FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) and (g) of the Securities Exchange Act of 1934
WHY USA FINANCIAL GROUP, INC.
____________________________________________
(Name of Small Business Issuer in its charter)
Nevada 87-0390603
________________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
8301 Creekside, Unit 101, Bloomington, Minnesota 55437
_______________________________________________ __________
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (952)841-7062
________________
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered Each class is to be registered
None None
______________________ ______________________________
Securities to be registered under Section 12(g) of the Act:
Common
________________
(Title of class)
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ITEM 3. DESCRIPTION OF PROPERTY
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 5. DIRECTORS, EXECUTIVE, OFFICERS, PROMOTERS AND CONTROL PERSONS
ITEM 6. EXECUTIVE COMPENSATION
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 8. DESCRIPTION OF SECURITIES
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
ITEM 2. LEGAL PROCEEDINGS
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS RECENT SALES OF
UNREGISTERED SECURITIES
ITEM 4. RECENT SALE OF UNREGISTERED SECURITIES
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
PART F/S
PART III
ITEM 1. INDEX TO EXHIBITS
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Introduction
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WHY USA Financial Group, Inc. is in the business of providing
comprehensive real estate services primarily for real estate brokers and their
sales agents and customers. The business is currently conducted through two
recently acquired, wholly-owned subsidiaries: Northwest Financial, Ltd., which
offers residential mortgage loan services principally as a loan originator,
and WHY USA North America, Inc., which offers a real estate franchise program.
The Company's franchise sales are regulated by the Federal Trade Commission.
as well as applicable state statutes.
Inception and History
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WHY USA Financial Group, Inc. (the "Company") was incorporated in Nevada
on January 6, 1983 as Triam, LTD. ("Triam") for the purpose of marketing a
newly discovered gemstone called Damsonite. Triam's sole shareholder at
inception was a Utah corporation named Black Butte Petroleum, Inc. ("Black
Butte") which was founded on September 30, 1980, for the purpose of acquiring
mineral properties and interests. Prior to its formation of Triam, Black
Butte conducted business for three years beginning with a public offering of
15,000,000 shares of its common stock at $.01 per share. The offering closed
with $150,000 in gross proceeds on November 20, 1980, and was made only to
residents of Utah in reliance upon the exemption from registration provided
for under Section 3a(11) of the Securities Act of 1933. The offering was also
registered with the Utah Securities Division. Black Butte purchased various
mining leases and interests in the State of Utah with the offering proceeds.
On March 4, 1983, in preparation for a contemplated merger with Black
Butte, the Company amended its Articles increasing its capitalization from
25,000,000 shares authorized, par value $0.001, to 100,000,000 common shares
authorized par value $0.001. The Company completed its merger with Black
Butte on March 7, 1983 which included the conversion of each of the 19,500,000
outstanding shares of Black Butte into 19,500,000 shares of the Company, the
dissolution of Black Butte, and the return to the Company's treasury of the
750,000 shares issued to Black Butte at the Company's inception. On March 29,
1983, the Company amended its articles expanding its business purpose. The
Company failed to file its Articles of Merger with the State of Nevada until
November 9, 1999.
The Company continued with its expanded business purposes which included
the holding of mining leases in the Cottonwood Canyons in Utah, interests in
drilling programs in Wyoming and Oklahoma, and the marketing of Damsonite
gemstones and a counterfeit bill detector. The Company later acquired
additional mining claims, distribution rights for Hawaiian commemorative
coins, investment stock in various Utah-based enterprises, an inventory of
historical books, and a lease/purchase of recreational/resort property in
Midway, Utah. In the late 1980s, the Company's operations proved unprofitable;
it became inactive in 1990. At such time the Company also reverse split its
outstanding common stock on a one for twenty-five basis.
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Acquisition of Northwest Financial Ltd.
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On December 31, 1999, the Company completed the acquisition of Northwest
Financial, Ltd., a residential mortgage origination company which incorporated
under the laws of Minnesota on October 20, 1998 as Northwest Property
Development Group, Inc. At the time of the acquisition transaction,
Northwest Financial, Ltd. was completing its own acquisition of a corporation
known as WHY USA North America, Inc. Included in the completion of the
Company's acquisition of Northwest Financial Ltd. were: (1) a name change of
the Company to WHY USA Financial Group, Inc.; (2) an increase in the Company's
capitalization from 100,000,000 common shares to 300,000,000 common shares,
par value $0.001, and the addition of 50,000,000 non-voting preferred shares
with no par value; (3) the acquisition of all of Northwest Financial, Ltd.'s
assets, liabilities and outstanding stock through the issuance of 10,000,000
of the Company's common shares; and (4) the election of a new Board of
Directors comprised of individuals associated with Northwest Financial, Ltd.
and WHY USA North America, Inc. The acquisition was conditioned upon
completion of Northwest Financial, Ltd.'s acquisition of WHY USA North
America, as discussed below. The transaction was effected through an
acquisition agreement dated December 16, 1999, and an addendum, dated December
20, 1999. The Company's Articles were amended on January 10, 2000 to effect
its name change and increase capitalization.
Northwest Financial, Ltd.'s Acquisition of WHY USA North America, Inc.
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On December 31, 1999, Northwest Financial Ltd. completed its acquisition
of WHY USA North America, Inc., a Wisconsin corporation formed on July 1, 1998
for the purpose of providing franchised real estate services. The
acquisition was accomplished through the purchase of all of the outstanding
shares of WHY USA North America from its three shareholders for a combination
of cash and promissory notes equaling $2,026,400, by Donald Riesterer. Mr.
Riesterer contributed the purchased shares of WHY USA North America to
Northwest Financial, Ltd. for 90,000 of its common shares. He then sold his
shares in Northwest Financial, Ltd. to the Company as part of its acquisition
of Northwest Financial, Ltd. WHY USA North America is wholly owned subsidiary
of Northwest Financial, Ltd.; as a result, both companies are wholly owned
subsidiaries of the Company. Mr. Riesterer is now the Company's Chief
Executive Officer and a director. The transaction was effected through a stock
purchase agreement entered into on September 24, 1999 and amended on December
30, 1999.
Voluntary Filing of this Registration Statement
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The Company has elected to file this Form 10-SB registration statement on
a voluntary basis in order to become subject to the reporting requirements of
Section 13 of the Securities and Exchange Act of 1934, as amended. The primary
purpose for this is the Company's intention to apply for a listing on the
National Association of Securities Dealers Over-the Counter Bulletin Board.
Forward Looking Information
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This registration statement contains certain forward-looking statements
relating to the Company that are based upon beliefs of the Company's
management as well as assumptions made by and information currently available
to the management. When used in this registration statement, the words
anticipate, believe, estimate, expect, and similar expressions, as they relate
to the Company and the Company's management, are intended to identify forward-
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looking statements. Such statements reflect the current view of the Company
with respect to the future events and are subject to certain risks,
uncertainties, and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward looking statements.
BUSINESS OF REGISTRANT
Principal Products or Services and Their Market
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Introduction
The Company provides comprehensive real estate services through two wholly
owned subsidiaries: Northwest Financial, Ltd.("NWF"),which offers residential
mortgage loan services principally as a mortgage loan originator, and WHY USA
North America, Inc. ("WHY USA NA"), which offers a real estate franchise
program. The franchise program utilizes a proprietary plan of operation which
consists of listing, selling, marketing and management techniques supported by
a comprehensive plan of assistance that includes training programs and a
variety of copyrighted marketing and educational materials (the "WHY USA
System"). The Company also intends to incorporate or acquire a third
subsidiary which will offer real estate title and insurance policies, and may
also establish or acquire additional entities to provide other real estate
related services.
Business Strategy - "Bundled" Real Estate Services
The Company's business strategy consists of developing and providing
"turnkey" residential real estate services and support to its network of
franchised real estate brokers and to all home buyers and sellers involved
with the Company's franchisees or directly with the Company. Because offering
"bundled" services has become an effective method of achieving market
penetration in many industries including the real estate industry, the Company
intends to offer its franchisees and their real estate customers a complete
real estate package of one-stop "bundled" services through its subsidiaries.
Currently, the Company's 66 franchisees: (1) utilize the Company's innovative
and proprietary WHY USA System; (2) are provided franchise support through the
Company and/or regional representatives, and (3) have loan origination
services available to them through NWF at its Minnesota office. The Company
is now positioning itself to expand its operations by offering its franchisee
and real estate customers a more complete package of "bundled" services. The
services will include not only its unique franchised real estate listing and
sales program with enhanced support services, but also full mortgage
origination services, owner and mortgagor title insurance, and mortgage and
homeowner insurance policies. The Company will accomplish this by placing
loan origination personnel on-site with franchisees, by acquiring or founding
a third subsidiary which will provide insurance services, by expanding
support services through various means including a telemarketing program, and
by acquiring other real estate services if warranted. The Company's goal is
to expand its franchise program and establish a significant national presence
in the industry; management believes offering "bundled" services will help
accomplish this goal.
