II INC, SB-2, 1999-12-30

AMERICAN EQUITIES INCOME FUND II INC
SB-2, 1999-12-30

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As Filed with the Securities and Exchange Commission on December 30, 1999
Registration No. 333-____
- --------------------------------------------------------------------------------
REGISTRATION STATEMENT
ON
FORM SB-2
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
AMERICAN EQUITIES INCOME FUND II, INC.
(Exact name of registrant as specified in charter)
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<CAPTION>
<S> <C> <C>
DELAWARE 6159 22-3684561
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Corp. No.) Identification No.)
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80 East Route 4
Paramus, New Jersey 07652
(201) 368-5900
(Address, and telephone number of registrant's principal executive offices)
David S. Goldberg
Chief Executive Officer
80 East Route 4
Paramus, New Jersey 07652
(201) 368-5900
(Name, address, and telephone number of agent for service)

With a copy to:
H. Bruce Bronson, Jr., Esq.
Bronson & Migliaccio, LLP
3010 Westchester Avenue, Suite 403
Purchase, New York 10577

Approximate date of commencement of proposed sale to the public: From time to
time after the Registration Statement becomes effective.

If any of the securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ].

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]

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

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CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of each class Amount maximum (1) maximum Amount of
of securities to be to be offering aggregate Registration
registered registered price per Note offering price fee
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<S> <C> <C> <C> <C>
12% Notes $9,950,000 $1,000 $9,950,000 $2,755.10
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Total Fee ........................................................................................ $2,755.10
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(1) Stated only for purposes of calculating registration fee.
----------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

<PAGE>

AMERICAN EQUITIES INCOME FUND II, INC.
Cross Reference Sheet
<TABLE>
<CAPTION>
Item
Number Caption in Form SB-2 Caption in Prospectus
- ------ -------------------- ---------------------
<S> <C> <C>
Item 1 Forepart of Registration Statement Cover page of Registration
and Outside Front Cover Page Statement and Outside
of the Prospectus Front Cover Page

Item 2 Inside Front and Outside Back Inside Front and Outside
Cover Pages of the Prospectus Back Cover Pages of
Prospectus

Item 3 Summary Information and Summary of the Offering,
Risk Factors Risk Factors

Item 4 Use of Proceeds Use of Proceeds

Item 5 Determination of Offering Price Not Applicable

Item 6 Dilution Not Applicable

Item 7 Selling Security Holders Not Applicable

Item 8 Plan of Distribution Plan of Distribution;
Summary of the Offering

Item 9 Legal Proceedings Business

Item 10 Directors, Executive Officers, Management
Promoters and Control Persons

Item 11 Security Ownership of Certain Security Ownership of
Beneficial Holders and Management Certain Beneficial Holders
and Management

Item 12 Description of Securities Description of Securities,
Summary of the Offering

Item 13 Interest of Names Experts and Not Applicable
Counsel

Item 14 Disclosure of Commission Position Management
on Indemnification for Securities
Act Liabilities

Item 15 Organization within Last Five Years Certain Relationships
and Related Transactions
</TABLE>

iii

Item
Number Caption in Form SB-2 Caption in Prospectus
- ------ -------------------- ---------------------
<S> <C> <C>

Item 16 Description of Business Business

Item 17 Management's Discussion and Plan of Operations
Analysis or Plan of Operations

Item 18 Description of Property Business

Item 19 Certain Relationships and Related Certain Relationships and
Transactions Related Transactions

Item 20 Market for Common Equity and Not Applicable
Related Stockholder Matters

Item 21 Executive Compensation Management

Item 22 Financial Statements Financial Statements

Item 23 Changes in and Disagreements with Not Applicable
Accountants on Accounting and
Financial Disclosure

</TABLE>

<PAGE>
Subject to Completion, Dated December 30, 1999
PROSPECTUS
$9,950,000
12% 10-Year Promissory Notes

AMERICAN EQUITIES INCOME FUND II, INC.

We were formed in 1999 as a special purpose corporation wholly-owned by
American Equities Group, Inc. ("AEG") primarily to acquire, lend against,
service and collect upon accounts receivable (the "Receivables") originated from
small and mid-sized businesses.

We are offering subscriptions for a maximum of up to $9,950,000
aggregate principal amount of our 12% promissory notes (the "Notes") in
denominations of $1,000 each, or any integral multiple thereof. Investor funds
will be held in a non-interest bearing Escrow Account at Republic National Bank
of New York, NY (the "Escrow Agent") until a minimum of $500,000 of Notes are
sold (the "Minimum Offering"). The Dealer Manager and its affiliates may
purchase Notes in connection with this offering and such purchases may be
counted towards the Minimum Offering amount. In the event the Minimum Offering
is not subscribed for within six (6) months from the date of this Prospectus,
the Offering will be terminated and the escrowed funds returned to investors
within 10 days, without interest less escrow costs, but in no event less than
the amount deposited.

The minimum purchase to you is $5,000 or $2,000 if you are investing
through an IRA; however, we reserve the right, in our sole discretion, to offer
and sell less than the minimum to any investor

The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

These are speculative securities. This Offering involves a high degree
of risk. You should purchase notes only if you can afford the loss of your
entire investment. See "Risk Factors" beginning on page 5.

-------------------------------------
Neither the Securities and Exchange Commission 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.
- --------------------------------------------------------------------------------
Price to Commissions and Proceeds to
Public (1) Concessions (1)(2)(3) Corporation(4)(5)
- --------------------------------------------------------------------------------
Per Note $ 1,000 $ 85 $ 915
Total Minimum $ 500,000 $ 42,500 $ 457,500
Total Maximum $ 9,950,000 $ 845,750 $ 9,104,250
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(Footnotes on following page)
The date of this Prospectus is _____________ __, 1999

STRATEGIC ASSETS INC.

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
securities and exchange commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.

<PAGE>

(1) The Notes are being offered on a "best-efforts" basis through Strategic
Assets Inc. (the "Dealer Manager") and Selected Dealers (collectively
referred to as the "Participating Dealers") who are members of the National
Association of Securities Dealers, Inc. (the "NASD"). See "PLAN OF
DISTRIBUTION."

(2) The Corporation has agreed to indemnify the Dealer Manager and Selected
Dealers against certain liabilities, including liabilities under the
Securities Act of 1933. See "PLAN OF DISTRIBUTION."

(3) The Corporation will pay the Dealer Manager a selling commission of up to
7% of the offering price for all Notes sold, a due diligence and
non-accountable expense allowance of 1%, which may be reallowed to Selected
Dealers and a Dealer Manager fee of .50%. See "PLAN OF DISTRIBUTION."

(4) Genesis Ventures, Limited will receive a payment of 5% of the offering
proceeds for providing investment banking and consulting services to the
Company.

(5) This is before deducting other expenses of issuance and distribution
payable by the Corporation in connection with this offering. The
Corporation will pay from the proceeds of this offering all of such
expenses, currently estimated at $225,000, not including the fee to Genesis
Ventures, Limited. If only the Minimum Offering is sold AEG will pay all
expenses of the Offering, estimated to be approximately $75,000.

If the Minimum Offering is sold and if the Corporation does not
terminate the offering earlier, which in the sole discretion of Management it
may, the offering of Notes will continue until the Corporation raises an
aggregate of $9,950,000, provided that the offering period for all Notes of the
Corporation will not exceed 24 months from the date of this Prospectus.

The Notes are being offered subject to prior sale, withdrawal,
cancellation or modification of the offer, including its structure, terms and
conditions, without notice. The Corporation reserves the right, in its sole
discretion, to reject, in whole or in part, any offer to purchase the Notes. See
"UNDERWRITING."

SUITABILITY STANDARDS: WHO CAN INVEST?

We will only sell the Notes to you if you make the required minimum
purchase and represent to us in writing that you have either:

o a minimum annual gross income of at least $30,000 and a net
worth of $30,000 (exclusive of home, home furnishings and
automobiles); or

o (ii) a net worth of $75,000 (exclusive of home, home furnishings
and automobiles); or

<PAGE>

o (iii) that you are purchasing in a fiduciary capacity for a
person who (or for an entity which) meets such conditions.

In the case of sales to fiduciary accounts, the suitability standards
must be satisfied by the beneficiary; however, where the fiduciary is the donor
of funds used for investment in our company, the fiduciary and not the
beneficiary must meet the standards set forth above. Certain states may impose
higher suitability standards which an Investor must satisfy.

All brokers selling our securities will make reasonable inquiry to
assure that there is compliance with these suitability standards, and we will
not accept subscriptions from any person who does not represent in the
Subscription Agreement that he meets such standards.

Arkansas Investors: Arkansas investors must have a $45,000 gross income
and $45,000 net worth (exclusive of home, home furnishings and automobiles) or
$150,000 net worth (exclusive of home, home furnishings and automobiles).

California Investors: California investors must have a liquid net worth
(exclusive of home, home furnishings and automobiles) of $60,000 plus a minimum
annual gross income of at least $60,000 or a liquid net worth of $225,000
(exclusive of home, home furnishings and automobiles).

Missouri Investors: Missouri investors must have a net worth (exclusive
of home, home furnishings and automobiles) of $60,000 plus a minimum annual
gross income of at least $60,000 or a net worth of $225,000 (exclusive of home,
home furnishings and automobiles).

North Carolina Investors: North Carolina investors must have a net
worth (exclusive of home, home furnishings and automobiles) of $60,000 plus a
minimum annual gross income of at least $60,000 or a net worth of $225,000
(exclusive of home, home furnishings and automobiles).

Wisconsin Investors: Wisconsin investors must have a $45,000 gross
income and $45,000 net worth (exclusive of home, home furnishings and
automobiles) or $150,000 net worth.

No transfers will be permitted of less than the minimum permitted
purchase, nor may an investor transfer, fractionalize or subdivide Notes so as
to retain less than such minimum purchase.

The reasons for establishing these standards include the relative lack
of liquidity of the Notes and certain risk factors associated with an investment
in the Notes. See "Risk Factors."

iii

<PAGE>

SUMMARY OF THE OFFERING

The following is a summary and is followed by more detailed information
and financial statements appearing elsewhere in this Prospectus. You should read
the entire Prospectus before you invest in our securities.

The Company

We were formed under the laws of the State of Delaware in 1999, and our
principal place of business is at 80 East Route 4, Suite 202, Paramus, New
Jersey 07652, telephone (201) 368- 5900. As a special purpose corporation, we
are restricted by our certificate of incorporation primarily to factoring and
financing accounts receivables, providing purchase order and inventory financing
and other financial services through a management agreement with our parent
corporation, American Equities Group, Inc. ("AEG"). We are not allowed to borrow
funds, except from AEG, which loans will be subordinated to the debt held by you
in the event of dissolution or liquidation of the Company, or engage in any
business other than the financing of accounts receivable, purchase order
financing and financial services. We will not deposit or commingle any of our
funds with those of AEG or its affiliates.

We will, through AEG, engage in the business of factoring and financing
accounts receivables and purchase order financing. A factor will purchase the
Receivables of businesses at a discount from their face value which provides the
business with immediate cash flow. This financing tool allows a business to put
its Receivables to work and allows companies to obtain working capital without
taking on new debt or giving up equity. The result is a streamlining of credit
and collection efforts and an enhanced cash flow. Small businesses are attracted
to factoring due to the fact that many small businesses cannot qualify for
traditional bank loans and factoring provides them with the immediate cash they
need to operate and grow.

We will typically charge 3% to 8% of the face amount of the Receivables
as a fee and will initially advance 65% to 85% of the face amount of the
Receivables, which are collateral for the payment of Receivables. See "Business
- - Acquisition of Receivables." We cannot give any assurances that all fees and
advances of all transactions will equal such amounts; and fees and advance rates
may be increased or reduced depending upon competition, credit standards and the
relative risk of the Receivables.

The Notes and the Offering

We are offering subscriptions for a maximum of up to $9,950,000
aggregate principal amount of the Company's 12% Promissory Notes (the "Notes").
The Notes:

o Will be sold in denominations of $1,000 each, or any integral
multiple thereof, with a minimum investment of $5,000 ($2,000 if
you are investing through an IRA). However, we reserve the
right, in our sole discretion, to offer and sell less than the
minimum number of Notes to any investor;

<PAGE>

o Investor funds will be held in a non-interest bearing Escrow
Account at Republic National Bank of New York, New York, NY (the
"Escrow Agent") until the Minimum has been reached;

o The Notes will bear simple interest at the rate of 12% per
annum, payable interest only, in one of the following options:
(i) 12 equal monthly installments, (ii) annually or (iii) upon
maturity, as chosen by the investor upon subscription;

o The Notes mature ten (10) years from issuance;

o The Notes will be secured by a group of Receivables acquired
with the proceeds of the Offering or funds obtained from the
repayment of such Receivables or any after acquired Receivables.

o We may prepay the Notes in whole or in part at any time without
premium or penalty.

o You may accelerate the maturity date of your Note on the first
day of the fifth, sixth, seventh, eighth, and ninth
anniversaries of the issuance of your Note upon six months prior
written notice to us.

Use of Proceeds

The net proceeds of the Offering will be used to acquire and finance
accounts receivables and to engage in other financial services.

Risk Factors

An investment in our Notes involves a high degree of risk which is
described in "Risk Factors" beginning on page 5 of this prospectus. You should
not invest in this offering unless you can afford the loss of your entire
investment. Accordingly, you are urged to consult with

<PAGE>

personal legal, tax and financial advisors before making this investment. Such
risk factors include:

. We have no operating history and will rely on the experience of our
management. We are a newly organized corporation which will be dependent upon
the management expertise of AEG and its officers and directors. Our success
will, to a large extent, depend upon the extent to which we and AEG are able to
acquire, finance and successfully collect Receivables to the extent of advances
on such Receivables and on the quality of the services provided by AEG, its
management and employees, particularly as it relates to evaluating the merits of
proposed investments. The loss of services of any one or more of AEG's key
employees could have a materially adverse effect on our operations and
prospects.
. There is no trading market for the Notes and you will not be able to
readily transfer your Notes. There is no trading market for the Notes and we do
not expect one to develop. Accordingly, you should purchase a Note only as a
long-term investment as you may not be able to liquidate your investment
quickly, if at all.
. We have only limited sources for the payments of the Notes. Payments
of interest and principal on the Notes will be derived primarily from cash flow
generated by the Receivables we finance. If sufficient funds are not available
from cash flow or other sources, the repayment of all or part of the interest or
principal on the Notes may be delayed or never be made.
. We have not obtained any ratings of the Notes. The Notes will not be
rated by any rating agency. Accordingly, you will not have any independent
evaluation of the creditworthiness of our company or our debt securities prior
to investing.
. The Notes are not self-amortizing. The Notes do not provide for the
amortization of principal prior to maturity or acceleration. Our ability to
repay at maturity the outstanding principal amount of the Notes is dependent
upon our ability to collect the Receivables at a profit. There can be no
assurance that we will have sufficient cash available for repayment of the Notes
upon their maturity or upon your acceleration of the Notes after five years.
. Our officers and directors may have conflicts of interest. Our
officers and directors are also officers and directors of AEG and other similar
corporations which engage in the factoring and financing of Receivables and may
have conflicts of interest in allocating management time, services and functions
between our company and the other companies with which they are affiliated with.
Furthermore, there may be competition among our various affiliates for certain
Receivables.
. We are uncertain as to the tax treatment of the Notes. We may be
deemed to be thinly capitalized and therefore the debt evidenced by the Notes
could be deemed a capital contribution. Such a determination could have a
materially adverse effect on our profitability and our ability to make interest
and principal payments to investors when due.

Tax Aspects

It is intended that interest payments under the Notes will be treated
as ordinary income. Income or loss on the disposition of the Notes will be
treated as a capital gain or loss.

<PAGE>

Selected Financial Information

November 1, 1999

Assets $100,100
Liabilities 100
Stockholders Equity $100,000

Plan of Distribution

The Notes are being offered by Strategic Assets Inc. and other selected
broker/dealers on a best efforts/all or none basis as to the Minimum ($500,000)
and a best efforts basis as to the Maximum ($9,950,000).

<PAGE>

RISK FACTORS

An investment in our Notes involves a high degree of risk. You should
carefully consider the following risk factors as well as the other information
contained in this Prospectus before making a decision to purchase the Notes.

We have no operating history and have not yet operated profitably.

We were founded in October, 1999 and we have not had any operations as
of the date of this Prospectus. Our lack of any operating history offers no
information to serve as a basis for evaluating us and our long-term prospects.
Our success and our ability to make payments to you is dependent upon the extent
to which AEG, on our behalf, is able to acquire and successfully collect
Receivables. However, neither AEG nor any of its affiliates engaging in the same
type of business have experienced any significant delays in the making of
interest payments to the investors of such investment vehicles. There is no
assurance that we will be able to acquire and to collect on all or a majority of
the Receivables or provide sufficient proceeds to make payments to you.

A default on Receivables held by us could make repayment of the Notes difficult
or impossible.

In the event our clients default on their Receivables, we will first
offset the defaulted amount against the deferred portion of the purchase price
of all Receivables acquired from the client. If this amount is inadequate, we
will, through AEG, pursue the obligor on the Receivables and any other
collateral. We can give no assurances that the market value of the Receivables
or other collateral securing the Notes will at any time be equal to or greater
than the aggregate principal amount of the Notes then outstanding, plus accrued
interest thereon. Therefore, upon an event of default with respect to such
Notes, the proceeds of any sale of such Receivables and the other collateral may
be insufficient to pay in full the principal of and interest on such Notes. In
the event of fraud or misappropriation of funds by our clients, pursuant to the
trust provisions of our purchase contracts, we have the right to pursue certain
principals of the client for such funds. Despite our and AEG's best efforts,
certain Receivables may prove to be uncollectible.

We face intense competition in the acquisition and financing of Receivables.

In connection with our acquisition and financing of Receivables, we can
expect to face significant competition from persons or entities which may have
objectives similar in whole or in part to ours. Many of our competitors are
substantially better financed and have reputations and public awareness of their
operations which are more widely known and accepted than we are. Such
competition may require that we pay more for Receivables that we acquire or
finance or that we may have to acquire or finance Receivables of lesser quality,
which could reduce or eliminate payments to you.

<PAGE>

We may be subject to government regulation, which may change or harm our
business.

There are no state laws affecting lending and factoring of accounts
receivable which would adversely affect our business. We and AEG will obtain
licenses wherever necessary prior to engaging in business in order to factor
receivables. In the event that we are required to obtain a license to factor
accounts receivable in any state, we can give no assurances that we will be able
to acquire such a license. Such a license requirement would also limit the
number of Receivables that we could acquire.

We need to continually invest our assets in Receivables.

Our success, in large part, depends on our ability to keep our assets
continuously invested in Receivables. We intend to have between 50% and 90% of
our assets invested in Receivables at any given time. We may be unable to keep
the minimum anticipated percentage of our assets so invested, which may result
in lower rates of return from the investment of our assets which could adversely
affect our ability to pay interest and principal to you when due.

We rely on and the experience of management and management has broad discretion.

Our day-to-day affairs, including, but not limited to, evaluating the
Receivables, determining which Receivables are to be purchased, effecting
Receivable purchases, collecting and turning over to us for direct deposit into
our bank account the payments on the Receivable and pursuing remedies for
defaulted Receivables and making payments due on the Notes to Note Holders from
funds provided by us, are administered entirely through, and decisions with
respect thereto will be made exclusively by, AEG. See "BUSINESS - American
Equities Group, Inc., as Manager." Our actions are limited to receiving the
proceeds of this Offering, releasing such proceeds for investment in Receivables
at the direction of AEG, depositing Receivable payments processed by AEG,
releasing funds for payments to Note Holders by AEG and for payments due AEG
under a Management Agreement and executing those contracts, commitments and
agreements to which we are a party not executed on our behalf by AEG, as
Manager. See "BUSINESS - American Equities Group, Inc., as Manager." Our
officers and directors are also officers and directors of AEG. Our success will,
to a large extent, depend on the quality of the services provided by AEG, its
management and employees, particularly as it relates to evaluating the merits of
proposed investments. The loss of services of any one or more of Messrs.
Goldstick or Goldberg could have a materially adverse effect on our operations
and prospects. AEG holds a $2,000,000 key-man life insurance policy on Mr.
Goldberg. Each of Messrs. Goldberg and Goldstick has a five-year employment
agreement with AEG which expires in August 2002. Such employment agreements may
be renewed for an indefinite number of one-year periods.

<PAGE>

We may face competition from Affiliates for Management Services and there may be
conflicts of interest.

Our officers and directors are also officers and directors of
affiliated corporations and may become officers and directors of similar
corporations which may be formed in the future. Our management and management
and employees of AEG will devote only so much of their time to the business of
our company as in their judgment is reasonably required. Our management and
management and employees of AEG may have conflicts of interest in allocating
management time, services and functions between this company, the Affiliates and
any future entities which they may organize, as well as other business ventures
in which they are involved. Furthermore, there may be competition among the
various entities for certain receivables. AEG has attempted to minimize these
problems by rotating the purchase of receivables among all its affiliated
companies so that all of its affiliates are engaged in financing activities with
all of AEG's clients. See, "BUSINESS - Acquisition of Receivables." Our
management and management of AEG believe that they have sufficient staff
personnel to be fully capable of discharging their responsibilities to all
entities they have organized. See, "MANAGEMENT - Conflicts of Interest."

All overhead costs, including those of employees available to work on
the business of our company will be borne by AEG, with the exception of costs of
legal, accounting, investor services, filing fees and taxes. See "PLAN OF
OPERATIONS - Operations and Overhead Expenses."

Both our company and AEG are represented by the same legal counsel in
connection with the issuance of the Notes. Separate counsel may be retained by
the Trustee in connection with any dispute under the Indenture of Trust.
Accordingly, it is possible that our counsel may not have drafted the documents
in the most favorable manner to you and may not have included legal protection
for you which would have been obtained if you or our company had retained
independent counsel. However, should a future dispute arise between us and AEG,
AEG will cause us to retain separate counsel for such matters.

Our business will have only a limited diversification.

Our business will not be diversified in that we will own only
Receivables. In the event of an economic recession in areas in which the makers
of the Receivables are located, our ability to realize income from our
operations may be adversely affected, which may affect our ability to make
distributions to you. We do not anticipate limiting our acquisition of
Receivables to specific geographical areas of the United States.

You will not be able to evaluate the merit of our investments.

The uncertainty and risk of an investment in the Notes is increased to
the extent that you will be unable to evaluate for yourself the economic merit
of the Receivables that we acquire.

<PAGE>

Although we are constantly seeking suitable Receivables, no agreement or
understanding has been reached for any specific Receivables. You must depend
solely upon the ability of AEG's management with respect to the selection of
Receivables. See "MANAGEMENT" for a description of the experience of the
management of AEG and its Affiliates. There can be no assurance that we will be
successful in using all of the proceeds of the Offering to acquire Receivables.
Our inability to find suitable Receivables to acquire with the proceeds of this
Offering may result in delays in investment of such proceeds and in the receipt
by you of a return, if any, from such investments.

You will not be able to trade the Notes and the Notes may be transferred by you
only under limited circumstances.

There is no public or other market for the Notes and we do not
anticipate that one will develop in the future. Because the Notes are subject to
certain restrictions on their transfer and because there is a lack of a trading
market for the Notes, you should purchase the Notes only as a long-term
investment, as you may not be able to liquidate your investment in the Notes in
the event of an emergency or for any other reason.

We will have limited sources of payment for the Notes and will not establish a
sinking fund to insure repayment of the Notes.

The sole sources of payment of interest on the Notes will be cash flow
generated by our Receivables that are security for the Notes, capital
contributions or loans from our sole shareholder or its affiliates, or
borrowings obtained from AEG. The sole sources of repayment of principal and
accrued interest on the Notes at the end of their term or upon your acceleration
after five years will be a refinancing of the Notes, a sale of the Receivables
which are pledged as security for the Notes, proceeds from the repayment of the
Receivables not used to acquire additional Receivables, or loans or capital
contributions from the sole shareholder or its Affiliates. There is no present
intention or potential for a loan or capital contribution from our sole
shareholder or affiliates. In addition, we reserve the right to sell additional
notes or equity interests in a public offering or an offering exempt from
registration under federal and state securities laws to provide additional
financing for us. If sufficient funds are not available from any of such
sources, the repayment of all or part of the interest or principal on the Notes
may be delayed or never by made. See Exhibit A - Secured Note, Exhibit B
Security Document, and Exhibit C - Indenture of Trust."

In addition, as you may choose the frequency of your interest payments,
if you choose to receive interest payments annually or upon maturity you will
face a greater risk of non-payment of interest than if you receive monthly
interest payments because our ability to pay interest annually or at maturity is
dependent upon our cash flow at such time and our ability to collect the
Receivables at a profit. We intend to make monthly interest payments to Notes
Holders even if it appears likely that payments to be made annually or upon
maturity may not be able to be made. Accordingly, such monthly interest payments
may deprive us of our ability to make other

<PAGE>

scheduled payments of interest when due. Similarly, if any Investor accelerates
any Note in accordance with its terms, the payment of the principal amount of
such Note and all interest accrued thereon may deprive us of our ability make
other scheduled payments of interest and payments of principal subsequently
accelerated or paid upon maturity.

We have no sinking fund for payment of principal or interest on the Notes.

Your ability to enforce your security interest is dependent upon our perfecting
the lien on our Receivables.

Through the Trustee, as agent for the investors, you will be granted a
security interest in the Receivables and the proceeds of the Receivables, which
will be perfected by the filing of UCC-1 Financing Statements. If the security
interest is not perfected for whatever reason, in the event of a default on the
Notes you would be treated as an unsecured creditor and your ability to collect
or sell the Receivables and use the proceeds to repay the Notes would be
adversely affected. As a result, you could suffer a partial or total loss of
principal and unpaid interest on the Notes.

We have not obtained any rating of the Notes.

The Notes will not be rated by any rating agency. We have not pursued,
nor do we intend to pursue, rating of the Notes from any of the rating agencies.
Accordingly, you will not have any independent evaluation of our credit
worthiness or of our debt securities.

The loan from you will not be self-amortizing.

The Notes do not provide for the amortization of any of the principal
amount prior to maturity. Such Notes involve greater risks than loans in which
the principal amount is amortized over the term of the loan because our ability
to repay at maturity the outstanding principal amount of such loans is dependent
upon our ability to collect the Receivables at a profit.

The enforceability of the Notes by you may be limited.

In the event that we default on the Notes, you may be limited in your
ability to enforce the Notes due to the effect of any applicable bankruptcy,
insolvency, reorganization, receivership, fraudulent conveyance or transfer,
moratorium or similar law affecting the rights or remedies of creditors or
secured creditors generally and the effect of general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing (regardless of whether considered in a proceeding in
equity, at law or both), upon the enforceability of any of the remedies,
covenants or other provisions of the Note or the Security Agreement. We can give
no assurances that any of such laws will not operate to impair the
enforceability of the Notes.

<PAGE>

We may prepay the Notes without penalty.

We may prepay the Notes in whole or in part at any time without premium
or penalty. In the event of such repayment of the Notes, you may not receive the
cumulative return that you may have originally expected.

Losses on Notes may be deemed capital losses.

If you suffer a loss on your Note, it may be treated as a capital loss
rather than an ordinary loss, which may affect the manner in which you may be
utilized such loss for tax purposes.

You will have no equity interest in our company and no voting rights.

You will not acquire an equity interest in our company or obtain any
benefits which might accrue through an equity interest in our company by a
purchase of notes. You will have no voting rights and no right or power to take
part in the management of our business or AEG. Accordingly, you should not
purchase the Notes offered hereby unless you are willing to entrust all aspects
of the management and control of our business to AEG, its officers, directors
and employees. See "MANAGEMENT."

If we do not sell all of the Notes offered we may suffer a lack of diversity of
Receivables.

We will be funded with the proceeds from the sale of the Notes. In the
event we sell less than the $9,950,000 of Notes offered hereunder, we may only
be able to acquire a limited number and less diversified portfolio of
Receivables as collateral, and you may have an increased risk of loss.

We may be required to file as an Investment Company.

Due to the nature of our business, we are not an "Investment Company"
as defined under the Investment Company Act of 1940 and therefore we are not
subject to regulation under the Investment Company Act of 1940. AEG's officers
and employees will monitor the purchase of Receivables and the investment of
those portions of proceeds of this Offering not immediately used, or from time
to time not used, in the purchase of Receivables so that we do not come within
the definition of an investment company under such act. As a result, we may have
to forego certain investments which would produce a more favorable return to us.
See "BUSINESS - Monitor of Corporation Investments." In the unlikely event that
we were required to register as an investment company, such registration and
compliance under such act would have an adverse effect on the current operations
of our business.

<PAGE>

We arbitrarily determined the purchase price of our Notes.

The price and amount of Notes offered by us has been established
arbitrarily and bears no relationship to our asset value, book value, net worth
or any other established criteria of value or to the earning potential of our
Company or the Notes.

We may face competition from our Affiliated Corporations.

Management of AEG may engage of its own account, or for the account of
others, including other public or private entities, in other business ventures,
and neither the we nor you shall be entitled to any interest therein. Management
has in the past and may form in the future other entities, some of which may
have the same investment objectives as our business.

The Trustee will be entitled to increased compensation if there is a default
under the Notes.

Our Indenture of Trust provides that, in addition to the fee of $4,000
per year to be paid to the Trustee, upon the occurrence of an Event of Default
as defined in the Indenture of Trust or the Security Agreements, the Trustee
will receive an additional fee of $200 per hour for time incurred in rendering
his duties as Trustee. If such an Event of Default occurs, there is no assurance
that the Trustee will not be required to expend a significant amount of time in
exercising his duties as Trustee, and the resulting compensation paid to the
Trustee will reduce funds available to satisfy the Notes.

Our officers and directors will maintain control of our company.

Following completion of this Offering, our current officers and
directors will indirectly own in the aggregate 82% of our outstanding Common
Stock. As a result, our current officers and directors are in a position to have
complete control over the outcome of all matters on which stockholders are
entitled to vote, including the election of directors. See "PRINCIPAL
STOCKHOLDERS."

We are uncertain as to the tax treatment of the Notes.

As of November 1, 1999, we had stockholders' equity of $100,000. The
Internal Revenue Service has taken the position in the past that debt of a
thinly capitalized corporation may be considered as a capital contribution not
giving rise to a deduction for interest expense by the debtor. See "TAX ASPECTS
- - Thinly Capitalized Corporation." Such a determination could have a materially
adverse effect on our profitability and would result in less funds being
available for the payment of distributions to you. In the event the Notes were
deemed by the IRS to be capital contributions, distributions of interest
payments to you may be deemed to be taxable dividends for income tax purposes
and the repayment of principal may be deemed to be a non-taxable return of
capital in the absence of earnings and profits. If we have earnings and profits
the repayment of principal would be taxed as a dividend to the extent of such
earnings and

<PAGE>

profits. The extent and amount of earnings and profits that we would have is
not determinable at this time.

Absence of Outside Directors.

Our officers and directors are each officers and directors of AEG. We
have no outside directors and do not anticipate obtaining the services of any
outside directors in the near future. Such inside directors may not have the
level of independent judgment that could be expected of an outside director and
such directors could have conflicts of interest in connection with their
relationship with AEG. See "MANAGEMENT - Conflicts of Interest."

We encourage you not to place undue reliance on forward-looking information.

This prospectus includes forward-looking statements. We have based
these forward looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:

o the ability of AEG to locate suitable receivables and other financing
business in sufficient amounts;
o changes in the financial industry and markets;
o the actions of our competitors;
o market acceptance of our services;
o economic and demographic trends affecting our business; and
o our ability to manage growth.

In light of these and other risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur.

(The remainder of this page has been intentionally left blank)

<PAGE>

USE OF PROCEEDS

We will receive approximately $8,381,750 in net proceeds, if the
Maximum number of Notes are sold, or approximately $357,500 if the Minimum
number of Notes are sold, after deduction of sales commissions and all expenses
of the Offering. We intend to utilize the net proceeds of the Offering as
follows:

Minimum % Maximum %
------- - ------- -

Acquisition of
Receivables $357,500 100.0 $8,381,750 100.0
-------- ----- ---------- -----

CAPITALIZATION

The following table sets forth our capitalization at November 1, 1999,
and as adjusted to give effect to the issuance of the maximum amounts of Notes
offered hereby. This table should be read in conjunction with our financial
statements and the notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>

November 1, 1999
------------------------------------------------
As adjusted to As adjusted to
reflect Minimum reflect Maximum
Actual Offering Offering
------ --------------- ----------------

<S> <C> <C> <C>
Long-Term Debt $ - $500,000 $9,950,000

Common Stock, $1.00 par value;
authorized 1,000 shares; 1,000
shares issued and outstanding 1,000 1,000 1,000

Additional Paid in Capital 99,000 99,000 99,000
------ ------ ------
Total Stockholder's Equity 100,000 100,000 100,000
------- ------- -------
Total Capitalization $100,000 $600,000 $10,050,000
======== ======== ===========
</TABLE>

<PAGE>

BUSINESS

General

We were formed on October 27, 1999 to be a special purpose corporation
in the financial services industry, primarily to acquire, factor and finance
receivables. We are a wholly owned subsidiary of American Equities Group, Inc.
("AEG"), which was formed on June 17, 1992 to provide asset-based financing,
primarily secured with accounts receivable, and to act as the manager for
subsidiaries and as a general partner of partnerships engaged in similar
financing activities.

Factoring and Financing of Receivables

We will, through AEG, as Manager, engage primarily in the business of
factoring accounts receivables (the "Receivables"). We may also provides
purchase order financing, inventory financing, credit lines, bridge loans and
letters of credit. Factoring is one of the oldest and most innovative methods of
financing, whereby a company purchases the accounts receivables at a discount
from their face value, providing such businesses with immediate cash flow. As an
alternative, funds can be loaned against receivables as opposed to factoring
(acquiring title to the receivables). Factoring and lending have different
characteristics and customers may prefer one over the other due to the financial
impact upon their financial statements. These financing tools allow businesses
to accelerate cash flow from their accounts receivable and to supply working
capital without increasing debt or selling equity. A collateral benefit of
factoring or financing receivables is the streamlining of credit and collection
efforts since the factor or lender performs many of these duties. Small and
medium-size businesses are attracted to factoring or receivables financing due
to the fact that traditional bank loans are often unavailable and factoring
provides them with the immediate cash to operate and grow without having to rely
on the typical repayment terms of 30, 60, or 90 days

We believe that due to the strict regulation of banks and stringent
lending criteria, the demand for factoring or financing of receivables will
continue to be good. To obtain bank financing today, companies may need to (i)
produce audited financial statements demonstrating profitable operations, (ii)
possess a strong collateral basis including equipment, real estate and other
hard assets, (iii) maintain a debt/equity ratio of 2:1 or better, depending on
the industry, and (iv) provide personal guarantees of their principals. By
focusing on the strength of a company's receivables as opposed to the above
criteria, AEG believes it will be able retain existing customers and readily
obtain new customers for its factoring and financing business. The Edwards
Directory of American Factors, second edition, estimates that the amount of
accounts receivable factored in the United States is in excess of $80 billion
annually. Most of this volume (approximately $62 billion in 1996) reflects the
activity of the 12 largest factoring companies.