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The WHY USA Franchise Program and System
-The Company's Ownership of the WHY USA System-
The primary focus of the Company's business is its WHY USA franchise
program under which franchisees are entitled to utilize the Company's unique
WHY USA System. The WHY USA System was developed in several steps beginning
with its introduction in 1988 by WHY USA, Inc., an Arizona corporation,
through its own non-franchised real estate office. WHY USA, Inc. granted
rights to license the WHY USA System to one of its affiliates, WHY USA
Franchise Corporation, an Arizona corporation which was formed in 1988 for the
purpose of franchising in Arizona. WHY USA Development Corporation was formed
in October of 1989 for the purpose of franchising the WHY USA System
nationally. Mr. Greg Hague was the developer of the WHY USA System, and the
founder and a principal in each of the foregoing Arizona entities. None of the
Arizona entities are affiliates of the Company or its subsidiaries.
Through a series of transactions beginning in December 1996 through
February 1998, WHY USA NA (then a partnership owned by Douglas Larson, Emil
Gluck and David O. Thomas) and Mid America Realty (a corporation owned by
David O. Thomas) acquired ownership of the WHY USA System which included the
WHY USA trademark, copyrighted materials, supplier agreements and the
assignment of existing franchise agreements. WHY USA North America, the
partnership, was assigned Mid America Realty's interest in the WHY USA System
in late April 1998; and, upon formation of WHY USA NA, the corporation, on
July 1, 1998, all of the partnership's ownership in the WHY USA System was
transferred to the corporate entity by the partners who became its sole
shareholders. The trademark was assigned to WHY USA NA in September 1998. WHY
USA NA now has all right title and interest to the WHY USA franchise system
subject to (1) an exclusive license granted in the State of Arizona, and (2)
various regional rights granted to certain individuals/entities entitling them
to a percentage of initial franchise fees and/or a percentage of transactions
fees generated by certain franchisees in their respective territories.
-The Why USA System-
The WHY USA System utilizes a confidential plan of operation to assist
independent real estate brokers and/or agents. It consists of a number of
successful listing, selling, marketing and management techniques developed
over the years and supported by a comprehensive plan of assistance that
includes an ongoing sequence of training programs and a variety of copyrighted
marketing methods and educational materials. These techniques are frequently
supplemented by new techniques or refinements which then become a part of the
WHY USA System. The System involves the use of the "WHY USA" name and service
marks. Franchisees may also participate in joint marketing and educational
programs and receive access to newly developed promotional and training
materials. Franchisees will also receive the benefit of newly developed
franchisee support as it is introduced into the WHY USA System. The Company
believes its WHY USA System to be unique and proprietary in nature and made
application for provisional patent protection on the WHY USA System in January
20, 2000. The WHY USA method for listing real property offers selling
owners three basic options:
* "$990-For Sale by Owner Plan". Under this plan, the seller pays a
flat fee of $990 for which the WHY USA franchise office provides
signs, and other printed information and professional real estate
forms, general advice about sale of the property, and allows the
agent to assist the seller in advertising and showing their homes.
The program allows the seller to host its own open houses and
buyers are referred to the agent.
* Full Service Listing. The full listing plan allows the agent to
list the property on the Multiple Listing System, conduct showings
and open houses and take all steps associated with an agent listing
sale and is offered at a discounted commission of 5.9%. The full
service plan also has additional options for reduction(s) in the
5.9% commission: if seller allows the Company to finance the
mortgage on a home he may be purchasing, seller would receive a
reduction in commission; seller may elect to pay a set
non-refundable fee that will reduce the commission; seller may
reduce commission further if he allows the Company to assist in
buying a new home. The seller may use any or all of the foregoing
and receive a reduction on the commission for each option seller
elects to use.
* Hybrid Plan. This plan allows the seller to continue to try to
sell his home to a friend or relative or acquaintance while the
agent commences the full listing process. If the seller finds a
friend, relative or acquaintance to purchase the property, he pays
only the flat fee of $990. If the agent finds a buyer first, the
seller pays the agreed upon commission price.
The WHY USA SYSTEM also includes a 29 DAY FAST SALE PROGRAM in which the
seller agrees to offer a bonus commission to the selling agent to conduct four
(4) consecutive open houses and to price their home based on three (3) recent
comparable sales in the market area.
-Availability and Cost of WHY USA Franchise-
WHY USA franchises are available to all licensed real estate brokers and
their agents who must review a Franchise Offering Circular and enter into WHY
USA Franchise Agreement in order to conduct business under the WHY USA name
utilizing the WHY USA System. The initial fee for a WHY USA real estate
franchise office is $9,900. (In 1998, initial franchise fees ranged from
$6,500 to $9,500.) Franchisees also pay ongoing transaction fees to the
Company based on flat fee per transaction or a percentage of commission
revenues, whichever is less, provided they must pay a minimum monthly fee.
Transactions are defined as any closing or rental as a listing or selling
agent, any referral or advance fee received from a client and any consulting,
assistance or materials purchase fee related to leasing or selling a property.
The Company provides substantial initial and ongoing support including
assistance with office location, provisions of the confidential WHY USA
Operations Manual, a training seminar for new franchisees, training and
promotional videos and brochures, sample marketing materials, continuing
advisory assistance regarding operations, supplemental marketing and
advertising materials, and advice about the purchase of a suitable computer
system with good Internet access capability. The Company may also provide
financial assistance to a qualified purchaser or become a 50% partner with a
franchisee.
-Current WHY USA Franchise Offices-
The Company currently has 71 franchisees of which almost two-thirds are
located in Minnesota and nearby Midwestern states, with remaining franchisees
spread throughout the country. The Company has no material presence in the
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Eastern and Southern states. Current franchisees include approximately 600
full and part-time agents, and generate a total of approximately 300 to 400
monthly real estate transactions. For additional information on the
Company's WHY USA franchisees, see this PART I, ITEM 1. DESCRIPTION OF
BUSINESS, "Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements, Labor Contracts."
The Company's Mortgage Service
The Company's mortgage origination activities are conducted by NWF based
in Minneapolis, Minnesota. NWF's primary mortgage financing operations to
date consist of residential mortgage originations in Minnesota and Wisconsin.
NWF typically processes mortgage loan applications through one of a number of
mortgage lenders with which it conducts business, acts a underwriter for the
mortgagee client, and promptly sells the loan to the third party mortgage
lender who usually funds the loan directly to the borrower. NWF normally pays
for the credit report, property appraisal, and expenses of processing and
underwriting the loan. NWF does not service any of the loans it originates,
and, in some cases, is not responsible for the underwriting.
Management believes that its mortgage origination business will assist the
Company substantially in expanding its WHY USA real estate franchise business
because it gives franchisees another source of revenues and enables them to
provide an additional service to their customers; it will also provide a
continual source of mortgage loan origination fees to the Company. The Company
intends to have a qualified mortgage loan originator in each of its franchisee
offices. Loan originators will earn established fees based on the volume of
loan originations which are successfully closed due to their efforts.
Mortgages placed by the Company for customers of WHY USA franchisees also
benefit their customers because the Company can provide them with an
additional discount of 1/2% of the real estate commission in consideration for
using the Company's mortgage origination services. Franchisee customers,
however, are not required to use WHY USA mortgage origination services. In
addition to anticipated business from WHY USA franchisees, the Company will
continue to obtain origination fees from its own direct sales of mortgage
services to other borrowers, especially in regard to secondary and refinanced
mortgages.
Title and Other Insurance Services
The final element of the Company's "bundled" services is to offer title,
mortgage and homeowner insurance to clients of the WHY USA franchise offices.
The Company is currently developing relationships and alliances with selected
national insurance companies to carry and resell their insurance policies to
WHY USA clients as well as other direct clients the Company may develop
independently. The Company has established a working relationship with a
large national title insurance company, Commonwealth Land Title Insurance
Corporation to underwrite those policies sold to the Company's customer base.
The Company also has developed a relationship with Prime One Home Warranty to
provide home warranty services to its customers. Franchisees generate
additional revenues each time they use either of the foregoing entities. An
immediate goal of the Company is the organization or acquisition of a title
and insurance subsidiary.
Distribution Methods of the Products or Service
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The market for the Company's WHY USA real estate brokerage services is
anyone buying or selling real estate. The Company has conducted no
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independent third party marketing studies regarding the marketing of its
services and is relying on management's familiarity with the industry, the
results of operations of the two subsidiaries prior to their acquisition by
the Company, and its own analysis of the current real estate market to
establish its marketing plans.