Although many growing enterprises fail to meet bank criteria, a
commercial business becomes a factoring or receivables financing prospect of AEG
if it can demonstrate (i) that it has

<PAGE>

a portfolio of accounts receivable (which can be acquired by AEG free of liens)
payable by creditworthy account debtors, (ii) that it generates the margins
necessary to absorb AEG's factoring fees, and (iii) that factoring or
receivables financing will, in fact, improve the Company's cash position and
enable it to accommodate increased sales.

In addition to providing funds for growth and expansion, factoring or
receivables financing also provides a practical transition tool for
restructuring long-term financial arrangements, such as (i) unfavorable or
overly restrictive bank relationships and (ii) bridging operations. Furthermore,
to help them reach the point where they become viable candidates for less
expensive bank financing or equity financing.

American Equities Group, Inc., as Manager

Management of our day-to-day affairs is provided by AEG, pursuant to a
management agreement by and between us and AEG (the "Management Agreement"). AEG
is a rapidly growing, national, accounts receivable financing organization.
Since 1992, AEG and its affiliates have provided more than $200 million of
factoring or receivables financing to businesses through a highly diversified
and qualified portfolio of Receivables.

We will seek to purchase or finance Receivables primarily of small to
medium-sized companies with sales between $500,000 and $25,000,000 annually.
Pursuant to the Management Agreement, AEG, as Manager, will originate the
receivables by purchasing or financing them from clients and assigning them to
us. AEG's clients in most cases agree to factor all of their receivables with
AEG. AEG services and collects the receivables for its affiliates and for its
own account. AEG, as our Manager, will also manage our day-to-day affairs,
including but not limited to, marketing our accounts receivables program to new
business, evaluating the quality and credit of the Receivables and clients and
their obligors, determining which Receivables are to be purchased, effecting
Receivables purchases, collecting upon the Receivables for our account,
effecting the disbursement of funds to clients and preparing checks for interest
and principal payments on the Notes and mailing such checks to you with
statements of account, and these activities will be performed by employees of
AEG. Typically, Receivables are purchased only after investigation of the
creditworthiness of the company selling the receivable and the company that is
obligated on the Receivable, combined with the subjective assessment by AEG's
personnel. In performing such analysis, AEG, as Manager, considers many factors
such as the type of business that generated the Receivable and the risk of loss
based upon potential non-performance. AEG generally will acquire or finance
receivables for which all events have occurred necessary for the receivable to
become an obligation of an account debtor. See "Factoring and Financing
Criteria" below.

The Receivables acquired by AEG for its affiliates are accounted for
separately. Although each affiliate has the ability to participate in the
acquisition of receivables from each client of AEG, all funds are held in
separate accounts and receivables are assigned to particular entities. This is
accomplished by the establishment of separate bank accounts and a highly
efficient staff

<PAGE>

supported by an integrated computer system. As receivables are collected, funds
are deposited directly into the affiliate's account which acquired those
receivables. AEG assigns the receivables to each participating affiliate via a
formal assignment agreement.

We will share with AEG the factoring or finance fees charged, 50% to us
and 50% to AEG. AEG will pay all of our overhead, expenses, and salaries from
its portion of the fees as relates to the ongoing businesses, except for legal,
accounting, investor services, filing fees, taxes and other administrative
expenses related to our operations. See "PLAN OF OPERATIONS." AEG will defer its
fee if we do not have funds sufficient to pay interest and/or principal as it
comes due. The portion of our net revenue not paid to you and the other Note
Holders, if any, is generally retained by us and utilized to acquire additional
Receivables. Distributions to AEG may only be paid to the extent of such
retained amounts; provided, that after the payment of any dividends our basis in
our Receivables plus cash on hand (less any liabilities) exceeds the face amount
of all Notes outstanding.

Monitoring the Receivables

Once the accounts receivable department of AEG has approved a batch of
Receivables as to their creditworthiness and completeness and those Receivables
are subsequently purchased, they are entered into AEG's monitoring system and
the collection department reviews aging of all Receivables owned by AEG and its
affiliates on a weekly basis. There is currently a staff of six (6) employees
including one manager of that department. The staff calls on all account debtors
over 30 days past due to determine if any problems exist or when payments will
be made. Statements are sent to all account debtors monthly and summary
statements showing account debtor's aging is shown to each client monthly.

Factoring and Financing Criteria

While AEG will provide financing to companies engaged in most
industries, it typically concentrates its purchase and finance of Receivables in
manufacturing, distribution, publishing and printing, and general services
industries (e.g. firms which have no tangible products but conduct such services
as telemarketing and market research). AEG believes that these are industries
that can best utilize the comprehensive services of AEG which include back
office functions such as credit checks and reports, billing, and collections.
See "RISK FACTORS You will not be able to evaluate the merits of our
investments." AEG, as Manager, has established certain criteria for determining
if a potential client's Receivables meet AEG's investment goals. These criteria
consists of many qualitative and quantitative factors that AEG will consider and
review in each case. See "Qualitative Factors" and "Quantitative Factors" below.
These factors have been designed based on professional practices and the current
and overall returns historically sought by AEG in structuring and purchasing
Receivables similar to those to be purchased and assigned to us. AEG may from
time to time re-evaluate and modify such criteria.

<PAGE>

Typically, AEG will review the financial viability of the entity
desiring financing by utilizing Dun & Bradstreet or other reporting services to
determine whether or not the client is in a position to factor its receivables
or secure its assets. AEG will also utilize Dun & Bradstreet reports to assess
the creditworthiness of clients' account debtors. In addition to the standard
underwriting practice, UCC searches will be conducted to determine whether or
not the client has previously pledged its assets, as well as to determine if any
tax liens or judgments are outstanding against the clients. AEG reviews a
prospective client's aged receivables report, financial reports and history of
the firm and confers with the prospective client's major customers to determine
quality of its receivables and to establish collection procedures. AEG has
established credit systems to ensure that acquired Receivables are valid
obligations. It should be noted that emphasis is based primarily on the quality
and unencumbered nature of the receivables, and secondarily upon the viability
of the client--by necessity many clients are unable to obtain or retain bank
financing and may experience financial jeopardy if they cannot grow their
business or obtain equity infusions following financing through the loans. AEG
has established credit systems to assure that acquired receivables are valid
obligations which are not in dispute. In some instances, AEG pays vendors
directly, such as printers in the magazine industry, to ensure that the funds
are properly utilized and the product is completed and ready to be shipped or
sold on time. By providing the cash payment directly to the vendor, rather than
to the client, the vendor receives a greater degree of security. When dealing
with clients in the publishing industry, AEG will often purchase the receivables
of a client's entire magazine issue. In this way AEG is able to ensure the
distribution of such issue, by making payments directly to the printer and
distributors.

Another way that AEG ensures that it is paid is built into the
structure of the factoring transaction. Typically a client will receive an
advance of 65% to 85% against the face value of an invoice. Once the invoice is
paid, the business owner will receive the balance (or reserve) of the invoice
amount less a discount for the factor's fee. This fee is negotiated but usually
ranges from 3% to 8% of the face amount of the receivables. The reserve provides
us with available funds from which to draw our fees and furnishes a buffer
against defaults by clients and/or account debtors.

Qualitative Factors

The major qualitative factors included in our guidelines for acquiring
Receivables are the account debtor's prior payment performance, the current
financial position of the client and the account debtor, the client's current
market and industry positions, an assessment of the client's management and the
general fit of the client with the our target profile.

Payment Performance of Account Debtors. When the Company
factors or lends against a client's receivables, one of the most important
criteria used by AEG in determining the desirability of the client's receivables
is the prior payment history of its account debtors. In the case of a new
account debtor with which AEG is not acquainted, AEG performs a thorough credit
evaluation in order to determine the past payment record of the account debtor.
If only

<PAGE>

limited information is available regarding the account debtor's payment record,
this fact may affect the final advance rate which AEG deems appropriate based on
the risk involved.

Current Financial Position. Historic and current operating
performance are important when considering the structure of any financing to be
provided. AEG analyzes the profitability of the client by reviewing its profit
and loss statements, tax returns, supplier contracts, receivables aging and
other necessary documentation along with in-depth personal interviews with the
principals of the client. One of the most important aspects of this review is
the ability of the client to properly produce and/or deliver the product or
service represented by its receivables. In addition, in factoring transactions
the client should be able to demonstrate that it enjoys sufficient profit
margins to absorb the factoring fees, that factoring will enable it to expand
sales or reduce expenses and that factoring will enhance its overall financial
position and growth potential. AEG anticipates that generally its clients will
have positive cash flow from operations and will be profitable or nearly
profitable.

Current Market and Industry Position. Market and industry
opportunities for a client are also an important factor in the decision to
provide financing. A potential client should exhibit a substantial opportunity
for growth in its revenues through (1) favorable growth characteristics of the
markets and industries it serves, (2) expanding into related markets, or (3)
growing its revenues through capturing greater market share within a particular
market or industry. A client must be able to demonstrate that it can produce and
deliver its products or services that it sells in a timely and profitable
fashion.

Management. The client's management team is another crucial
factor impacting the decision to provide financing. The Company will seek
potential clients having management teams with integrity that possess the
experience and skill required to accomplish the client's near term objectives.
The management team's commitment to a client is also critical to success. AEG
expects that a client's management will own or have the right to acquire a
significant ownership position in the client or have some other benefits package
that rewards management based upon performance. The Company also looks to see if
management of a potential client has committed substantial personal financial
resources to the client.

General Fit with AEG's Target Profile. AEG's general target
profile is a business that desires financing to generate cash flow in order to
grow and/or expand its business. The prospective business must demonstrate the
ability to utilize the proceeds of such financing to the benefit of such growth
or expansion. Current cash flow should be positive or the prospective client
must demonstrate that with the enhancement of such annual financing the
company's cash flow will be positive. AEG typically seeks companies with sales
volume of between $500,000 to $25,000,000. Generally, if the management of AEG
believes that the services it would provide a client would enhance the growth of
that client and the client demonstrates that it could deliver qualified
receivables or otherwise provide sufficient security for such financing and
provide its goods and services to its clientele as per its agreements, and its
management team appears to be sound, then AEG would consider financing that
business.

<PAGE>

If at any time after AEG enters into a contract with a client and that
client experiences financial difficulties, AEG has the right to terminate the
agreement and discontinue providing financing to the client. Additionally, if a
client has breached any of its obligations to AEG including, but not limited to,
providing AEG with a valid receivable for services rendered or goods delivered,
AEG has the right to terminate the agreement. Furthermore, AEG in its discretion
has the right to acquire without advancing funds any invoice presented which
might be questionable or lack creditworthiness which AEG will nonetheless charge
its factoring fee.

Another factor that AEG considers when evaluating a potential client is
whether the client can show that it can successfully address such problems as
outstanding trade debt within a reasonable period of time. AEG also looks at a
client's long-term debt obligations. Such debt will not necessarily preclude a
factoring relationship so long as AEG can effectively negotiate its priority
security position with other creditors.

Quantitative Factors

The quantitative factors included in AEG's criteria relating
to the purchase or financing of receivables are (1) receivable concentration
limits, and (2) the prior payment performance of a client's account debtors.

Receivables Concentration. AEG will generally direct its
purchasing efforts toward small and medium-size companies that have creditworthy
receivables with good payment histories. Generally AEG will typically purchase
between $50,000 and $1,000,000 of receivables from any particular client in any
given month. AEG will not be limited in the amount of receivables that it may
purchase from any one client. However, AEG has the right not to acquire or
advance funds on any receivables it deems a concentration risk. Typically, if an
account debtor represents more than 10% of the total outstanding accounts
receivable of a client's portfolio, such accounts receivable will be scrutinized
prior to acquisition to avoid concentration problems.

Past Performance of Account Debtors. Typically, AEG requires
aging reports of receivables in order to determine past payment record of the
account debtor. AEG reserves the right to reject any receivable it deems
unacceptable. This would include any account over 90 days past due or an account
showing a recurring history of late payments or multiple disputes.

* * *

Assuming the client meets the Company's standards, the Company will
provide financing either by acquiring, factoring or lending against receivables,
through purchase order financing, providing long or short term bridge loans,
inventory financing or through other financing options. In a receivables
financing, the Company will enter into either a purchase or financing agreement
(a "Purchase Contract" or "Financing Contract") with the client which will
typically provide that all of the client's receivables would be pledged or sold
to the Company for a cash advance payment of a fraction of their face amount
(typically 65% to 85%) with the balance (the

<PAGE>

"Reserve") being due to the client upon collection. Such advance rate, as well
as the fee to be charged, are negotiated and determined based upon the relative
risk of the receivables. For instance, for receivables purchased from a client
whose account debtors have a history of slow payment or multiple disputes, AEG
may provide for an advance rate of only 50% to 60% of the face amount of the
receivables in order to limit its risk.

Each Purchase or Financing Contract provides terms and conditions of
the purchase or financing including chargebacks, representations and warranties,
restrictive covenants, term and a penalty charge for early termination. Each
Purchase or Financing Contract also contains covenants that provide that any
funds collected by the client will be paid to the Company. In addition, AEG
usually obtains a Guaranty of Validation from a client's principals through
which such principals guaranty to AEG, among other things, that their company
will immediately turn over to AEG any payments made with respect to Receivables
that have been purchased or financed by AEG.

AEG has developed a system for placing receivables with its different
segregated pools of capital. Each pool managed by AEG, including any pool used
by AEG for its own account, acquires definitive receivables on a rotating so
that all AEG companies are engaged in financing activities with all AEG clients.
In this manner, pools which have sufficient funds available for the purchase of
receivables receive the first opportunity to purchase new receivables. This is
intended to ensure that no one pool receives preferential treatment in the
purchase of receivables. All pools and receivables are accounted for in AEG's
financial accounting software programs which were developed by AEG. Each fund
has separate bank accounts and funds are not commingled for any purpose. AEG, in
managing the pools, maintains corporate separateness for each affiliated entity
in order to afford the maximum amount of protection to its providers of capital,
whether funded as notes to the vehicle, limited partnership interests or some
other form of investor debt or equity financing.

AEG will typically charge as a fee 3% to 8% of the face amount of the
receivables. Generally, between 65% to 85% of the face amount of the receivables
will be initially advanced. AEG will have the right to offset against the
Reserve any receivables paid for and not collected as well as AEG's fees.
Additionally, the client will be a guarantor of any advances made and of AEG's
fee.

Receivables are typically due upon delivery of goods and services and
are typically considered late after thirty (30) days, although this may vary by
client. If an account debtor has outstanding invoices more than 90 days, AEG
generally will not advance funds on newly presented invoices of the delinquent
debtor. No pre-defined credit limit is established for any one account debtor.
Credit limits for account debtors are determined on an account by account basis
and are determined by the creditworthiness of that particular account debtor,
its payment history with AEG, and the account debtor's concentration within the
client's and AEG's portfolio. Invoices generally vary in size from $200 to
$50,000.

<PAGE>

Cash Flow Management

Unlike traditional financing sources, AEG offers comprehensive
financial and business solutions, programs and evaluations designed to increase
cash flow which are based on the client's current performance and business, not
the value of its assets. The Company's solutions, programs and evaluations are
designed to create growth by supplying needed capital for expansion, purchase of
equipment, marketing plans without heavy front end loads or high fixed monthly
payments. The Company provides additional value-added services including
management consulting, credit enhancement, billing services and credit
evaluation of a client's customers.

Collection Management

In the event receivables are not paid when due, AEG embarks on a strong
collection effort through its in-house staff of collectors. The first stage of
collection involves letters and telephone calls to the non-paying account
debtor. If AEG is unsuccessful in collecting, it utilizes law firms and national
collection organizations. AEG has established relationships with several
national law firms that specialize in collecting delinquent receivables and AEG
will aggressively attempt to collect all such receivables where costs of
collection justify the likelihood of recovery. The results of sending
receivables to collection agencies generally do not affect AEG, due to the fact
that any defaults on receivables are charged against the reserves after AEG has
collected its fee.

In addition, AEG provides a full range of accounts receivable
management programs to assist virtually every business that extends credit to
its customers. The Company's accounts receivable team consists of supervisors,
collectors, credit analysts and investigators who conduct comprehensive reviews
of each new account prior to contacting the customer. Thereafter, the Company's
state-of-the-art computer system effectively tracks all contacts, payments and
credit utilization trends.

Other Financial Services

The Company will provide purchase order financing, inventory financing,
credit lines and letters of credit, bridge loans, and equipment leasing.
Purchase order financing is similar to factoring except that financing is made
available to a client upon an order being placed. This type of financing allows
companies to borrow in order to produce the products that are already sold.
Purchase order financing requires careful monitoring to ensure that orders
become valid sales and receivables since customers can reject or cancel orders
for a number of reasons and the borrowing company can also cease operations
before performing the work necessary to convert the purchase order into a
receivable. The Company intends to only enter into purchase order financing if
it can establish proper procedures and security to maximize the likelihood of
collection. Likewise, inventory financing requires careful monitoring of
inventory since the liquidation value of the inventory is the basis of the
Company's security. In the event that the

<PAGE>

Company must sell the inventory in order to recoup its advance, there is no
assurance that the inventory will be able to be readily sold. AEG carefully
analyzes potential inventory and liquidation methods before entering into any
such financing agreement with its clients

Credit lines, letters of credit, bridge loans and equipment leasing
will only be issued to clients of AEG which have another financing relationship
such as factoring or financing receivables, inventory or purchase orders. The
Company's issuance of these financial instruments will be based upon an analysis
of exposure as it relates to collateral (e.g., the value of receivables,
inventory or purchase orders).

Marketing

AEG markets its accounts receivable programs in three distinct ways.
The first method identifies specific industries as target markets and implements
an integrated strategy of combining advertising, trade show marketing, direct
mail, cold calling and networking. The second method utilizes "centers of
influence" to target individuals who act as personal, professional and financial
consultants to today's business owners. This group includes attorneys, financial
planners, investment advisors, accountants, management consultants and
commercial bankers. The final component of AEG's marketing program is built
around AEG's Internet presence and marketed through the growing influence of the
World Wide Web. AEG has always emphasized technological innovation and, as part
of its marketing agenda, has placed a significant emphasis on the creation of an
interactive website. By marketing its website, AEG believes it can capitalize on
markets on a national basis, using such techniques as banner advertising, direct
e-mail campaigns, strategic search engine listings, matching services and
through other marketing efforts.

Customer Service

AEG also provides customer service to its clients. Such value-added
services include such critical accounts receivable support as customer credit
analysis and approval, invoice handling, collection, payment processing, and
credit reporting. AEG believes that for many businesses, the desire to obtain
these services actually drives the decision to factor. AEG generates computer
records for each receivables pool including the aging of such receivables which
is reported to clients. These reports allow AEG's clients to monitor collections
activity and cash flow. In addition, AEG acts as a back office for many of its
clients by overseeing their billing and collection efforts. By using AEG as
their credit, billing and collection departments, clients can save money that
would have otherwise been used to hire additional personnel to provide such
office services.

AEG's services also help a client determine the companies to which it
should extend credit. AEG can access financial and credit information including
payment history for those companies and provide a credit evaluation report. AEG
has nine employees dedicated to customer service of its affiliates.

<PAGE>

We will not engage in any business other than as set forth above and
AEG, as Manager, will prohibit us from incurring any liabilities. AEG will
handle all administrative matters and employ the necessary personnel. All
Receivables which we acquire will either be owned by us or subject to UCC-1
Financing Statements filed against the client in our favor. Although AEG may
sponsor other special purpose corporations or partnerships in the future or
raise funds and acquire receivables itself, all transactions will remain
strictly segregated. See "RISK FACTORS - We may face competition from affiliates
for management services and there may be conflicts of interest."

Perfection of Security Interest

AEG acquires and finances the Receivables from its clients pursuant to
a Purchase Contract or a Financing Contract. The client also executes UCC-1
financing statements against all the Receivables of the client and in some
instances other assets of the client. If a search indicates the existence of any
liens covering a client's Receivables, AEG will not enter into a Purchase
Contract or Financing Contract without first obtaining subordinations,
terminations and/or releases from the appropriate secured parties. Depending
upon the assessed risk relating to the payment of the Receivables and the
availability of the client's assets, such payment may be secured by the factored
Receivables only, all of the client's Receivables, whether factored or not, or
by the client's Receivables and other business assets. In some cases, AEG will
also require the personal guarantees of the client's principals as additional
collateral.

Because of the ongoing nature of the acquisition and collection of
Receivables, we will not file UCC-1 financing statements delineating us as an
assignee, but rather a written assignment will be executed between us and AEG
specifically identifying the assigned Receivables. Nevertheless, if the security
interests on receivables are not properly perfected or assigned or if
Receivables cannot be separately identified, it is possible that a court could
find that you were a general unsecured creditor of the corporation and/or AEG.
See "RISK FACTORS - Your ability to enforce your security interest is dependent
upon our perfecting the lien on our Receivables"; and "A default on Receivables
held by us could make repayment of the Notes difficult or impossible."

Collections

Pursuant to the Purchase Contract, we will generally file a "doing
business as" certificate, or d/b/a, in the jurisdiction of the client's
principal place of business with a name similar to the client's name indicating
that we will be doing business under a name similar to that of the client for
the purpose of collecting the client's Receivables. All funds remitted on the
purchased Receivables are paid directly to us under the assumed name and are
deposited into a separate bank account under such assumed name. Accordingly,
funds are never commingled with AEG or funds of our other clients.

<PAGE>

Year 2000 Compliance

The Company has established an overall plan to address the Year 2000
compliance issue ("Y2K") within the operations of the organization. The Y2K
Compliance Plan (the "Plan") focuses on several strategic concerns related to
Y2K compliance: the ability to deliver services to customers and investors, the
corporate legal liabilities, and concerns related to computer or mechanical
systems failure within the organization. Appropriate resources have been applied
to the Plan including the allocation of staff time and the hiring of an outside
systems consultant. Progress is reported regularly to the senior management of
the Company.

AEG uses computerized technology to process information throughout the
company. The company uses computerized record-keeping of accounts receivable
invoices; client account reporting and collections; financing delivered through
an on-line banking system interface; investor distributions generated from a
computerized system; and general office and accounting systems. In addition to
an overall strategic focus, AEG has implemented the Plan with the goal to assure
uninterrupted service delivery to AEG'S clients and investors.

The Plan is being managed within the AEG's Technology Task Force. This
Task Force is staffed with members from all AEG areas and includes the Manager
of Information Technology and the company's General Counsel. Two additional
members have joined the Y2K Project: the Company's Chief Financial Officer and
an outside systems consultant who is familiar with both AEG systems and Y2K
compliance issues. The committee meets regularly, at least monthly, with interim
written communication, to assess and limit the impact of potential Y2K failures
and to prepare for the consequences of the internal and external failures that
could occur.

The Plan recognizes that verification of compliance must be addressed
on several levels: the readiness of computer hardware systems, software systems
and equipment containing embedded chips, the impact of third-parties related to
vendors and clients, the legal issues, the company's financial exposure and
contingency plans for failure. All AEG systems development and purchases within
the last year have been evaluated for Y2K compliance. Y2K indemnification and
protection clauses are incorporated into contracts for new clients and client
renewals. Company exposure will be risk-assessed and ranked, and significant
risks with important business partners may require additional verification.
Issues related to financial exposure have also been addressed. A test of all
systems, both partition testing and fully integrated testing, was completed
successfully. Other IT projects have not been delayed because additional
resources and staff hours have been assigned to address the issue.

AEG has committed additional financial resources to implement the Plan.
A separate budget, in addition to the regular operating budget, has been
identified to implement the Plan. Incremental amounts include the cost of the
outside systems consultant and an amount for the verification of readiness for
significant AEG business partners.

AEG bears some risk related to the unreadiness of third parties which
would expose the Company to the potential for loss and impairment of business
processes and activities. AEG has

<PAGE>

developed a business contingency plan to address the possibility of the failure
of systems or processes and will continue to assess the level and magnitude of
these risks.

Effect of Inflation

Inflation is not a material factor affecting the Company's business.
General operating expenses such as salaries and employee benefits are, however,
subject to normal inflationary pressures.

Banking

We maintain our banking accounts at a major money center bank. Pending
acquisition of Receivables, funds are kept in checking accounts which are both
interest bearing and non-interest bearing.

Reports and Investor Services

We will provide you upon request copies of our annual audited financial
statements as soon as possible after the end of the year, as well as copies of
any documents filed with the Securities and Exchange Commission. We will also
prepare all interest payment checks and handle all investor inquiries including
change of ownership requests. We may decide to outsource our investor relation
services to AEG or another affiliate of ours, including Genesis Ventures,
Limited.

Employees

As of December 1, 1999, there were twenty-eight (28) full-time
employees of AEG available to work on the business of the Company, five (5) of
whom are senior management and twenty-three (23) of whom are administrators
employees. The loss of the services of one or more members of management could
materially adversely affect the business of the Company.

The staff of the accounts receivable management department presently
consists of four (4) full time personnel including the manager of the
department. The staff will make evaluations as to credit history and
completeness of information and present these findings to the manager who must
approve the batch of invoices prior to submitting the request for funding to
senior management. Once the request for funding has been submitted to senior
management, additional review takes place and requires the sign off of the CEO
of the Company or his designee. This review consists of an overall assessment of
our client's status which is supplied on a form submitted to senior management
known as a "Request for Funding" form. This form will show the details of that
particular batch of receivables including total receivables presented, total
receivables approved, an explanation for any differences and a recommendation
for funding or not and a breakdown of the fees that are sent to the client.
Furthermore, the client's total account summary, including total receivables,
total reserve and total exposure to the client is documented.

<PAGE>

Once the CEO or his designee approve the transaction, the form is forwarded to
our accounting department. The accounting department presently consists of five
(5) full time personnel, managed by the controller. The accounting department,
with the approval of the controller or other senior officer, will arrange for
the advancing of funds to the client and will record the proper accounting of
the transaction in our general ledger system.

Patents and Trademarks

We possess no patents or federally filed trademarks. We are not a party
to any agreements pursuant to which we either license the use of our name or any
part of our operational methods to any third party, or, with the exception of
licenses granted to us by our clients to use their names in the collection of
their receivables, have we obtained any licenses to use the name or operational
methods of any other person.

Property

We share office space with AEG. AEG believes that the facility is
adequate for its immediate and near-term needs and does not anticipate the need
for significant expansion in the near future.

Legal Proceedings

We are not currently a party to any material litigation, nor, to the
knowledge of management, is there any material litigation threatened or
contemplated against us.

AEG's largest client currently owes it and its affiliates (other than
us) approximately $9,000,000. This client filed for protection under Chapter 11
and a Trustee was appointed to oversee the sale of assets and the continuation
of the client's business. An agreed Final Secured Financing Order was entered by
the Bankruptcy Court on January 7, 1999 that decreed, among other things, that
AEG will allow the use of its cash collateral and provide debtor-in-possession
financing to enable the Trustee to sell the client's plant and equipment and to
outsource the client's brands. AEG has a first priority security interest in the
client's inventory, accounts receivable and brands, a secondary lien on the
client's equipment, and a third priority lien on the client's real estate.
Additionally, AEG has a personal guaranty from a principal of the client and
certain of his affiliates and a stock pledge of a minority interest in another
company as collateral. AEG has established a provision for credit losses that is
an estimate of financial exposure in the situation, If additional funds are
realized, their recovery will have a positive impact on AEG's and/or its
affiliates' results of operations in the year that such recovery takes place. If
funds realized are less that the current projected amount, an amount greater
that the current provision will be written off and additional losses will be
recorded. See, "RISK FACTORS - Our business will have only a limited
diversification."

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<PAGE>

MANAGEMENT

We are wholly-owned by AEG. Our business will be managed by AEG and our
officers and directors. The following persons are the officers and directors of
AEG and the officers and directors of our company:

Name Age Position
- ---- --- --------

Phillip C. Goldstick 68 Director and Chairman of AEG and the
Company

David S. Goldberg 39 CEO, President, Secretary, Treasurer and
Director of AEG and the Company

M. Ellen Donnelly 47 Chief Financial Officer of AEG and the
Company

J. Scott MacKay 37 General Counsel of AEG

Sam A. Awar 44 Operations Manager of AEG

Set forth below is a brief background of the executive officers and
directors of the Corporation and AEG:

Phillip C. Goldstick has served as a member of our Board of Directors
and Chairman of the Board since its inception and of AEG since 1992. Since 1975,
Mr. Goldstick has served, and continues to serve, as the Chairman of G Equity
Investment Group, Ltd., an NASD Broker- Dealer which will not participate in
this Offering. Mr. Goldstick is also the Senior Partner of the Law Firm of
Phillip C. Goldstick & Associates, Ltd., located in Chicago, Illinois, where he
has practiced real estate, tax and corporate law for over 40 years. Mr.
Goldstick received a bachelors degree from the University of Illinois (1953) and
his law degree from DePaul University (1956). Formerly, Mr. Goldstick was a
member of the Illinois General Assembly, Chairman of the Gateway National Bank
of Chicago, and President for the Calumet Area Industrial Commission. He also
serves as a Director of the University of Illinois Foundation where he is an
active member of the Investment Policy Committee. Mr. Goldstick has been elected
to the Chicago Area Entrepreneurship Hall of Fame and is also a member of the
Cook County, Illinois Economic Development Advisory Committee.

David S. Goldberg, has served as our CEO, Secretary, Treasurer and a
Director since its inception and of AEG since 1992. In addition, Mr. Goldberg
has served as the President of Genesis Ventures Limited since 1992 which
corporation acts as consultant to companies seeking

<PAGE>

financial and marketing advice. Mr. Goldberg advises and consults with corporate
clients in the areas of financial management, finance, corporate structure,
marketing strategies, and corporate fund raising. Over the past 15 years, Mr.
Goldberg and his affiliates have successfully arranged for over $250 million of
equity financing for corporations, limited partnerships, trusts, and individuals
in businesses ranging from real estate, cable television, equipment leasing,
energy development and medical technology. Most of this activity was
accomplished through Capital Planning Equity Corp. where Mr. Goldberg was the
President and sole shareholder from 1985 to 1990. Mr. Goldberg was President of
an affordable housing syndicator from 1989 through April 1993, where he raised
over $20 million in investor capital. Mr. Goldberg founded and operated Capital
Planning Services Inc., from 1981 to 1985, a financial planning firm and
registered investment advisor. Mr. Goldberg is President and a registered
principal of G Equity Investment Group, Ltd., a NASD member firm headquartered
in Chicago, IL which will not participate in this Offering. Mr. Goldberg
received his B.S. degree in management from Fairleigh Dickinson University.

M. Ellen Donnelly, has served as the Chief Financial Officer of the
Company since its inception and of AEG since November 1998. Ms. Donnelly joined
AEG in 1997 as its Controller. She was appointed Chief Financial Officer of AEG
in November 1998. She is responsible for several operating areas of AEG
including the Financial Services Department: accounting, financial reporting and
financial planning; the Investor Services Department; and the Human Resources
Department. Prior to joining AEG, Ms. Donnelly worked in financial management
for several organizations. From 1990 to 1997, Ms. Donnelly served as Controller
and Chief Financial Officer of NewBridge Services, Inc. During the years 1981 to
1989, she served in various financial management positions at CBS, Inc.,
including Director of Financial Analysis, Broadcast Group (1988 to 1989),
Director of Financial Analysis, Entertainment Division (1985 to 1988), and in
several Broadcast Operations financial management positions (1981 to 1985). Ms.
Donnelly received her Bachelor of Arts degree from the University of Toledo
(1974) and her Master of Business Administration degree in finance from Rutgers
University Graduate School of Management (1981).

J. Scott MacKay, has served as General Counsel to AEG since July, 1997.
From November 1992 until July, 1997, Mr. MacKay was a corporate/transactional
attorney with Cuyler Burk. From 1991 to November 1992, Mr. MacKay was associated
with the firm of Saiber Schlesinger Satz & Goldstein while earning an MBA degree
in finance and management from Columbia Business School. Mr. MacKay was a
corporate associate with Riker Danzig Scherer Hyland & Perretti from 1987 to
1990 after earning his JD degree (magna cum laude) from Rutgers University
School of Law (Newark). He received an AB degree (magna cum laude) from Bowdoin
College in 1984.

Sam A. Awar, has served as Director of Operations of AEG since February
1996. As the Director of Operations, Mr. Awar is fully responsible for the
Accounts Receivable Management area of the business. This includes the Accounts
Receivable Financing, Outsourcing and Third Party Collection. Prior to joining
AEG, Mr. Awar was the President of ARMC - Accounts

<PAGE>

Receivable Management Consulting which specialized in startup, expansion and
turnaround projects. From 1988 to 1992 Mr. Awar served as Corporate Credit and
Collections Manager for a Regional Bell Operating Company. From 1981 to 1988 Mr.
Awar was the Operations Manager for the largest private financial services firm
specializing in accounts receivable management and collection systems
development. Mr. Awar has a Bachelor of Business Administration degree (1981)
and has completed one year of an MBA program Operations Research from Loyola
Marymount University, Los Angeles, California. Mr. Awar is a lecturer on the
topic of credit and collection at several colleges, and a member of the Bergen
Community College's Banking, Credit and Finance Committee.

We will not pay salaries to Management. All management receive salaries
only from AEG.

Conflicts of Interest

AEG and its affiliates may be subject to various conflicts of interests
in connection with their relationships and transactions with us. The contractual
and other arrangements between the us and AEG have not been established by arm's
length negotiations. See "RISK FACTORS We may face competition from affiliates
for Management Services and there may be conflicts of interest."

1. We may compete with other affiliates for management services. We
will not have independent management or employees and will rely upon AEG for the
management and administration of our operations. AEG currently serves in a
similar function for a number of affiliates and expects to be Manager of other
issuers in the financing business, and expects to be involved in other business
ventures in the future and may have a conflict in allocating time and resources
to our operations. Management of AEG believes that they have sufficient staff
personnel to be fully capable of discharging their responsibilities to all
entities they have organized. Our officers and directors will devote such time
to our affairs as they, in their sole discretion, determine to be necessary for
the conduct of our operations.

2. We may compete with other affiliates for the acquisition of
receivables. In addition to the competition with affiliated entities for the
management services of AEG, there may be competition among the various
affiliated entities for certain receivables. AEG has attempted to minimize these
problems by rotating the purchase of receivables among all its affiliated
companies so that all AEG companies are engaged in financing activities with all
of AEG's clients. See, "BUSINESS - Acquisition of Receivables."

3. Lack of Separate Representation. Both our company and AEG are
represented by the same legal counsel in connection with the issuance of the
Notes. Separate counsel may be retained by the Trustee in connection with any
dispute under the Indenture of Trust. Accordingly, it is possible that counsel
may not have drafted the documents in the most favorable manner to you and may
not have included legal protection for you which would have been

<PAGE>

obtained if you or our firm had retained independent counsel. It is anticipated
that such dual representation may continue in the future. However, should a
future dispute arise between us and the Manager, the Manager will cause us to
retain separate counsel for such matters.

Limitation on Liability and Indemnification Matters

We have adopted provisions in our Certificate of Incorporation that
eliminate the personal liability of its directors for monetary damages arising
from a breach of their fiduciary duties under certain circumstances to the
fullest extent permitted by Delaware law and we are authorized to indemnify our
directors and officers to the fullest extent permitted by Delaware law. Such
limitation of liability does not eliminate the duty of care or affect the
availability of equitable remedies such as injunctive relief or rescission. Our
by-laws provide that we shall indemnify our directors and officers to the
fullest extent permitted by Delaware law, including circumstances in which
indemnification is otherwise discretionary under Delaware law.

At present, there is no pending litigation or proceeding involving any
of our directors, officers, employees or agents where indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.

Notwithstanding the foregoing indemnification provisions of the
Corporation's Certificate of Incorporation and Bylaws, we have been informed
that it is the opinion of the Securities and Exchange Commission that
indemnification for liabilities arising under the Securities Act is against
public policy and is therefore unenforceable.

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<PAGE>

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

Set forth below is certain information as of the date of this
prospectus with respect to any persons known to us to be the beneficial owner of
more than 5% of our common stock and of the common stock owned by all of our
directors and all of our directors and officers as a group. Because the Notes do
not constitute and are not convertible into equity, the percentage of ownership
set forth below will not vary as a result of this Offering.

Name and Address Shares of Common Stock Ownership
of Beneficial Owner(1) Beneficially Owned Percentage
---------------------- ------------------ ----------

American Equities Group, Inc. 1,000 100.0%

Phillip C. Goldstick(2) 412 41.1%
20 N. Clark Street
Chicago, IL 60602

David S. Goldberg(3) 412 41.1%

Officers and Directors 824 82.2%
as a group (two persons)(1)(2)(3)

(1) The address of AEG and Mr. Goldberg is 80 East Route 4, Paramus, NJ 07652.

(2) Represents the indirect ownership in the corporation of the Phillip C.
Goldstick Revocable Trust U/A Dtd. 8/2/89 through the ownership of an
aggregate of 9,006,250 shares of AEG common stock.

(3) Represents the indirect ownership in the corporation of the David S.
Goldberg Family Trust, an affiliate of David S. Goldberg, through the
ownership of an aggregate of 9,006,250 shares of AEG common stock.

We are wholly-owned by AEG and we have the same directors and officers
as AEG. See "RISK FACTORS - Our officers and directors will maintain control of
our company" and "You will have no equity interest in our company and no voting
rights."

Other than as set forth above, we are not aware of any other
shareholders who beneficially own, individually or as a group, 5% or more of the
outstanding shares of our common stock.

<PAGE>

PLAN OF OPERATIONS

We will acquire and finance Receivables principally from companies in
the manufacturing, distribution, printing and publishing and general service
industries (e.g. firms which have no tangible products but conduct such services
as telemarketing and market research). The total AEG portfolio of financed
receivables as of December 31, 1998 was engaged in the following industries: 50%
in manufacturing, 37% in distribution and 13% in other industries. As the AEG
client base changes and increases, the concentration of industries will change.
AEG continually monitors its portfolio to ensure that concentration within an
industry, client or customer is within acceptable levels.

Compensation and Fees to AEG and Genesis Ventures Limited.

AEG and Genesis Ventures Limited ("Genesis") will receive the following
compensation and fees from us in connection with this Offering and the conduct
of our business.
<TABLE>
<CAPTION>

Recipient(1) Nature of Payment Amount of Payment
- ------------ ----------------- -----------------

<S> <C> <C>
Genesis Ventures Investment Banking and 5% of the gross proceeds of this Offering,
Limited Consulting Service $497,500 if the Maximum is sold.

AEG Factoring Fee AEG will receive 50% of the factoring fees obtained
from acquisition of Receivables during our
operational stage. Such fees will typically equal 3%
to 8% of the face amount of the receivables being
factored.

Reimbursement of AEG will receive approximately $225,000
Offering Expenses from the gross proceeds of this Offering as
reimbursement of certain offering expenses
advanced by AEG in connection with this Offering.
</TABLE>

- ----------------------

(1) While our officers and directors will not receive any direct compensation
from the company in connection with their services, such officers and
directors are officers and directors of AEG and, therefore, will
indirectly benefit from the above payments.

Operations and Overhead Expenses

AEG will pay all of our other operational and overhead expenses, other
than legal, accounting, investor services, filing fees and taxes, out of its
portion of the fees earned in the factoring or financing of the Receivables,
which fee will typically equal 3% to 8% of the face

<PAGE>

amount of the Receivables being factored or financed. We will share with AEG the
fees charged, 50% to us and 50% to AEG. Such costs and expenses to be paid by
AEG will include personnel costs, including employee salaries, associated with
the identification, evaluation, purchasing, monitoring and collection of
Receivables; the use of AEG's accounting and computer systems; and expenses
incurred for providing most administrative services and managerial assistance.
Any costs and expenses which exceed the amount of fees generated by the
factoring of our shall be paid by AEG out of its own funds. AEG has established
all of the necessary systems required in order to provide us with a turn-key
management program which will eliminate the traditional start-up time of a new
company. AEG has invested a significant amount of time and money to properly
staff the various departments that will be required if and when we sell the
Minimum amount of the Offering. In addition, AEG has arranged for the necessary
computer systems, banking systems, servicing and collection operations, credit
review and evaluation facilities, accounting and finance operations and has
procured the necessary office space in order to effectively service and manage
our funds and the Receivables that it acquires. We may decide to outsource our
investor relations services needs to an affiliate which services would be paid
out of our share of the fees earned in the factoring or financing of
receivables.

Other Expenses

In addition, the Dealer Manager will receive (i) sales commissions of
up to 7% of the Offering price, a due diligence and non-accountable expense of
1% of the Offering price and a Dealer Manager fee of .5% of the Offering price.
Assuming that the Maximum Offering is sold, we will pay an aggregate of
$696,500, $99,500 and $49,750, respectively in such fees and commissions to the
Participating Dealers. See "PLAN OF DISTRIBUTION."

The Agent shall be entitled to a annual fee of $4,000 in consideration
for his services as Agent and may be entitled to additional compensation in the
event of a default under the Indenture. See "DESCRIPTION OF SECURITIES Indenture
of Trust" and "RISK FACTORS - The Trustee will be entitled to increased
compensation if there is a default under the Notes."

There are no known trends, events or uncertainties that are reasonably
likely to materially impact our short-term and long-term liquidity or results of
operations.

We believe we will be able to satisfy our cash requirements for the
foreseeable future. If we desire to acquire additional Receivables beyond those
which can be acquired with the proceeds of this Offering, we would need to raise
additional funds in the future. We can give no assurance that we will seek or
secure additional funds to acquire additional Receivables. Management does not
believe that you would be adversely affected if we were not able to expand our
business by acquiring additional Receivables.

<PAGE>

DESCRIPTION OF THE SECURITIES

General

Up to $9,950,000 aggregate principal amount of our ten-year promissory
notes (the "Notes") is being offered to qualified investors in denominations of
$1,000 or any integral multiple thereof. Your minimum investment is $5,000,
unless you are investing through your IRA, in which case your minimum investment
is $2,000. The Notes will bear interest at the rate of 12% per annum. You may
choose the frequency of your interest payments (monthly, annually in arrears or
upon maturity with the payments due on the first day of the each month or year).
Principal is payable on ten (10) years from the date of the issuance of your
Note. (A form of 12% Note is attached hereto as Exhibit A.) We are not required
to establish a sinking fund; however, we will use our best efforts to reserve
sufficient funds for payment of the Notes on maturity by liquidating its
portfolio of Receivables. See "RISK FACTORS - We will have limited sources of
payment for the Notes and will not establish a sinking fund to insure repayment
of the Notes", "We have not obtained any rating of the Notes", The loan to you
will not be self-amortizing" and "The enforceability of the Notes by you may be
limited."

Acceleration at Option of Note Holder

On the first day of the month of each of the fifth, sixth, seventh,
eighth and ninth anniversaries of the issuance of your Note, you may, upon six
(6) months prior written notice, accelerate your Note to receive payment of
principal and accrued interest at that time.

Prepayment

We may prepay the Notes at any time and from time to time, in whole or
in part, at our option and without any premium or penalty.

Subordination

Pursuant to the Note, we are representing to you that there presently
is no indebtedness senior or equal to that of the Notes. In addition, we further
represent that we will not incur any debt which is senior or equal to your lien,
other than ordinary and necessary expenses of operations.

Restrictions as to Dividends and Certain Other Payments

We have agreed not to pay dividends, or make distributions on our stock
or purchase, redeem, or otherwise acquire or retire any of our stock if (a) an
event of default exists under any of the Notes or (b) it would reasonably appear
that after any such action we would not have sufficient funds to avoid an event
of default within six (6) months of such action.

<PAGE>

Merger and Consolidation

Under the terms of the Notes, we may consolidate or merge with or into
any other entity or any other entity may consolidate or merge into us, and we
may sell or transfer all or substantially all of our property and assets to
another entity, or another entity may sell or transfer all or substantially all
of its property and assets to us, provided that (i) such action is duly
authorized by us and our shareholders by the required actions thereto, (ii) the
entity (if other than our company, formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such
property and assets shall be a corporation, partnership or trust, shall be
organized and validly existing under the laws of the United States and any state
thereof and shall expressly assume payment of the principal of, premium, if any,
and interest on the Notes, and (iii) there shall not immediately thereafter be
an event of default under the Notes.

Events of Default

Events of Default under the terms of the Notes include, among other
things,

o our failure to make payment of principal or interest for a
period of more than 30 days after the due date;

o if we make an assignment for the benefit of creditors, commence
(as the debtor) any case in bankruptcy under Title 11 of the
United States Code ("Bankruptcy"), commence (as the debtor) any
proceedings under any other insolvency or receivership law or
files a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any
bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute or if we file an
answer admitting the material allegations of a petition filed
against us in any proceeding under any such law or any corporate
action is taken for the purpose of effecting any of the
foregoing and such proceeding is not dismissed within thirty
(30) days of the date of its filing;

o a case in Bankruptcy or any proceeding under any insolvency or
receivership law is commenced against us (as the debtor in such
case or proceeding) and a court having jurisdiction in the
premises enters an order for relief against us in such case or
proceeding, or such case or proceeding is consented to by us or
remains undismissed for 40 days, or we consent to or admit the
material allegations against us in any case or proceeding;

o a trustee, receiver, agent or custodian (however named) is
appointed or authorized to take charge of substantially all of
our property for the purpose of enforcing a lien against such
property for the benefit of creditors;

<PAGE>

o a notice of lien, levy or assessment representing indebtedness
in excess of $100,000 is filed or recorded with respect to any
of our assets by the United States or other government agency;

o any material portion of the Collateral (as defined in the
Security Agreement) is attached, seized, subjected to a writ or
distress warrant, or is levied upon, or comes within the
possession of any receiver, trustee, custodian or assignee for
the benefit of creditors and, on or before the thirtieth (30)
day thereafter, such assets are not returned to us and/or such
writ, distress warrant or levy is not dismissed, stayed or
lifted;

o any default under the Indenture of Trust, the Notes or the
Security Agreement; or

o we voluntarily or involuntarily dissolve or are dissolved, or
our existence terminates or is terminated.

Security Agreement

The Notes will be secured by a security interest in the Receivables
acquired with the proceeds of the Offering. This interest will be subject to the
provisions of a Security Agreement between the company and the Trustee for your
benefit. A copy of the Security Agreement is attached hereto as Exhibit B.

Indenture of Trust

An Indenture of Trust will be entered into between us and the Trustee
for your benefit. The Trustee will be granted a security interest in the
Receivables on your behalf. The description of the Indenture of Trust set forth
below and references to Note Holders will be determined based on the Notes
issued to you. The duties of the Trustee are to perform certain obligations in
the event of a default in the payment of the principal and interest on the
Notes, and to execute and deliver to us partial or full satisfaction of the
Security Agreement upon partial or full repayment of the Notes. See "RISK
FACTORS - The Trustee will be entitled to increased compensation if there is a
default under the Notes."

James E. Morris serves as the Trustee under the Indenture of Trust.
Pursuant to the terms of the Indenture of Trust, the Trustee receives a fee of
$4,000 per year plus reimbursement of actual expenses. In addition, upon the
occurrence of an Event of Default under the Trust Agreement or the Security
Agreement, the Trustee shall receive a fee of $200 per hour for time incurred in
rendering its duties as Trustee. Mr. Morris serves in a similar capacities for
several privately offered note offerings and one public note offering of an
affiliate.

<PAGE>

Events of Default

Subject to the following limitations, the following constitute Events
of Default under the Indenture of Trust:

o We receive written notice from a Note Holder of a default in the
payment of principal or interest on any Note when the same becomes due and
payable;

o We fail to comply with any of its other agreements in the Notes, the
Security Agreement, or the Indenture and the default continues for the period
and after the notice specified therein; or

o Pursuant to or within the meaning of any Bankruptcy Law;

(a) we commence a voluntary case,

(b) we consent to the entry of an order for relief
against us in any involuntary case or a court of
competent jurisdiction enters an order or decree for
relief against us in an involuntary case,

(c) we consent to the appointment of a Receiver for any
substantial part of our property or a court of
competent jurisdiction enters an order or decree for
the appointment of a Receiver for our company or for
any substantial part of its property,

(d) we make a general assignment for the benefit of our
creditors, or we fail generally to pay our debts as
they become due; or

(e) a court of competent jurisdiction orders our
liquidation, and the order or decree remains unstayed
and in effect for 90 days.

o A proceeding under any bankruptcy, reorganization, arrangement
of debt, insolvency, readjustment of debt or receivership law
or statute is filed against us and such proceeding is not
dismissed within thirty (30) days of the date of its filing;
or

o We voluntarily or involuntarily dissolve or are dissolved, or
our existence terminates or is terminated.

The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Receiver"
means any receiver, trustee, assignee, liquidator, or similar official under any
Bankruptcy Law.

A default in complying with the agreements contained in the Notes, the
Security Agreement or the Indenture is not an Event of Default until the Trustee
or the Holders of at least

<PAGE>

a majority in principal amount of the Notes notify us of the default and we do
not cure the default within 90 days after receipt of the notice. The notice must
specify the default, demand that it be remedied, and state that the notice is a
"Notice of Default."

If an Event of Default occurs and is continuing either the Trustee or
the Holders of any Note, by written notice to us and, if applicable, the
Trustee, may declare the principal of and accrued interest on all the Notes to
be due and payable immediately. The Trustee may then pursue any available remedy
by proceeding at law or in equity to collect the payment of principal and
interest on the Notes or to enforce the performance of any provision of the
Notes, the Security Agreement or the Indenture. The Holders of a majority in
principal amount of the Notes may direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. The Trustee, however, may refuse to follow
any direction that conflicts with law or the Indenture, that is unduly
prejudicial to the rights of other Note Holders, or that may involve the Trustee
in personal liability.

Rights of Note Holders

The holders of not less than 75% in aggregate principal amount of Notes
at the time outstanding may consent on behalf of the holders of all such Notes
to the postponement of any interest payment for a period or periods not
exceeding three years from its original due date. The waiver of any additional
interest payments is not dependent upon the payment of any previously waived
interest payments.

You have the right to receive payment of principal and interest on or
after the due dates of your Note and to institute suit to enforce such payment
on or after the due date. You may waive such right by sending us a written
consent of such waiver.

The Holders of a majority of the Notes may consent to the waiver of any
past default and its consequences, except a default in payment of principal and
interest.

You may not use the Indenture to prejudice the rights of another Note
holder or to obtain a preference or priority over the other Note holder.

Priority of Payments under the Indenture

If the Trustee collects any money pursuant to the Indenture, it shall
pay out the money in the following order:

(1) to the Trustee for amounts due under the Indenture;

(2) to Note holders for amounts due and unpaid on the Notes for
interest, then principal, ratably, without preference or
priority of any kind, according to the amounts due and payable
on the Notes for principal and interest; and

(3) to the Company.

<PAGE>

Communication with other Note Holders

You may communicate with other Note holders by sending the Trustee a
written application by any three or more Note holders stating that you desire to
communicate with other Note holders with respect to their rights under the
Indenture or under the Notes, and accompanied by a copy of the form of proxy or
other communication which you propose to transmit. You must also provide
reasonable proof that each such applicant has owned a Note for a period of at
least six months preceding the date of such application. The Trustee shall, at
its election, either (1) afford to such applicants access to all information so
furnished to or received by the Trustee, or (2) inform such applicants as to the
approximate number of Note holders and as to the approximate cost of mailing to
such Note holders the form of proxy or other communication, if any, specified in
such application. If the Trustee shall elect not to afford to such applicants
access to such information, the Trustee shall, upon the written request of such
applicants, mail to all such Note holders copies of the form of proxy or other
communication which is specified in such request, after a tender to the Trustee
of the material to be mailed and of payment, or provision for payment, of the
reasonable expenses of such mailing.

If in the opinion of the Trustee such mailing would be contrary to the
best interests of the Note holders or would be in violation of applicable law,
the Trustee shall mail to such applicants, and file with the SEC together with a
copy of the material to be mailed, a written statement to that effect. Such
written statement shall specify the basis of such opinion. After opportunity for
hearing upon the objections specified in the written statement so filed, the SEC
will then decide if such materials may be lawfully sent to such Note Holders.

Indemnification

The Company shall indemnify the Trustee against any loss or liability
incurred by it. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. The Trustee shall defend the claims and the Company
will reimburse the Trustee, either directly or from funds subject to the
Indenture, for reasonable legal expenses. The Company need not pay for any
settlement made without its consent. Notwithstanding the foregoing, the Company
need not reimburse any expense or indemnify against any loss or liability
incurred by the Trustee through the Trustee's negligence or bad faith.

Resignation or Termination of Trustee

The Trustee may resign by so notifying the Company, but such
resignation shall not be effective until 60 days after such notification. The
holders of a majority in principal amount of the Notes may remove the Trustee by
so notifying the removed Trustee and may appoint a successor Trustee with the
Company's consent. The Company may remove the Trustee under certain
circumstances. If the trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.

<PAGE>

A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have the rights, powers, and
duties of the Trustee under the Indenture. A successor Trustee shall give notice
of its succession to each Note Holder as provided in Section 7.02 of the
Indenture.

If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of a majority in principal amount of the Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On ________, 1999, we entered into a Management Agreement (the
"Management Agreement") with AEG. Under the Management Agreement, AEG originates
Receivables by purchasing or financing them from client companies and assigning
them to us. AEG also services and collects the Receivables on our behalf. We
will typically charge a fee of 3% to 8% of the face amount of the receivables.
Under the Management Agreement we have agreed to share such fee 50% to us and
50% to AEG. See "BUSINESS - Acquisition of Receivables." Our officers and
directors are also officers and directors of AEG.

We are the wholly-owned subsidiary of AEG. The capital stock of AEG is
principally owned directly and indirectly by Messrs. Goldstick and Goldberg and
such individuals are the principal officers and sole directors of AEG. All fees
and discounts earned by us will be split 50% to AEG, as Manager, and 50% to us
pursuant to the Management Agreement. As officers and directors of AEG, Messrs.
Goldstick and Goldberg will indirectly benefit from such payments.

In connection with this Offering Genesis Ventures Limited will be paid
a 5% Investment Banking and Consulting Services fee (up to $497,500 if the
Maximum Offering is sold). See "PLAN OF OPERATIONS - Operations and Overhead
Expenses." In addition. Messrs. Goldstick and Goldberg are the principal
stockholders, officers and directors of Genesis Ventures Limited.

Messrs. Goldstick and Goldberg are also principals of G Equity
Investment Group, Inc., a NASD registered broker/dealer which will not
participate in this Offering. See "PLAN OF DISTRIBUTION."

We shall make no loans to our officers, directors or stockholders and
we are forbidden to receive loans from any person or entity other than AEG. We
have adopted a policy that all transactions with our affiliates are to be on
terms no less favorable than could be obtained from unaffiliated third parties
and must be approved by a majority of the Board of Directors.

<PAGE>

PLAN OF DISTRIBUTION

Distribution will be made on a "best-efforts" basis by Strategic Assets
Inc. (the "Dealer Manager") and selected broker/dealers that are members of the
NASD (jointly referred to as the "Participating Dealers").

Participating Dealers will execute Selling Agency Agreements with us;
however, such Participating Dealers will be under no obligation to sell any or
all of the Notes offered hereby. The Division of Corporation Finance of the U.S.
Securities and Exchange Commission has taken the position that any broker/dealer
that sells Notes in the Offering may be deemed an underwriter as defined in
Section 2(11) of the Securities Act of 1933, as amended. We have currently
entered into a Dealer Manager Agreement. There is no assurance that, even if any
Participating Dealers sell the Notes offered hereby, a court of competent
jurisdiction or arbitration panel would deem any such Participating Dealer to be
an underwriter as so defined.

The Dealer Manager will receive a sales commission of up to 7% of the
Offering price for all Notes sold, a due diligence and non-accountable expense
allowance of 1%, which may be reallowed to Selected Dealers, and a Dealer
Manager fee of .50%.

The Notes are being offered subject to prior sale, withdrawal,
cancellation or modification of the offer, including its structure, terms and
conditions, without notice. We reserve the right, in our sole discretion, to
reject, in whole or in part, any offer to purchase the Notes.

We intend to sell the Notes in this Offering only in the states in
which the Offering is qualified. An offer to purchase may only be made and the
purchase of the Notes may only be negotiated and consummated in such states. The
Subscription Agreement for the Notes must be executed, and the Notes may only be
delivered in, such states. Resale or transfer of the Notes may be restricted
under state law. See "RISK FACTORS - You will not be able to trade the Notes and
the Notes may be transferred to you only under limited circumstances" and "LACK
OF LIQUIDITY OF NOTES" below.

The Notes are being offered on a best efforts, Minimum or none basis as
to the Minimum ($500,000) and a best efforts basis as to the Maximum
($9,950,000). The Offering of Notes will continue until we raise an aggregate of
$9,950,000, provided that the offering period for all of the Notes shall
terminate on _________, 200_ (24 months from the initial effective date of this
Prospectus).

Each Participating Dealer has agreed in accordance with the provisions
of SEC Rule 15c2-4 to cause all funds received for the sale of Notes to be
promptly deposited upon the receipt of the executed Subscription Agreement and
related funds by the Participating Dealer by or before noon of the next business
day following the sale of said Notes.

<PAGE>

The Dealer Manager Agreement provides for reciprocal indemnification
between the us and the Dealer Manager against certain liabilities in connection
with the Registration Statement of which this Prospectus is a part, including
liabilities under the Securities Act. To the extent this section may purport to
provide exculpation from possible liabilities under the federal securities laws,
it is the opinion of the Securities and Exchange Commission that such
indemnification is against public policy and is therefore unenforceable.

Messrs. Goldberg and Goldstick are also principals of G Equity
Investment Group, Inc., a NASD registered broker/dealer which will not
participate in this Offering. Messrs. Goldberg and Goldstick will receive no
compensation in connection with the offering and sale of the Notes hereby.

TAX CONSIDERATIONS

The following paragraphs summarize the material federal income tax
aspects of purchasing the Notes. The Investors may rely upon the tax opinion of
counsel to the Corporation attached hereto as Exhibit E-1 and the following
discussion relating to the tax treatment of an investment on the Corporation,
HOWEVER, EACH INVESTOR IS URGED TO CONSULT HIS OR HER OWN TAX ADVISER FOR MORE
DETAILED INFORMATION WITH RESPECT TO THE FEDERAL AND STATE TAX CONSEQUENCES OF
AN INVESTMENT IN THE CORPORATION.

Thinly Capitalized Corporation

We currently have a capitalization of $100,000. See the financial
statements included elsewhere in this prospectus. The Internal Revenue Service
("IRS") has taken the position in the past that debt of a thinly capitalized
corporation may be considered as a capital contribution not giving rise to a
deduction for interest expense by the debtor. The case law on this issue is
diverse and inconsistent in application. The courts list numerous factors in
determining whether or not a debt is true debt or a contribution to capital,
some of which are as follows: (1) the names given to the certificates evidencing
the indebtedness; (2) the presence or absence of a maturity date; (3) the source
of the payments; (4) the right to enforce the payment of principal and interest;
(5) participation in management; (6) a status equal to or inferior to that of
regular corporate creditors; (7) the intent of the parties; (8) "thin" or
adequate capitalization; (9) identity of interest between creditor and
stockholder; (10) payment of interest only out of "dividend" money; (11) the
ability of the corporation to obtain loans from outside lending institutions;
(12) the extent to which the initial advances were used to acquire capital; and
(13) the failure of the debtor to pay on the due date or to seek a postponement.

In the event the Notes were deemed by the IRS to be capital
contributions, distributions of interest payments to you would be deemed to be
taxable dividends for income tax purposes and the repayment of principal would
be deemed to be a non-taxable return of capital in the absence of earnings and
profits. If we have earnings and profits the repayment of principal would be

<PAGE>

taxed as a dividend to the extent of such earnings and profits. The extent and
amount of earnings and profits we would have is not determinable at this time.
See "RISK FACTORS - We are uncertain as to the tax treatment of Notes" and
"Losses on Notes may be deemed capital losses."

Interest Payments

Interest payments under the Notes will be treated as ordinary interest
income and taken into account under your general method of accounting (e.g.,
cash or accrual). A trust has not been created for tax purposes and you will
receive Form 1099 for your share of interest income from your investment.

Disposition of Notes

In the event of a sale or other taxable disposition of a Note prior to
the stated maturity date, gain is measured by the excess of the net proceeds of
the sale or other disposition over your adjusted tax basis. Any gain on sale
will be capital gain if the Note is held as a capital asset.

Loss will be recognized upon disposition of a Note in exchange for an
amount less than the Note Holder's adjusted basis in the Note. If the Note is
held as a capital asset, the deductibility of such loss may be limited by the
rules contained in the Internal Revenue Code of 1986, as amended (the "Code")
relating to restrictions upon the deductibility of capital loss. In addition, a
sale to a related party could result in limitations upon the deductibility of
loss under Code Section 267. For Note Holders other than initial Note Holders,
gain recognized upon the maturity or earlier disposition of a Note may be
affected by the provisions of the Code governing market discount.

Possible Withholding

Payments of interest made by us on a Note and proceeds from the sale of
the Note to or through certain brokers may be subject to a back-up withholding
tax at a rate of 20%, unless you comply with certain reporting and/or
certification procedures. All amounts withheld on such payments will be
allowable as a credit against your federal income tax liability.

We will make arrangements to provide you with a Form W-9 (or a
substitute Form W-9) on which you can provide information required by the Code
in order to avoid the back-up withholding provisions.

Special considerations which may apply to you if you are not a United
States citizen or resident are not discussed in this Prospectus.

<PAGE>

Unrelated Business Taxable Income

Section 501 of the Code provides that qualified pension,
profit-sharing, and stock bonus plans are exempt from federal income tax. This
exemption also extends to charitable, educational and other organization.
However, Section 511 of the Code imposes federal income tax on any "unrelated
business taxable income" of organizations exempt under Section 501.

Sections 512 and 513 of the Code define the phrase "unrelated business
taxable income" (or UBTI) as net income earned by an otherwise exempt
organization from the regular conduct of an unrelated trade or business. Section
512 generally excludes interest income from the definition of unrelated business
taxable income. Assuming that you do not incur any indebtedness with respect to
its acquisition of a Note, the interest on the Note will not be treated as
unrelated business taxable income. You should consult your own tax advisors on
this matter.

ERISA Conditions

If you intend to purchase Notes through a pension, profit-sharing, or
other plan governed by Title I of the Employee Retirement Income Security Act of
1974 ("ERISA"), the fiduciaries of such plan must consider: (a) whether the
investment is permitted under the governing instrument for the plan and is an
appropriate investment for the plan; (b) whether the investment satisfies the
diversification requirements of Section 404(a)(1)(C) of ERISA; (c) whether the
investment is prudent; and (d) whether the investment is for the exclusive
purpose of providing benefits to participants. Fiduciaries should also be aware
that ERISA requires that assets of a plan be revalued at least once each plan
year, and that valuation of the Notes may be difficult because of the lack of a
resale market.

Section 406 of ERISA provides that the fiduciary of a plan governed by
ERISA may not cause the plan to become involved in a "prohibited transaction."
Similarly, Section 4975 of the Code imposes taxes on "prohibited transactions"
involving pension plans, IRAs and Keogh plans. A "prohibited transaction"
includes a transaction in which a plan lends money to a "party in interest." A
"party in interest" is broadly defined to include parties such as plan
fiduciaries, plan beneficiaries, person providing services to the plan, and
businesses, affiliates and relatives of such parties. An example of a
"prohibited transaction" would be if an individual purchased Notes through his
pension, profit-sharing or other plan when the individual also owned an equity
interest in our company. Additionally, if a plan purchased Notes when the plan
fiduciary owned an interest in our company, this purchase could also be
considered a "prohibited transaction." Section 4975 of the Code may impose a tax
on such "prohibited transactions."

<PAGE>

LACK OF LIQUIDITY OF NOTES

The Notes will be registered with the Securities and Exchange
Commission and the States of Arkansas, California, Connecticut, Colorado,
Florida, Georgia, Illinois, Maryland, Missouri, New Jersey, New York, North
Carolina, South Carolina, Virginia, and Wisconsin. The Notes may be registered
or exempt from registration in other states. No public or other market for the
notes exists and there can be no assurance that one may develop in the future.
Accordingly, you should purchased Notes only as an investment to be held to the
end of the term of the Notes because you may not be able to liquidate your
investment in the event of any emergency or for any other reason. See "RISK
FACTORS - You will not be able to trade the Notes and the Notes may be
transferred by you only under limited circumstances."

LEGAL MATTERS

The validity of the Notes offered hereby and the tax considerations of
an investment in the Notes will be passed upon by Bronson & Migliaccio, LLP,
3010 Westchester Avenue, Purchase, NY 10577, as counsel to the Corporation. The
statements under the heading "TAX CONSIDERATIONS" have been reviewed by Bronson
& Migliaccio, LLP and have been included herein, to the extent such statements
constitute matters of law, in reliance upon the authority of said firm as an
expert thereon.

EXPERTS

The financial statement of the Corporation included in this Prospectus
and Registration Statement has been included in reliance on the report of
Richard A. Eisner & Company, LLP, independent auditors, given upon the authority
of said firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

Upon effectiveness of our Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended, we will become a reporting company and will
file reports pursuant to Section 12(g) of the Securities Exchange Act of 1934
(the "Exchange Act") for the year ended December 31, 1999. We have filed with
the Securities and Exchange Commission, Washington, D.C., a Registration
Statement under the Securities Act of 1933 with respect to the securities
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, its amendments and exhibits. For further
information pertaining to the Notes offered hereby, and our company, reference
is made to the Registration Statement, including the exhibits, financial
statements and schedules filed therewith or incorporated by reference as a part
thereof. Statements in this Prospectus concerning the contents of any contract
or other document referred to are not necessarily complete. Where such contract
or other document is an exhibit to the Registration Statement, each such
statement is qualified in all respects by the provisions of such exhibit, to
which reference is hereby made for a full statement of the provisions thereof.
The Registration Statement may be inspected and copied at the

<PAGE>

Commission's Washington, D.C. office at 450 Fifth Street, N.W., Washington, D.C.
20439 and the Northeast Regional Office and Midwest Regional Office at the
following addresses: 7 World Trade Center, Suite 1300, New York, NY 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511,
respectively. The Registration Statement also may be inspected but not copied at
the Commission's Atlanta, Georgia office. Further, copies can be obtained at
prescribed rates from the Washington, D.C. office. Exchange Act reports may be
inspected and copied at the Commission's Washington, D.C. office and Northeast
and Midwest Regional Offices and may be obtained at prescribed rates from the
Commission's Washington, D.C. office.

REPORTS TO NOTE HOLDERS

Upon request we will distribute to you our annual audited financial
statements that have been audited and reported on by independent auditors. You
may also request copies of any documents filed by us with the Securities and
Exchange Commission. We may furnish such other reports as the we may deem
necessary to inform you of major developments concerning us.

<PAGE>

AMERICAN EQUITIES INCOME FUND II, INC.

INDEX TO FINANCIAL STATEMENT

Page

Financial Statement

Independent auditors' report F-2

Balance sheet as of November 1, 1999 F-3

Notes to balance sheet F-4

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
American Equities Income Fund II, Inc.

We have audited the accompanying balance sheet of American Equities Income Fund
II, Inc. as of November 1, 1999. This financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of American Equities Income Fund II,
Inc. as of November 1, 1999, in conformity with generally accepted accounting
principles.

Richard A. Eisner & Company, LLP

Florham Park, New Jersey
November 26, 1999
With respect to Note D
December 7, 1999

F-2

<PAGE>

Balance Sheet
November 1, 1999
<TABLE>
<CAPTION>

ASSETS

<S> <C>
Cash $100,100
========

LIABILITIES AND STOCKHOLDER'S EQUITY

Due to Parent $ 100

Common stock, $1 par value, authorized; issued and outstanding 1,000 shares 1,000

Paid-in capital 99,000
--------
100,000
--------
$100,100
========
</TABLE>

See notes to balance sheet

F-3

<PAGE>

NOTES TO BALANCE SHEET

NOVEMBER 1, 1999

NOTE A - ORGANIZATION

American Equities Income Fund II, Inc. (the "Company") a wholly-owned subsidiary
of American Equities Group, Inc. (the "Parent"), was organized on October 27,
1999 principally to originate loans and factor receivables generally on a
recourse basis.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from these estimates.

NOTE C - STOCKHOLDER'S EQUITY

In October 1999, the Company issued 1,000 shares of its common stock to its
Parent for $100,000.

NOTE D - RELATED PARTY TRANSACTIONS

The Parent provides management, credit, collection and other operational
services for the Company. The management agreement requires that the Company pay
50% of its financing income to the Parent as compensation for the services
provided.

On November 2, 1999, the Company advanced $95,000 to the Parent. On December 7,
1999, the advance was repaid.

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EXHIBIT A

FORM OF 12% PROMISSORY NOTE

$ Paramus, New Jersey
---------------- --------------- , ----

FOR VALUE RECEIVED, the undersigned promises to pay to ________________
(hereinafter, together with any holder hereof, called "Holder") at _____________
or at such other place as the Holder may from time to time designate in writing,
the principal sum of ___________ Dollars ($_________), on_________________,
together with simple interest thereon at the rate of 12% per annum payable
interest only monthly [or annually in arrears or upon maturity]. Interest is
calculated on the basis of a 360-day year (the "Calculation Basis") but is paid
in [12 equal monthly installments, annually or upon maturity], regardless of the
number of days in each month (the "Payment Basis"), with any difference between
interest determined on the Calculation Basis and the Payment Basis paid in the
final installment due under the Note. The entire outstanding principal balance
and accrued interest, if any, shall be due on the tenth anniversary of the
issuance of this Note.