The Company distributes its product in three ways: (1) by providing
support and promotion of the WHY USA System to current franchisees; (2) sales
of franchises, and (3) by generating mortgage financing business both to
franchisees and their customers as well as to persons not being served by a
WHY USA franchise.
Franchisee Support
The Company's primary marketing focus is franchisee support. The Company
now utilizes or will utilize the following to provide support to its
franchisees:
* Telephone and On-site Technical Support - Franchisees receive
telephone and on-site technical support as well as professional
training videos emphasizing services and advantages of the WHY USA
real estate franchises.
* Telemarketing - The Company is developing a permanent
telemarketing operation to conduct regular telemarketing into the
territories of the WHY USA Franchisees to generate both real
estate listing and mortgage origination leads for them. The
Company currently has six part-time telemarketers who work out of
a small office in Sebeka, Minnesota; the Company intends to hire up
to 25 additional employee/telemarketers who will work out of the WHY
USA NA office in Menomonie. It expects to hire the first five (5) of
these full-time telemarketers during the summer of 2000. The Company
utilizes lists generated by WHY USA open houses which it shares with
other sellers through telemarketing; it also purchases "for sale by
owner" lists which are compiled by a company in Utah through a
database of newspaper classified ad listings by owners selling their
own homes.
* WEB Site - The Company has established two (2) web sites:
www.WHYUSA.com and www.WHYUSA.org. The web sites currently
advertise the advantages of the WHY USA system of listing and sales
emphasizing its $990 For Sale By Owner Program. The sites also
provide links to an office locator, real estate information, and
information about owning a WHY USA franchise. In the future, all of
the WHY USA bundled services will be accessed by all of the
Company's franchisees and their clients through these web sites
including on-line loan application.
* Promotion/Advertising - Although neither the franchisee nor the
Company is required to provide advertising under the terms of the
Franchise Agreements, the Company dedicates a small portion of its
budget each year to advertising/promotion in an effort to increase
name recognition on national, regional and local levels and to help
generate business for franchisees. Most of this effort is
consolidated in its promotional materials. The Company spent
approximately $10,000 on advertising and promotion efforts in 1999.
The Company has established in its updated franchise offering
circular the requirement of franchisees to contribute an
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amount not less than $50 nor more than 10% of its monthly
transaction fees to an national advertising fund. No fund has been
established as of this date.
* Forums and Seminars - The Company hosts both national and regional
forums/seminars for franchisees and agents. The Company's most
recent national forum was held in Las Vegas in early 2000 and was
attended by 110 individuals representing 45 WHY USA real estate
franchise offices. The Company's current plan is to host regional
seminars four times per year in various parts of the country for
training of new and existing agents of WHY USA franchisees. A
regional training seminar is being held in Minnesota in June, in the
Eastern US during September, and in the West during December. It is
likely one or more of the regional trainers will host or assist with
the Western forum.
* Special Franchisee Assistance - Occasionally the Company will assist
certain franchisees with marketing in their locale. During 1998,
the Company invested $30,000 in marketing and promotional assistance
for a California franchisee with positive results: the franchisee's
business increased significantly and it hired two new agents.
Franchise Sales
-How Franchises are Sold-
The Company intends to expand franchises into existing markets as well as
new areas of the United States. The Company has sales representation
agreements and/or sales directors agreements in effect with seven (7)
individuals/ entities including two new agreements with sales
representative/employees. Leads are generated by the sales representatives
who, under the terms of their respective representation agreements, complete
the sale of franchise in a manner which complies with the Company's policies,
or gives the leads to the Company to complete the transaction. Compensation,
in general, is commiserate with the nature of the service required of and
performed by the sales representative, usually a percentage of the initial
franchise fee or a commission. Some of these sales representatives/directors
also have certain obligations to provide support to franchisees in their
territories, or to sell a quota of franchises each year. Individuals who have
obligations to provide support services in their territory, in general,
receive both a percentage of the initial franchise fee and also a percentage
of the transaction fees paid to the Company by franchisees in their territory.
The Company has sold six (6) franchises in this fiscal year 2000 as a result
of the efforts of a sales representative/employees. (See "Regional Sales
Representative/Director Agreements", below.)
Franchise sales are also made by various individuals at the WHY USA NA
offices. These sales are made in areas which are not subject to sales
representation agreements or in which the agreements do not grant exclusive
rights to sell franchises (currently none of these territories are exclusive),
and are based mostly on referrals and inquiries. The majority of any referral
sales are/will be handled by David O. Thomas and Don Riesterer who are both
officers and/or directors of the Company, and Mr. Jay Luck, an independent
contractor who provides services to the Company. David O. Thomas is also
responsible for training new WHY USA franchisee owners and agents and
supervising the opening of new franchises which are sold by sales
representatives or assigning that responsibility to a trainer/ consultant.
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The Company does not solicit franchise sales except in those states where
it has registered its Franchise Offering Circular.
-Franchise Offering Circular-
The Company offers its franchises through its Franchise Offering Circular
which must be reviewed by the Federal Trade Commission and updated a minimum
of once every 12 months; the WHY USA NA Franchise Offering Circular was
updated on March 31, 2000 and filed with the Federal Trade Commission. The
updated Franchise Offering Circular must also be provided to those states in
which the Company is registered to sell franchises or where it is required to
maintain a current circular on file. Potential franchisees go through a four
step process when applying for a franchise which includes (1) a preliminary
questionnaire to establish eligibility; (2) an examination of the WHY USA
marketing program;(3) the receipt and review of the Franchise Offering
Circular; and (4) application for the franchise. The Company, in approving a
franchisee's application, assigns a geographical area which is inserted into
the franchise agreement and includes a one mile radius "protected area."
-Franchise Agreement -
Franchise Agreements are executed as between the Company's subsidiary, WHY
USA NA and each new franchisee. Existing franchisees are required to renew
their agreements with the Company every three years, although renewals may
contain certain special provisions, as applicable, which may have been a part
of the renewing franchisee's initial franchise agreement. The basic terms and
conditions in the Company's current franchise agreement are as follows and
each reference to the Company in this discussion shall mean the Company's
subsidiary, WHY USA NA, as a party to the franchise agreement.
1. Term - three years; renewable for three (3) additional 3-year terms
with written notice to the Company prior to expiration, and is without
additional cost provided franchisee has complied with its obligations under
the franchise agreement.
2. Franchisee operates only under a trade name approved by the Company and
is prohibited from using "WHY" or "USA" in any corporate name.
3. Franchisee receives a "protected area"; the Company cannot grant
another franchisee a location in the "protected area."
4. Franchisee opens its office within 120 days of the agreement.
5. The Company agrees to: provide franchisee with a manual and training
materials and sample marketing materials; provide franchisee with initial
training library video or audio tapes and supervise franchisee with respect to
the information contained in the same; provide an initial training seminar at
a location chosen by the Company and paid for by the Company, except
franchisee pays travel expenses and lodging of their agents; provide
supplemental marketing and training material from time to time; provide
advisory assistance to franchisee at its discretion. The Company has the
right to establish an advertising fund.
6. Franchisee agrees to: pay an initial franchise fee of $9,900; submit
reporting forms and pay the lesser of $95 per transaction or 6% of revenues
received from each transaction; submit report and make payment to the Company
by the tenth day of each month based upon calculations on revenues received in
the preceding month; pay a minimum of $325 in fees in each month; pay not less
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than $50 per month or more than 10% of transaction fees per month into an
advertising fund if established; and, pay a $2,500 transfer fee upon an
approved transfer of the real estate franchise. Transaction is defined as a
commission received upon closing or rental as listing agency; a commission
received upon closing or rental as selling agency; a referral fee received; a
retainer or advance from prospective seller or buyer, lessor or lessee (which
may be deducted from "final" transaction fee paid on closing of the related
transaction);franchisee pays 1.5% transaction fee on a commission received
from the sale of a nonresidential property.
7. Franchisee's obligations: completion of initial training seminar prior
to commencing business; operation of franchise in accordance with standards
set by the Company; assisting the Company in protection of its trademark;
implementation of substitute marks or changes to marks at its own expenses
within one year; include WHY USA logo, 990 SELLS HOMES and the slogan
"Independently Owned and Operated" on promotional materials; the purchase at
its own expense of hardware, software, dedicated phone lines, modems, printer,
etc. as specified by the Company; duty not to operate a web site or internet
presence without prior written consent of Company as to use and content; act
as or designate and maintain a licensed real estate broker for the franchise
office; make an independent determination of that marketing and advertising
provided by the Company complies with applicable laws, rules and regulations
before using; maintain and report listings sold, sales and financial
information as prescribed by Company; permit inspection of premises and
records by Company on reasonable notice; permit audit of books and records by
the Company and pay costs of the same if audit establishes a 10% or more
underpayment of fees due the Company; maintain comprehensive public liability
insurance insuring indemnity given by the Company with minimum coverage of
$500,000 bodily injury liability and $100,000 property damage liability with
WHY USA designated as additional named insured; make purchases of supplies
from approved suppliers if designated by the Company or meet minimum
requirements as established by the Company.