This Note may be prepaid in whole or in part at any time without
penalty. On the first day of January of each of the fifth, sixth, seventh,
eighth and ninth years after issuance hereof, the Holder, upon six (6) months
prior written notice, may accelerate the Notes and receive payment of principal
and accrued interest at the time. This Note may be prepaid in whole or in part
at any time without penalty.

Interest shall accrue on the Notes at the rate of 12% per annum which
shall be compounded monthly.

This Note is one of an issue of an aggregate principal amount of up to
Nine Million Nine Hundred Fifty Thousand Dollars ($9,950,000) (the "Notes") of
the undersigned and is subject to an Indenture of Trust by and between the
undersigned and James E. Morris as Trustee ("Trustee"). Reference is hereby made
to the Indenture of Trust for a description of the rights, limitations,
obligations and immunities of the undersigned, the holders of the Notes and the
Trustee. This Note may only be deemed to be in default and the Holder may only
exercise any available rights and remedies thereon upon the occurrence of an
Event of Default as defined in the Security Agreement and the Indenture of
Trust.

This Note may be prepaid in whole or in part at any time without
penalty. On the first day of the month of each of the fifth, sixth, seventh,
eighth and ninth years anniversaries of the issuance hereof, the Holder, upon
six (6) months prior written notice, may accelerate this Note and receive
payment of principal and accrued interest at the time.

This Note and the instruments securing it have been executed and
delivered in, and their terms and provisions are to be governed and construed by
the laws of the State of New York. The indebtedness evidenced by this Note is
not subordinated to any other indebtedness of the undersigned nor will the
undersigned incur any indebtedness senior to the indebtedness evidenced hereby.

This Note is secured by a Security Agreement, dated as of the day of ,
1999, executed by the undersigned in favor of the Trustee on behalf of the
holders of the Notes.

<PAGE>

If an Event of Default, as defined in the Indenture of Trust or
Security Agreement, shall have occurred and be continuing, the principal hereof
may be declared due and payable in manner, with the effect, and subject to the
conditions provided in the Indenture of Trust or Security Agreement.

Time is of the essence of this Note and in case this Note is collected
by law or through an attorney at law, or under advice therefrom, the undersigned
agrees to pay all costs of collection, including reasonable attorney's fees.
Reasonable attorney's fees are defined to include, but not be limited to, all
fees incurred in all matters of collection and enforcement, construction and
interpretation, before, during and after suit, trail proceedings and appeals, as
well as appearances in and connected with any bankruptcy proceedings or
creditors' reorganization or similar proceedings.

The undersigned has agreed not to pay dividends, or make distributions
on its stock or purchase, redeem, or otherwise acquire or retire any of its
stock if (a) an Event of Default exists under any of the Notes or (b) it would
reasonably appear that after any such action the undersigned would not have
sufficient funds to avoid an Event of Default within six (6) months of such
action.

The undersigned may consolidate or merge with or into any other entity
or any other entity may consolidate or merge into the undersigned and the
undersigned may sell or transfer all or substantially all of its property and
assets to another entity, or another entity may sell or transfer all or
substantially all of its property and assets to the undersigned, provided that
(i) such action is duly authorized by the undersigned and its shareholders by
the required actions thereto, (ii) the entity (if other than the undersigned),
formed by or resulting from any such consolidation or merger or which shall have
received the transfer of such property and assets shall be a corporation,
partnership or trust, shall be organized and validly existing under the laws of
the United States and any state thereof and shall expressly assume payment of
the principal of, premium, if any, and interest on the Notes, and (iii) there
shall not immediately thereafter be an Event of Default under the Notes.

All persons now or at any time liable, whether primarily or
secondarily, for the payment of the indebtedness hereby evidenced, for
themselves, their heirs, legal representatives, successors and assigns
respectively, hereby (a) expressly waive presentment, demand for payment, notice
of dishonor, protest, notice of nonpayment or protest, and diligence in
collection; (b) consent that the time of all payments or any part thereof may be
extended, rearranged, renewed or postponed by the Holder hereof and further
consent that the collateral security or any part thereof may be released,
exchanged, added to or substituted for releasing, affecting or limiting their
respective liability or the lien of any security instrument; and (c) agree that
the Holder, in order to enforce payment of this Note, shall not be required
first to institute any suit or to exhaust any of its remedies against the Maker
or any other person or party to become liable hereunder.

IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
on the day and year first above written.

AMERICAN EQUITIES INCOME FUND II, INC.,
a Delaware corporation

By:
-------------------------------------
David S. Goldberg, CEO

A-3

<PAGE>

EXHIBIT B

FORM OF SECURITY AGREEMENT

This SECURITY AGREEMENT (hereinafter called this "Agreement") is made
and entered as of ______________, 1999, by and between AMERICAN EQUITIES INCOME
FUND II, INC., a Delaware corporation, located at 80 East Route 4, Suite 202,
Paramus, New Jersey 07652 (hereinafter called "Debtor"), and JAMES E. MORRIS as
Trustee ("Trustee") on behalf of those persons listed on Schedule A (hereinafter
collectively called "Secured Party").

W I T N E S S E T H:

In consideration of the covenants and conditions stated in this
Agreement, the parties agree as follows:

1. Indebtedness Secured.

This Agreement and the security interest granted hereby secure the
payment of certain secured notes issued and executed by Debtor, pursuant to the
Indenture of Trust (the "Indenture") of even date herewith by and between Debtor
and Trustee and made payable to the holders of such secured notes in the
aggregate principal sum of up to $9,950,000.00 (hereinafter collectively called
the "Notes"), together with all other indebtedness of every kind or nature owing
by Debtor to Secured Party, whether now existing or hereafter incurred, direct
or indirect, absolute or contingent, and whether the indebtedness is from time
to time reduced and thereafter increased or entirely extinguished and thereafter
reincurred, and including any sums advanced and any costs and expenses incurred
by Secured Party pursuant to this Agreement, the Note or any other note or
evidence of indebtedness (all of such is herein sometimes referred to as the
"Indebtedness").

2. Security Interest.

For value received, Debtor hereby grants to Secured Party a security
interest (the "Security Interest") in and to all of the following: any and all
accounts receivable (the "Receivables") acquired with the funds constituting the
Indebtedness or with funds received from the repayment of said Receivables or
any replacement Receivables, including all rights to receive payments thereunder
and security interest in and instruments of title to the Receivables, whether
now owned or hereafter acquired, all funds in the following bank account ; all
proceeds of the offering pursuant to the Registration Statement of Debtor
declared effective by the Securities and Exchange Commission on ____________,
______ (the "Registration Statement"); and in all products thereof and all cash
and non-cash proceeds of any of the foregoing, in any form, including, without
limitation, proceeds of insurance policies from the loss thereof, all titles to
the Receivables and all assignment of liens, all Receivables, assignments or
other documents and instruments located in a separate, segregated, locked
fireproof file cabinet marked "American Equities Income Fund II, Inc. Secured
Notes" (the "Collateral"); provided, however, that the security interest granted
hereunder is subject to the conditions and limitations set forth in the
Registration Statement.

<PAGE>

3. Representation and Warranties of Debtor.

Debtor represents and warrants and so long as any portion of the
Indebtedness remains unpaid, shall be deemed continuously to represent and
warrant that:

3.1. Debtor is the owner of the Collateral free and clear of
all security interests or other encumbrances and claims of any kind or nature in
favor of any third persons, and Secured Party has a first, perfected security
interest in all of the Collateral;

3.2. Debtor is authorized to enter into this Agreement and
into the transactions contemplated hereby and evidenced by the Notes;

3.3. The Collateral is used or bought for use solely in
business operations, and all of the relevant Collateral will remain personal
property regardless of the manner in which any of it may be affixed to real
property.

4. Covenants of Debtor.

Debtor covenants that so long as any Indebtedness remains unpaid,
Debtor:

4.1. Will defend the Collateral against the claims and demands
of all other parties, except purchasers of inventory in the ordinary course of
business;

4.2. Will keep the Collateral free and clear from all security
interests, liens and other encumbrances and claims of any kind or nature in
favor of any third persons, except the Security Interest; and Debtor will not
pledge the Collateral as security for any debts or obligations other than the
Notes;

4.3. Will not sell, pledge, transfer, assign, deliver, or
otherwise dispose of any Collateral or any interest therein, except that until
the occurrence of an Event of Default (as defined in paragraph 6.1 of this
Agreement) including taking any aforementioned action, as described in the
Registration Statement;

4.4. Will keep in accordance with generally accepted
accounting principles, consistently applied, accurate and complete records
concerning the Collateral; will mark such records and, upon request of the
Secured Party made from time to time, the Collateral to give notice of the
Security Interest; and will, upon request made from time to time, permit the
Secured Party or his agents to inspect the Collateral and the Debtor's records
concerning the Collateral and to audit and make abstracts of such records or any
of the Debtor's books, ledgers, reports, correspondence and other records;

4.5. Upon demand will deliver to the Trustee any instruments,
documents of title and chattel paper representing or relating to the Collateral
or any part thereof, and all schedules,

B-2

<PAGE>

invoices, shipping, or delivery receipts, together with any required endorsement
or assignment and all other documents representing or relating to purchases or
other acquisitions or sales or other dispositions of the Collateral and the
proceeds thereof and any and all other schedules, documents, and statements.

4.6. Will notify the Secured Party in writing at least thirty
(30) days in advance of any change in the Debtor's address specified on the
first page of this Agreement, of any change in the location or of any additional
locations at which the Collateral is kept, of any change in the address at which
records concerning the Collateral are kept and of any change in the location of
the Debtor's, chief executive office or principal place of business;

4.7. Will execute and deliver to the Secured Party such
financing statements and other documents requested by the Secured Party and take
such other action as described in the Registration Statement and subject to the
limitations set forth herein, to perfect, protect or continue the perfection of
the Security Interest and effect the purposes of this Agreement;

4.8. Will pay or cause to be paid when due all taxes,
assessments and other charges of every kind and nature which may be levied or
assessed upon or against the transaction contemplated hereby or the Collateral;

4.9. Will deliver the Collateral to the Trustee pursuant to
the Trust Indenture between the Debtor, and Trustee on behalf of the Secured
Party of even date herewith;

4.10. Will not make any distributions to shareholders or
payments to affiliates except as set forth in the Registration Statement;

4.11. Will use the Collateral only for the purposes set forth
in the Registration Statement and will not commingle the Collateral constituting
cash with funds of any person or entity other than Debtor;

4.12. Upon an Event of Default, will deliver any Collateral in
the form of funds in Debtor's bank account to the Trustee and will surrender
control of said accounts to the Trustee; and

4.13. Will keep all funds which constitute the Collateral in
the following segregated Bank Account , and will not commingle any other funds
with funds in said account.

5. Verification of Collateral.

Secured Party shall have the right to verify the existence and value of
the Collateral in any manner and through any medium which Secured Party may
consider appropriate, and Debtor shall furnish such assistance and information
and perform such acts as Secured Party may require in connection therewith.

B-3

<PAGE>

6. Default.

6.1. Events of Default. Subject to the following limitations,
an Event of default occurs if:

a. the Debtor receives written notice from a Secured
Party of a default in the payment of interest on any Notes
when the same becomes due and payable;

b. the Debtor receives written notice from a Secured
Party of a default in the payment of the principal of any Note
when the same becomes due and payable;

c. the Debtor fails to comply with any of its other
agreements in the Notes, this Agreement or the Indenture of
Trust and the default continues for the period and after the
notice specified below;

d. the Debtor pursuant to or within the meaning of
any Bankruptcy Law;

(1) commences a voluntary case,

(2) consents to the entry of an order for
relief against it in any involuntary case,

(3) consents to the appointment of a
Receiver of it or for any substantial part of its
property,

(4) makes a general assignment for the
benefit of its creditors, or

(5) fails generally to pay its debts as
they become due, or

e. a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:

(1) is for relief against the Debtor in any
involuntary case,

(2) appoints a Receiver of the Debtor or
for any substantial part of its property, or

(3) orders the liquidation of the Debtor,

and the order or decree remains unstayed and in
effect for 90 days, or

f. A notice of lien, levy or assessment representing
indebtedness in excess of Fifty Thousand Dollars ($50,000) is
filed or recorded with respect to any of the assets of the
Corporation (including, without limitation, the Collateral),
by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipality
or other governmental agency or any taxes or debts in excess
of Fifty Thousand Dollars ($50,000) owing at any time or times

B-4

<PAGE>

hereafter to any one or more of them become a lien, upon any
of the assets of the Corporation (including, without
limitation, the Collateral), provided that this clause 6.1(f)
shall not apply to any liens, levies, or assessments which the
Corporation is contesting in good faith;

g. Any material portion of the Collateral is
attached, seized, subjected to a writ or distress warrant, or
is levied upon, or comes within the possession of any
receiver, trustee, custodian or assignee for the benefit of
creditors and, on or before the thirtieth (30) day thereafter,
such assets are not returned to the Corporation and/or such
writ, distress warrant or levy is not dismissed, stayed or
lifted; and

h. The Corporation voluntarily or involuntarily
dissolves or is dissolved, or its existence terminates or is
terminated.

A default under section (c) is not an Event of Default until the
Secured Party holding at least a majority in principal amount of the Notes
notifies the Debtor of the default and the Debtor does not cure the default
within 90 days after receipt of the notice. The notice must specify the default,
demand that it be remedied, and state that the notice is a "Notice of Default."

6.2. Rights and Remedies Upon Default. If an Event of Default
occurs and is continuing, any Secured Party, by written notice to the Debtor,
may declare the principal of and accrued interest on all the Notes to be due and
payable immediately. After a declaration such principal and interest shall be
due and payable immediately.

If an Event of Default occurs and is continuing, any Secured Party may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal and interest on the Notes or to enforce the performance of
any provision of the Notes or this Agreement.

6.3. Notice. Debtor agrees that any notice by Secured Party of
the sale, lease or other disposition of the Collateral or any other intended
action hereunder, whether required by the Uniform Commercial Code or otherwise,
shall constitute reasonable notice to Debtor if the notice is mailed by regular
or certified mail, postage prepaid, at least ten (10) days before the date of
any public sale, lease or other disposition of the Collateral, or the time after
which any private sale, lease or other disposition of the Collateral is to take
place, to Debtor's address as specified in this Agreement or to any other
address which Debtor has notified Secured Party in writing as the address to
which notices shall be given to Debtor.

6.4. Costs. Debtor shall pay all costs and expenses incurred
by Secured Party in enforcing this Agreement, realizing upon any Collateral and
collecting any Indebtedness.

B-5

<PAGE>

Costs and expenses will include but not be limited to all reasonable attorneys'
and paralegals' fees and expenses.

6.5. Deficiency. In the event that the proceeds of the
Collateral are insufficient to satisfy the entire unpaid Indebtedness, Debtor
will be responsible for the deficiency and shall pay the same upon demand.
Secured Party will account to Debtor for any proceeds of the Collateral in
excess of the Indebtedness and the costs and expenses referred to in Section
6.4.

7. Miscellaneous.

7.1. Perfection of Security Interest. Debtor authorizes
Secured Party at Debtor's expense to file any financing statement or statements
relating to the Collateral (with or without Debtor's signature thereon), and to
take any other action deemed necessary or appropriate by Secured Party to
perfect and to continue perfection of the Security Interest. Debtor hereby
irrevocably appoints Secured Party as its attorney-in-fact to execute financing
statements in Debtor's name and to perform all other acts which Secured Party
deems necessary or appropriate to perfect and protect the Security Interest.
Such appointment is binding and coupled with an interest. Upon request of
Secured Party before or after the occurrence of an Event of Default, Debtor
agrees to give Secured Party possession of any Collateral, possession of which
is, in Secured Party's opinion, necessary or desirable to perfect or continue
perfection or priority of the Security Interest. A photocopy of this Agreement
is sufficient as a financing statement and may be filed as such if Secured Party
so elects.

7.2. Continuing Agreement. This Agreement is a continuing
agreement with respect to the subject matter hereof and shall remain in full
force and effect until all of the Indebtedness now or hereafter contracted for
or created or existing and any extensions or renewals of the Indebtedness
together with all interest thereon has been paid in full.

7.3. Right to Proceeds. Secured Party may demand, collect, and
sue for all proceeds of the Collateral (either in Debtor's or Secured Party's
name at the latter's option) with the right to enforce, compromise, settle, or
satisfy any claim. Debtor hereby irrevocably appoints Secured Party as Debtor's
attorney-in-fact to endorse, by writing or stamp, Debtor's name on all checks,
commercial paper, and other instruments pertaining to the proceeds. Such
appointment is binding and coupled with an interest. Debtor also authorizes
Secured Party to collect and apply against the Indebtedness any refund of
insurance premiums or any insurance proceeds payable on account of the loss of
or damage to any of the Collateral and hereby irrevocably appoints Secured Party
as Debtor's attorney-in-fact to endorse, by writing or stamp, any check or draft
representing such proceeds or refund. Such appointment is binding and coupled
with an interest. Before or after an Event of Default, Secured Party may notify
any party obligated to pay proceeds of the Collateral of the existence of the
Security Interest and may also direct them to pay all such proceeds to Secured
Party.

B-6

<PAGE>

7.4. Property in Secured Party's Possession. As further
security for the repayment of the Indebtedness, Debtor grants to Secured Party a
security interest in all property of Debtor which is or may hereafter be in
Secured Party's possession in any capacity, including all monies owed or to be
owed by Secured Party to Debtor; and with respect to all of such property,
Secured Party shall have the same rights as it has with respect to the
Collateral.

7.5. Failure to Perform; Reimbursement. Upon Debtor's failure
to perform any of its duties hereunder, Secured Party may, but it shall not be
obligated to, perform any of such duties and Debtor shall forthwith upon demand
reimburse Secured Party for any expense incurred by Secured Party in doing so
with interest thereof at a rate equal to the lesser of eighteen percent (18%)
per annum or the maximum rate permitted by applicable law.

7.6. Non-Waiver. No delay or omission by Secured Party in
exercising any right or remedy hereunder or with respect to any Indebtedness
shall operate as a waiver of that or any other right or remedy, and no single or
partial exercise of any right or remedy shall preclude Secured Party from any
other or future exercise of the right or remedy or the exercise of any other
right or remedy. Secured Party may agree to a cure of any default by Debtor in
any reasonable manner without waiving any other prior or subsequent default by
Debtor.

7.7. Third Parties. Secured Party shall have no obligation to
take, and Debtor shall have the sole responsibility for taking, any steps to
preserve rights against all prior parties to any document of title, general
intangible, instrument or chattel paper in Secured Party's possession as
Collateral or proceeds of the Collateral.

7.8. Waiver of Notice of Dishonor and Protest, Etc. Debtor
waives dishonor, protest, presentment, demand for payment, notice of dishonor
and notice of protest of any instrument at any time held by Secured Party with
respect of which Debtor is in any way liable and waives notice of any other
action by Secured Party.

7.9. Assignments. Debtor's right and obligations under this
Agreement are not assignable in whole or in part by operation of law or
otherwise. Secured Party may assign its rights and obligations under this
Agreement, in whole or in part, without notice to or consent of Debtor and all
of such rights shall be enforceable by Secured Party's successors and assigns.

7.10. Definitions; Multiple Parties; Section Headings. The
term "person" when referred to herein shall mean an individual, partnership,
corporation or any other legal entity. If more than one Debtor executes this
Agreement, the term "Debtor" includes each of the Debtors as well as all of
them, and their obligations under this Agreement shall be joint and several.
Whenever the context so requires, the neuter gender includes the feminine and
masculine and the singular number includes the plural. Unless otherwise defined
herein or the context requires otherwise, terms used herein shall have the same
meaning as defined in the Uniform Commercial Code as enacted by the State of New
York. Section headings are used herein for convenience only and do not alter or
limit the meaning of the language contained in each section.

B-7

<PAGE>

7.11. Amendment; Waiver. This Agreement may not be modified or
amended nor shall any provision of it be waived except by a written instrument
signed by Debtor and by Secured Party.

7.12. Choice of Law; Waiver of Jury Trial. This Agreement has
been delivered in the State of New York and shall be interpreted, and the rights
and liabilities of the parties hereto determined, in accordance with the
internal laws (as opposed to the conflicts of law provisions) of the State of
New York. Debtor and Secured Party hereby waive any right to a trial by jury in
any action to enforce or defend any matter arising from or related to (i) this
Agreement; (ii) any Note; or (iii) any documents or agreements evidencing or
relating to this Agreement or any Note. Debtor agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in any
other jurisdiction by suit on the judgment or in any other manner provided by
law. Nothing in this paragraph shall affect or impair Secured Party's right to
serve legal process in any manner permitted by law, or Secured Party's right to
bring any action or proceeding against Debtor, or the property of Debtor, in the
courts of any other jurisdiction.

7.13. Expenses. Debtor shall pay all costs and expenses
relating to this Agreement and the Indebtedness, including but not limited to,
filing and recording fees, documentary stamps including, without limitation, New
York documentary stamps (if any), and Secured Party's attorney's fees and
expenses.

7.14. Notice. Except as otherwise provided herein, any notice
required hereunder shall be in writing and shall be deemed to have been validly
served, given or delivered upon deposit in the United States certified or
registered mails, with proper postage prepaid, addressed to the party to be
notified as follows:
<TABLE>
<CAPTION>

<S> <C>
a. If to Secured Party at: James F. Morris
30 Corporate Woods, Suite 120
Rochester, New York 14623

b. If to Debtor at: American Equities Income Fund II, Inc.
80 East Route 4, Suite 202
Paramus, NJ 07652
</TABLE>

or to such other address as each party may designate for itself by like notice.

7.15. Severability. If any provision of this Agreement is
prohibited by, or is unlawful or unenforceable under, any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective to
the extent of such prohibition without invalidating the remaining provisions
hereof; provided, however, that any such prohibition in any jurisdiction shall
not invalidate such provision in any other jurisdiction.

B-8

<PAGE>

7.16. Reliance by Secured Party. All covenants, agreements,
representations and warranties made herein by Debtor shall, notwithstanding any
investigation by Secured Party, be deemed to be material to and to have been
relied upon by Secured Party.

7.17. Entire Agreement. This Agreement, the Note and the other
instruments, agreements and documents contemplated hereby contain the entire
agreement between Secured Party and Debtor with respect to the subject matter
hereof and supersedes and cancels any prior understanding and agreement between
Secured Party and Debtor with respect thereto.

7.18. Binding Effect. Subject to the provisions of paragraph
7.9, this Agreement shall be binding upon the heirs, personal representatives,
successors and assigns of Debtor and shall inure to the benefit of the
successors and assigns of Secured Party.

7.19. Time. Time is of the essence in this Agreement.

7.20. Attorney's Fees. The parties hereby agree that in the
event any of the terms and conditions contained in this Agreement, including the
indemnification provisions contained herein, must be enforced by reason of any
past, existing or future delinquency of payment, of failure of observance or of
performance by any of the parties hereto, in each such instance, the defaulting
party shall be liable for reasonable collection and/or legal fees, trial and
appellate levels, any expenses and legal fees incurred, including time spent in
supervision of paralegal work and paralegal time, and any other expenses and
costs incurred in connection with the enforcement of any available remedy.

7.21. Capacity. The Secured Party is entering into this
Agreement solely in his capacity as Trustee under the Indenture and shall be
entitled to the privileges, immunities and protections afforded him thereunder
in any actions taken by him as Secured Party hereunder.

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<PAGE>

IN WITNESS WHEREOF, the parties have executed this Security
Agreement the day and year first above written.

DEBTOR:

AMERICAN EQUITIES INCOME FUND II, INC.

By:
------------------------------------
David S. Goldberg, CEO

SECURED PARTY:

---------------------------------------
James E. Morris

B-10

<PAGE>

SCHEDULE A

Collective List of Persons
Constituting the Secured Party

<PAGE>

EXHIBIT C

FORM OF INDENTURE OF TRUST

This Indenture of Trust dated as of the ____ day of _____, ____, by and
between AMERICAN EQUITIES INCOME FUND II, INC., a Delaware corporation (the
"Company") and JAMES E. MORRIS, as Trustee.

WHEREAS, the Company has duly authorized the offer and sale of an
aggregate of $9,950,000 12% Promissory Notes (the "Notes"), a specimen copy of
which is attached hereto as Exhibit "A"; and

WHEREAS, the Company has determined that it is in the best interests of
the Company and the holders of the Notes to enter into this Indenture of Trust
(the "Indenture").

NOW, THEREFORE, for valuable consideration, the receipt, adequacy and
sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Recitals. The above recitals are those of the Company and are true
and correct and are incorporated herein by reference. The Trustee takes no
responsibility for such recitals.

2. Acceptance of Trust. The Trustee hereby accepts the appointment as
Trustee under the terms and conditions hereof.

3. Duties of Trustee.

a. The Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee.

b. In the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely on the affidavit delivered to the Trustee by the
Company under terms of paragraph 4 hereof. The Trustee shall not be liable with
respect to any action taken or omitted to be taken by him or his agents in good
faith in accordance with the direction of the holders of not less than a
majority in principal amount of the Notes relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee under this Indenture.

c. No provision of this Indenture shall require the Trustee to
expend or risk his own funds or otherwise incur financial liability in the
performance of any of his duties hereunder or in the exercising of any of his
rights or powers, if there is a reasonable ground for believing that the
repayment of such funds or liability is not reasonably assured to him.

<PAGE>

d. The Trustee may rely and shall be protected in acting upon
any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, note, or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.

e. The Trustee may consult with his counsel, and any opinion
of counsel shall be full and complete authorization and protection with respect
to any action taken, suffered, or omitted by him hereunder in good faith and in
accordance with such opinion of counsel.

f. The Trustee shall be under no duty or obligation to
exercise any of the rights or powers vested in him by this Indenture at the
request, order, or direction of any of the holders of the Notes, pursuant to
this Indenture, unless such holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred thereon or thereby. Nothing herein contained shall, however, relieve
the Trustee of the obligations, upon the occurrence of an Event of Default
(which has not been cured or waived) to give notice to the holders of the Notes
as provided for in paragraph 6(g) hereof.

g. The Trustee shall not be liable for any action taken,
suffered or omitted by him in good faith and believed by him to be authorized or
within the discretion or rights or powers conferred upon him by this Indenture.

h. The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
appraisal, note, or other paper or document, unless requested to do so by
holders of not less than a majority in the aggregate principal amount of the
Notes then outstanding; provided, that if the payment in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee, the Trustee may require payment or assurance and indemnity against such
expenses or liabilities as a condition to such proceedings.

i. The Trustee may execute any of the rights or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys, and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care.

j. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or the Notes.

4. Covenants of the Company.

a. The Company covenants to duly and punctually pay all
principal and accrued interest on the Notes as due under the terms of the Notes.
Simultaneously with the mailing of monthly interest payments, the Company shall
deliver to the Trustee a list of its checks payable to

C-2

<PAGE>

the Note Holders together with its affidavit as evidence of the making of such
payments. The same procedure shall be followed with respect to the payment of
the principal on the Notes.

b. The Company shall also keep an accurate list of the names
and addresses of all Note Holders and shall deliver a copy of same to the
Trustee and to any Note Holder upon request.

5. Events of Default. The following shall constitute Events of Default
hereunder:

a. The failure of the Company to make interest payments when
due under the terms of the Notes.

b. The failure of the Company to pay the principal of any of
the Notes in full when due, it being expressly understood that a default in the
payment of the principal of any Notes shall constitute a default in all Notes.

c. A default by the Company in any of its obligations under
this Indenture.

d. The Company or any subsidiary makes an assignment for the
benefit of creditors, commences (as the debtor) any case in bankruptcy under
Title 11 of the United States Code ("Bankruptcy"), commences (as the debtor) any
proceedings under any other insolvency or receivership law or files a petition
or answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute or files an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law or any corporate action is taken for the purpose of effecting any of
the foregoing and such proceeding is not dismissed within sixty (60) days of the
date of its filing.

e. A case in Bankruptcy or any proceeding under any insolvency
or receivership law is commenced against the Company (as the debtor in such case
or proceeding) and a court having proper jurisdiction enters an order for relief
against the Company in such case or proceeding, or such case or proceeding is
consented to by the Company or remains undismissed for 60 days, or the Company
consents to or admits the material allegations against it in any case or
proceeding.

f. A trustee, receiver, agent or custodian (however named) is
appointed or authorized to take charge of substantially all of the property of
the Company for the purpose of enforcing a lien against such property for the
benefit of creditors.

g. A notice of lien, levy or assessment representing
indebtedness in excess of $100,000 is filed or recorded with respect to any of
our assets by the United States or other government agency.

C-3

<PAGE>

h. The Company voluntarily or involuntarily dissolves or is
dissolved, or its existence terminates or is terminated.

6. Remedies.

a. If an Event of Default occurs and has not been cured within
thirty (30) days after written notice of its occurrence has been received by the
Company, the Trustee may then pursue any available remedy by proceeding at law
or in equity to collect the payment of principal and interest on the Notes or to
enforce the performance of any provision of the Notes, or the Indenture. The
Holders of a majority in principal amount of the Notes may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on it. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture,
that is unduly prejudicial to the rights of other Note Holders, or that may
involve the Trustee in personal liability. This provision, however, is subject
to the condition that if, at any time after the principal of the Notes shall
have been so declared due and payable, and before any Judgment or decree for the
payment of monies due shall have been obtained or entered as hereinafter
provided, the Company shall pay all accrued interest upon the Notes and the
principal payment of the Notes has not matured (excluding any maturity due to an
election to accelerate) and the Company shall pay all expenses of the Trustee,
and any and all defaults under the Notes referred to in paragraph 5(c) hereof
and under this Indenture shall have remedied, than in each such case all
defaults shall be deemed waived and the declaration of default and its
consequences shall be rescinded and annulled, but no such waiver or rescission
or annulment shall extend to or shall affect any subsequent default, or shall
impair any right relating thereto.

b. At any time after an election under paragraph 6(a) to
declare the Notes due and payable, the Trustee may institute any action or
proceeding at law or in equity for the collection of sums due and unpaid and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce such judgment or final decree against the Company.

c. All rights of action under this Indenture or under any of
the Notes may be enforced by the Trustee without the possession of any of the
Notes, or the production thereof at any other proceeding relative thereto, and
any such suit or proceeding instituted by the Trustee shall be brought in its
own name as Trustee of an express trust, and any recovery of judgment shall be
for the ratable benefit of the holders of the Notes.

d. Any and all monies collected by the Trustee pursuant to
this paragraph 6 shall be applied in the following order:

(1) To the Trustee for amounts due under the
Indenture, including the payment of all costs and expenses of collection and all
Trustee's fees.

C-4

<PAGE>

(2) To the Note Holders for payment of amounts due
and unpaid on the Notes for interest, then principal, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes.

(3) The remainder, if any, shall be paid to the
Company, its successors and assigns or to any other person under an order of any
court of competent jurisdiction.

e. The Holders of not less than 66 2/3% in aggregate principal
amount of Notes at the time outstanding may consent on behalf of the Holders of
all such Notes to the postponement of any interest payment for a period or
periods not exceeding three years from its original due date. The waiver of any
additional interest payments is not dependent upon the payment of any previously
waived interest payments.

Each Note Holder has the right to receive payment of
principal and interest

on or after the respective due dates of the Notes and institute suit to enforce
such payment on or after the respective due dates. Waiver of such right may not
occur except upon the individual consent of each Note Holder. The Holders of a
majority of the Notes may consent to the waiver of any past default and its
consequences.

A Note Holder may not use the Indenture to prejudice
the rights of another Note Holder or to obtain a preference or priority over the
other Note Holder.

f. All powers and remedies given by this paragraph 6 to the
Trustee or to the Note Holder shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any other powers and remedies available to the
Trustee or the holders of the Notes by judicial proceedings or otherwise, to
enforce the performance or observance of the covenants and agreements contained
in this Indenture, and no delay or omission of the Trustee or of any holder of
any of the Notes to exercise any right or power accruing upon any default
occurring and continuing as aforesaid, shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of paragraph 6(e), every power and
remedy given by this paragraph 6 or by law to the Trustee or to the Note Holders
may be exercised from time to time, and as often as shall be deemed expedient,
by the Trustee or by the Note Holders.

g. The Trustee shall, within thirty (30) days after it
receives notice of the occurrence of an event of Default, mail to the Note
Holders, as the names and addresses of such holders appear upon the books of the
Company, notice of each Event of Default hereunder known to the Trustee, unless
such Event of Default shall have been cured before the giving of such notice.

7. Payment of Trustee. The Trustee agrees to provide the services as
Trustee hereunder for a fee of $4,000 per year plus reimbursement of all actual
expenses. In addition, upon the occurrence of an Event of Default under this
Indenture, the Trustee shall receive a fee of $200 per hour for time incurred in
rendering his duties hereunder. The Company shall also reimburse Trustee for all
fees incurred by the Trustee for legal and accounting services in the Event of
Default.

C-5

<PAGE>

8. Indemnification. The Company covenants and agrees to indemnify the
Trustee for, and to hold him, his agents, employees, and attorneys harmless
against, any loss, liability or expense incurred without negligence or bad faith
on the part of the Trustee, arising out of or in connection with the acceptance
or administration of this trust, including the cost and expenses of defending
itself against any claim of liability relating thereto.

9. Resignation and Removal of Trustee. The resignation and removal of
Trustee shall be governed by the provisions of this paragraph 9.

a. The Trustee, or any trustee or trustees hereafter appointed
may at any time resign by giving written notice of such resignation to the
Company and by mailing notice thereof to the holders of the Notes at their
addresses as they shall appear on the books of the Company, but such resignation
shall not be effective until 60 days after such notification. Upon receiving
such notice of resignation the Company shall promptly appoint a successor
trustee. If no successor trustee shall have been so appointed and have accepted
appointment within thirty (30) days after the mailing of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Note Holder may,
on behalf of himself and all others similarly situated, petition any such court
for the appointment of a successor trustee. Such court may thereupon after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.

b. In case at any time the Trustee shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of his property shall be appointed, or any public officer shall take
change or control of the Trustee or of his property or affairs for the purpose
of rehabilitation, conservation or liquidation, the Company may remove the
Trustee and appoint a successor trustee or, may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee. Such Court may thereupon after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor trustee.

c. The holders of a majority in aggregate principal amount of
the Notes at the time outstanding may at any time remove the Trustee by so
notifying the removed Trustee and may appoint a successor Trustee with the
Company's consent.

d. Any successor trustee appointed under this paragraph 9,
shall execute and deliver to the Company and to its predecessor trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed, or conveyance, shall become vested with
all rights, powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as Trustee herein; but, nevertheless, on the
written request of the Company or of the successor trustee, the Trustee ceasing
to act shall, upon payment of any amount then due it hereunder, execute and
deliver an instrument transferring to such successor trustee all the rights and
powers of the Trustee so ceasing to act. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and

C-6

<PAGE>

confirming to such successor trustee and certainly vesting in and confirming to
such successor trustee all such rights and powers.

Upon acceptance of appointment by a successor trustee, the
Company shall mail notice of the succession of such trustee hereunder to the
holders of Notes at their addresses as they shall appear on the registration
books of the Company. If the Company fails to mail such notice within ten (10)
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Company.

10. Concerning the Note Holders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action the holders of such
specified percentage have joined therein may be evidenced by any instrument or
any number of instruments of similar tenor executed by Note Holders in person or
by agent or proxy appointed in writing. All signatures of the Note Holders shall
be under oath and notarized.

11. Miscellaneous Provisions.

a. All of the covenants, stipulations, promises and agreements
contained herein by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.

b. Nothing in this Indenture or in the Notes, express or
implied, shall give or be construed to give any person, firm or corporation,
other than the parties hereto and the Note Holders, any legal or equitable right
remedy or claim under or in respect of the Indenture, or any covenant, condition
or provision herein contained and all its covenants, conditions and provisions
shall be for the sole benefit of the parties hereto and of the Note Holders.

c. Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the holders of the Notes on the Company shall be deemed to have been
sufficiently given or served, for all purposes, if given or served on the
Company at 80 East Route 4, Suite 202, Paramus, New Jersey 07652 (until another
address is filed by the Company with the Trustee). Any notice, direction,
request or demand by any Note Holder to or on the Trustee shall be deemed to
have been sufficiently given or made, for all purposes, if given or made at the
post office address of the Trustee.

d. This Indenture and each Note shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of such state.

C-7

<PAGE>

IN WITNESS WHEREOF, the parties have signed this agreement as of the
day and year first above written.

AMERICAN EQUITIES INCOME
FUND II, INC.

By:
-------------------------------
David S. Goldberg, CEO

-------------------------------
James E. Morris

C-8

<PAGE>

EXHIBIT D - Form of Subscription Agreement

AMERICAN EQUITIES INCOME FUND II, INC.
INVESTOR QUESTIONNAIRE

- --------------------------------------------------------------------------------
|_| INITIAL SUBSCRIPTION
|_| ADDITIONAL INVESTMENT: Account Number Previously Assigned ________________
- --------------------------------------------------------------------------------
INVESTMENT
I desire to purchase $___________ aggregate principal amount of Notes of
American Equities Income Fund II, Inc. MAKE CHECKS PAYABLE TO:

"Republic National Bank - AEIFII"

- --------------------------------------------------------------------------------

SUBSCRIBER INFORMATION: Please print name(s) in which Notes are to be acquired.
All checks and correspondence will go to this address unless another address is
listed in the Investor Mailing or Direct Deposit Address sections.
<TABLE>
<CAPTION>

<S> <C>
Name (1st) ______________________________________ Mailing address (if different)

Name (2nd) ______________________________________ Name _______________________________________________

Address _________________________________________ Address ______________________________________________

City ____________________________________________ City _________________________________________________

State_______________________ Zip Code______________-____________ State__________________ Zip Code____________-__________

Custodian Account No._____________________ Daytime Telephone Number (_____) - _____ - _______________

Occupation_______________________________________________
</TABLE>

|_| U.S. Citizen |_| Resident Alien |_| Foreign Resident Country_____________
|_| Check if the Subscriber is a U.S. citizen residing outside the U.S. State
in which taxes are paid_______________
-> ALL SUBSCRIBERS: State of Residence of Subscriber/ (required) ______________

Enter the taxpayer identification number below. For most individual taxpayers,
it is their Social Security number. Note: If the purchase is in more than one
name, the number should be that of the first person listed. For IRA's, Keoghs,
and qualified plans, enter both the Social Security number and the taxpayer
identification number for that plan.

Taxpayer ID #_________-___________ and/or Social Security # ______-______-_____

- --------------------------------------------------------------------------------

DIRECT DEPOSIT ADDRESS: Investors requesting direct deposit of distribution
checks to another financial institution or mutual fund, please complete below.
In no event will the Company or Affiliates be responsible for any adverse
consequences of direct deposit. IRA accounts must have a custodian.

Company/Custodian ______________________________________________________________

Account No. ____________________________________________________________________

Address ________________________________________________________________________

City __________________________ State___________ Zip Code____________-__________

- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
FORM OF OWNERSHIP: (Select only one)
|_| INDIVIDUAL |_| JOINT TENANTS WITH RIGHT OF SURVIVORSHIP-
all parties must sign
|_| HUSBAND AND WIFE, AS COMMUNITY PROPERTY - |_| A MARRIED PERSON/SEPARATE PROPERTY - one
two signatures required signature required
|_| TENANTS IN COMMON |_| KEOGH (H.R.10)-trustee signature required
|_| TENANTS BY THE ENTIRETY-two signatures required |_| CUSTODIAN-custodian signature required
|_| CORPORATIONS |_| PARTNERSHIP (authorization required)
|_| S-Corporation |_| NON-PROFIT ORGANIZATION
|_| C-Corporation |_| PENSION PLAN-trustee signature(s) required
|_| IRA- custodian signature required |_| PROFIT SHARING PLAN-trustee signature(s) required
|_| SEP- custodian signature required |_| CUSTODIANUGMA-STATE of _______-custodian signature required
|_| TAXABLE TRUST |_| CUSTODIAN UTMA-STATE of _______-custodian signature required
|_| TAX-EXEMPT TRUST |_| ESTATE - Personal Representative signature required
|_| IRREVOCABLE TRUST - trustee signature required |_| REVOCABLE GRANTOR TRUST-grantor signature required
- -------------------------------------------------------------------------------------------------------------------
BROKER/DEALER REGISTERED REPRESENTATIVE INFORMATION (To be completed by Registered Representative.) PLEASE PRINT
Broker/Dealer Firm Name:____________________________________________________________________________________________

Name of Selling Representative: _______________________________________________________________________________________

Representative's Office: ____________________________________________________________________________________________
(Street) (City) (State) (Zip) (Office Phone)

Sales Representative Signature: ________________________________________________________
- -------------------------------------------------------------------------------------------------------------------
INTEREST DISTRIBUTION: Please check the method below which describes your desired plan of interest distribution.
|_| Monthly beginning on the first day of the first full month following the date of issuance of the Notes.
|_| Annually on the 31st day of December, of each year the Notes are outstanding, compounded on a monthly basis.
|_| Upon Maturity - interest may be compounded on monthly basis and paid with principal at maturity.

- -------------------------------------------------------------------------------------------------------------------

SUBSCRIBER SIGNATURES: (The undersigned has the authority to enter into this subscription agreement on behalf of the
person(s) or entity registered above. I (We) certify under penalty of perjury that this is my (our) correct Social
Security Number (or Tax Identification Number) and that interest income on this account should be reported on this
number. I acknowledge and agree to the statement on the reverse side hereof.)

X Date X Date
-------------------------------------------- --------- ----------------------------------------- ---------
Authorized Signature of 1st Subscriber Authorized Signature of 2nd Subscriber
- -------------------------------------------------------------------------------------------------------------------
COMPANY'S ACCEPTANCE (To be completed only by an authorized representative of the Company.)

The Foregoing subscription accepted this ________ day of _______________, 19___. ______________________________________
Authorized Representative of the Company
</TABLE>
SUBSCRIPTION AGREEMENT
AMERICAN EQUITIES INCOME FUND II, INC.
- --------------------------------------------------------------------------------

<PAGE>

The undersigned hereby subscribes to acquire Notes in American Equities
Income Fund II, Inc. (the "Company") pursuant to the terms set forth in the
Company's Prospectus dated _____________, ______ (the "Prospectus").

By signing and returning this Subscription Agreement, you are
acknowledging that:

- You have received a copy of the Prospectus of American
Equities Income Fund II, Inc. and you have assented to all the
terms and conditions of the Company's Indenture.

- You are at least 21 years old and reside in the state
indicated by you on the reverse side of this Subscription
Agreement.

- You confirm that you have either (i) annual gross income of at
least $30,000 and a net worth of at least $30,000 (exclusive
of home, home furnishings and automobiles) or (ii) a net worth
of at least $75,000 (exclusive of home, home furnishings, and
automobiles). If you live in a state listed on page iii of the
Prospectus, you confirm that you meet the net worth and/or the
gross income specified for such stock.

- You confirm that you satisfy the particular suitability
standard of your state residence as set forth in the
Prospectus under "SUITABILITY OF AND INVESTMENT IN NOTES -
ADDITIONAL SUITABILITY REQUIREMENTS."

INSTRUCTIONS

o Make check payable to "Republic National Bank EA for
AEIFII"

o Complete the attached subscription document.

o Forward the subscription document and check to the
Dealer Manager at the following address:

STRATEGIC ASSETS INC.
445 Broad Hollow Road, Suite 425
Melville, NY 11747

<PAGE>

EXHIBIT E

_______, 1999

American Equities Income Fund II, Inc.
c/o American Equities Group, Inc.
80 East Route 4, Suite 202
Paramus, NJ 07652

Gentlemen:

We have acted as legal counsel in connection with the organization of,
and offering of promissory notes (the "Notes") in denominations of $1,000 each
in American Equities Income Fund II, Inc., a Delaware corporation. You have
asked us to advise you with respect to certain tax issues relating to the
Company.

For purposes of this letter, any capitalized term not otherwise defined
herein shall have the meaning given to it in the Memorandum, as defined below.

For purposes of this letter, we have examined the following documents:

(a) A copy of the Company's Registration Statement on
Form SB-2, as amended, as filed with the Securities
and Exchange Commission on December __, 1999 (the

"Registration Statement").

(b) Copy of the Certificate of Incorporation of the
Company as filed with the Secretary of State of
Delaware on October 27, 1999 (the "Certificate of
Incorporation") and amendments thereto.

(c) Copies of the By-laws, Resolutions and Stock Ledger
of the Company (the "Corporate Books and Records") as
of the date hereof.

(d) A Representation Certificate of the Chief Executive
Officer of the Company.

Please be advised that we have relied upon all representations
made and factual matters stated in the foregoing documents and have not assumed
any responsibility for making any independent investigation or verification of
(i) any factual matter stated in or represented by any of

E-1

<PAGE>

the foregoing documents or (ii) any other factual matter, except to obtain,
where we deemed appropriate, written representations or certificates (including
the Representation Certificate referenced above) of officers of the Company or
other persons.

In rendering our advice, we have examined the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
existing and proposed Treasury Regulations interpreting the pertinent provisions
of the Code, the existing published rulings by the Internal Revenue Service (the
"Service"), reported judicial and administrative decisions, present
administrative practices and other relevant authorities and interpretations, all
through the date hereof, which we consider appropriate for purposes of this
letter. Because all of such Code provisions, regulations, rulings, decisions and
other interpretations are subject to change, our conclusions are specifically
based upon the Code provisions, regulations, rulings, decisions and other
interpretations as in effect on the date of this letter.

In giving this opinion, we have considered and followed the
guidelines of Formal Opinion 346 (revised) of the American Bar Association
Standing Committee on Ethics and Professional Responsibility, issued January 29,
1982, as well as the regulations governing practice before the Service, issued
by the U.S. Department of the Treasury on February 23, 1984.

Our opinion is expressly conditioned upon both the initial and
the continuing fulfillment at all times during the existence of the Company of
the following requirements stated in certain Regulations and Revenue Procedures
published by the Service: (1) the Company is organized and will be operated at
all times during its existence in accordance with state statutes concerning
corporate powers and corporate actions; and (2) the Company will not undertake
any action inconsistent with the representations made to us as of the date of
this letter.

ASSUMPTIONS

For purposes of this letter, we have assumed the following:

(a) The Company is organized as a C corporation and has only
one authorized class of stock;

(b) All Note holders will be either citizens or residents of
the United States;

(d) Certain other assumptions set forth in the section of the
Registration Statement captioned "Tax Aspect" are true as of the date
of this letter.

E-2

<PAGE>

OPINION

Based upon and subject to the qualifications set forth in this
letter, we advise you as follows:

1. Subject to the assumptions, qualifications and limitations set forth
in this letter and in the section of the Registration Statement captioned "Tax
Aspects," it is more likely than not that the Company would prevail on the
merits of each material Federal tax issue (other than those Federal tax issues
which involve inherently factual questions, as to which we express no
conclusion), if challenged and litigated before a court of competent
jurisdiction, to the same extent as concluded in the section of the Registration
Statement captioned "Income Tax Considerations."

2. The issue of whether or not the Company's Notes issued to investors
would be categorized as debt or equity under the Code and Regulations is
basically a factual issue on which the courts have differed. There are no simple
tests for the resolution of debt-equity questions. The Courts have stated that
each debt-equity case must be judged on its own unique fact situation. Tomlinson
v. The 1661 Corporation, 377 F.2d 291 (5th Cir. 1967). Some of the determining
factors as to whether an investment would be considered debt or equity utilized
by the courts are as follows:

(1) the names given to the certificates evidencing the indebtedness;
(2) the presence or absence of a maturity date; (3) the source of the
payments; (4) the right to enforce the payment of principal and
interest; (5) participation in management; (6) a status equal to or
inferior to that of regular corporate creditors; (7) the intent of the
parties; (8) 'thin' or adequate capitalization; (9) identity of
interest between creditor and stockholder; (10) payment of interest
only out of 'dividend' money; (11) the ability of the corporation to
obtain loans from outside lending institutions Montclair, Inc. v.
Commissioner, 318 F.2d 38 (5th Cir. 1963)); (12) the extent to which
the initial advances were used to acquire capital (Janeway v.
Commissioner, 147 F.2d 602 (2d Cir. 1945); and (13) the failure of the
debtor to pay on the due date or to seek a postponement (Commissioner
v. Meridian & Thirteenth Realty Co., 132 F.2d 182 (7th Cir. 1942).

Applying these tests to the Company we note that the "certificates" to
be received by the investors are recourse promissory notes, payable by the
Company (payment is expected to be made from revenues), the Notes may be
enforced as valid promissory note obligations, the investors have no
participation in management, the investors will be senior debtors and the
Company will have no other debt (other than junior and subordinate debt arising
in the ordinary course of business such as minor accruals or trade payables),
the Company will have an equity capitalization of at least .2% of the amount of
debt which should increase over time as the Company makes profits, the creditors
are not stockholders and are unrelated to the stockholders, interest is payable
from all sources not just funds available for dividends, the Company is
forbidden by its Certificate of Incorporation from obtaining commercial loans
for its business purposes, the proceeds of the Notes will not be used to

E-3
<PAGE>

acquire capital assets and whether or not the debtor will seek a postponement of
the due date of the obligation can not be presently determined.

The courts have emphasized the concept of "thin capitalization" as
strong evidence of a capital contribution where (1) the debt to equity ratio was
high, (2) the parties understand that it would go higher and (3) substantial
portions of these funds were used for the purchase of capital assets and for
meeting expenses needed to commence operations. United States v. Henderson, 5
Cir. 1967, 375 F.2d 40. Thin capitalization is also of significance when
combined with subordination to other indebtedness. Rowan v. United States, 219
F. 2d 55 (5th Cir. 1955). In the case of the Company the debt to equity ratio is
high; however, it is expected to decrease over time and these funds will be
predominately utilized to factor or finance accounts receivable and not for the
acquisition of capital assets or for meeting expenses, which will be borne by
the Company's parent American Equities Group., Inc. ("AEG").

Section 385 of the Internal Revenue Code which was promulgated in an
attempt to add some certainty to this area, states that

The regulations prescribed under this Section shall set forth
factors which are to be taken into account in determining with
respect to a particular factual situation whether a debtor
creditor relationship exists or a corporation-shareholder
relationship exists. The factors so set forth in the
regulations may include, among other factors:

1) whether there is a written unconditional promise to pay on
demand or on a specified date a sum certain in money in return
for an adequate consideration in money or money's worth, and
to pay a fixed rate of interest,

2) whether there is subordination to or preference over any
indebtedness of the corporation,

3) the ratio of debt to equity of the corporation,

4) whether there is convertability into the stock of the
corporation, and

5) the relationship between holdings of stock in the
corporation and holdings of the interest in question.

Applying these tests to the Company: (1) there is a written
unconditional promise to pay evidenced by the promissory note; (2) there is no
subordination of the debt; (3) the ratio of debt to equity is very high;
however, based upon AEG's obligation to fund operating costs and the financial
forecasts which demonstrate an ability of the Company to pay, the equity is
sufficient to operate the

E-4
<PAGE>

Company; (4) the debt is not convertible to stock; and (5) the debt holders will
not be stockholders, officers or directors of the Company.

The service promulgated regulations under this Section in 1980 which
regulations were withdrawn in 1983 and at the present time there are no viable
regulations implementing Code Section 385. Accordingly, the Code offers little
additional guidance on this issue.

In the event the Notes are characterized as equity by the service, the
Company's deduction for interest paid on the Notes would be disallowed.
Accordingly, the funds available to the Company to be utilized for its business
purposes would be lower than forecasted and its profits less than forecasted.

Based upon the application of the tests above, and assuming that the
financial forecasts are substantially achieved, it is our view that it is more
likely than not that the Notes will be treated as debt for tax purposes.

CONCLUSION

The Federal income tax consequences to the Company cannot be predicted
with absolute certainty. No assurance can be given that the interpretation of
current law will not be changed by the courts, or that the Service will not
alter its present views with regard to any of the matters discussed herein, nor
can any assurance be given that the Service will not audit or question the
treatment given to the various items on the Company's Federal income tax
returns. However, it is our opinion that it is more likely than not that the
material Federal income tax aspects as discussed will be realized as the Company
has anticipated. Finally, it must be recognized that this opinion represents our
views as to the interpretation of existing law and can in no way be taken as an
assurance that the Service will agree with these views.

This letter is limited to those issues discussed in this letter. This
letter is not intended to be, and should not be, relied upon by persons other
than the Company and the Investors. This letter may not be quoted in whole or in
part or otherwise used in a reference to any document to be filed with any
governmental or other administrative agency or other person without our prior
written consent, except that we have consented to this letter being included as
an exhibit to the Registration Statement.

Very truly yours,

BRONSON & MIGLIACCIO, LLP

E-5

<PAGE>

Until ___________, 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as underwriters and with resect to their unsold
allotments or subscriptions.

No dealer, salesman or any other person has been authorized to give any
information or to make any representation, other than those contained in this
prospectus in connection with the offering described herein, and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company.

---------------------

TABLE OF CONTENTS

Page

SUITABILITY STANDARDS.............................................. ii
SUMMARY OF OFFERING................................................ 1
RISK FACTORS....................................................... 5
USE OF PROCEEDS.................................................... 13
CAPITALIZATION..................................................... 13
BUSINESS........................................................... 14
General........................................................... 14
Factoring and Financing
of Receivables.................................................. 14
American Equities Group, Inc.,
as Manager...................................................... 15
Monitoring of Receivables......................................... 16
Factoring and Financing Criteria.................................. 16
Cash Flow Management.............................................. 21
Collection Management..............................................21
Other Financial Services.......................................... 21
Marketing......................................................... 22
Customer Service.................................................. 22
Perfection of Security Interest................................... 23
Collections....................................................... 24
Year 2000 Compliance.............................................. 24
Effect of Inflation............................................... 25
Banking........................................................... 25
Reports and Investor Services..................................... 25
Employees......................................................... 25
Patents and Trademarks............................................ 26
Property.......................................................... 26
Legal Proceedings................................................. 26
MANAGEMENT ........................................................ 28
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................... 32
PLAN OF OPERATIONS................................................. 33
DESCRIPTION OF SECURITIES.......................................... 35
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS............................................... 41
PLAN OF DISTRIBUTION .............................................. 42
TAX CONSIDERATIONS................................................. 43
LACK OF LIQUIDITY OF NOTES......................................... 46
LEGAL MATTERS...................................................... 46
EXPERTS............................................................ 46
ADDITIONAL INFORMATION ............................................ 46
REPORTS TO NOTE HOLDERS............................................ 47
Form of Promissory Note......................................Exhibit A
Form of Security Agreement...................................Exhibit B
Form of Indenture............................................Exhibit C
Subscription Agreement.......................................Exhibit D
Form of Tax Opinion......................................... Exhibit E
<PAGE>

$9,950,000 of 12% 10-Year Promissory Notes

AMERICAN
EQUITIES
INCOME
FUND II, INC.

----------------------

PROSPECTUS

----------------------

STRATEGIC ASSETS INC.

December __, 1999

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Certificate of Incorporation of the Registrant specifically
provides that no director of the Registrant shall be personally liable to the
Registrant or any of its shareholders for damages for any breach of duty in such
capacity except if a judgment or other final adjudication adverse to him
establishes that his acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of the law, or that he personally gained in
fact a financial profit or other advantage to which he was not legally entitled,
or that his acts violated specific provisions of the Delaware General
Corporation Law.

The Dealer Manager Agreement contains, among other things, provisions
whereby the Dealer Manager agrees to indemnify the Corporation, each officer and
director of the Corporation who has signed the Registration Statement and each
person who controls the Corporation within the meaning of Section 15 of the
Securities Act of 1933, as amended, against any losses, liabilities, claims or
damages arising out of alleged untrue statements or alleged omissions of
material facts with respect to information furnished to the Corporation by the
Dealer Manager for use in the Registration Statement or Prospectus. See Item 28,
"Undertakings."

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth our estimate of the various expenses
(other than selling commissions and other fees paid to the underwriter) which
will be paid by the Registrant in connection with the issuance and distribution
of the securities being registered.

Registration fee............................................... $ 2,755.10
NASD filing fee................................................ 1,495.00
Blue sky fees and expenses (including legal and filing fees)... 25,000.00
Printing expenses.............................................. 40,000.00
Legal fees and expenses (other than Blue sky).................. 75,000.00
Accounting fees and expenses................................... 25,000.00
Organizational Expenses........................................ 50,000.00
Investment Banking and Consulting Services..................... 497,500.00
Miscellaneous expenses......................................... 5,749.90
-------------
Total.................................................. $ 722,500.00
=============
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

During the last three years, we have made no sales of unregistered
securities other than the issuance of 1,000 shares of common stock to AEG for an
aggregate of $100,000 in connection with its organization.
<PAGE>

ITEM 27. EXHIBITS AND FINANCIAL SCHEDULES.

A. Exhibits.

NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------

1.1 Form of Dealer Manager Agreement between the Corporation and
Strategic Assets Inc.

1.2 Form of Selected Dealers Agreement, by and among the Strategic
Assets Inc. and the Selected Dealers.

3.1 Certificate of Incorporation of the Corporation.

3.2 By-Laws of the Corporation.

4.1 Form of 12% Promissory Note.(1)

4.2 Form of Security Agreement by and between the Corporation and James
E. Morris ("Morris"). (1)

4.3 Form of Indenture of Trust, by and between the Corporation and
Morris.(1)

4.4 Form of Escrow Agreement by and between the Corporation and Republic
National Bank of New York, NY.

5.1 Opinion of Bronson & Migliaccio, counsel to the Corporation.(2)

8.1 Opinion of Bronson & Migliaccio, counsel to the Corporation,
relating to certain tax issues.(1)

10.1 Management Agreement, dated as of _______, 1999, by and between the
Corporation and AEG.(2)

II-2

<PAGE>

10.2 Investment Banking and Consulting Services Agreement, dated as of
___________, 1999, by and between the Company and Genesis Ventures,
Limited.(2)

10.3 Form of Master Purchase & Sale Agreement utilized by AEG to acquire
Receivables.

10.4 Form of Master Purchase & Sale Agreement utilized by AEG to acquire
Receivables of publishing clients.

10.5 Form of Master Purchase & Sale Agreement utilized by AEG in credit
line transactions.

23.1 Consent of Richard A. Eisner & Company, LLP.

23.2 Consent of Bronson & Migliaccio, contained in Exhibit 5.1.(2)

27 Financial Data Schedule (included in EDGAR Filing Only).

- ---------------
(1) Incorporated by reference, filed as an exhibit to the Corporation's
Prospectus filed as a part of this Registration Statement.

(2) To be filed by amendment.

ITEM 28. UNDERTAKINGS.

1. The undersigned Registrant hereby undertakes:

(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:

(1) To include any prospectus required by Section
10(a)(3) of the Securities Act;

(2) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and

II-3

<PAGE>

(3) To include any additional or changed material
information with respect to the plan of distribution not
previously disclosed in the registration statement;

(b) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and

(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.

2. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

3. The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

II-4

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has fully caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Borough of Paramus, State of New Jersey, on the 28th day
of December, 1999.

AMERICAN EQUITIES INCOME FUND II, INC.

By:
------------------------------------------
David S. Goldberg, Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

AMERICAN EQUITIES INCOME FUND II, INC. and each of the persons whose
signature appears below hereby constitutes and appoints DAVID S. GOLDBERG such
person's true and lawful attorneys-in-fact, with full power to him to sign for
such person and in such person's name, in the capacities indicated below, any
and all amendments to this Registration statement, hereby ratifying and
confirming such person's signature as it may be signed by said attorney-in-fact
to any and all amendments to said Registration Statement.

SIGNATURE TITLE DATE

/s/ Chairman of the Board December 28, 1999
- ---------------------------- and Director
Phillip C. Goldstick

/s/ Chief Executive Officer, December 28, 1999
- ---------------------------- Secretary and Director
David S. Goldberg

/s/ Chief Financial Officer December 28, 1999
- ----------------------------
M. Ellen Donnelly

II-5

<PAGE>
EXHIBIT INDEX

NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------

1.1 Form of Dealer Manager Agreement between the Corporation and
Strategic Assets Inc.
1.2 Form of Selected Dealers Agreement, by and among the Strategic
Assets Inc. and the Selected Dealers.
3.1 Certificate of Incorporation of the Corporation.
3.2 By-Laws of the Corporation.
4.1 Form of 12% Promissory Note.(1)
4.2 Form of Security Agreement by and between the Corporation and James
E. Morris ("Morris"). (1)
4.3 Form of Indenture of Trust, by and between the Corporation and
Morris.(1)
4.4 Form of Escrow Agreement by and between the Corporation and Republic
National Bank of New York, NY.
5.1 Opinion of Bronson & Migliaccio, counsel to the Corporation.(2)
8.1 Opinion of Bronson & Migliaccio, counsel to the Corporation,
relating to certain tax issues.(1)
10.1 Management Agreement, dated as of _______, 1999, by and between the
Corporation and AEG.(2)
10.2 Investment Banking and Consulting Services Agreement, dated as of
___________, 1999, by and between the Company and Genesis Ventures,
Limited.(2)
10.3 Form of Master Purchase & Sale Agreement utilized by AEG to acquire
Receivables.
10.4 Form of Master Purchase & Sale Agreement utilized by AEG to acquire
Receivables of publishing clients.
10.5 Form of Master Purchase & Sale Agreement utilized by AEG in credit
line transactions.
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Bronson & Migliaccio, contained in Exhibit 5.1.(2)
27 Financial Data Schedule (included in EDGAR Filing Only).
- ---------------
(1) Incorporated by reference, filed as an exhibit to the Corporation's
Prospectus filed as a part of this Registration Statement.
(2) To be filed by amendment.

<PAGE>

Exhibit 1.1

AMERICAN EQUITIES INCOME FUND II, INC.
$9,950,000 In
12% Promissory Notes
Minimum Purchase: $5,000

FORM OF DEALER MANAGER AGREEMENT

THIS AGREEMENT is entered into as of the ____ day of _________, ____ by
and among AMERICAN EQUITIES GROUP, INC., a New York corporation ("AEG"),
AMERICAN EQUITIES INCOME FUND II, INC., a Delaware corporation (the "Company")
and STRATEGIC ASSETS INC., a New York corporation (the "Dealer Manager").

Background

A. The Company is currently offering and selling up to a
Maximum of $9,950,000 aggregate principal amount of its 12% Notes in $1,000
denominations, or any integral multiple thereof (the "Notes"). The minimum
subscription is for $5,000, or $2,000 for investors subscribing through an IRA.

B. The Dealer Manager desires on a "best-efforts basis" to act
as a non-exclusive agent in the offer and sale of the Notes (the "Offering")
subject to the terms of this Agreement and the Company's prospectus pursuant to
which the Offering is to be conducted (the "Prospectus").

C. In consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:

1. Non-Exclusive Appointment of Dealer Manager.

(a) Subject to the terms and conditions set forth herein, the
Company hereby appoints the Dealer Manager on a non-exclusive basis as its agent
to solicit written subscriptions from prospective investors to purchase the
Notes. The Dealer Manager hereby accepts said appointment and agrees to use its
best efforts from the date hereof through _______________ (the "Termination
Date"), as the Company shall determine in its sole discretion, to secure offers
from qualified investors to acquire Notes pursuant to the terms of this
Agreement. Prior to such time, either party shall have the right, by giving
notice as provided in Section 13 of this Agreement, to terminate this Agreement
immediately. In the event of such termination, all of the obligations of the
parties hereto which are required to be performed pursuant to this Agreement
shall be performed with respect to any sales which are made pursuant to this
Agreement. The Dealer Manager may in its sole discretion utilize the services of
other securities dealers who are members of the National Association of
Securities Dealers, Inc. (the "Selected Dealers") in connection with the
offering and sale of the Notes under an Agreement with each of the other
Selected Dealers substantially in the form as attached hereto as Exhibit A.

(b) The Company and the Dealer Manager jointly may determine
to reduce the capital contribution required of investors; provided, that any
such reduction shall only be reflected in the sales commission payable with
respect to such Notes, and shall not reduce the net proceeds to the Company from
the sale of such Notes.

(c) Upon the delivery of a subscription agreement, each
subscriber will be required to provide a check in the amount of the total
subscription price of Notes subscribed. The minimum purchase is $5,000, $2,000
for investors subscribing through an IRA. However, the Company reserves the
right, in its sole discretion, to offer and sell less than $5,000 of Notes to
any investor.

-1-

<PAGE>
(d) It is understood and agreed that Dealer Manager's
relationship with the Company is that of an independent contractor and that
nothing herein shall be construed as creating a relationship of partners, joint
venture, or employer and employees, between the Dealer Manager and the Company.
The Dealer Manager is not authorized to make any placement of the Notes to any
person unless and until that person complies with the suitability standards
contained in the Prospectus, nor is the Dealer Manager authorized to deliver a
Prospectus or any other information or documents, or make any representations to
any person concerning the Offering except as provided in this Agreement. No
additional material, documents or information may be delivered to any person
unless expressly authorized in writing by the Company.

2. Representations and Warranties of AEG and the Company.

The Company and AEG represents and warrants to the Dealer
Manager as follows:

(a) Organization and Qualification of the Company and AEG.
Each of the Company and AEG is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
with full power and authority to own or lease its properties and conduct the
business heretofore conducted by it in the manner and in the places where such
properties are owned or leased or such business is conducted by it. Each of
AEG's and the Company's corporate charter and By-laws, as amended to date, are
complete and correct. AEG is duly registered or qualified to do business as a
foreign corporation in the State of New Jersey and neither the character or
location of the properties owned or leased by AEG or the Company nor the nature
of the business transacted by AEG or the Company makes registration or
qualification in any other jurisdiction necessary, except where the failure to
so qualify would not have a material adverse effect on AEG or the Company.

(b) Authority of AEG and the Company; No Conflicts

(i) Each of AEG and the Company, as applicable, has full
power and authority to enter into this Agreement; issue and sell the Notes and
consummate the transactions contemplated hereby. All necessary action, corporate
or otherwise, has been taken by each of AEG and the Company to authorize the
execution, delivery, and performance of this Agreement, and the Agreement is a
valid and binding obligation of each of AEG and the Company enforceable in
accordance with its terms.

(ii) The execution and delivery of this Agreement by each
of AEG and the Company does not, and the issuance of the Notes and the
performance of the terms hereof by AEG and the Company will not, constitute a
default or event of default under, or violate, conflict with, or result in any
breach of the terms, conditions, or provisions of: (1) the corporate charter of
By-laws of AEG or the Company, (2) the laws or regulations of any jurisdiction
or any other governmental requirements; or (3) any material mortgage, lien,
lease, agreement, contract, instrument, order, arbitration award, injunction,
judgment or decision to which AEG or the Company is a party or by which it or
its property is bound or materially affected. Except for filings with the
Securities and Exchange Commission (the "Commission") and applicable state
securities administrators, no approval, authorization, license, permit or other
action by, or filing with, any federal, state or municipal commission, board,
agency or other governmental authority is required in connection with the
execution and delivery by AEG and the Company of this Agreement, the issuance of
the Notes, or the consummation of the transaction contemplated hereby.

-2-
<PAGE>

(i) Each of AEG and the Company has good and marketable
title to all of its material assets and properties, and all of its leases of
real or personal property are valid and subsisting, and no default exists under
any provision thereof, the existence of which gives rise to a right of
termination by the lessor; and none of AEG's material assets and property is
subject to any title restriction; none of AEG's material assets and property is
subject to any mortgage, pledge, lien, conditional sale agreement, security
interest, encumbrance or other charge.

(ii) To the best of their knowledge, neither AEG's nor the
Company's use of the properties occupied by AEG or the Company, respectively, is
in material violation of any law, and no notice from any governmental body has
been served upon AEG or the Company or upon any property occupied by AEG or the
Company claiming any violation of any such law, ordinance, code or regulation or
requiring, or calling attention to the need for, any work, repairs,
construction, alterations, or installation on or in connection with said
properties which has not been complied with. To their knowledge, each of AEG and
the Company has the right to use such properties occupied by it for the
operations presently therein conducted.

(d) Payment of Taxes. Each of AEG and the Company has filed,
or obtained extension of the time to file all federal, state and to the best of
their knowledge, all local income, withholding, exercise or franchise tax
returns, real estate and personal property tax returns, sales and use tax
returns and other tax returns required to be filed by it, has accrued or paid
all taxes owing by it, except taxes which have not yet accrued or otherwise
become due.

(e) Absence of Undisclosed Liabilities. As of the date hereof,
neither AEG or the Company has any material liabilities of any nature, whether
accrued, absolute, contingent or otherwise (including without limitation
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due) except liabilities
fully disclosed in the Registration Statement or in such documentation as may
otherwise delivered to Dealer. To the best of their knowledge, there is no
threatened material claim, debt, liability or obligation (including unpaid
federal, state, or local

-3-

<PAGE>

taxes) of any nature or in any amount not fully reserved against in the AEG's or
the Company's balance sheet or not fully reflected in the Registration
Statement.

Except as disclosed in the Registration Statement, neither AEG
or the Company has any notes or accounts payable to any person, firm, or
corporation which is affiliated with AEG or the Company or to any director,
officer, or principal stockholder of AEG or the Company.

(f) Contracts. Except as set forth in the Registration
Statement, neither AEG or the Company is in material default under any contract,
commitment, plan, agreement, instrument, license or lease or under any purchase
order or sales order, which default would have a materially adverse effect on
the business or financial condition of AEG or the Company.