8. Franchisee acknowledges proprietary nature of the WHY USA System and
agrees to keep confidential except information specifically designed
to be promoted to the public; franchisee also acknowledges that the WHY USA
System is exclusive property of the Company and that franchisee has no
interest therein; franchisee will not register or license to others the use of
the WHY USA System or trademark nor do anything to diminish the Company's
right to use or value of the trademark.
9. Franchisee makes representations regarding: availability of Franchise
Offering Circular and attachments including franchise agreement and
acknowledgment that neither the Company nor its employees or agents has made
any representations regarding projected revenues or earnings.
10. The franchise agreement may be terminated upon expiration of the term
or one of the following: mutual consent; upon 15 days notice by the Company
specifying a default by franchisee; immediately if franchisee becomes bankrupt
or insolvent, is convicted of or pleads guilty to any felony or criminal
misconduct relevant to the real estate business, makes a material
misrepresentation or omission in the franchise agreement, breaches any
provision of the non-compete covenants or confidentiality provisions of the
franchise agreement, fails to timely submit reports three or more times in a
12 month period, or abandons or closes business.
11. Upon termination franchise automatically terminates and reverts to
the Company and all monies owed by franchisee are immediately payable.
Franchisee at its own expense shall: discontinue use of the WHY USA System and
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trademark; return training and marketing materials; delete/disconnect web
sites if the same had been permitted; pay all monies due the Company; maintain
required records for one year and allow inspection thereof; abide by
non-compete covenants and confidentiality provisions for the specified period
in the franchise agreement; cancel all assumed names or equivalent
registrations used in connection with any name or trademark of WHY USA; comply
with obligations to clients under existing agreements.
12. Franchisee agrees not to participate in any capacity in any other
residential real estate brokerage business during the term of the franchise
agreement without prior written consent of the Company; for two years after
the expiration or termination of the franchise agreement franchisee will not
participate in any business which copies or imitates the names, methods or
discount plan of WHY USA, or the fee structure of WHY USA System.
13. Franchisee may sell franchise to a qualified franchisee approved by
the Company upon payment of a $2,500 fee if: transferee executes a franchise
agreement and assumes its obligations of franchisee; franchisee is not in
default on payments to the Company; and transferee meets WHY USA criteria.
14. The Company has right to sell all or some of its obligations under
the franchise agreement including to a regional manager.
15. The franchise agreements also provides for: modification by mutual
agreement of the parties; disputes to be settled by arbitration; all terms of
the franchise agreement including exhibits and expressly referenced documents
are binding.
-Trainer Consultation Agreements-
To assist the Company in opening new franchises, the Company has
consultation agreements with three individuals. These individuals are each
owners of a WHY USA franchise themselves and have agreed to provide, upon
request by the Company, certain training and consulting services to new
start-up franchises and to coordinate regional forums.
-Regional Sales Representative/Director Agreements-
To assist in franchise sales and support, the Company has the following
agreements in effect granting non-exclusive rights to sell and/or service
franchises in certain territories, and to receive one or more of the
following: a percentage of initial franchise fees, a commission on initial
franchise fees, and/or a percentage of transaction fees generated by certain
of the WHY USA franchises within a territory:
1. THE JARVIS AGREEMENT WHY USA NA is the successor party to an
agreement between Jerry Jarvis and Mid America Development Corporation, dated
April 30, 1998. WHY USA NA purchased all rights owned by Mid America
Development and Dale & Carol Erks in November of 1998 which resulted in WHY
USA NA becoming the successor party to the existing agreement with Mr. Jerry
Jarvis. The agreement
* requires that Jarvis meet a quota of sales and maintenance of seven
(7) franchises during the first 3.5 years following the execution
date;
* grants Jarvis the right to offer and sell franchises in Minnesota
and 30% of the initial franchise fees for franchises sold by him;
and grants Jarvis 30% of the revenues received by the Company from
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franchises sold by him in his territory, provided the sales and
maintenance quota is maintained.
* obligates Jarvis to perform certain training and support services
for those franchises he has sold.
* reduces by on-half the 30% of revenues from transaction fees to
which Jarvis is entitled to until such time as the quota is met and
waives obligations to provide support services during that time
period.
Jarvis has sold only one franchise and is paid one-half of 30% of the revenues
paid by such franchisee to the Company. The Jarvis agreement is not exclusive
and contains a non-compete clause which survives any termination of the
agreement for two years.
2. The BUTTS AGREEMENT - WHY USA NA is also the successor party to a
second agreement between Mid America Development Corporation and a regional
representative, Diane Butts, dated April 28, 1998. The terms of the agreement
are the same as those of the Jarvis Agreement above. Ms. Butts has sold only
one franchise and is entitled to one-half of 30% of the transaction fee
revenues generated from such franchisee. The Company is currently negotiating
with Ms. Butts for repurchase of the territory.
3. THE ERKS AGREEMENT -As part of the purchase of rights granted to Mid
America Development Corporation/Dale and Carol Erks on November 9, 1998, the
Company agreed to enter into a regional manager agreement with Mr. Erks which
it consummated on November 17, 1998. The agreement with Mr. Erks
* granted him franchise sales rights and compensation for those sales
in Minnesota and Wisconsin;
* granted him the right to 30% of transaction fees collected by the
Company from franchises which he has sold in Minnesota and
Wisconsin.
* made the rights in Minnesota exclusive for the first year (although
exclusive nature expired on November 17, 1999 for failure to meet
certain sales quotas)
* expires two years from execution with Erks continuing to receive his
30% of transaction fees from those franchises which he sold after
the termination unless the Company buys all of his rights under the
agreement.
* grants the Company the right to purchase Erks' rights at the
expiration of two years at a price equal to four times Erks' net
income under the agreement during the previous year.
As of this date, Mr. Erks has sold only one franchise in this territory.
The Erks agreement contains a non-compete clause which survives any
termination of the agreement for two years.
4. THE MAINSTREET REALTY AGREEMENT - The Company is the successor party
in a regional director agreement between WHY USA Development Corporation and
Larry Day/Dean Molinsky (dba Mainstreet Realty) which was executed in August
of 1992. The agreement grants Molinsky/Day the right to receive 35% of all
revenues paid to the Company by WHY USA offices in their region in exchange
for advice and assistance regarding the development of the WHY USA business as
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and participation in strategic planning and training for WHY USA franchise
owners in their territory. There are currently five WHY USA franchise offices
in their territory which is comprised of Nebraska and parts of Iowa. The
agreement is in effect so long as Day/Molinksky continue to meet their
obligations under the agreement and continue to own and operate a WHY USA
franchise. The agreement is non-exclusive and does not contain any
non-competition clauses although it does have a confidentiality clause.
5. THE O'HERN AGREEMENT - The Company is a successor party to a regional
director agreement between WHY USA Development Corporation and Joe O'Hern
which was executed in January of 1993. The agreement grants O'Hern the right
to receive 35% of all revenues paid to the Company by WHY USA offices in their
region in exchange for conduct of regional leadership conferences and
provision of training for WHY USA franchise owners in the territory. O'Hern is
also permitted to sell franchises and grant approved locations and protected
areas in his location. There are 10 franchisees in the O'Hern territory for
which O'Hern receives 35% of transaction fees. The Company is currently
concluding the purchase of the O'Hern territory for $75,000 which will be paid
in the form of units of stock and warrants in its current offering. The O'Hern
territory is comprised of territories within of Iowa and Nebraska.
6. REGIONAL SALES EMPLOYMENT AGREEMENTS - The Company is a party to two
regional sales/employment agreements which grant the right to sell franchises
and collect a $2,500 - $2,750 commission on sales. The agreements are with
Donna Dwyer VanZandt for the State of Texas and Marvin Hansen for Wisconsin
and Michigan. The agreements are non-exclusive and grant each individual
specified compensation, a commission on franchise sales, and a specified
monthly expense allowance; two of the agreements allow for bonuses for
certain sales quotas. There are no rights to a percentage of transaction fees
granted under these agreements.
7. "UNDERSTANDINGS" RE: FRANCHISE SALES WITH KEY PERSONNEL AND
INDEPENDENT CONTRACTORS- The Company has an understandings with certain
members of management that they will receive a percentage of or commission on
initial franchise fees for those franchises sold by them.(See "Certain
Relationships and Related Transactions.") The Company also has an
understanding with two individuals who act as independent sales agents and who
receive $2,500 for each franchise sold by them.
Interest Generated by Web Site/Name Recognition
Some franchise interest has also been generated from the WHY USA web
site. The Company has responded to approximately 61 inquiries on the web site
since January 1, 2000. The Company expects to continue to generate interest
from the website. The Company also generates leads for franchise sales based
on WHY USA name recognition which has stimulated calls to the Company's office
regarding franchisee applications.