(g) Litigation. Except as set forth in the Registration
Statement, there is no suit, action, or legal, administrative or other
proceeding or governmental investigation pending, or, to the best of AEG's or
the Company's knowledge, threatened, anticipated or contemplated against AEG or
the Company or any or their respective properties, which, in any single case or
in the aggregate, challenges or questions in any respect, the validity of, or
would prevent or hinder the consummation of, the transactions contemplated by
this Agreement or which, if adversely determined, would have a material adverse
effect on the properties, assets, condition (financial or otherwise) and
business of AEG or the Company, and there are no unsatisfied or outstanding
judgments, orders, decrees or stipulations which would prevent or hinder the
consummation of the transactions contemplated by this Agreement. Neither AEG or
the Company knows or has grounds to know of any basis for any action or of any
governmental investigation relating to or affecting the properties, assets,
condition (financial or otherwise) and business of AEG or the Company.

There are no claims or proceedings against AEG or the Company
pending, or to the best of AEG's or the Company's knowledge, threatened,
anticipated or contemplated which, if valid, would constitute or result in a
breach of any representation, warranty or agreement set forth herein.

(h) Compliance with Laws. Each of AEG and the Company is in
compliance in all material respects with all laws, ordinances, rules,
regulations and other governmental requirements which apply to the conduct of
its business, including, without limitation, all laws and regulations relating
to (1) employment and labor relations (including all provisions thereof relating
to wages, hours, equal opportunity, discrimination, collective bargaining, and
the withholding and payment of social security and all other taxes and (2)
government contracts.

-4-
<PAGE>

(i) Licenses and Permits. Each of AEG and the Company holds in
good standing, or has applied for, all licenses, permits, authorizations,
franchises, consents and orders of all federal, state, local, and foreign
governmental bodies necessary to carry on its business and each of AEG and the
Company has no reason to believe that any such licenses, permits,
authorizations, franchises, consents and orders will be revoked, terminated or
suspended.

(j) Burdensome Agreements. Neither AEG nor the Company is
subject to or bound by any consent decree, agreement, judgment, decree or order,
and does not know of or have grounds to know of any basis for any action or
governmental proceedings, which may materially and adversely affect the
properties, assets, business, prospects or condition, financial or otherwise, of
AEG or the Company, or result in the revocation or limitation of any license,
permit or franchise held by AEG or the Company.

(k) Misstatements and Omissions. Neither AEG or the Company
has made any material misstatement of fact or omitted to state any material fact
necessary or desirable to make complete, accurate and not misleading every
representation, warranty and agreement set forth herein

(l) Securities Law Disqualification. Neither the Company, nor
any officer, director or beneficial owner of ten percent or more of any class of
the equity securities of the Company falls within any of the "bad boy"
provisions of Rule 262(a) or (b), as applicable, of SEC Regulation A.

3. Representations and Warranties of the Dealer Manager. The
Dealer Manager represents and warrants to the Company as follows:

(a) The Dealer Manager is a corporation duly organized and
validly existing in good standing under the laws of the State of New York, with
power and authority to enter into this Agreement and to carry out its
obligations hereunder.

(b) The Dealer Manager is duly registered pursuant to the
provisions of the Securities Exchange Act of 1934, as amended (the "1934 Act")
as a broker-dealer and is a member of good standing

-5-

<PAGE>

of the NASD and is duly registered as a broker-dealer in those states in which
it is required to be so registered in order to carry out the Offering pursuant
to this Agreement.

(c) Neither the Dealer Manager nor any director or officer
thereof falls within any of the "bad boy" provisions of Rule 262(a), (b), or
(c), as applicable, of SEC Regulation A.

(d) This Agreement has been duly authorized, executed and
delivered by the Dealer Manager and constitutes a valid and binding obligation
thereof.

4. Manner of Offering Notes. The Dealer Manager covenants and
agrees with the Company as follows:

(a) Dealer Manager will offer the Notes pursuant to the
Prospectus and only in such a manner as to assure that the offer and sale
thereof will meet the registration requirements of Section 5 of the Securities
Act of 1933, as amended (the "1933 Act"), and will be exempt from or comply with
any registration requirements applicable for qualifying the Notes for offering
and sale under the laws of any state in which they may be offered. Moreover,
Dealer Manager agrees to indemnify the Company and the directors, officers and
agents of the Company against any liability, damage, cost, loss or expense to
any of them arising out of its failure to so offer the Notes;

(b) Immediately prior to making any offer of any Note to any
offeree, Dealer Manager shall have reasonable grounds to believe and shall
believe that the offeree is a person who is able to bear the economic risk of
the investment and who otherwise meets the applicable suitability standards set
forth in the Prospectus and the subscription documents in the form prescribed by
the Company;

(c) Dealer Manager will deliver to each offeree, prior to any
submission by him of a written subscription to buy any Note, a copy of the
Prospectus, together with any supplements or amendments thereto, and will keep
records of to whom, by what manner, and on what date Dealer Manager delivered
each such copy;

(d) Dealer Manager will not offer the Notes by means of any
letter, circular, notice or written communication other than the Prospectus, and
other written communications expressly approved in writing by the Company;

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<PAGE>

(e) Dealer Manager will make reasonable inquiry to determine
whether a prospective purchaser is acquiring the Notes for his own account or on
behalf of other persons;

(f) Dealer Manager will abide by, and take reasonable
precautions to ensure that others comply with all provisions contained in this
Agreement or Prospectus regulating the terms and manner of offering the Notes;

(g) Dealer Manager will take other action or refrain from
taking action in accordance with the reasonable requests of the Company, in
order to comply with all applicable laws, including, among other things,
requiring offerees and purchasers to execute and deliver such documents and
instruments as the Company may require;

(h) All funds will immediately be placed in an escrow account
to be maintained by the Company pursuant to an Escrow Agreement with Republic
National Bank of New York, New York. Upon the closing or other termination of
the Offering, the proceeds therefrom shall be distributed to the Company or
returned to subscribers as provided in such Escrow Agreement; and

(i) The Notes shall be offered only in such states in which
the Dealer Manager has been advised by the Company that the offer and sale of
Notes has been approved. Dealer Manager shall advise the Company in advance and
in writing of the states in which it desires to offer the Notes, and shall
conduct the Offering in any such state only after the Company, upon consultation
with legal counsel, has had an opportunity to review the applicable securities
laws of such state and to effect any required filings.

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<PAGE>

5. Further Agreements of the Company. The Company covenants
and agrees with the Dealer Manager as follows:

(a) If at any time any event shall occur as a result of which
it becomes necessary to supplement the Prospectus so that it does not include
any untrue statement of any material fact or omit to state any material fact
necessary in order to make the statements made not misleading, the Company will
promptly notify Dealer Manager in writing and will promptly supply it with
amendments or supplements correcting such statement or omission;

(b) The Company will make such filings with the Securities and
Exchange Commission and state and other governmental agencies as may be
necessary to comply with the registration requirements of the 1933 Act and of
the securities laws of any state or other jurisdiction in which the Notes may be
offered, provided that the Company shall not be required in any event to
register as a broker/dealer in any jurisdiction; and

(c) The Company will pay all expenses in connection with the
preparation and duplication of the Prospectus and any amendments or supplements
thereto, legal fees related thereto, and all other fees and expenses of the
offering of the Notes except wages, salaries and commissions of the Dealer
Manager's employees engaged in the Offering and related administrative and
overhead costs.

6. Compensation.

(a) Subject to adjustment as provided in section 1(c) hereof,
in consideration of Dealer Manager's services as the Company's agent hereunder,
the Company hereby agrees to compensate the Dealer Manager as set forth in
section 6(b) below. All sales commissions and other compensation shall be
payable in full upon acceptance by the Company of subscriptions for Notes and
release of subscription proceeds from escrow. The Dealer Manager shall be
entitled to no compensation with respect to subscriptions rejected by the
Company or if the Company terminates the Offering and refunds subscription
payments to investors.

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<PAGE>

(b) The Dealer Manager shall be entitled to (i) sales
commissions of 7% of the gross proceeds from the sale of each Note; (ii) 1% of
the gross proceeds of the sale of each Note as a due diligence and
non-accountable expense allowance; and (iii) .50% of the gross proceeds of the
sale of each Note as a Dealer Manager fee. Fees will only be payable upon
receipt by the Company of the full price for Notes sold in accordance with the
Prospectus.

7. Non-Circumvention Covenants.

(a) In the course of business between the Dealer Manager and
the Company, the Dealer Manager will learn the identity of and gain access to
certain clientele, agents and sources of projects of the Company, and the
Company will likewise learn the identity of and gain access to certain
clientele, agents and contacts of the Dealer Manager. In consideration of the
agreement of each party to make certain business opportunities and contacts
available to the other party and to work together in evaluating and carrying out
business opportunities, the Dealer Manager agrees to preserve the integrity of
the proprietary relationship between the Company and each of its respective
clientele, agents, employees, project sources, or contacts in general that may
become known to the Dealer Manager, and the Company agrees to preserve the
integrity of the proprietary relationship between the Dealer Manager and each of
its respective clientele, agents, employees, project sources, or contacts in
general that may become known to the Company.

(b) The Dealer Manager agrees not to contact or otherwise
communicate with any clients or contacts of the Company (including but not
limited to banks, financing sources, broker-dealers, marketing or sales
entities, developers or others) with whom the Dealer Manager does not have a
pre-existing relationship, without the prior knowledge and approval of the
Company as appropriate, nor shall any business transactions be conducted by the
Dealer Manager with any clients or contacts of the Company without appropriate
compensation arrangements to the Company being agreed upon in advance. The
Dealer Manager further agrees that the non-circumvention covenants set out
herein shall apply equally to its agents, employees, directors, officers and
affiliates. The Company agrees not to contact or otherwise communicate with any
clients or contacts of the Dealer Manager, without the prior knowledge and
approval of the Dealer Manager as appropriate, nor shall any business
transactions be conducted by the Company with any clients or contacts of the
Dealer Manager without appropriate compensation arrangements to the Dealer
Manager being agreed upon in advance. The Company further agrees that the
non-circumvention covenants set out herein shall apply equally to its agents,
employees, directors, officers and affiliates.

(c) All parties agree that they will not utilize any third
party to make any contacts or disclosures that would violate the intent of this
provision. The non-circumvention covenants set forth herein

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<PAGE>

shall apply to past and any future business dealings between the parties hereto
and is not limited to dealings with the Company. The covenants shall stand for a
period of three years from the date of execution of this contract and are to be
applied to any and all transactions/proposals submitted to the Dealer Manager by
the Company or to the Company by the Dealer Manager, and regardless of the
success of any such project.

8. Indemnification.

(a) Each of AEG and the Company shall jointly and severally
indemnify and hold harmless the Dealer Manager and the Selected Dealers, each of
their directors, officers, employees, agents and each person, if any, who
controls (within the meaning of the 1933 Act or the 1934 Act) the Dealer Manager
and the Selected Dealers from and against any loss, claim, damage or liability,
joint or several, and any action in respect thereof, to which the Dealer Manager
and the Selected Dealers or such director, officer, employee, agent or
controlling person may become subject, under the 1933 Act, 1934 Act, any state
securities laws or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus, as amended or
supplemented, or any Federal or state securities filing, or arises out of, or is
based upon, the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse the Dealer Manager and Selected Dealers and each of their
directors, officers, or controlling persons for any legal and other expenses
reasonably incurred by such persons in investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action; provided,
however, that AEG and the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in the Prospectus, as amended or supplemented, regarding
the Dealer Manager or in conformity with information furnished by the Dealer
Manager or its agent for inclusion therein or in conformity with any direction
of the Dealer Manager or its agents.

(b) The Dealer Manager shall indemnify and hold harmless the
Company, and each of its directors, officers, employees, agents and each person,
if any, who controls (within the meaning of the 1933 Act or the 1934 Act) the
from and against any loss, claim, damage or liability, joint or several, and any
action in respect thereof, to which the Company or any of its directors,
officers, employees, agents or controlling persons may become subject, under the
1933 Act, the 1934 Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus, as
amended or supplemented, or any federal or state securities filing, or arises
out of, or is based upon, the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission regards the Dealer

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<PAGE>

Manager, the Selected Dealers or their agents or was in conformity with
information provided by the Dealer Manager, the Selected Dealers or their agents
for inclusion therein or was in conformity with any direction of the Dealer
Manager or its agents, and shall reimburse the Company and its directors,
officers or controlling persons for any legal and other expenses reasonably
incurred by such persons in investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action.

(c) The provisions of this Section 8 are in addition to any
and all remedies or rights any of the parties hereto may have, including the
right to sue and recover damages for any breach of any representation, warranty
or covenant made or given by one party to the other party.

10. Rights Cumulative. All rights and remedies with respect to
the subject matter hereof, whether evidenced hereby or by any other agreement,
instrument, or paper, will be cumulative, and may be exercised separately or
concurrently.

11. Entire Agreement. The parties have not made any
representations, warranties, or covenants not set forth herein with respect to
the subject matter hereof, and this Agreement constitutes the entire Agreement
between them with respect to the subject matter.

12. Further Instruments. The parties agree to execute any and
all such other and further instruments and documents, and to take any and all
such further actions reasonably required to effectuate this Agreement and the
intent and purpose hereof.

13. Notice. All notices or other communications required or
permitted hereunder shall be in writing and shall be mailed by First Class,
Registered or Certified Mail, Return Receipt Requested, postage prepaid, as
follows:

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<PAGE>

To the Company:

American Equities Income Fund II, Inc.
80 East Route 4, Suite 202
Paramus, NJ 07652
Attn: David S. Goldberg

To the Dealer Manager:

Strategic Assets Inc.
445 Broad Hollow Road, Suite 425
Melville, NY 11747
Attn: Randall S. Appel

or in each case to such other address as shall have last been
furnished by like notice. If mailing by Registered or Certified Mail is
impossible due to an absence of postal service, notice shall be in writing and
personally delivered to the aforesaid address. Each notice or communication
shall be deemed to have been given as of the date so mailed or delivered, as the
case may be.

14. Jurisdiction and Venue. This Agreement was negotiated in
New York and the parties agree that with respect to any legal or equitable
action, suit, or other proceeding arising under, or in any way connected with,
this Agreement, the parties hereto consent to the in personam jurisdiction of
the Federal and State courts in New York, waive any forum non convenience and
any venue objections they might otherwise have, and agreed to accept service of
process upon them by certified mail, return receipt requested.

15. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all together
shall constitute one and the same Agreement.

16. Captions. The descriptive headings in this Agreement are
for convenience of reference only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.

17. Further Dealings. Any dealing by or between the parties
after the date of expiration or prior termination of this Agreement shall not
constitute a renewal of this Agreement or the creation of a new agreement, but
shall nevertheless be controlled by the terms hereof.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first set forth above.

THE COMPANY: THE DEALER MANAGER:

AMERICAN EQUITIES INCOME STRATEGIC ASSETS INC.
FUND II, INC.

By:_____________________________ By:__________________________________
Title:__________________________ Title:_______________________________

Dealer Firm CRD Number:
AEG:
States in which Firm is Registered: ______
AMERICAN EQUITIES GROUP, INC.

By:_____________________________
Title:__________________________

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<PAGE>

EXHIBIT A

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<PAGE>

EXHIBIT 1.2

AMERICAN EQUITIES INCOME FUND II, INC.
$9,950,000 In
12% Promissory Notes
Minimum Purchase: $5,000
(IRA's $2,000)

FORM OF SELECTED DEALER'S AGREEMENT

THIS AGREEMENT is entered into as of the ____ day of _______________ by
and among AMERICAN EQUITIES GROUP, INC., a New York corporation ("AEG"),
AMERICAN EQUITIES INCOME FUND II, INC., a Delaware corporation (the "Company"),
STRATEGIC ASSETS INC., a New York corporation (the "Dealer") and you, the
undersigned, as Selected Dealer (the "Agent").

Background

A. The Dealer has entered into an agreement dated as of ___________,
_____ to offer 12% promissory notes (the "Notes") in the Company for a maximum
aggregate offering price of $9,950,000. The Notes are to be offered in $1,000
denominations, or any integral multiples thereof, with a minimum subscription of
$5,000, or $2,000 if invested by means of an IRA.

B. The Agent desires on a "best-efforts basis" to act as a
non-exclusive agent in the offer and sale of the Notes (the "Offering") subject
to the terms of this Agreement and the Company's prospectus, as filed with the
Securities and Exchange Commission, pursuant to which the Offering is to be
conducted (the "Prospectus").

C. In consideration of the mutual promises and covenants set forth
herein, the parties agree as follows:

1. Non-Exclusive Appointment of Agent.

(a) Subject to the terms and conditions set forth herein, the
Dealer hereby appoints the Agent on a non-exclusive basis as a Selected Dealer
to solicit written subscriptions from prospective investors to purchase the
Notes. The Agent hereby accepts said appointment and agrees to use its best
efforts from the date hereof through _________, 200_, to secure offers from
qualified investors to acquire Notes pursuant to the terms of this Agreement.
Prior to such time, either party shall have the right, by giving notice as
provided in section 13 of this Agreement, to terminate this Agreement
immediately. In the event of such termination, all of the obligations of the
parties hereto which are required to be performed pursuant to this Agreement
shall be performed with respect to any sales which are made pursuant to this
Agreement, at the option of Dealer. Except with the written consent of the
Dealer the Agent will not employ any person or other entity as its agent or
subagent or utilize the services of any other broker/dealer in connection with
the Offering.

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<PAGE>

(b) Upon the delivery of a subscription agreement, each
subscriber will be required to deliver a check in the amount of the total
subscription price.

(c) It is understood and agreed that Agent's relationship with
the Dealer and the Company is that of an independent contractor and that nothing
herein shall be construed as creating a relationship of partners, joint venture,
or employer and employees, between the Agent and the Dealer or the Company. The
Agent is not authorized to make any placement of the Notes to any person unless
and until that person complies with the suitability standards contained in the
Prospectus, nor is the Agent authorized to deliver a Prospectus or any other
information or documents, or make any representations to any person concerning
the Offering except as provided in this Agreement. No additional material,
documents or information may be delivered to any person unless expressly
authorized in writing by the Dealer or the Company.

2. Representations and Warranties of AEG and the Company.

AEG and the Company represent and warrant to the Agent as
follows:

(a) The Prospectus does not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they are
made, not misleading; provided, however, that this representation and warranty
shall not apply to statements in or omissions from the Prospectus made in
reliance upon and in conformity with information furnished in writing to the
Company by the Agent or on its behalf for use in connection with the Prospectus;

(b) The Company has been duly formed under the laws of the
State of Delaware, with the power to enter into this Agreement and to own
properties and conduct the business as described in the Prospectus;

(c) The Company is authorized to issue up to an aggregate of
$9,950,000 principal amount of Notes requiring capital contributions as
described herein. Following the completion of the Offering, each person whose
subscription for a Note is accepted in writing by the Company will be duly
admitted as a note holder;

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<PAGE>

(d) This Agreement has been duly authorized, executed and
delivered by the Company, and constitutes the valid and binding obligation
thereof; and

(e) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, the Certificate of Incorporation or By-laws, or any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company is a party
or by which it may be bound.

3. Representations and Warranties of the Agent. The Agent represents
and warrants to the Dealer as follows:

(a) The Agent is a corporation duly organized and validly
existing in good standing under its state of incorporation and all states in
which it does business, with power and authority to enter into this Agreement
and to carry out its obligations hereunder;

(b) The Agent is duly registered pursuant to the provisions of
the Securities Exchange Act of 1934, as amended (the "1934 Act") as a
broker-dealer and is a member of good standing of the NASD and is duly
registered as a broker-dealer in those states in which it is required to be so
registered in order to carry out the Offering pursuant to this Agreement;

(c) Neither the Agent nor any director or officer thereof
falls within any of the "bad boy" provisions of Rule 262(a), (b), or (c), as
applicable, of SEC Regulation A.

(d) This Agreement has been duly authorized, executed and
delivered by the Agent and constitutes a valid and binding obligation thereof.

4. Manner of Offering Notes. The Agent covenants and agrees with the
Company as follows:

(a) Agent will offer the Notes pursuant to the Prospectus and
only in such a manner as to assure that the offer and sale thereof complies with
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "1933 Act"), and will be exempt from or comply with any
registration requirements applicable for qualifying the Notes for offering and
sale under the laws of any state in which they may be offered. Moreover, Agent
agrees to indemnify the Dealer, the Company and the directors, officers and
agents of the Dealer, and the Company against any liability, damage, cost, loss
or expense to any of them arising out of its failure to so offer the Notes;

(b) Immediately prior to making any offer of any Note to any
offeree, Agent shall have reasonable grounds to believe and shall believe that
the offeree is a person who is able to bear the economic risk of the investment
and who otherwise meets the applicable suitability standards set forth in the
Prospectus and the subscription documents in the form prescribed by the Company;

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<PAGE>

(c) Agent will deliver to each offeree, prior to any
submission by him of a written subscription to buy any Note, a copy of the
Prospectus, together with any supplements or amendments thereto, and will keep
records of to whom, by what manner, and on what date Agent delivered each such
copy;

(d) Agent will not offer the Notes by means of any letter,
circular, notice or written communication other than the Prospectus, and other
written communications expressly approved in writing by the Company;

(e) Agent will make reasonable inquiry to determine whether a
prospective purchaser is acquiring the Notes for his own account or on behalf of
other persons;

(f) Agent will abide by, and take reasonable precautions to
ensure that others comply with all provisions contained in this Agreement or
Prospectus regulating the terms and manner of offering the Notes;

(g) Agent will take other action or refrain from taking action
in accordance with the reasonable requests of the Company, in order to comply
with all applicable laws, including, among other things, requiring offerees and
purchasers to execute and deliver such documents and instruments as the Company
may require;

(h) All funds will immediately be placed in an escrow account
to be maintained by the Company pursuant to an Escrow Agreement with Republic
National Bank of New York, NY. Upon the closing or other termination of the
Offering, the proceeds therefrom shall be distributed to the Company or returned
to subscribers as provided in such Escrow Agreement; and

(i) The Notes shall be offered only in such states in which
the Agent has been advised by the Dealer that the offer and sale of Notes has
been approved. Agent shall advise the Company in advance and in writing of the
states in which it desires to offer the Notes, and shall conduct the Offering in
any such state only after the Company, upon consultation with legal counsel, has
had an opportunity to review the applicable securities laws of such state and to
effect any required pre-sale filings. Agent shall immediately advise the Company
in writing of the receipt of all checks or subscriptions for Notes in order to
permit the Company, upon consultation with legal counsel, to effect any required
post-sale filings on a timely basis.

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<PAGE>

5. Further Agreements of the Company. The Company covenants and agrees
with the Agent as follows:

(a) If at any time any event shall occur as a result of which
it becomes necessary to supplement the Prospectus so that it does not include
any untrue statement of any material fact or omit to state any material fact
necessary in order to make the statements made not misleading, the Company will
promptly notify Agent and will supply it with amendments or supplements
correcting such statement or omission;

(b) The Company will make such filings with the Securities and
Exchange Commission and state and other governmental agencies as may be
necessary to assure or confirm that the offer in and sale of the Notes complies
with the registration requirements of the 1933 Act, and of the securities laws
of any state or other jurisdiction in which the Notes may be offered, provided
that the Company shall not be required in any event to register as a
broker/dealer in any jurisdiction; and

(c) The Company will pay all expenses in connection with the
preparation and duplication of the Prospectus and any amendments or supplements
thereto, legal fees related thereto, and all other fees and expenses of the
offering of the Notes except wages, salaries and commissions of the Agent's
employees engaged in the Offering and related administrative and overhead costs.

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<PAGE>

6. Compensation.

(a) In consideration of Agent's services as the Company's
agent hereunder, the Company hereby agrees to compensate the Agent as set forth
in section 6(b) below. All sales commissions and other compensation shall be
payable in full upon acceptance by the Company of subscriptions for Notes and
release of subscription proceeds from escrow. The Agent shall be entitled to no
compensation with respect to subscriptions rejected by the Company or if the
Company terminates the Offering and refunds subscription payments to investors.
At the discretion of the Dealer, the Notes may be sold for an amount less than
the Note price; provided, Agent waives its commissions to the extent of the
price reduction.

(b) The Agent shall be entitled to (i) sales commissions of
__% of the gross proceeds from the sale of each Note and (ii) __% of the gross
proceeds of the sale of each Note as a due diligence fee and non-accountable
expense allowance. Fees will only be payable upon receipt by the Company of the
full price for Notes sold or financed in accordance with the Prospectus.

7. Non-Circumvention Covenants.

(a) In the course of business between the Agent and the
Dealer, the Agent will learn the identity of and gain access to certain
clientele, agents and sources of projects of the Dealer, and the Dealer will
likewise learn the identity of and gain access to certain clientele, agents and
contacts of the Agent. In consideration of the agreement of each party to make
certain business opportunities and contacts available to the other party and to
work together in evaluating and carrying out business opportunities, the Agent
agrees to preserve the integrity of the proprietary relationship between the
Dealer and each of its respective clientele, agents, employees, project sources,
or contacts in general that may become known to the Agent, and the Dealer agrees
to preserve the integrity of the proprietary relationship between the Agent and
each of its respective clientele, agents, employees, project sources, or
contacts in general that may become known to the Dealer.

(b) The Agent agrees not to contact or otherwise communicate
with any clients or contacts of the Dealer (including but not limited to banks,
financing sources, broker-dealers, marketing or sales entities, developers or
others) with whom the Agent does not have a pre-existing relationship, without
the prior knowledge and approval of the Dealer as appropriate, nor shall any
business transactions be conducted by the Agent with any clients or contacts of
the Dealer without appropriate compensation arrangements to the Dealer being
agreed upon in advance. The Agent further agrees that the non-circumvention
covenants set out herein shall apply equally to its agents, employees,
directors, officers and affiliates. The Dealer agrees not to contact or
otherwise communicate with any clients or contacts of the Agent, with whom the
Dealer did not have a pre-existing relationship, without the prior knowledge and
approval of the Agent as appropriate, nor shall any business transactions be
conducted by the Dealer with any clients or contacts of the Agent without
appropriate compensation arrangements to the Agent being agreed upon in advance.
The Dealer further agrees that the non-circumvention covenants set out herein
shall apply equally to its agents, employees, directors, officers and
affiliates.

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<PAGE>

(c) All parties agree that they will not utilize any third
party to make any contacts or disclosures that would violate the intent of this
provision. The non-circumvention covenants set forth herein shall apply to past
and any future business dealings between the parties hereto and is not limited
to dealings with the Company. The covenants shall stand for a period of three
years from the date of execution of this contract and are to be applied to any
and all transactions/proposals submitted to the Agent by the Dealer or to the
Dealer by the Agent, and regardless of the success of any such project.

8. Indemnification.

(a) AEG and the Company shall jointly and severally indemnify
and hold harmless the Agent, each of its directors, officers, employees, agents
and each person, if any, who controls (within the meaning of the 1933 Act or the
1934 Act) the Agent from and against any loss, claim, damage or liability, joint
or several, and any action in respect thereof, to which the Agent or such
director, officer, employee, agent or controlling person may become subject,
under the 1933 Act, 1934 Act, any state securities laws or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement of a material fact contained in
the Prospectus as amended or supplemented, or any Federal or state securities
filing, or arises out of, or is based upon, the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse the Agent and each
director, officer, or controlling person for any legal and other expenses
reasonably incurred by such persons in investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action; provided,
however, that the Dealer, the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out of,
or is based upon, any untrue statement or alleged untrue statement or omission
or alleged omission made in the Prospectus, as amended or supplemented,
regarding the Agent or in conformity with information furnished by the Agent or
its agent for inclusion therein or in conformity with any direction of the Agent
or its agents.

(b) The Agent shall indemnify and hold harmless the Dealer,
the Company and its directors, officers, employees, agents and each person, if
any, who controls (within the meaning of the 1933 Act or the 1934 Act) them from
and against any loss, claim, damage or liability, joint or several, and any
action in respect thereof, to which the Company and/or the Dealer or any of
their directors, officers, employees, agents or controlling persons who may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus, as amended or supplemented, or any federal or state securities
filing, or arises out of, or is based upon, the omission or alleged

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<PAGE>

omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission regards the Agent or its agents or was in conformity with information
provided by the Agent or its agents for inclusion therein or was in conformity
with any direction of the Agent or its agents, and shall reimburse the Dealer,
the Company and each of their directors, officers or controlling persons for any
legal and other expenses reasonably incurred by such persons in investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action.

9. Miscellaneous. This Agreement is made for the benefit of the parties
hereto, their successors and assigns and any director, officer or controlling
person of the parties, but not for the benefit of any other person, including
any offeree or purchaser of the Notes, except that the provisions of Section
5(c) hereof shall be for the benefit of and enforceable by each offeree and
purchaser representative. This Agreement is formed under and shall be construed
in accordance with the laws of the State of New York and may not be amended
except in writing signed by the parties hereto.

10. Rights Cumulative. All rights and remedies with respect to the
subject matter hereof, whether evidenced hereby or by any other agreement,
instrument, or paper, will be cumulative, and may be exercised separately or
concurrently.

11. Entire Agreement. The parties have not made any representations,
warranties, or covenants not set forth herein with respect to the subject matter
hereof, and this Agreement constitutes the entire Agreement between them with
respect to the subject matter.

12. Further Instruments. The parties agree to execute any and all such
other and further instruments and documents, and to take any and all such
further actions reasonably required to effectuate this Agreement and the intent
and purpose hereof.

-8-

<PAGE>

13. Notice. All notices or other communications required or permitted
hereunder shall be in writing and shall be mailed by First Class, Registered or
Certified Mail, Return Receipt Requested, postage prepaid, as follows:

To Dealer:

Strategic Assets Inc.
445 Broad Hollow Road
Suite 425
Melville, NY 11747

To the Agent:

To the Principal
at the address shown on the last page hereof;

To the Company or AEG:

80 East Route 4
Suite 202
Paramus, NJ 07652

14. Jurisdiction and Venue. This Agreement was negotiated in New York
and the parties agree that with respect to any legal or equitable action, suit,
or other proceeding arising under, or in any way connected with, this Agreement,
the parties hereto consent to the in personam jurisdiction of the Federal and
State courts in New York, waive any forum non convenience and any venue
objections they might otherwise have, and agreed to accept service of process
upon them by certified mail, return receipt requested.

15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all together shall
constitute one and the same Agreement.

16. Captions. The descriptive headings in this Agreement are for
convenience of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.

17. Further Dealings. Any dealing by or between the parties after the
date of expiration or prior termination of this Agreement shall not constitute a
renewal of this Agreement or the creation of a new agreement, but shall
nevertheless be controlled by the terms hereof.

-9-
<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first set forth above.

DEALER: THE AGENT:

STRATEGIC ASSETS INC. _______________________________________
(NAME OF AGENT)

By:____________________________ By:____________________________________
Its:___________________________ Title:_________________________________

Address:_______________________________
_______________________________________

Telephone Number:( )
----------------------

Dealer Firm CRD Number:________________

States in which Firm is Registered:

_______________________________________
_______________________________________

AEG: THE COMPANY:

AMERICAN EQUITIES GROUP, INC. AMERICAN EQUITIES INCOME FUND II, INC.

By:_____________________________ By:____________________________________
Its:____________________________ Title:_________________________________

-10-

<PAGE>

Exhibit 3.1

CERTIFICATE OF INCORPORATION
OF
AMERICAN EQUITIES INCOME FUND II, INC.

ARTICLE I

I, the undersigned, David S. Goldberg, whose post office address is
East 80 Route 4, Suite 202, Paramus, New Jersey 07652, being of at least 18
years of age, do hereby intend to form a corporation under and by virtue of the
General Corporation Law of the State of Delaware.

ARTICLE II

The name of the corporation is AMERICAN EQUITIES INCOME FUND II, INC.
(the "Corporation").

ARTICLE III

The nature of business or purpose to be conducted or prompted by the
Corporation is to engage in only the following activities:

(a) to authorize, issue, sell and deliver its Promissory Notes in the
aggregate principal amount of $9,950,000 (the "Notes");

(b) to acquire and/or finance accounts receivable, loan funds to
businesses, engage in leasing transactions, purchase order financing, inventory
financing, extend credit lines, letters of credit and other financial
instruments and act as a financial intermediary;

(c) to purchase, invest in, hold and dispose of debt and equity
securities, instruments or other ownership interests or assets;

(d) to issue shares of common stock and preferred stock; and

(e) to engage in any lawful act or activity and to execute any powers
permitted to corporations organized under the General Corporation Law of
Delaware that are incidental to and necessary or convenient for the
accomplishment of the above-mentioned purposes, all in such a manner so as not
to be required to register as an investment company under the Investment Company
Act of 1940.

ARTICLE IV

The registered agent address of the Corporation in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805 and the name of its
initial resident agent at that address is Corporation Service Company. Said
agent is a Delaware corporation, and is in New Castle County, Delaware.

<PAGE>

ARTICLE V

The total number of shares of stock which the Corporation shall have
authority to issue is one thousand (1,000) shares of common stock with a $1.00
par value per share.

ARTICLE VI

(a) The business and affairs of the Corporation shall be managed and
conducted by a Board of Directors initially consisting of one or more members
who need not be stockholders, the exact number to be fixed and determined by the
Board of Directors with full authority in the Board of Directors to vary said
amount at any time and from time to time. Election of Directors need not be by
ballot.

(b) No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as Director; provided, however, that this limitation of liability of a
Director shall not apply with respect to (i) any breach of the Director's duty
of loyalty to the Corporation or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) any liability arising under the law of the State of Delaware, and
(iv) for any transaction from which the Director derives an improper personal
benefit.

(c) The Corporation shall indemnify its directors and officers to the
fullest extent authorized or permitted by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended, and such
right to indemnification shall continue as to a person who has ceased to be a
director or officer of the Corporation and shall inure to the benefit of his or
her heirs, executors and administrators; provided, however, that, except for
proceedings to enforce rights to indemnification, the Corporation shall not be
obligated to indemnify any director or officer (or his or her heirs, executors
or administrators) in connection with a proceeding (or part thereof) initiated
by such person unless such proceeding (or part thereof) was authorized or
consented to by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article VI shall include the right to be paid
by the Corporation the expenses incurred in defending or otherwise participating
in any proceeding in advance of its final disposition.

ARTICLE VII

The Corporation shall have perpetual existence.

ARTICLE VIII

The Corporation shall maintain its own separate and distinct books of
account and corporate records. All corporate formalities, including the
maintenance of current minute books, shall be maintained by the Corporation and
the Corporation shall cause its financial statements to be prepared in
accordance with generally accepted accounting principles in a manner that

<PAGE>

indicates the separate existence of the Corporation and its assets and
liabilities. The Corporation shall not commingle its assets with any other
person or entity. The Corporation shall not enter into any debt obligations
which are not subordinate to the Notes except for senior debt from a bank or
other financial institution utilized to acquire loans or provide funds from
which to make loans. The Corporation shall (i) pay all its liabilities, (ii) not
assume the liabilities of any other person or entity, and (iii) not guarantee
the liabilities of any person or entity except pursuant to the terms of the
transactions contemplated by Article III. The Corporation shall not acquire
obligations or securities of, or make loans or advances to any person or entity,
except for the transactions contemplated by Article III. The Corporation shall
independently make decisions with respect to its business and daily operations.