Participation in Industry Trade Shows
The Company participates in selected regional and national industry trade
shows such as the national franchise convention and the national real estate
convention where it displays and markets via trade booths.
Loan Origination
Most of the Company's residential loan origination business is achieved in
the Minnesota and Wisconsin area and is based on existing reputation and
referrals in the industry. It also received referral business and applications
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directly from its WHY USA offices although the majority of the franchisees who
utilize NWF for this purpose are currently located in Minnesota and Wisconsin.
One way the Company intends to distribute its loan origination services is
through the placement of qualified loan origination agents at each WHY USA
franchise office. The Company currently has one loan origination agent at the
office of one of its Minnesota franchisees. The Company hopes to have several
more qualified agents at various WHY USA franchise offices within the next six
months. Timing on such placement will be based on the Company's ability to
meet mortgage broker licensing requirements in each of the individual states
where the Company intends to operate its loan origination business. Some
states will also require licensing of the individual agents.
Until the Company achieves its goal of a mortgage loan originator for each
franchisee, franchisees can utilize the Company's office in Minnesota for loan
origination if they wish. Franchisees earn a commission on mortgage
applications completed by them and placed through NWF. The Company also
intends to make mortgage loan applications available through its web sites.
The Company has not yet determined when loan applications will be processed
through its web site.
Competitive Business Conditions/Competitive Position
in the Industry/Methods of Competition
- ---------------------------------------
The Company faces extreme competition on national, regional and local
levels. Competition will come from companies which offer similar multiple
real estate services. The Company will compete on three levels: (1) market
share for franchise sales, (2) market share for real estate transactions, and
(3) market share for loan origination.
Real Estate Market Competition
There are many real estate franchise companies which have a large presence
at the national level and have far more financial resources, personnel, and
experience than the Company. These companies also have the ability to respond
quickly to industry trends, and have, in response to such trends, begun
offering a wider variety of "non-traditional" or "associated" real estate
services to their clients. Many of these companies also offer mortgage loan
services themselves or through affiliates. They also have larger advertising
budgets, a stronger national presence, and more internet services available to
their clients including loan origination at their web sites. These larger
companies are in the financial position to organize, acquire, and/or provide
additional nationwide services faster and sooner to their clients than the
Company will be able to. Some of the Company's national competitors include
Coldwell Banker, Prudential, Better Homes & Gardens Real Estate, Century 21,
and ReMax. Each of these companies is larger, offers similar and more
"bundled" real estate related services, and has a stronger reputation in the
industry. Each local franchise office will suffer competition from other
local real estate offices as well as the nationally franchised independent
offices. In Minnesota, two local real estate companies which compete with the
Company are Edina Realty and Burnett.
Competition for Loan Origination
The Company also suffers competition from a multitude of different
business organizations for loan origination market share. The Company must
compete not only with companies which provide such services in connection with
bundled real estate services but with companies which provide such services in
general such as banks and loan institutions as well as a diverse group of
internet companies that provide loan origination services through their web
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<PAGE>
sites. The majority of the Company's loan origination competition as of this
date are local competitors in the greater Minneapolis/St. Paul area as well as
"bundled" loan origination products offered through several national companies
including many of the national real estate franchise companies.
Prior to the Company's acquisition of NWF and during the first quarter of
2000, NWF also competed with Northwest Financial Group Inc., an affiliated
entity. Both entities were owned by Don Riesterer prior to the acquisition
transaction; subsequent to the acquisition transaction, Riesterer became a
principal of the Company and remained Northwest Financial Group's sole
shareholder. On April 1, 2000, Northwest Financial Group ceased conducting
mortgage loan business and is no longer a competitor of the Company.
Methods of Competition - Some Advantages of the WHY USA System
The Company believes its main method of competition is its one-stop
"bundled" services available to its customers/franchisees under the WHY USA
trademark combined with its unique listing and selling method, especially its
$990 For Sale by Owner Plan. The Company hopes that by offering its "bundled
services" and unique method of listing and selling, it will develop a presence
and WHY USA name recognition in the industry despite the extreme competition
it will suffer from several dominant companies offering networked real estate
services. It hopes to target those sellers interested in competitive listing
fees, flexible listing programs and the ability to save money through its
"$990 For Sale by Owner Plan." The following are some of the advantages of its
WHY USA System which the Company believes will help it to compete for market
share:
* Innovative Approach- The For Sale by Owner plan motivates sellers
to hold "open houses" whenever they choose since the WHY USA agent
will handle everything else for $990 if the seller finds a buyer
not working with an agent; buyers not working with agents are
automatically directed to the WHY USA agent.
* Flexibility - Sellers unite with a broker to receive a full listing
service or a "for sale by owner" plan; each option is
competitively priced.
* Value - Sellers receive a mortgage service that is guaranteed to
offer them the lowest available commercial interest rate for which
they qualify. Sellers have certain options available to them which
may further reduce fees.
* Convenience - Sellers receive other real estate related services
such as a full title insurance company which can arrange for title
insurance, document preparation and closing services as requested.
Sellers may also have other related services available as the
Company expands and includes other services in its "bundled" system
as well as national marketing support.
* Extra Income -Franchise offices can generate extra income for their
office through loan origination fees, commissions on home
warranties, as well as other commissions when a buyer uses one of
the Company's other services. They have the advantage of additional
buyers approaching them through "for sale by owner" open houses.
* Franchise Financing - In an effort to promote franchise sales, the
Company also offers its own financing on franchise purchases or the
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alternative of having the Company as a 50% partner in a franchise.
The Company currently has two (2) promissory notes outstanding on
purchased franchises. The Company is not currently a partner in any
WHY USA franchise office but intends to actively seek such
opportunities.
* Name Recognition - The Company has already achieved some name
recognition in the market through its trade mark WHY USA and
through its $990 Program. It was featured in two books: "How to
Sell Your Home in the '90s" by Carolyn Janik and in "Kiplinger's
Buying & Selling a Home" by the staff of Changing Times Magazine.
The Company has also was featured in the following periodicals:
"Smart Money Moves to Make Now" in the Wall Street Journal, Money
Magazine, the Miami Herald, the Real Estate Professional in an
article entitled "The Story Behind WHY USA," in a US News & World
Report cover story "Saving Brokers Fees," and in the Pittsburgh
Business Times.
* Loan Origination - the Company will continue to conduct its loan
origination business as a separate business. The Company has
succeeded in achieving some market penetration in Minnesota and
Wisconsin with its loan origination especially in the area of
refinancing and secondary mortgages. The Company attributes this to
management's market experience.
Sources and Availability of Raw Materials/Names of Principal Suppliers
- ----------------------------------------------------------------------
The Company does not have any supplier agreements currently in effect
although it consistently uses three main vendors who are familiar with the WHY
USA specifications for required materials and use of trademarks and the WHY
USA System. Because franchisees are required to conform to the Company's
specifications, they often use the Company's vendors. These vendors are ADA
Printing and Design, MacDaniel Sign Co., and Fiesta Business Forms. No
franchisee, however, is required to use these suppliers. The Company has
retained the right to designate certain suppliers at its discretion. The
Company and its franchisees often use Commonwealth Land Title, a national
title insurance company, to provide title insurance, and Prime One Home
Warranty, a national company which provides home warranties.
Dependence on a Few Major Customers
- -----------------------------------
The Company is not dependent on a few major customers. It has 66
franchisees which generate revenues for the Company; it also has a multitude
of customers for its mortgage origination business in the Minnesota area many
of which are unrelated to the Company's franchise business.
Patents, Trademarks, Licenses, Franchises, Concessions,
Royalties Agreements, Labor Contracts
- ---------------------------------------
Provisional Patent Application Made
The Company made provisional application on its WHY USA System which was
applied for in January 20, 2000 with the US Patent and Trademark Office.
Provisional patent application protects the Company's right to complete the
application process so long as it is done within one year from the provisional
application.
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Trademark
The Company's trademark was registered by the U.S. Patent and Trademark
Office on the Principal Register as US Trademark Registration Number 1,524,821
on February 14, 1989. The ownership of the trademark was assigned to the
Company's wholly owned subsidiary, WHY USA NA, by the previous owner, WHY USA
Development Corporation, in September of 1998. The assignment was filed by WHY
USA NA with the US Patent and Trademark Office.