ARTICLE IX

The power to make, adopt, alter, amend or repeal the Corporation's
By-Laws, in whole or in part, at any time and from time to time, shall be vested
in the Board of Directors of the Corporation. Subject to the provisions of these
Articles of incorporation, the Board of Directors shall also have full power and
authority to manage the Corporation and any and all of its assets, properties,
businesses, and affairs, including the right to elect such officers and
assistant officers and to designate and appoint such agents and employees as the
Board of Directors deems advisable, and shall have any and all other and
additional powers and authority, not inconsistent with the express terms of
these Articles of incorporation, which are expressly granted to or invested in
them by the statutes or laws of the State of Delaware as now in effect and as
hereafter amended or modified.

ARTICLE X

Notwithstanding any other provision of these Articles of incorporation
and any provision of law that otherwise so empowers the Corporation, the
Corporation shall not do any of the following:

(a) engage in any business or activity other than as set forth in
Article III hereof;

(b) dissolve or liquidate, in whole or in part, prior to payment in
full of all obligations due the Note Holders;

(c) consolidate or merge with or into any other entity or convey or
transfer its properties and assets substantially as an entirety to any entity,
unless:

(1) the entity (if other than the Corporation) formed or
surviving the consolidation or merger or which
acquires the properties and assets of the Corporation
substantially as an entirety is organized and
existing under the laws of any state of the United
States, expressly assumes the due and punctual
payment and performance of all obligations of the
Corporation

<PAGE>

in connection with indebtedness of the Corporation,
and has in its Articles of Incorporation provisions
identical to the provisions of Article VIII; and

(2) immediately after giving effect to the transaction,
no default or event of default has occurred and is
continuing under any of the documents described in
Article III hereof; and

(3) such consolidation, merger, conveyance or transfer
has been approved by the affirmative vote of 100% of
the members of the Board of Directors of the
Corporation.

(d) without the affirmative vote of 100% of the members of the Board of
Directors of the Corporation, institute proceedings to be adjudicated a bankrupt
or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consent to reorganization
or relief under any applicable federal or state law relating to bankruptcy, or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Corporation or a substantial
part of its property, or make any assignment for the benefit of creditors,
except as required by law, or admit in writing its inability to pay its debts
generally as they become due, or declare or effect a moratorium on its debt or
take any corporate action in furtherance of any such action.

ARTICLE XI

After issuance of the Notes, the Corporation shall not, without the
prior written consent of the holders of the Notes representing a majority in
principal amount of the Notes issued and outstanding at the time of such
consent, amend, alter, modify or repeal Articles III, VI, VIII, X, or this
Article XI of this Certificate of Incorporation. Subject to the foregoing, the
Corporation reserves the right to amend, alter, change, or repeal any provision
contained in this Certificate of Incorporation in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.

ARTICLE XII

Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class

<PAGE>

of stockholders of this Corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of this Corporation as consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.

IN WITNESS WHEREOF, I have signed this Certificate of Incorporation as
of this 21st day of October, 1999, and I acknowledge the same to be my act.

S/S DAVID S. GOLDBERG
-----------------------------
David S. Goldberg
East 80 Route 4, Suite 202
Paramus, New Jersey 07652

<PAGE>

Exhibit 3.2

BY-LAWS
OF
AMERICAN EQUITIES INCOME FUND II, INC.

ARTICLE I - OFFICES

Section 1. The registered office of the corporation in the State of
Delaware shall be at 1013 Centre Road, Wilmington, Delaware.

The registered agent in charge thereof shall be Corporation Service
Company.

Section 2. The corporation may also have offices at such other places
as the Board of Directors may from time to time appoint or the business of the
corporation may require.

ARTICLE II - SEAL

Section 1. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware."

ARTICLE III - STOCKHOLDERS' MEETINGS

Section 1. Meetings of stockholders shall be held at the registered
office of the corporation in this state or at such place, either within or
without this state, as may be selected from time to time by the Board of
Directors.

Section 2. Annual Meetings: The annual meeting of the stockholders
shall be held on the 11th day of March in each year if not a legal holiday, and
if a legal holiday, then on the next secular day following at 10 o'clock A.M.,
when they shall elect a Board of Directors and transact such other business as
may properly be brought before the meeting. If the annual meeting for election
of directors is not held on the date designated therefor, the directors shall
cause the meeting to be held as soon thereafter as convenient.

Section 3. Election of Directors: Elections of the directors of the
corporation shall be by written ballot.

Section 4. Special Meetings: Special meetings of the stockholders may
be called at any time by the President, or the Board of Directors, or
stockholders entitled to cast at least one-fifth of the votes which all
stockholders are entitled to cast at the particular meeting. At any time, upon
written request of any person or persons who have duly called a special meeting,
it shall be the duty of the Secretary to fix the date of the meeting, to be held
not more than sixty days after receipt of the request, and to give due notice
thereof. If the Secretary shall neglect or refuse to fix the date of the meeting
and give notice thereof, the person or persons calling the meeting may do so.

<PAGE>

Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto, unless all stockholders
entitled to vote are present and consent.

Written notice of a special meeting of stockholders stating the time
and place and object thereof, shall be given to each stockholder entitled to
vote thereat at least ten days before such meeting unless a greater period of
notice is required by statute in a particular case.

Section 5. Quorum: A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares entitled to vote is represented at a meeting, a majority of
the shares so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be present, or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.

Section 6. Proxies: Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.

A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. All
proxies shall be filed with the Secretary of the meeting before being voted
upon.

Section 7. Notice of Meetings: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.

Unless otherwise provided by law, written notice of any meeting shall
be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting.

Section 8. Consent in Lieu of Meetings: Any action required to be taken
at any annual or special meeting of stockholders of a corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.

By-Laws - 2 -

<PAGE>

Section 9. List of Stockholders: The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. No share of stock upon which any installment is due and unpaid
shall be voted at any meeting. The list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.

ARTICLE IV - DIRECTORS

Section 1. The business and affairs of this corporation shall be
managed by its Board of Directors. The initial Board of Directors shall be three
(3) in number. The directors need not be residents of this state or stockholders
in the corporation. They shall be elected by the stockholders at the annual
meeting of stockholders of the corporation, and each director shall be elected
for the term of one year, and until his successor shall be elected and shall
qualify or until his earlier resignation or removal.

Section 2. Regular Meetings: Regular meetings of the Board shall be
held without notice immediately following the annual shareholders' meeting at
the registered office of the corporation, or at such other time and place as
shall be determined by the Board.

Section 3. Special Meetings: Special meetings of the Board may be
called by the President on ten days notice to each director, either personally
or by mail or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of a majority
of the directors in office.

Section 4. Quorum: A majority of the total number of directors shall
constitute a quorum for the transaction of business.

Section 5. Consent in Lieu of Meeting: Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
The Board of Directors may hold its meetings, and have an office or offices,
outside of this state.

Section 6. Conference Telephone: One or more directors may participate
in a meeting of the Board, of a committee of the Board or of the stockholders,
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other;
participation in this manner shall constitute presence in person at such
meeting.

Section 7. Compensation: Directors as such, shall not receive any
stated salary for their services, but by resolution of the Board, a fixed sum
and expenses of attendance, if any, may be

By-Laws - 3 -

<PAGE>

allowed for attendance at each regular or special meeting of the Board PROVIDED,
that nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.

Section 8. Removal: Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors, except that when cumulative
voting is permitted, if less than the entire Board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted an election of the entire
Board of Directors, or, if there be classes of directors, at an election of the
class of directors of which he is a part.

ARTICLE V - OFFICERS

Section 1. The executive officers of the corporation shall be chosen by
the directors and shall be a President, Secretary and Treasurer. The Board of
Directors may also choose a Chairman, one or more Vice Presidents and such other
officers as it shall deem necessary. Any number of offices may be held by the
same person.

Section 2. Salaries: Salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.

Section 3. Term of Office: The officers of the corporation shall hold
office for one year and until their successors are chosen and have qualified.
Any officer or agent elected or appointed by the Board may be removed by the
Board of Directors whenever in its judgment the best interest of the corporation
will be served thereby.

Section 4. President: The President shall be the chief executive
officer of the corporation; he shall preside at all meetings of the stockholders
and directors; he shall have general and active management of the business of
the corporation, shall see that all orders and resolutions of the Board are
carried into effect, subject, however, to the right of the directors to delegate
any specific powers, except such as may be by statute exclusively conferred on
the President, to any other officer or officers of the corporation. He shall
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the corporation. He shall be EX-OFFICIO a member of all committees, and shall
have the general power and duties of supervision and management usually vested
in the office of President of a corporation.

Section 5. Secretary: The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and act as clerk thereof, and record
all the votes of the corporation and the minutes of all its transactions in a
book to be kept for that purpose, and shall perform like duties for all
committees of the Board of Directors when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, and under whose supervision he shall be. He shall
keep in safe custody the corporate seal of the corporation, and when authorized
by the Board, affix the same to any instrument requiring it.

By-Laws - 4 -

<PAGE>

Section 6. Treasurer: The Treasurer shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall keep the moneys
of the corporation in a separate account to the credit of the corporation. He
shall disburse the funds of the corporation as may be ordered by the Board,
taking proper vouchers for such disbursements, and shall render to the President
and directors, at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and of the financial
condition of the corporation.

ARTICLE VI - VACANCIES

Section 1. Any vacancy occurring in any office of the corporation by
death, resignation, removal or otherwise, shall be filled by the Board of
Directors. Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of these By-Laws.

Section 2. Resignations Effective at Future Date: When one or more
directors shall resign from the Board, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective.

ARTICLE VII - CORPORATE RECORDS

Section 1. Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other books
and records, and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in this state or at its principal
place of business.

ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.

Section 1. The stock certificates of the corporation shall be numbered
and registered in the share ledger and transfer books of the corporation as they
are issued. They shall bear the corporate seal and shall be signed by the
President and Secretary.

By-Laws - 5 -

<PAGE>

Section 2. Transfers: Transfers of shares shall be made on the books of
the corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by attorney, lawfully constituted in writing.
No transfer shall be made which is inconsistent with law.

Section 3. Lost Certificate: The corporation may issue a new
certificate of stock in the place of any certificate theretofore signed by it,
alleged to have been lost, stolen or destroyed, and the corporation may require
the owner of the lost, stolen or destroyed certificate or his legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.

Section 4. Record Date: In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action.

If no record date is fixed:

(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.

(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when
no prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed.

(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.

(d) A determination of stockholders of record entitled to
notice of or vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.

Section 5. Dividends: The Board of Directors may declare and pay
dividends upon the outstanding shares of the corporation from time to time and
to such extent as they deem advisable, in the manner and upon the terms and
conditions provided by statute and the Certificate of Incorporation.

Section 6. Reserves: Before payment of any dividend there may be set
aside out of the net profits of the corporation such sum or sums as the
directors, from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for

By-Laws - 6 -

<PAGE>

repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve in the manner in
which it was created.

ARTICLE IX - MISCELLANEOUS PROVISIONS

Section 1. Checks: All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.

Section 2. Fiscal Year: The fiscal year shall begin on the first day of
January.

Section 3. Notice: Whenever written notice is required to be given to
any person, it may be given to such person, either personally or by sending a
copy thereof through the mail, or by telegram, charges prepaid, to his address
appearing on the books of the corporation, or supplied by him to the corporation
for the purpose of notice. If the notice is sent by mail or by telegraph, it
shall be deemed to have been given to the person entitled thereto when deposited
in the United States mail or with a telegraph office for transmission to such
person. Such notice shall specify the place, day and hour of the meeting and, in
the case of a special meeting of stockholders, the general nature of the
business to be transacted.

Section 4. Waiver of Notice: Whenever any written notice is required by
statute, or by the Certificate or the By-Laws of this corporation a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Except in the case of a special meeting of
stockholders, neither the business to be transacted at nor the purpose of the
meeting need be specified in the waiver of notice of such meeting. Attendance of
a person either in person or by proxy at any meeting shall constitute a waiver
of notice of such meeting, except where a person attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting was not lawfully called or convened.

Section 5. Disallowed Compensation: Any payments made to an officer or
employee of the corporation such as a salary, commission, bonus, interest, rent,
travel or entertainment expense incurred by him, which shall be disallowed in
whole or in part as a deductible expense by the Internal Revenue Service, shall
be reimbursed by such officer or employee to the corporation to the full extent
of such disallowance. It shall be the duty of the directors, as a Board, to
enforce payment of each such amount disallowed. In lieu of payment by the
officer or employee, subject to the determination of the directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the corporation has been recovered.

Section 6. Resignations: Any director or other officer may resign at
any time, such resignation to be in writing, and to take effect from the time of
its receipt by the corporation, unless some time be fixed in the resignation and
then from that date. The acceptance of a resignation shall not be required to
make it effective.

By-Laws - 7 -

<PAGE>

ARTICLE X - ANNUAL STATEMENT

Section 1. The President and Board of Directors shall present at each
annual meeting a full and complete statement of the business and affairs of the
corporation for the preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Directors shall deem advisable and
need not be verified by a certified public accountant.

ARTICLE XI - AMENDMENTS

Section 1. These By-laws may be amended or repaired by the vote of
stockholders entitled to cast at least a majority of the votes which all
stockholders are entitled to cast thereon, at any regular or special meeting of
the stockholders, duly convened after notice to the stockholders of that
purpose.

By-Laws - 8 -

<PAGE>

Exhibit 4.4

FORM OF ESCROW AGREEMENT

THIS ESCROW AGREEMENT ("Agreement") is entered into as of __________,
2000, by and among AMERICAN EQUITIES INCOME FUND II, INC., a Delaware
corporation (the "Company"), STRATEGIC ASSETS INC. (the "Placement Agent"), and
REPUBLIC NATIONAL BANK OF NEW YORK (the "Escrow Agent").

W I T N E S S E T H

WHEREAS, the Company intends to engage in a public offering of certain
of its securities (the "Offering"), which Offering contemplates minimum
aggregate offering proceeds of $500,000 and maximum aggregate offering proceeds
of $9,950,000; and

WHEREAS, there will be deposited into an escrow account with the Escrow
Agent from time to time funds from prospective investors who wish to subscribe
for securities offered in connection with the Offering ("Subscribers"), which
funds will be held in escrow and distributed in accordance with the terms
hereof; and

WHEREAS, the Escrow Agent is willing to act as an escrow agent in
respect of the Escrow Funds (as hereinafter defined) upon the terms and
conditions set forth herein;

NOW, THEREFORE, for good and valuable considerations, the receipt and
adequacy of which are hereby acknowledged by each of the parties hereto, the
parties hereto hereby agree as follows:

1. Appointment of Escrow Agent. The Placement Agent and the Company
hereby appoint the Escrow Agent as escrow agent in accordance with the terms and
conditions set forth herein, and the Escrow Agent hereby accepts such
appointment.

2. Delivery of Escrow Funds.

(a) The Placement Agent shall deliver to the Escrow Agent
checks or wire transfers made payable to the order of "Republic National Bank of
New York, Escrow Agent for American Equities Income Fund II, Inc." together with
the Subscriber's mailing address and social security number or tax
identification number (if the aforesaid information is not provided, the check
will be returned or the amount of the wire transfer refunded). The funds
delivered to the Escrow Agent shall be deposited by the Escrow Agent into a
non-interest bearing account at Republic National Bank of New York entitled
"Republic National Bank of New York, Escrow Agent for American Equities Income
Fund II, Inc." (the "Escrow Account") and shall be held and distributed by the
Escrow Agent in accordance with the terms hereof. The collected funds deposited
into the Escrow Account are referred to herein as the "Escrow Funds." The Escrow
Agent shall acknowledge receipt of all Escrow Funds by notifying the Company of
deposits into the Escrow Account. The Escrow Agent shall give such notice, in
substantially the form attached hereto as Exhibit A, via facsimile on the next
business day following the business day on which the Escrow Funds are deposited
into the Escrow Account.

<PAGE>

(b) The Escrow Agent shall have no duty or responsibility to
enforce the collection or demand payment of any funds deposited into the Escrow
Account. If, for any reason, any check deposited into the Escrow Account shall
be returned unpaid to the Escrow Agent, the sole duty of the Escrow Agent shall
be to return the check to the Subscriber.

3. Investment of the Escrow Funds. As the Escrow Funds are being held
in a non-interest bearing account, there will be no investment of the Escrow
Funds.

4. Release of Escrow Funds. The Escrow Funds shall be paid by the
Escrow Agent in accordance with the following:

(a) provided that the Escrow Funds total at least $500,000 at
or before 2:00 P.M., New York City time, on ___________, 2000, or on any date
prior thereto, the Escrow Funds (or any portion thereof) shall be paid as
otherwise instructed by the Company and the Placement Agent, within one (1)
business day after the Escrow Agent receives a written release notice in
substantially the form of Exhibit B attached hereto (a "Release Notice") signed
by authorized persons of the Placement Agent and the Company, and thereafter,
the Escrow Account will remain open for the purpose of depositing therein the
subscription prices for additional securities sold by the Company in the
Offering, which additional Escrow Funds shall be paid as instructed by the
Placement Agent and the Company upon receipt by the Escrow Agent of a Release
Notice as described above; or

(b) if the Escrow Agent has not received a Release Notice from
the Company and the Placement Agent at or before 2:00 P.M., New York City time,
on ___________, 2000, and the Escrow Funds do not total at least $500,000 at
such time and date, then the Escrow Funds shall be returned to Subscribers
without interest thereon or deduction therefrom.

In the event that at any time the Escrow Agent shall receive from the Company
and the Placement Agent written instructions signed by individuals who are
identified on Exhibit C attached hereto as persons authorized to act on behalf
of the Company and the Placement Agent, respectively, requesting the Escrow
Agent to refund to an individual or entity the amount of a collected check or
other funds received by the Escrow Agent from said individual or entity and
deposited into the Escrow Account, the Escrow Agent shall comply with such
instructions provided that said funds are in the Escrow Account and have not
been paid by the Escrow Agent.

5. Acceptance by Escrow Agent. The Escrow Agent hereby accepts and
agrees to perform its obligations hereunder, provided that:

(a) The Escrow Agent may act in reliance upon any signature
believed by it to be genuine, and may assume that any person who has been
designated by the Placement Agent and the Company to give any written
instructions, notice or receipt, or make any statements in connection with the
provisions hereof has been duly authorized to do so. The Escrow Agent shall have
no duty to make inquiry as to the genuineness, accuracy or validity of any

-2-

<PAGE>

statements or instructions or any signatures on statements or instructions. The
names and true signatures of each individual authorized to act on behalf of the
Placement Agent and the Company are set forth in Exhibit C attached hereto.

(b) The Escrow Agent may act relative hereto in reliance upon
advice of counsel in reference to any matter connected herewith. The Escrow
Agent shall not be liable for any mistake of fact or error of judgment or law,
or for any acts or omissions of any kind, unless caused by its willful
misconduct or gross negligence.

(c) The Company and the Placement Agent agree to indemnify and
hold the Escrow Agent harmless from and against any and all claims, losses,
costs, liabilities, damages, suits, demands, judgments or expenses (including
but not limited to reasonable attorneys' fees) claimed against or incurred by
Escrow Agent arising out of or related, directly or indirectly, to this
Agreement.

(d) In the event that the Escrow Agent shall be uncertain as
to its duties or rights hereunder, the Escrow Agent shall be entitled to refrain
from taking any action other than to keep safely the Escrow Funds until it shall
be directed otherwise by a court of competent jurisdiction or a writing signed
by the Company and the Placement Agent.

(e) The Escrow Agent shall have no duty, responsibility or
obligation to interpret or enforce the terms of any agreement other than Escrow
Agent's obligations hereunder, and the Escrow Agent shall not be required to
make a request that any monies be delivered to the Escrow Account, it being
agreed that the sole duties and responsibilities of the Escrow Agent shall be
(i) to accept wire transfers, checks or other instruments for the payment of
money delivered to the Escrow Agent for the Escrow Account and deposit the
Escrow Funds into the Escrow Account and (ii) to disburse or refrain from
disbursing the Escrow Funds as stated above, provided that the funds received by
the Escrow Agent have been collected and are available for withdrawal.

6. Fees. The Escrow Agent shall be entitled to receive from the Company
a total of $1,500 in fees for the services to be rendered by the Escrow Agent
hereunder, and the Escrow Agent hereby acknowledges receipt of such amount from
the Company as payment in full of such fees.

7. Resignation. The Escrow Agent may resign at any time by giving 30
days' notice of such resignation to the Company. Upon providing such notice, the
Escrow Agent shall have no further obligations hereunder except to hold the
Escrow Funds which it has received as of the date on which it provided the
notice of resignation as depositary. In such event, the Escrow Agent shall not
take any action until the Company has designated a banking corporation, trust
Company, attorney or other person as successor. Upon receipt of such written
instructions signed by the Company, the Escrow Agent shall promptly deliver the
Escrow Funds to such successor and shall thereafter have no further obligations
hereunder. If such instructions are not received within 30 days following the
effective date of such resignation, then the Escrow Agent may deposit the Escrow
Funds and any other amounts held by it pursuant to this Agreement with a clerk
of a court of competent jurisdiction

-3-

<PAGE>

pending the appointment of a successor. In either case provided for in this
Section 7, the Escrow Agent shall be relieved from all liability thereafter
arising with respect to the Escrow Funds.

8. Termination. The Placement Agent may terminate the appointment of
the Escrow Agent hereunder upon written notice signed by an individual on behalf
of the Placement Agent, each of whose name and signature are included in Exhibit
C attached hereto, specifying the date upon which such termination shall take
effect. In the event of such termination, the Company shall, within 30 days of
such notice, appoint a successor escrow agent and the Escrow Agent shall, upon
receipt of written instructions signed by the Company, turn over to such
successor escrow agent all of the Escrow Funds. Upon receipt of the Escrow
Funds, the successor escrow agent shall become the Escrow Agent hereunder and
shall be bound by all of the provisions hereof and the Escrow Agent shall be
relieved of all further obligations and released from all liability thereafter
arising with respect to the Escrow Funds.

9. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given when delivered personally, on the next business
day after delivery to a recognized overnight courier or mailed first class
(postage prepaid) or when sent by facsimile to the parties (which facsimile copy
shall be followed, in the case of notices or other communications sent to the
Escrow Agent, by delivery of the original) at the following addresses (or to
such other address as a party may have specified by notice given to the other
parties pursuant to this provision).

If to the Placement Agent: Strategic Assets Inc.
445 Broad Hollow Road, Suite 425
Melville, NY 11747
Attn: Randall S. Appel
Phone: (516) 249-4990

If to the Company to: American Equities Income Fund II, Inc.
80 East Route 4, Suite 202
Paramus, NJ 07652
Attn: David S. Goldberg
Phone: (201) 368-5900

with a copy to: Bronson & Migliaccio, LLP
3010 Westchester Avenue, Suite 403
Purchase, NY 10577
Attn: Mark F. Coldwell, Esq.
Phone: (914) 251-1212

-4-

<PAGE>

If to the Escrow Agent, to: Republic National Bank of New York
1356 Broadway
New York, NY 10018
Attn: Leonard Spector
First Vice President
Phone: (212) 947-0991

10. General.

(a) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be entirely performed within such state.

(b) This Agreement sets forth the entire agreement and
understanding of the parties in respect to the matters contained herein or
covered hereby and supersedes all prior agreements, arrangements and
understandings related thereto.

(c) All of the terms and conditions of this Agreement shall be
binding upon, and inure to the benefit of and be enforceable by, the parties
hereto.

(d) This Agreement may be amended, modified, superseded or
cancelled, and any of the terms or conditions hereof may be waived, only by a
written instruction executed by each party hereto or, in the case of a waiver,
by the party waiving compliance.

The failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver of any party of any condition, or of the breach of any term
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement. No party may assign any rights,
duties or obligations hereunder unless all other parties have given their prior
written consent.

(e) If any provision included in this Agreement proves to be
invalid or unenforceable, it shall not affect the validity of the remaining
provisions.

(f) This Agreement may be executed in several counterparts or
by separate instruments and all of such counterparts and instruments shall
constitute one agreement, binding on all of the parties hereto.

-5-

<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first set forth above.

_________________ REPUBLIC NATIONAL BANK
Federal I.D. # OF NEW YORK, as Escrow Agent

By:______________________________________
Leonard Spector, First Vice-President

By:______________________________________
Howard Efran, Assistant Vice President

STRATEGIC ASSETS INC.

By:___________________________
Randall S. Appel, President

AMERICAN EQUITIES INCOME
FUND II, INC.

By:___________________________
David S. Goldberg, CEO

-6-

<PAGE>

EXHIBIT A

Forms of Receipt of Funds by Escrow Agent

[Republic National Bank of New York Letterhead]

[Date]

Strategic Assets Inc.
445 Broad Hollow Road, Suite 425
Melville, NY 11747

Dear Sirs:

Pursuant to Section 2(a) of the Escrow Agreement dated __________, ____, we
confirm receipt of the amount of $_______ today for deposit into the Escrow Fund
of American Equities Income Fund II, Inc.

Very truly yours,

__________________
Name:
Title:

<PAGE>

EXHIBIT B

Release Notice

Mr. Leonard Spector
Republic National Bank of New York
1356 Broadway
New York, New York 10018

Dear Mr. Spector:

The undersigned hereby authorize and instruct Republic National Bank of
New York, as escrow agent, to release [$_______] of Escrow Funds from the Escrow
Account and to deliver such funds as follows:

[Insert Delivery Instructions]

IN WITNESS WHEREOF, this release has been executed on __________, 2000.

STRATEGIC ASSETS INC.

By:_____________________________
Its:____________________________

AMERICAN EQUITIES INCOME FUND II, INC.

By:______________________________
Its:_____________________________

<PAGE>

EXHIBIT C

Authorized Personnel

The Escrow Agent is authorized to accept instructions and notices signed or
believed by the Escrow Agent to be signed by each of the following, each of whom
is authorized to act on behalf of the Company and the Placement Agent,
respectively:

THE PLACEMENT AGENT:

Name Title Signature
- ---- ----- ---------
<S> <C> <C>
Randall S. Appel President _________________

Marilyn Dobres Director of Operations _________________
</TABLE>

THE COMPANY:

Name Title Signature
- ---- ----- ---------
<S> <C> <C>
David S. Goldberg Chief Executive Officer _________________

M. Ellen Donnelly Chief Financial Officer _________________
</TABLE>

<PAGE>

Exhibit 10.3

MASTER PURCHASE & SALE AGREEMENT

BY AND BETWEEN

[COMPANY NAME]

- and -

AMERICAN EQUITIES GROUP, INC.

Dated: [ ]

<PAGE>

DEFINITIONS....................................................................1

1. PURCHASE AND SALE OF INVOICES.........................................1

2. SELLER'S REPRESENTATIONS AND WARRANTIES...............................3

3. AFFIRMATIVE COVENANTS.................................................4

4. NEGATIVE COVENANTS....................................................5

5. SECURITY..............................................................5

6. RECOURSE..............................................................6

7. EVENTS OF DEFAULT.....................................................6

8. REMEDIES..............................................................7

9. GOVERNING LAW.........................................................8

10. JURISDICTION..........................................................8

11. SEVERABILITY OF PROVISIONS............................................8

12. COLLECTION............................................................8

13. INDEMNIFICATION.......................................................8

14. PURCHASER CHARGES.....................................................8

15. COMPLETE AGREEMENT....................................................8

16. TERM..................................................................9

17. EFFECTIVE DATE........................................................9

18. SURVIVAL. ..........................................................9

19. BINDING EFFECT........................................................9

20. FURTHER ASSURANCES. .................................................9

21. COUNTERPARTS; TELECOPIES..............................................9

<PAGE>

MASTER PURCHASE & SALE AGREEMENT

This Master Purchase & Sale Agreement (the "Agreement") is made and
entered into by [COMPANY NAME], a [STATE OF ORGANIZATION] corporation (the
"Seller"), having an office at [COMPANY ADDRESS] and AMERICAN EQUITIES GROUP,
INC., a New York corporation ("AEG" and/or "Purchaser"), having an office at 80
East Route 4, Suite 202, Paramus, New Jersey 07652. The Seller and AEG hereby
agree to the terms and conditions contained herein and in any Addendums and/or
Attachments to this Agreement.

DEFINITIONS

The following definitions shall apply to this Agreement:

a. "Advance Rate Percentage" shall mean [ADVANCE RATE PERCENTAGE].
b. "Account Debtor" shall mean any third party who is indebted to
Seller on account of products and/or services provided by
Seller.
c. "Administrative Fee" shall mean ten percent (10%) of (A) the
Net Invoice Value of any Receivable which Seller does not sell
to AEG in accordance with the terms of this Agreement, or (B)
any amounts paid to or collected by Seller with respect to any
Receivable which are not remitted to AEG in accordance with
the terms of this Agreement.
d. "Book Account" shall mean the account maintained by Purchaser
for the Seller pursuant to Section 1(c).
e. "Charge-back Payment" shall have the meaning set forth in
Section 6(b).
f. "Client Risk Receivable" shall have the meaning set forth in
Section 1(b).
g. "Collateral" shall mean those assets owned by Seller which are
subject to Purchaser's security interest granted in Section
5(b).
h. "Discount Fee" shall have the meaning set forth in Section 1(b).
i. "Dispute" shall mean a dispute, deduction, claim, offset,
defense or counterclaim of any kind, whether bona fide or not,
including, without limitation, any dispute relating to goods
or services already paid for or relating to Receivables other
than the Receivable on which payment is being withheld.
j. "Factor Risk Receivables" shall have the meaning set forth in
Section 1(b).
k. "Maximum Permitted Advance" shall be the amount obtained by
multiplying the Advance Rate Percentage by the sum of the Net
Invoice Values of all Factor Risk Receivables in a Receivable
Pool.
l. "Net Invoice Value" shall mean, as to any Receivable, the
amount shown on the original invoice therefore as being
payable in cash by the customer owing the same, net of all
commissions, discounts (other than prompt payment discounts),
allowances, and credits granted by Seller or claimed by the
Account Debtor.

<PAGE>

m. "Obligations" shall have the meaning set forth in Section
5(b).
n. "Overdraft" shall mean any negative balance in Seller's Book
Account.
o. "Receivable" or "Receivables" shall have the meaning set forth
in Section 1(a).
p. "Residual" shall have the meaning set forth in Section
1(b)(ii).
q. "Seller" shall mean [COMPANY NAME], and its subsidiaries, if
any.
r. "Service Fee" shall have the meaning set forth in Section
1(b).
s. "Supporting Documents" shall mean original invoices, confirmed
purchase orders, insertion orders, contracts, approvals,
shipping documents, and any other documents which AEG may
require or specify with respect to a Receivable.
t. "Termination Fee" shall mean the fee which may become payable
to Purchaser on termination of this Agreement pursuant to
Section 16.

1. PURCHASE AND SALE OF INVOICES.

<PAGE>

and distribution of goods or the performance of services, including, but not
limited to, [DESCRIPTION OF PRODUCT/SERVICE] and related products, supplies, and
services, together with all collection rights in connection therewith, as well
as Seller's interest in any goods represented by its receivables and all goods
returned by customers and Seller's rights against any unpaid vendor(s)
(collectively, the "Receivables"). In purchasing Receivables, AEG has or will
materially rely upon the documents and other information provided by Seller and
on Seller's representations, warranties and covenants contained in this
Agreement. AEG shall be the absolute owner of all Receivables purchased under
this Agreement. As owner, AEG shall have the sole and exclusive power and
authority to collect each Receivable through legal action or otherwise,
including, in its sole determination, the right to settle, compromise, or assign
(in whole or part) any of the Receivables.

(b) Purchase Price. AEG will purchase all the Receivables presented on
a weekly basis and will consider them to be a pool of Receivables (a "Receivable
Pool"). Seller each week will forward the Supporting Documents with respect to
each Receivable Pool to AEG by a national overnight delivery service for
delivery by 10:00 AM the next business day. As to any Receivable within a
Receivable Pool, if Seller fails to deliver Supporting Documents with respect to
that Receivable, if the Receivable is with an Account Debtor which has any
invoice which is outstanding more than 90 days, or if AEG determines in the
exercise of its reasonable discretion that the customer has unacceptable credit,
AEG shall have the right to declare the Receivable to be an unacceptable client
risk (a "Client Risk Receivable") and shall not advance any monies against the
Client Risk Receivable. Notwithstanding a Client Risk Receivable designation,
AEG shall be deemed to have purchased the Receivable, shall have the right to
collect the Receivable, and shall have the right to charge Service Fees and
Discount Fees on the Receivable. The Receivables upon which AEG advances money
at the Advance Rate Percentage shall be deemed factor risk Receivables (the
"Factor Risk Receivables"). The amount which AEG advances with respect to any
Receivable Pool shall not exceed the amount of the Maximum Permitted Advance for
that Receivable Pool. AEG will charge Seller a Service Fee equal to (i) [SERVICE
FEE - PURCHASE] of the sum of the Net Invoice Values of all Receivables in a
Receivable Pool at the time a Receivable Pool is purchased, and (ii) [SERVICE
FEE - DAYS 31 AND 61] of the sum of the Net Invoice Values of any unpaid and
outstanding Receivables within a Receivable Pool on each of the 31st and 61st
days next following AEG's purchase of a particular Receivable Pool (each, a
"Service Fee") for the production, collection, accounting and administrative
services rendered by AEG under this Agreement. In addition, AEG will charge
Seller a Discount Fee equal to [DISCOUNT FEE] of the sum of the Net Invoice
Values of any unpaid and outstanding Receivables within a Receivable Pool on
each of the 31st and 61st days next following AEG's purchase of a particular
Receivable Pool (each, a "Discount Fee").

<PAGE>

Upon AEG'S acceptance of a Receivable Pool and its receipt of all
Supporting Documents from Seller concerning that Receivable Pool, AEG shall be
deemed to have purchased the Receivable Pool and Seller shall be paid by check
or wire transfer as follows:

(i) the Maximum Permitted Advance less the Service Fee and any
other applicable charges then due within two (2) business days.

(ii) the Residual, as defined below, shall be payable monthly
with regard to each Receivable Pool. With regard to each Receivable Pool, the
amounts collected in excess of the Maximum Permitted Advance less the sum of (A)
all prior payments on account of the Residual for the Receivable Pool, and (B)
any offsets, charges, charge-backs, or other obligations that Seller shall have
to AEG, shall be the Residual.