Exclusive License Granted in Arizona
WHY USA NA's ownership of the WHY USA franchise rights and system is
subject to an exclusive license granted to WHY USA Development Corporation (a
non-affiliated entity) for franchise sales, revenues from franchise sales and
revenues from transaction fees for the State of Arizona. Such rights were
granted back to WHY USA Development Corporation (the company from whom Mid
America Realty, one of WHY USA NA's predecessors in interest, acquired the WHY
USA System) by Mid America Realty. There is no written agreement in effect
regarding the agreement. The Arizona license was subsequently transferred to
other parties by WHY USA Development Corporation which, in accordance with
existing agreements between WHY USA NA and WHY USA Development, entitled the
Company to 10% of total revenues generated in Arizona. In its transfer of the
license, WHY USA Development Corporation retained the right to receive 25% of
the Arizona revenues. WHY USA Development Corporation subsequently sold its
right to receive 25% of the Arizona revenues to the Company.
The results of the various Arizona transactions are that: (1) an
exclusive license to utilize the WHY USA System and trademark in Arizona
currently exists between the Company and Mr. Tim Doughtery (the transferee of
the Arizona license); (2) Tim Dougherty is entitled to full use of the WHY USA
name and WHY USA System in Arizona including the right sell and service
franchises; and (3)the Company is entitled to receive 25% of all revenues
from franchise sales and transactions fees in Arizona, and 10% of all revenues
from franchise sales and transaction fees generated in Arizona prior to the
25%/75% split, or a total of 32.5% of all revenues generated in Arizona. As
of this date, Doughtery has one franchisee in the State of Arizona.
Rights to Initial Franchise or Transaction Fees Granted Pursuant to Regional
Agreements and/or "Understandings"
The Company currently has seven (7) written sales representative/
regional director agreements in effect with varying provisions, terms of
compensation, and obligations. All of those agreements provide for one or
more of the following with respect to the territory defined in each agreement:
a percentage of franchise sales, a percentage of all or certain specific
transaction fees within the territory, and/or a commission on franchise sales.
The Company also has an understanding with two members of management which
provide for commissions on franchise sales as well as two independent
contractors. The agreements and understandings ultimately provide for varying
commission/percentages on initial franchise fees that range from $2,500 to
$7,500 per sale or between 25% and 76% of the initial franchise fee. Five of
the agreements provide for percentages of transaction fees to be paid which
range from 30% to 35% (which under the terms of two agreements have been
reduced by half because certain sales quotas were not met). As of this date,
the Company pays a percentage of transactions fees to regional sales
representatives/directors on a total of 18 out of its 66 franchises.
Percentages of transaction fees paid equals approximately 4% of its total
transaction fee revenues per month. The Company is negotiating to repurchase
two of these agreements. The Regional Sales Representation/Director Agreements
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are discussed in detail under PART I, Item 1. DESCRIPTION OF BUSINESS,
Distribution Methods of the Products or Service, Franchise Sales.
The WHY USA Franchise
The Company is the owner of one real estate brokerage franchising system,
which is sold and operated under the trademark WHY USA. A summary of the
franchisee status as of January 1, 2000/1999/1998** is as follows:
<TABLE>
<CAPTION>
Cancelled Reacquired Left the Total from Net
or Not by System System Left Operating
State Transfers Terminated Renewed Franchisor Other Columns At Year End
- -------- --------- ---------- ------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1
Alaska 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1
Arizona 0/0/3 4/0/0 0/1/1 0/0/1 0/0/0 4/1/5 0/5/5
Calif. 0/1/2 1/1/0 0/0/4 0/0/0 0/1/0 1/3/6 5/14/12
Colorado 0/0/0 2/0/1 0/0/0 0/0/0 0/0/0 2/0/1 0/2/2
Florida 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
Illinois 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1
Indiana 0/0/0 1/0/0 0/0/0 0/0/0 0/0/0 1/0/0 1/2/2
Iowa 0/0/0 0/2/0 0/1/0 0/0/0 0/0/0 0/3/0 6/6/9
Kansas 0/0/0 0/0/0 0/1/0 0/0/0 0/0/0 0/1/0 0/0/1
Louisiana 0/0/0 0/0/0 0/0/0 O/0/0 0/0/0 0/0/0 1/1/1
Maryland 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1 0/0/1 2/4/4
Michigan 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1
Minnesota 0/0/3 1/5/0 0/1/1 1/0/0 0/2/0 2/8/4 21/21/19
Missouri 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/0
Montana 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1
Nebraska 0/0/0 0/2/0 0/0/0 0/0/0 0/0/0 0/2/0 8/10/11
Nevada 0/0/0 1/0/0 0/0/0 0/0/0 0/0/0 1/0/0 0/1/1
Ohio 0/1/0 1/0/0 0/0/1 0/0/0 0/0/0 1/1/1 3/4/3
Oklahoma 0/0/0 0/1/0 0/0/0 0/0/0 0/0/1 0/1/1 0/0/1
Oregon 0/0/0 0/1/0 0/0/0 0/0/0 0/0/0 0/1/0 1/1/2
Penna. 0/0/0 3/0/0 0/0/0 0/0/0 0/0/0 3/0/0 0/3/3
S.Carolina 0/0/0 0/1/0 0/0/0 0/0/0 0/0/0 0/1/0 0/0/1
S. Dakota 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 1/1/1
Tennessee 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1 0/0/1 0/0/0
Texas 0/0/1 0/0/0 0/0/1 0/0/0 0/0/0 0/0/2 3/2/1
Virginia 0/0/1 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1 1/1/1
Wisconsin 0/0/0 0/1/0 0/0/0 0/0/0 0/1/0 0/2/0 6/3/5
Wyoming 0/0/0 0/0/0 0/1/1 0/0/0 0/0/0 0/1/1 0/0/1
- -------- --------- ---------- ------- ---------- -------- ---------- -----------
Totals 0/2/0 14/14/1 0/5/9 1/0/1 0/4/2 15/25/23 65/86/91
** The Company has sold six (6) additional franchises since January 1, 2000.
</TABLE>
Need for Government Approval/Effect of Existing or Probable
Government Regulations/Costs and Effects of Compliance
- --------------------------------------------------------
The sale of franchises is regulated by the Federal Trade Commission. The
Company must maintain a franchise offering circular in effect which has been
filed with the FTC and is updated a minimum of once every 12 months. In
addition, the following states where the Company may sell franchises are known
to the Company to have statutes which may supersede franchise agreements in
the franchisee's relationship to the Company, especially in regard to
termination or renewal: Arkansas, California, Connecticut, Delaware, DC,
Hawaii, Illinois, Indiana, Iowa, Maryland, Michigan, Minnesota, Mississippi,
Missouri, Nebraska, New Jersey, Rhode Island, South Dakota, Virginia,
Washington and Wisconsin. The Company's WHY USA franchise is currently
approved for sale in California, Illinois, Michigan, Minnesota and Wisconsin
(all states requiring franchise registration) and it is registered in Texas
and Louisiana. Individual agents of WHY USA franchises must comply with rules
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regarding licensing of personnel. The Company spends approximately $10,000
per year on regulatory compliance for sales of its franchises.
The Company's loan origination business is currently licensed as a
mortgage broker in the state of Minnesota where it operates; it is not
required to have any special licenses for its agents in the State of
Minnesota. The Company will be required to license as a mortgage broker in
those states where it intends to conduct loan origination by placing qualified
loan origination agents at WHY USA franchise offices. Some of these states may
also require the licensing of the individuals agents. Cost of such state
registration/compliance will be between $500 and $1,000 for each state not
including associated legal expenses. In providing its loan origination
services the Company must comply with the provisions of the Truth and Lending
Act. There are no special costs to such compliance.
Other regulations which affect the Company are the Securities Act of 1933
which regulates the manner in which it offers securities privately and or to
the public; and the Securities and Exchange Act of 1934, which imposes certain
reporting obligations on the Company once it is a "full reporting" company.
The Company will become subject to reporting obligations within 60 days of the
filing of this registration statement. The Company estimates it will cost it
between $25,000 and $50,000 per year to comply with legal and accounting
obligations under the 1934 Act.
Status of Any Recently Announced Products or Services
- -----------------------------------------------------
The Company has no recently announced products or services other than the
business of its recently acquired subsidiaries which is the only business of
the Company. It is discussed under the various subheadings above.
Research and Development Activities in the Past Two Years
- ---------------------------------------------------------
None.
Total Number of Employees
- -------------------------
The Company currently has 24 full time employees who are not executive
officers of the Company: one (1) is employed by the Company at its principal
office in Bloomington, four (4)are employed by WHY USA NA in administrative
capacities and work out of the Menomonie office, two (2) are regional sales
representative employees who receive both a salary and commissions on
franchise sales, and 16 are employed by NWF as loan processors and other
personnel. The foregoing does not include the Company's executive officers who
serve on an "as needed" basis devoting approximately 30% - 90% of their time
to the Company. The Company has six (6) part time employees who perform
telemarketing and work out of the Company's office in Sebeka, Minnesota. It
also has five (5) contracts in effect with various individuals/ entities who
serve as independent contractor sales representatives/directors for
territorial sales and/or support of WHY USA franchises, and are not considered
employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview - Financial Condition of the Company
- ---------------------------------------------
The Company's business is that of its subsidiaries which were acquired on
December 31, 1999. The Company's results of operations and financial condition
reflect as if those subsidiaries were acquired at January 1, 1998. The
Company's revenues from operations are derived from franchise sales and
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transaction fees from franchisees as well as from loan origination fees
through its subsidiaries. The Company was inactive up until its acquisition of
its subsidiaries which increased its assets from zero to $2,084,134.
Although the Company's consolidated income achieved in its last fiscal
year was over $ 924,000 (not including income from discontinued operations of
$9,372), its net income was only $10,228. The Company does not know whether
this trend of little or no profit margin will continue as it begins its
business expansion. The Company does a higher volume of business in its loan
origination business than in franchise related operations. The franchise fee
revenue stream has been relatively stable for the past two years. An increase
in franchise fee revenues from $289,635 to $366,830 is the result of
additional franchise acquisitions in late 1998. The Company's real estate
franchise fees are earned with a relatively small amount of direct expense.
The resulting gross margin has been used to fund legal expenses to register
the franchise in additional states, fund the expansion of marketing efforts,
pay interest expense on debt utilized to purchase franchises, and compensate
the owners.
The mortgage loan origination fee income is a more volatile source of
income stream. Reduced or declining interest rates directly impact refinancing
activities. Refinancing has accounted for up to 75% of the Company's fee
income from loan originations. Second mortgage loan origination are a
significant source of revenue and are utilized as equity builds in personal
residences to pay credit card or other high interest debt. New mortgage loans
account for 25 - 50% of the fee volume and are based on home sales in the
areas serviced by NWF and, in the future, by WHY USA NA.
Management intends, therefore, to increase both the amount of income
derived from franchisees and the number of WHY USA franchise offices in order
to increase its revenues from that source. The Company expects to expend a
significant amount of financial resources on marketing and expansion in an
effort to increase its WHY USA franchise operations which will also result in
an increase in loan origination sales volume as the Company begins providing
expanded loan origination services to its franchisees.
Liquidity and Capital Resources
- -------------------------------
Revenues
The Company generated revenues from continuing operations of $ 924,835
during its fiscal year 1999. Such revenues reflect revenues derived from: (1)
franchise fees; (2) new franchise sales; and (3) mortgage origination fees.
The Company also had revenues of approximately $ 9,372 from discontinued
operations which consists of rental income on real property owned by NWF but
disposed of prior to its acquisition by the Company. Mortgage origination fees
accounted for more than half of the Company's revenues during 1999 and equaled
$546,200 and were achieved through NWF. Revenues from real estate
transactions are generated by WHY USA NA, the majority of which were derived
from franchise fees. Franchise fees are comprised of ongoing transaction fees
paid to the Company by its franchisees (65 in 1999) based on $95 per
transaction or 6% of commission revenues, whichever is less, provided each
franchisee must pay a monthly minimum of $325. During 1999,
the Company had also reduced the minimum percentage to 4% of commission
revenues, and the monthly minimum payment to $225 under certain circumstances.
Franchise fees from the Company's franchisees accounted for $366,830 in
revenues in 1999. Approximately 65% of such franchise fee revenues were
generated from the franchisees located in Minnesota and surrounding Midwestern
states (Nebraska, Iowa and Wisconsin). In 1998 and 1999, revenues from
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franchise sales were based on an initial fee of $9,500 for local market areas
with a population greater than 50,000 and $6,500 for areas with a population
of less than 50,000. The Company's new franchise offering circular provides
for one initial fee of $9,900. Sales of new franchises accounted for only
1.3% of the Company's revenues in 1999.
Costs of Revenues
Costs of revenues include franchise related expenses which are comprised
of (1) commissions based on a percentage of initial franchise fees ranging
from 25% to 76% on sale of new franchises and/or a percentages of transaction
fees ranging from 30% (or one-half of 30% if certain quotas are not met)to 35%
paid to certain sales representatives for revenues derived from franchisees in
their territories; (2)state registration fees; (3) conference expenses; (4)
equipment and trade show expenses; and (4)marketing expenses including
advertising and promotional material, sales personnel expenses and recruiting
fees. Costs of revenues related to loan origination include (1)appraisal
expenses, (2) commissions, (3) credit report expenses, and (4)payroll. Total
costs and expenses in 1999 were $923,379 of which approximately 48% were
expenses related to revenues. Commissions on transaction fees were paid under
five existing agreements, for a total of 18 operating franchisees and equaled
approximately 4% of the gross revenues from transaction fees received by the
Company each month.
Investing Activities
The Company increased its assets during 1999 to $2,089,134 through its
acquisition of NWF and its subsidiary WHY USA NA. The Company's assets are
comprised of: approximately $35,617 in accounts receivable, office and
computer equipment (net of accumulated depreciation) valued at $9,709; the WHY
USA franchise system acquired on December 31, 1999 valued at $1,968,189,
organizational and patent costs of approximately $5,000; and, advances to
affiliated sales entities of $70,000. The purchase of the WHY USA franchise
and System was accomplished through the payment by NWF's then sole shareholder
of a combination of cash and promissory notes totaling $2,026,400. WHY USA
NA's acquisition of the WHY USA System and existing franchises cost it a total
of approximately $1,305,000 beginning with its initial payment under an
exclusive regional territory agreement of $150,000 in December of 1996 and
ending with its purchase of the Dale & Carol Erks territory in November of
1998 for $400,000; its franchise assets were valued at $1,305,518 as of
December 31, 1998 and $1,968,189 at December 31, 1999.
Liabilities/Contingent Liabilities
The Company has total liabilities of $53,720 which includes a current
income tax payable of $3,000 and a promissory note payable in the name of
Donald Riesterer for $26,400 (which has been paid in full in 2000), and an
advance from Northwest Financial Group, Inc. of $18,371. As of December 31,
1999, the Company was not committed under any operating lease agreements.
However, on February 1, 2000, the Company entered into a sub-lease with
payments of $2,500 per month through October 31, 2000, with total future
minimum sub-lease payments of $ 22,500. The Company's three other office
facilities are rented on a month to month basis from affiliates.
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Financing Activities
Funding of Losses prior to Acquisition of Subsidiaries
The Company was inactive from approximately 1990 until its acquisition of
its subsidiaries in December 1999. Historically, the Company has funded its
losses through issuances of its common stock. During the past two years, The
Company issued a total of 3,134,000 shares to Castlewood Corporation, a
company which provided services to the Company while it was inactive. The
shares were issued between July of 1997 and June 30, 1999 for services
comprised mostly of minimal administrative services and corporate compliance
matters.
Funding of the Acquisition of NWF and WHY USA NA
The Company's purchase of NWF (which included NWF's ownership of WHY USA
NA) was accomplished through an acquisition of assets whereby the Company
acquired all of the assets and shares of NWF, in exchange for the issuance of
10,000,000 of its unregistered common shares. The transaction was completed
on December 31, 1999, concomitant with NWF's purchase of all of the
outstanding shares of WHY USA. The WHY USA NA purchase was completed by NWF's
sole shareholder, Donald Riesterer.
Expansion Plans and Cash Requirements
Although the Company realized net income in 1999, and had sufficient
revenues from operations to meet its cash requirements, the Company does not
have sufficient cash flows to meet its expansion plans which it believes are
necessary for the Company to succeed. The number of the Company's franchisees
actually decreased over the last three years from 91 at year end 1997 to 65 at
the Company's acquisition of WHY USA NA. The Company intends to aggressively
pursue its plans to expand franchise support and services and to expand its
WHY USA Franchise System into more territories. Although the Company is a
national franchiser, it has achieved mostly regional recognition in the
Midwestern States where almost two-thirds of its franchisees are located.
Management believes the Company must develop a stronger national presence in
order to increase revenues from existing franchisees and increase the number
of franchise offices.