(c) Book Account. As used herein the term "Book Account" shall
mean the account to which all monies owing to Seller by AEG shall be credited
and all monies owing by Seller to AEG shall be charged. All monies owing by
either party will be entered into the Book Account on the day they become due.
An Overdraft shall be payable on demand. Any (i) Overdraft, or (ii) payment or
charge due from Seller to AEG under the terms of this Agreement which is not
paid when due, including, but not limited to, any Service Fee, Discount Fee or
Charge-back Payment which is not paid when due (a "Past Due Charge"), may be
set-off at any time against any amount which would otherwise be due from AEG to
Seller. Any (i) Overdraft or (ii) Past Due Charge shall bear interest for each
day it is outstanding until paid in full at the rate of twenty four percent
(24%) per annum. Interest

<PAGE>

shall be charged daily and posted to the Book Account monthly. AEG each month
shall provide Seller with an account statement which lists all charges and
credits to the Book Account in the previous month. Each account statement shall
be conclusively presumed to be correct in all respects, except for specific
objections which the Seller makes in writing within fifteen (15) days from the
date upon which the account statement is sent.

(d) Invoicing. All invoices shall be sent from AEG directly to the
Account Debtors. Each invoice shall state in a manner satisfactory to AEG that
the Receivable is payable to AEG or an agreed upon trade style (D/B/A), in US
Dollars only, at an address specified by AEG and shall be accompanied by all
other Supporting Documents with respect to that invoice. Seller shall, and
hereby does, grant AEG a license to use Seller's name and trade names, if any,
in one or more alternate names or D/B/As for the purpose of administering,
managing, and collecting Receivables. This license may not be modified or
revoked until all Receivables purchased by AEG under this Agreement have been
collected and any and all Obligations of Seller to AEG have been paid in full.
At AEG's election Seller shall execute a Bill of Sale (without representation or
warranty except as is expressly set forth in this Agreement) to AEG transferring
ownership of all Receivables within a Receivable Pool.

2. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and warrants
to AEG the following which shall be continuing representations and warranties
for so long as this Agreement is in effect or AEG shall have any commitment
under this Agreement:

(a) Ownership of Receivables. Seller is the sole owner of the
Receivables and none of the Receivables has been previously assigned or
encumbered in any manner. Seller has full power and authority to sell each of
the Receivables and has duly authorized their sale to AEG pursuant to this
Agreement.

(b) Current Receivables. Each Receivable is for the amount stated on
the invoice. As of the date of sale of the Receivable there are no prepays,
set-offs, deductions, disputes, contingencies or counterclaims against any of
the Receivables or against Seller in connection therewith. Each Receivable is
currently due to Seller and is by its terms collectable in full no later than
thirty (30) days after the date of invoice.

(c) Corporate Structure. Seller is a corporation duly organized and
existing and in good standing under the laws of the State of [STATE OF
ORGANIZATION] and is qualified and authorized to do business in the State of
[STATE OF ORGANIZATION] and in all other states in which it is currently
conducting business and qualification is required. Seller does not have any
subsidiaries or affiliates. Seller is not a partner in any partnership or a
participant in any joint ventures.

<PAGE>

(d) Proper Execution. The execution, delivery and performance of this
Agreement by Seller has been duly authorized by all necessary corporate action
and does not and will not: (i) require any consent or approval of its
stockholders, (ii) contravene its corporate charter or by-laws, (iii) violate
any provision of any law, rule, regulations or any order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to it and of which it has notice; or (iv) result in any breach of
or constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which it is a party or by which it or
its properties may be bound or affected.

(e) Binding Obligations. This Agreement is, and when delivered will be,
a legal, valid and binding obligation of the Seller enforceable against the
Seller in accordance with its terms.

(f) Liens. Seller has no liens of any kind on any of its assets, and
Seller will not grant or suffer any such liens hereafter without AEG's prior
written consent.

(g) No Litigation. Seller has no notice of any actions, suits or
proceedings pending, or to the knowledge of Seller, threatened against or
affecting it before any court, governmental agency, arbitrator or other body
which may materially adversely affect the financial condition, operations,
properties or the business of Seller or the ability of the Seller to perform its
obligations under this Agreement.

<PAGE>

(h) Place of Business; Books and Records. Seller's principal place of
business and its chief executive offices are located at [COMPANY ADDRESS].
Seller has no other offices or places of business. Seller's books and records
and all of its assets are located at its principal place of business. Seller
maintains its books and records in accordance with Generally Accepted Accounting
Principles ("GAAP").

(i) Corporate Name, Merger, Acquisition. Seller has not (i) changed its
name or been known by any other name, (ii) been the surviving corporation of a
merger or consolidation, (iii) acquired all or substantially all of the assets
of any person or entity, or (iv) obtained assets in a transaction subject to any
bulk transfer laws.

(j) No Default; No Violation. Seller is not (A) in default under or in
breach of any indenture or loan or credit agreement or any other agreement,
lease or instrument to which it is a party or by which it or its properties may
be bound or affected, or (B) in violation of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination, or award presently in effect
having applicability to it and of which it has notice.

(k) Year 2000. To the best of Seller's knowledge, all software utilized
in the conduct of Seller's business will have appropriate capabilities and
compatibility for operation to handle calendar dates falling on or after January
1, 2000, and all information pertaining to such calendar dates, in the same
manner and with the same functionality as the software does with respect to
calendar dates falling on or before December 31, 1999.

3. AFFIRMATIVE COVENANTS. So long as this Agreement shall remain in effect
or AEG shall have any commitment under this Agreement, Seller covenants and
agrees that it:

(a) will not, nor consent or permit any of its shareholders, directors,
officers, employees or agents to, deposit in any bank or other depository, any
check, remittance or other payment for or on account of any Receivable, nor
attempt to collect any payment from an Account Debtor.

(b) will, within 24 hours of its receipt of payment with respect to any
Receivable, forward such payment to AEG by regular mail.

(c) will preserve and maintain its corporate existence, in good
standing in the jurisdiction of its incorporation, and in each foreign
jurisdiction in which it owns property or conducts business, and maintain all of
its properties, necessary or useful in the proper conduct of its business, in
good working order and condition, ordinary wear and tear excepted.

<PAGE>

(d) will keep adequate records and books of account in accordance with
GAAP and will maintain such books and records at its principal place of business
as specified in Section 2(h).

(e) will at its own expense, maintain insurance with respect to its
real and personal properties against such risks, in such commercially reasonable
form and with such insurers, as shall be reasonably satisfactory to AEG from
time to time and shall cause AEG to be named as an additional insured and as
loss payee on such policies.

(f) will at any reasonable time, and at Seller's expense, permit AEG or
any agent or representative thereof, to examine and make copies and abstracts
from the records and books of account of, and visit the properties of the Seller
and to discuss its affairs, finances and accounts with any of its officers and
directors and independent accountants.

(g) will furnish to AEG:

(A) promptly after the commencement thereof, written notice of
all actions, suits, and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, in
excess of $10,000 affecting Seller.

<PAGE>

(B) written notice of any change in the officers or owners of
Seller within five (5) days of the occurrence of any such change.

(C) such other information respecting the condition or
operations financial or otherwise, of the Seller as AEG may from time to time
reasonably request.

(h) will maintain, preserve, and keep its buildings, machinery, and
equipment in good condition, repair, and working order for the proper and
efficient operation of its business.

(i) will comply in all respects with all applicable laws, rules,
regulations, and orders.

4. NEGATIVE COVENANTS. So long as this Agreement is in effect, or AEG
shall have any commitment under this Agreement, Seller shall not:

(a) organize or cause to exist any subsidiaries or affiliates without
AEG's prior written consent, which consent may be conditioned, without
limitation, upon such subsidiary or affiliate guarantying all of the Seller's
obligations under this Agreement.

(b) remove any inventory of raw materials or completed products from
its business premises other than on shipment to Account Debtors in the ordinary
course of business without the prior written consent of AEG.

(c) invest in or otherwise acquire any shares or substantially all of
the assets of any corporation, firm, or business, or division thereof.

(d) change the general character of its business as conducted at the
date hereof, or engage in any type of business not reasonably related to its
business as normally conducted.

(e) increase the salaries, expense accounts, or bonuses presently being
paid to its officers or directors or shareholders except for reasonable
increases made in the ordinary course of business.

(f) declare or pay any dividend on its capital shares of any class or
make any distribution to any shareholders as such or purchase, redeem, or
otherwise acquire for value any shares of any class.

(g) merge with or consolidate into any other entity or change its
corporate name or do business under any name other than its corporate name.

(h) permit any lien, security interest or other encumbrance of any
nature whatsoever to be placed on the Collateral other than the lien in favor of
AEG.

(i) change the location of its principal place of business or the
location of its chief executive offices without providing AEG with thirty (30)
days' prior written notice; provided, however, no change in location may be
effected until all filings required to be made to evidence AEG's ownership of
the Receivables and its first priority security interest in the Collateral have
been made.

(j) sell, lease, transfer, abandon, or otherwise dispose of any of its
assets except in the ordinary course of business.

(k) grant, or attempt to grant, any discount, credit, or allowance on
any Receivable that has been purchased by AEG without AEG's prior written
consent.

<PAGE>

5. SECURITY.

(a) In the event that AEG's interest in the Receivables purchased under
this Agreement is deemed by a court of competent jurisdiction to be a security
interest instead of a purchase, then this Agreement shall be deemed to
constitute a security agreement under Article 9 of the New Jersey Uniform
Commercial Code and AEG shall have all rights of a secured party thereunder with
respect to the Receivables so purchased, and the Collateral.

(b) As security for the payment and performance of Seller's obligations
under or in connection with (i) any Overdraft, (ii) any other obligation of
Seller to AEG under or in connection with this Agreement, including, but not
limited to, any attorneys' fees or other expenses incurred by AEG in enforcing
or amending this Agreement and any Termination Fee, and (iii) and any and all
other obligations of Seller to AEG, whether now existing or arising in the
future (such obligations, collectively, the "Obligations"), Seller does hereby
assign, transfer, and grant to AEG a lien upon and a valid first priority
security interest in the following assets (the "Collateral"): the Receivables,
and all books and records pertaining to such Receivables, all machinery and
equipment, fixtures, inventory, trademarks, patents, copyrights, contract rights
and all other general intangibles, and all other personal property and assets of
Seller, all as more particularly described on Schedule A which is attached
hereto and made a part hereof.

(c) Seller also hereby grants AEG an irrevocable power of attorney,
which shall be deemed coupled with an interest and shall be irrevocable so long
as this Agreement is in force and thereafter until all Obligations have been
fully paid, for the purpose of collecting the Receivables assigned hereunder and
exercising all of its rights with respect to the Collateral such rights to
include, but not be limited to, the right to sign Seller's name on any UCC
financing statement or any amendment thereto relating to Collateral.

6. RECOURSE.

(a) AEG shall have recourse against Seller with respect to any
Receivable not paid within 90 days from its invoice date. In addition, AEG shall
have recourse against Seller, if Seller: (i) is in breach of this Agreement;
(ii) has breached any representations, warranties or covenants with respect to
any unpaid Receivable; (iii) has contributed to or aggravated any Account
Debtor's financial inability to pay; (iv) is involved with any Account Debtor in
a Dispute of any kind, regardless of validity; or (v) any Account Debtor has
asserted a claim of loss or offset of any kind against Seller or AEG.

<PAGE>

(b) AEG shall have the right to charge the amount of any Receivable for
which AEG has recourse against Seller back to Seller's Book Account and to
require Seller to immediately pay to AEG an amount equal to the number obtained
by multiplying the Net Invoice Value of such Receivable by the Advance Rate
Percentage (a "Charge-back Payment"); provided, however, if the sum of (A) the
Charge-back Payment plus (B) all amounts collected to date with respect to the
Receivable Pool which included such Receivable exceeds the Maximum Permitted
Advance for that Receivable Pool, then the amount of the Charge-back Payment
shall be reduced to an amount which shall cause such sum to equal such Maximum
Permitted Advance. The charge-back of a Receivable shall reduce the purchase
price for the Receivable Pool which included that Receivable. The charge-back of
a Receivable shall not constitute a reassignment thereof, and the title thereto
and the goods represented thereby shall remain in AEG until all Obligations are
paid in full.

7. EVENTS OF DEFAULT.

Each of the following shall constitute an event of default under this
Agreement an ("Event of Default"):

(a) any covenant, representation, or warranty made in this
Agreement or which is contained in any certificate, document,
opinion, financial or other statement furnished under or in
connection with this Agreement shall be found to have been
incorrect or breached in any material respect;

(b) Seller shall fail to pay any amount outstanding under or in
connection with this

<PAGE>

Agreement when due including, but not limited to, any payment
of an Overdraft or any other amount which may be due upon the
demand of AEG;

(d) Seller shall make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a
custodian, receiver, or trustee for it or for a substantial
part of its assets; or shall commence any proceeding under any
bankruptcy reorganization, arrangements, readjustment of debt,
dissolution, or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or shall
have any petition or application filed or any such proceeding
commenced against it in which an order for relief is entered
or adjudication or appointment is made, and such involuntary
petition or application is not overturned or stayed within 60
days of entry; or by any act of omission shall indicate its
consent to, approval of, or acquiescence in any such petition,
application, proceeding, receiver, or trustee for all or any
substantial part of its properties; or shall suffer any such
custodianship, receivership, or trusteeship; or the Seller
shall discontinue its operations;

(e) any security interest or other document delivered by Seller
pursuant to this Agreement shall at any time after its
execution and delivery and for any reason cease: (A) to create
a valid and perfected lien upon and first priority security
interest in and to the property covered therein; or (B) to be
in full force and effect or shall be declared null and void,
or shall be terminated, or the validity or enforceability
thereof shall be contested by Seller or Seller shall deny it
has any further liability or obligation under this Agreement,
or the Seller shall fail to perform any of its obligations
under any of its agreements with AEG.

(f) any guaranty of the Seller's obligations executed in favor of
AEG shall at any time after its execution and delivery and for
any reason cease to be in full force and effect or shall be
declared null and void, or the validity or enforceability
thereof shall be contested by the guarantor, or the guarantor
shall deny he has any further liability or obligation
thereunder or shall fail to perform his obligations
thereunder;

(g) a material adverse change in the condition (financial or
otherwise), business, operations or prospects of the Seller
shall have occurred;

<PAGE>

then, and in any such event, AEG may, in its sole discretion, by notice to the
Seller, (A) terminate its obligation to (i) purchase Receivables, and (ii) make
advances or credit accommodations under any loans or other credit facilities
provided under or in connection with this Agreement, and (B) declare the
outstanding balance of any Overdraft and any and all other Obligations to be
immediately due and payable, without presentment, demand, protest or further
notice of any kind, including notice of dishonor, all of which are expressly
waived by the Seller.

8. REMEDIES. AEG shall have the following rights, in addition to its
rights at law and in equity.

<PAGE>

and make it available to AEG at a place or places designated by AEG, and (v)
sell any or all of the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Seller's premises) as in AEG's opinion is
commercially reasonable. Should AEG exercise its rights to possession, Seller
hereby waives its right, if any, to cause AEG to post a bond or any other type
of security. Any requirement of reasonable notice regarding disposition of the
Collateral by AEG shall be conclusively met if notice is given to Seller in
writing at least five (5) days before the date fixed for a public sale or after
which a private sale or other disposition is to be made. AEG shall be entitled
to purchase the Collateral at any public sale. It is not necessary that the
Collateral be present at any sale by AEG hereunder. Any deficiency in the amount
Seller owes to AEG which exists after the disposition of the Collateral will be
paid immediately by Seller to AEG. Any excess of sale proceeds over the amounts
owing by Seller to AEG shall be returned to Seller, subject however, to
applicable law and the rights of the holders of other liens on the property.

(b) AEG may set off, exercise any lien or other right of attachment or
garnishment, and apply any and all monies, balances, credits, accounts and
deposits any time owing by AEG to or for Seller's account against any of
Seller's obligations to AEG.

9. GOVERNING LAW. THIS AGREEMENT AND ALL TRANSACTIONS OCCURRING HEREUNDER
SHALL BE DEEMED MADE IN AND GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO ITS CONFLICTS OF LAWS
PRINCIPLES.

10. JURISDICTION. The Parties consent to the non-exclusive jurisdiction and
venue of the state or federal courts located in New Jersey. Service of process
on either party in connection with any dispute shall be binding on such party if
sent to it by Registered or Certified Mail at the address specified above.
SELLER WAIVES ANY RIGHT SELLER MAY HAVE TO A TRIAL BY JURY FOR ANY DISPUTE
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

11. SEVERABILITY OF PROVISIONS. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction. Without
limiting the generality of the foregoing, should this Agreement call for the
payment of monies in excess of the maximum legally permitted rate of interest,
then this Agreement shall be deemed automatically amended so as to not require
payment of monies in excess of the maximum lawfully permitted rate of interest.

12. COLLECTION. AEG will undertake collection efforts for all Receivables
and use its best efforts to collect them in accordance with normal industry
practice. Notwithstanding the foregoing, AEG shall have the full power and
authority to collect each Receivable, through legal action or otherwise, and
may, in its sole discretion, settle, compromise, or assign (in whole or in part)
any of the Receivables, or otherwise exercise any other right with respect to
any of the Receivables if such action will facilitate collection. AEG shall have
the right to endorse Seller's name and trade names (if any) upon any and all
checks, drafts, money orders, and other instruments for the payment of money
that are payable to Seller which AEG receives in connection with its collection
of Seller's accounts receivable under or in connection with this Agreement.

<PAGE>

13. INDEMNIFICATION. Seller agrees to indemnify and hold AEG harmless from
and against any and all claims, losses, expenses, costs, obligations and
liabilities (including court costs and reasonable attorney's fees at the trial,
appellate and post-judgment levels) that AEG may incur by reason of: (i)
Seller's breach of or failure to perform any of its representations, warranties,
commitments or covenants in this Agreement, or (ii) AEG's collecting or
attempting to collect any Receivable. To the maximum extent permitted by
applicable law, Seller hereby releases AEG and its officers, attorneys, agents
and employees from all claims for loss or damage caused by any act or omission
on the part of any of them except for actions or omissions which constitute
willful misconduct.

<PAGE>

as a deposit. The balance of these fees and charges will be paid in two (2)
equal installments which will be deducted from each of AEG's first two (2)
advances to Seller. AEG also shall charge Seller for its direct out-of-pocket
costs for wire transfers, mail, overnight delivery, lien searches, credit
reports, accounting fees, consultant fees, and all legal and other expenses,
including, but not limited to, reasonable attorneys' fees, incurred by AEG in
administering, enforcing, or amending this Agreement. In addition, AEG will
charge Seller an (A) an Administrative Fee with respect to (i) any Receivable
Seller fails to sell to AEG, or (ii) any payment made to Seller with respect to
a Receivable which is not remitted to AEG, in accordance with the provisions of
this Agreement, and (B) any Termination Fee payable pursuant to Section 16 of
this Agreement.

15. COMPLETE AGREEMENT. This Agreement is the complete and entire
understanding between Seller and AEG and may only be modified by a written
instrument signed by the party to be bound thereby.

16. TERM. The term of this Agreement shall commence on the effective date
hereof and continue in effect for a period of two (2) years and shall be
automatically renewed from year to year thereafter unless terminated as provided
in this Section.

(a) Provided Seller is not in default of its obligations under this
Agreement, Seller may terminate this Agreement prior to the end of the term
without penalty upon one-hundred eighty (180) days' written notice to AEG. If
the Agreement is terminated by AEG because of Seller's default, AEG shall charge
Seller a termination fee equal to the number obtained by multiplying (i) the
daily average of the sum of all Service Fees, Discount Fees, and other fees and
charges charged by AEG to Seller from the effective date of this Agreement to
the date of termination by (ii) one hundred and twenty (120).

(b) Upon the expiration of the initial two (2) year term of this
Agreement, either party may terminate this Agreement through ninety (90) days'
written notice to the other party.

(c) AEG may terminate this Agreement through written notice to Seller
if AEG is unable, after good faith attempts to do so, to secure funds with which
to purchase Seller's Receivables in accordance with the terms of this Agreement.

(d) Upon any termination of this Agreement, (i) the aggregate amount of
any and all outstanding Receivables shall be charged back to Seller's Book
Account, (ii) any and all Obligations (including, but not limited to, any
Overdraft created through the charge back of Receivables upon termination) shall
be immediately due and payable in full, and (iii) AEG's obligation to purchase
Receivables and to make advances or credit accommodations under any other credit
facilities provided under or in connection with this Agreement shall terminate.
Notwithstanding the termination of this Agreement, all rights of AEG shall
survive the termination or expiration of the term of this Agreement until all of
the Obligations have been satisfied in full to AEG's satisfaction. In
recognition of AEG's right to have all its attorneys' fees and expenses incurred
under or in connection with this Agreement secured by the Collateral,
notwithstanding payment in full of the Obligations by Seller, AEG shall not be
required to record any terminations or satisfactions of any of its liens on the
Collateral unless and until Seller and any and all Guarantors have executed and
delivered to AEG a Release And Covenant Not To Sue in a form acceptable to AEG.
AEG's security interest in, and rights in connection with, the Collateral shall
remain in effect until Seller has paid all of the Obligations in full. Upon
payment of the Obligations in full, AEG shall promptly reconvey all outstanding
and unpaid Receivables to Seller together with the underlying documentation with
respect to such Receivables.

<PAGE>

17. EFFECTIVE DATE. This Agreement shall be effective when (i) AEG has
received written confirmation from the appropriate state, county, and local
filing offices that it holds a first priority lien on the Collateral, or, in the
alternative, and in its sole discretion, AEG elects to waive this condition to
the effectiveness of this Agreement with respect to all or any part of the
Collateral, and (ii) it is executed and accepted by AEG in its office in
Paramus, New Jersey.

18. SURVIVAL. All representations, warranties, indemnities and covenants of
the Seller under this Agreement shall survive the making of payment and the
expiration or earlier termination of this Agreement.

<PAGE>

19. BINDING EFFECT. The terms, covenants and conditions of this Agreement
shall be upon and shall enure to the benefit of each of the parties hereto,
their respective successors, and assigns.

20. FURTHER ASSURANCES. At anytime, upon the request of AEG, Seller shall
make, execute, and deliver any and all such additional documents and instruments
and do such further acts and things as AEG may reasonably require to effect, or
to effectuate more fully, the purposes of this Agreement.

21. COUNTERPARTS; TELECOPIES. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. Signatures delivered by
telecopier or other electronic device shall be binding and enforceable against
the party as if an original signed counterpart had been delivered.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized corporate officers on the day and year first
above written.

AS TO PURCHASER: AS TO SELLER:

AMERICAN EQUITIES GROUP, INC. [COMPANY NAME]

By: By:
---------------------------- -------------------------
DAVID S. GOLDBERG, C.E.O. [COMPANY'S CEO/PRESIDENT]

By: By:
---------------------------- -------------------------
DAVID S. GOLDBERG, SECRETARY [COMPANY'S SECRETARY]

<PAGE>

SCHEDULE A

The "Collateral" shall mean the following, whether now or hereafter
existing or created or now or hereafter acquired by [COMPANY NAME] (the
"Debtor"):

(i) The Accounts Receivable (as hereafter defined);

(ii) The Inventory (as hereinafter defined;

(iii) The Equipment (as hereinafter defined);

(iv) Any claims of the Debtor against third parties for loss
or damage to, or destruction of, any and all of the foregoing, all guarantees,
security and liens for payment of any Accounts Receivable and documents of
title, policies, certificates of insurance, insurance proceeds, securities,
chattel paper, and other documents and instruments evidencing or pertaining
thereto; and all files, correspondence, computer programs (whether software,
firmware or operating systems), tapes, discs and related data processing
software or media owned by the Debtor or in which the Debtor has an interest
which contain information identifying or pertaining to any one or more of the
items in (i), (ii) and (iii) above, or (v) and (vi) below, or any account
debtor, showing the amounts owed by each, payment thereon or otherwise necessary
or helpful in the realization thereon or the collection thereof.

(vi) All proceeds and products of the Equipment, the Accounts
Receivable and the Inventory, said proceeds and products to include without
limitation, any "Collateral" as used in clauses (i), (ii), (iii), (iv) or (v)
above.

The term "Accounts Receivable" shall mean, in
addition to the definition of the terms "Accounts" and "General Intangibles"
contained in the Uniform Commercial Code, of the State of New Jersey, any and
all obligations of any kind at any time due and/or owing to the Debtor and all
rights of the Debtor to receive payment or any other consideration (whether
classified under the Uniform Commercial Code of the State of New Jersey or any
other State as accounts, contract rights, chattel paper, general intangibles, or
otherwise) including without limitation, invoices, contract rights (including
without limitation contracts for time or services from service bureaus and
others, licenses and agreements for computer hardware and/or software), accounts
receivable, acceptances, instruments and all other debts, obligations and
liabilities in whatever form owing to the Debtor from any person, firm,
governmental authority, corporation or any other entity, all security therefor,
and all the Debtor's rights to goods sold (whether delivered, undelivered, in
transit or returned), which may be represented thereby, whether now existing or
hereafter arising, together with all proceeds and products of any and all of the
foregoing.

The term "Inventory" shall mean, in addition to the
definition thereof contained in the Uniform Commercial Code, of the State of New
Jersey, all goods, merchandise or other personal property held by the Debtor for
sale or lease or to be furnished under labels and other devices, names or marks
affixed thereto for purposes of selling or identifying the same or the seller or
manufacturer thereof, and all right, title and interest of the Debtor therein
and thereto, all raw materials, work or goods in process or materials and
supplies of every nature used, consumed or to be consumed in the Debtor's
business, all packaging and shipping materials.

The term "Equipment" shall mean, in addition to the
definition thereof contained in the Uniform Commercial Code of the State of New
Jersey, all equipment, machinery, furniture, fixtures, and all other tangible
assets (including motor vehicles, if any) and all replacements, repairs,
modifications, alterations, additions, controls and operating accessories
therefor, all substitutions and replacements therefor, and all accessions and
additions thereto and all proceeds and products of the foregoing now owned or
hereafter acquired by the Debtor.

The term "Lender" means American Equities Group, Inc.
and its successors and assigns.

[COMPANY NAME]

By:
-------------------------------
Name: [COMPANY'S CEO/PRESIDENT]
Title:

<PAGE>

Exhibit 10.4

MASTER PURCHASE & SALE AGREEMENT

BY AND BETWEEN

[COMPANY NAME]

- and -

AMERICAN EQUITIES GROUP, INC.

Dated: [ ]

<PAGE>

DEFINITIONS....................................................................1

1. PURCHASE AND SALE OF INVOICES..............................................1

2. SELLER'S REPRESENTATIONS AND WARRANTIES....................................3

3. AFFIRMATIVE COVENANTS......................................................4

4. NEGATIVE COVENANTS.........................................................5

5. SECURITY...................................................................5

6. RECOURSE...................................................................6

7. EVENTS OF DEFAULT..........................................................6

8. REMEDIES...................................................................7

9. GOVERNING LAW..............................................................8

10. JURISDICTION...............................................................8

11. SEVERABILITY OF PROVISIONS.................................................8

12. COLLECTION.................................................................8

13. INDEMNIFICATION............................................................8

14. PURCHASER CHARGES..........................................................8

15. COMPLETE AGREEMENT.........................................................9

16. TERM.......................................................................9

17. EFFECTIVE DATE.............................................................9

18. SURVIVAL. ...............................................................9

19. BINDING EFFECT.............................................................9

20. FURTHER ASSURANCES. ......................................................9

21. COUNTERPARTS; TELECOPIES...................................................9

<PAGE>

MASTER PURCHASE & SALE AGREEMENT

DEFINITIONS

The following definitions shall apply to this Agreement:

a. "Advance Rate Percentage" shall mean [ADVANCE RATE PERCENTAGE].
b. "Account Debtor" shall mean any third party who is indebted to
Seller on account of products and/or services provided by Seller.
c. "Administrative Fee" shall mean ten percent (10%) of (A) the Net
Invoice Value of any Receivable which Seller does not sell to AEG in
accordance with the terms of this Agreement, or (B) any amounts paid
to or collected by Seller with respect to any Receivable which are
not remitted to AEG in accordance with the terms of this Agreement.
d. "Book Account" shall mean the account maintained by Purchaser for
the Seller pursuant to Section 1(c).
e. "Charge-back Payment" shall have the meaning set forth in Section
6(b). f. "Client Risk Receivable" shall have the meaning set forth
in Section 1(b). g. "Collateral" shall mean those assets owned by
Seller which are subject to Purchaser's security interest granted in
Section 5(b).
h. "Discount Fee" shall have the meaning set forth in Section 1(b).
i. "Dispute" shall mean a dispute, deduction, claim, offset, defense or
counterclaim of any kind, whether bona fide or not, including,
without limitation, any dispute relating to goods or services
already paid for or relating to Receivables other than the
Receivable on which payment is being withheld.
j. "Factor Risk Receivables" shall have the meaning set forth in
Section 1(b).
k. "Maximum Permitted Advance" shall be the amount obtained by
multiplying the Advance Rate Percentage by the sum of the Net
Invoice Values of all Factor Risk Receivables in a Receivable Pool.
l. "Net Invoice Value" shall mean, as to any Receivable, the amount
shown on the original invoice therefore as being payable in cash by
the customer owing the same, net of all commissions, discounts
(other than prompt payment discounts), allowances, and credits
granted by Seller or claimed by the Account Debtor.
m. "Obligations" shall have the meaning set forth in Section 5(b).
n. "Overdraft" shall mean any negative balance in Seller's Book
Account.
o. "Receivable" or "Receivables" shall have the meaning set forth in
Section 1(a).
p. "Residual" shall have the meaning set forth in Section 1(b)(ii).
q. "Seller" shall mean [COMPANY NAME], and its subsidiaries, if any.
r. "Service Fee" shall have the meaning set forth in Section 1(b).
s. "Supporting Documents" shall mean original invoices, confirmed
purchase orders, insertion orders, contracts, approvals, shipping
documents, and any other documents which AEG may require or specify
with respect to a Receivable.
t. "Termination Fee" shall mean the fee which may become payable to
Purchaser on termination of this Agreement pursuant to Section 16.

1. PURCHASE AND SALE OF INVOICES.

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the sale of advertisements or advertising space in magazines, trade journals and
other periodicals including, but not limited to, the magazine [NAME OF
MAGAZINE], together with all collection rights in connection therewith, as well
as Seller's interest in any goods represented by its receivables and all goods
returned by customers and Seller's rights against any unpaid vendor(s)
(collectively, the "Receivables"). In purchasing Receivables, AEG has or will
materially rely upon the documents and other information provided by Seller and
on Seller's representations, warranties and covenants contained in this
Agreement. AEG shall be the absolute owner of all Receivables purchased under
this Agreement. As owner, AEG shall have the sole and exclusive power and
authority to collect each Receivable through legal action or otherwise,
including, in its sole determination, the right to settle, compromise, or assign
(in whole or part) any of the Receivables.

(b) Purchase Price. AEG will purchase all the Receivables generated by
Seller in connection with each issue of any magazine, trade journal, or other
periodical published by Seller, including, but not limited to, all of the
Receivables generated in connection with each issue of the magazine [NAME OF
MAGAZINE], and will consider them to be a pool of Receivables (a "Receivable
Pool"). Seller will forward the Supporting Documents with respect to each
Receivable Pool to AEG as such Supporting Documents are generated. As to any
Receivable within a Receivable Pool, if Seller fails to deliver Supporting
Documents with respect to that Receivable, if the Receivable is with an Account
Debtor which has any invoice which is outstanding more than 90 days, or if AEG
determines in the exercise of its reasonable discretion that the customer has
unacceptable credit, AEG shall have the right to declare the Receivable to be an
unacceptable client risk (a "Client Risk Receivable") and shall not advance any
monies against the Client Risk Receivable. Notwithstanding a Client Risk
Receivable designation, AEG shall be deemed to have purchased the Receivable,
shall have the right to collect the Receivable, and shall have the right to
charge Service Fees and Discount Fees on the Receivable. The Receivables upon
which AEG advances money at the Advance Rate Percentage shall be deemed factor
risk Receivables (the "Factor Risk Receivables"). The amount which AEG advances
with respect to any Receivable Pool shall not exceed the amount of the Maximum
Permitted Advance for that Receivable Pool. AEG will charge Seller a Service Fee
equal to (i) [SERVICE FEE PURCHASE] of the sum of the Net Invoice Values of all
Receivables in a Receivable Pool at the time a Receivable Pool is purchased, and
(ii) [SERVICE FEE - DAYS 31 AND 61] of the sum of the Net Invoice Values of any
unpaid and outstanding Receivables within a Receivable Pool on each of the 31st
and 61st days next following AEG's purchase of a particular Receivable Pool
(each, a "Service Fee") for the production, collection, accounting and
administrative services rendered by AEG under this Agreement. In addition, AEG
will charge Seller a Discount Fee equal to [DISCOUNT FEE] of the sum of the Net
Invoice Values of any unpaid and outstanding Receivables within a Receivable
Pool on each of the 31st and 61st days next following AEG's purchase of a
particular Receivable Pool (each, a "Discount Fee").

(i) the Maximum Permitted Advance less the Service Fee and any
other applicable charges then due within two (2) business days.

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(c) Book Account. As used herein the term "Book Account" shall mean
the account to which all monies owing to Seller by AEG shall be credited and all
monies owing by Seller to AEG shall be charged. All monies owing by either party
will be entered into the Book Account on the day they become due. An Overdraft
shall be payable on demand. Any (i) Overdraft, or (ii) payment or charge due
from Seller to AEG under the terms of this Agreement which is not paid when due,
including, but not limited to, any Service Fee, Discount Fee or Charge-back
Payment which is not paid when due (a "Past Due Charge"), may be set-off at any
time against any amount which would otherwise be due from AEG to Seller. Any (i)
Overdraft or (ii) Past Due Charge shall bear interest for each day it is
outstanding until paid in full at the rate of twenty four percent (24%) per
annum. Interest shall be charged daily and posted to the Book Account monthly.
AEG each month shall provide Seller with an account statement which lists all
charges and credits to the Book Account in the previous month. Each account
statement shall be conclusively presumed to be correct in all respects, except
for specific objections which the Seller makes in writing within fifteen (15)
days from the date upon which the account statement is sent.

2. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants to AEG the following which shall be continuing representations and
warranties for so long as this Agreement is in effect or AEG shall have any
commitment under this Agreement:

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(e) Binding Obligations. This Agreement is, and when delivered will be,
a legal, valid and binding obligation of the Seller enforceable against the
Seller in accordance with its terms.

(f) Liens. Seller has no liens of any kind on any of its assets, and
Seller will not grant or suffer any such liens hereafter without AEG's prior
written consent.

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3. AFFIRMATIVE COVENANTS. So long as this Agreement shall remain in effect
or AEG shall have any commitment under this Agreement, Seller covenants and
agrees that it:

(b) will, within 24 hours of its receipt of payment with respect to any
Receivable, forward such payment to AEG by regular mail.

(d) will keep adequate records and books of account in accordance with
GAAP and will maintain such books and records at its principal place of business
as specified in Section 2(h).

(g) will furnish to AEG:

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(A) promptly after the commencement thereof, written notice of all
actions, suits, and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, in
excess of $10,000 affecting Seller.

(B) written notice of any change in the officers or owners of
Seller within five (5) days of the occurrence of any such change.

(C) such other information respecting the condition or operations
financial or otherwise, of the Seller as AEG may from time to time reasonably
request.