Expansion plan needs include: (1) increased working capital to support the
growth of current operations, (2) capital to finance marketing and operational
expansion into new territories, and (3) funding for the acquisition of one or
more established businesses engaged in real estate or mortgage service
operations. The Company is required therefore to seek sources of financing to
fund this expansion and has commenced the private placement discussed below to
fund part of it. The Company's general expansion plans include some of the
following:
* expand existing telemarketing service; begin hiring full-time
telemarketing personnel (first five in the next 3-6 months)
* negotiate and buyout certain territories(currently O'Hern & Butts)
* recruit additional employee/sales representatives
* expand web site capabilities including loan origination at website
* begin placing loan origination agents on site;
* acquire/organize insurance entity;
* offer loan origination for higher risk loans;
* investigate and pursue other acquisition possibilities in order to
expand bundled services
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Private Placement Offering
In order to fund a portion of its expansion plans, on January 24, 2000,
the Company commenced a private placement of up to 1,500,00 units at an
offering price of $1.00 per unit. Units are comprised of one share of common
stock and one warrant to purchase a share of common stock for $1.00,
exercisable at any time for three year term commencing upon the purchase of
the Unit. The Company reserved the right to call and redeem the warrants upon
thirty days notice whenever the underlying stock has been quoted in a public
trading market for at least 20 consecutive days at $2.00 or more. There is
currently no public trading market for the Company's securities. The offering
is a "best efforts" offering with no minimum; funds are available to the
Company immediately upon receipt. The Company intends to use $500,000 of the
proceeds towards working capital expenses to support the growth of current
operations and the balance for marketing and operation expansion and/or
acquisitions. The Company currently has 550,000 Units subscribed for. The
subscribed for shares have not been issued as of this date. The offering was
scheduled to close on March 31, 2000 but has been extended for 60 days. The
Company intends to use $75,000 of the Units offered in the private placement
to purchase the Joe O'Hern territory.
Seasonal Aspects
The Company realizes less revenues in general in the winter months
especially just prior to Christmas.
Inflation
Inflation usually softens the real estate market and increases interest
rates which may also soften the market.
Results of Operations - Comparative Discussion
- ----------------------------------------------
NWF commenced its mortgage loan origination operations in 1999; therefore
there is no comparable activity in 1998. WHY USA NA operated as a Sub Chapter
S corporation in 1999 and the second half 1998; prior to that it operated as
a partnership from January of 1997 until June 30, 1998 and the founding of the
corporate entity. WHY USA NA acquired franchise interest throughout 1997 and
1998 thereby increasing its revenue stream as it acquired additional franchise
territories. The operations of WHY USA were adversely impacted in 1998 by a
expansion costs in California of $20,000 which did not yield any substantial
results; and, in 1999, the Company expended $20,000 to recruit new sales
representative/employees which did not produce any revenues in that year.
Franchise amortization costs were $87,035 in 1999 vs. $55,318 in 1998.
Depreciation expenses in the two years were comparable. Commissions on
franchise sales were $19,119 in 1998 and $39,021 in 1999. Commissions in 1998
were funded by other entities which were acquired in late 1998. The interest
expense to Quality Investments was $50,463 in 1999 vs. $49,232 in 1998.
Quality Investments is paid in full as of this date. The Company's net income
from operation of the WHY USA franchise system was $4,154 in 1999 vs. $5,202
in 1998. In general, WHY USA NA has utilized its operating revenues to fund
expansion efforts and for legal fees associated with franchise registration
both at the federal and state levels. The Company's expenditures have not
increased the revenues sources from franchises in 1998 or 1999, however,
management hopes it will increase franchise sales and transaction fee revenues
in the year 2000.
NWF's operating year was impacted by increasing mortgage rates in the
second half of 1999 which reduced the volume of refinances; up to 75% of the
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business of NWF consisted of refinances. The operations of NWF are largely
geared to a "break-even" concept as employees and officers were paid the
majority of the margins generated from their business activities. The mortgage
loan activity had a loss of $1,056 in 1999.
Trends/Uncertainties/Risk Factors Affecting Continuing Operations
- ------------------------------------------------------------------
Limited Operating History
Both of the operating subsidiaries of the Company have relatively short
operating histories upon which to judge their progress and potential
profitability. The Company's future must be considered in light of the many
risks and uncertainties, expenses and difficulties encountered by businesses
in the early stages of expansion. The Company must be able to implement and
successfully execute its business and marketing strategy, develop and offer
quality services for its franchises at a competitive price, provide effective
support to its franchisees, develop and implement effective internal business
and financial systems controls, respond to competitive developments in the
real estate industry, respond to the effects of changes in the economy
including rising interest rates or inflation, and attract and retain qualified
personnel.
Need for Additional Financing.
The Company's current cash flow is sufficient to satisfy its cost of
operations, however its profit margin is insufficient to provide for its
current expansion plans. As of this date, the Company is dependent on
obtaining funding necessary for expansion through its current private
placement offering. To date it has received $550,000 in proceeds in the
offering. Even presuming the Company completes its offering and achieves
maximum gross proceeds of $1,500,000, the proceeds will be sufficient to
satisfy only a portion of the Company's over-all business plan. There is no
assurance that additional financing will be available from any source when and
if needed by the Company either through debt or equity sources. Although
revenues will likely provide sufficient cash flow to fund operations, the
inability to obtain additional funding could prevent the Company from
implementing its business expansion plans. Additional financing could have a
negative impact on the Company's shareholders in the form of dilution.
Reliance on Key Personnel
The Company's future success is highly dependent on the experience and
efforts of its management and key personnel. The loss of services of one of
more of these individuals could have an adverse affect on the Company's
business operations and future prospects. The Company is especially dependent
upon those individuals who have experience with the operations of WHY USA NA
and the WHY USA System although one of its priorities is to train and
familiarize all key personnel with all phases of the Company's various
operations. The Company does not have any key man insurance policies. The
Company is also dependent on its ability to attract and retain key management,
marketing and operational personnel for its planned expansion.
Uncertainty of Market Acceptance
The Company's financial condition and future prospects will depend on it
ability to obtain a substantial and increasing share of the real estate and
mortgage business in the areas in which it operates and its ability to
significantly increase its franchisee network. Although the Company has gained
a toe hold in the Midwestern market, there is no assurance that the Company
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will achieve national market acceptance.
Control by Management
Even assuming the successful completion of the current private placement
offering, the Company's officers and directors and affiliated persons,
especially Don Riesterer, will continue to hold a large percentage of the
Company's outstanding shares. Accordingly, they will be able to control the
Company's business, operations and corporate policies, including the ability
to manage all operations, appoint all future executive officers, determine
management salaries and other compensation, and elect the members of the
Board. Current Management controls approximately 44% of the Company's
outstanding shares.
Conflicts of Interest
Each of the Company's officers and directors have other interests to which
they devote a significant portion of their time. Leslie Pearson has a legal
practice, as does Greg Miller; each devotes approximately 30% of their time to
the Company's business. David O. Thomas owns his own independent Why USA
franchises although he does devote a majority of his time to the Company.
Although Donald Riesterer intends to devote a majority of his time to the
Company, he has numerous business interests which he manages including an
affiliate, Northwest Financial Group, Inc. Northwest Financial Group has
historically directly competed with the Company for business although in April
2000, the entity ceased business operations which would be considered
competitive with the Company. Mr. Riesterer also owns several office complexes
some of which the Company rents. There can be no assurance that if a conflict
of interest arose that it would be resolved in favor of the Company.
Competition
Competition in the real estate franchising, mortgage origination, and
insurance industries is intense and each of these industries includes large
well established firms and companies, banks and other financing institutions,
and specialized service companies. Most of these competitors are
substantially larger than the Company with greater expertise and name
recognition and substantially greater financial, personnel, marketing and
other resources than the Company has. In addition, these competitors have
obtained a large and loyal customers base and have achieved significant brand
name recognition for their services, franchises and marketing networks. The
Company will also compete with local businesses in each locale into which it
decides to expand franchise operations. Small, local competitors could provide
significant competition because they have achieved name recognition, customer
base, and reputation within their locale.
Uncertainty of Protection of Intellectual Property
The Company regards its intellectual property including its WHY USA
System franchise program, trademarks and trade names, and its confidential
Operations Manual and trade secrets as being particularly valuable to the
Company's business operations. The Company is relying on the uniqueness of its
full service WHY USA System, as well as its unique listing and selling methods
to help it penetrate and compete in the real estate business. The Company
will rely on general trademark laws, confidentiality agreements, and certain
other protective matters to protect its intellectual property. The Company
has filed for provisional patent protection on its WHY USA System but must
make a patent application before 2001. There can be no assurance, however,
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that the various steps taken will protect the proprietary intellectual
property rights, will be adequate or effective, or that third parties will not
assert infringement claims against the Company regarding its proprietary
rights. When and if the Company achieves patent protection, there is no
guarantee that a third party will not violate the Company's patent rights
forcing the Company to assert an action or that the Company will be successful
in such assertion.
ITEM 3. DESCRIPTION OF PROPERTY
The Company currently rents space for its management and administrative
offices in Bloomington, Minnesota in office space owned by the Northwest
Financial Group, Inc., an affiliated entity controlled by Donald Riesterer.
NWF shares the space with its parent for the administration of its business
operations. The Company rents approximately 2,300 square feet on a month to
month basis for $2,000 per month. The Company does not have a lease on that
space and has not made the monthly payments to date which have been accrued.
Beginning in the year 2000, NWF runs its processing center out of 1,500
square feet of office space in Minneapolis, Minnesota which is rented on a
month-to-month basis. The processing center shares space with an independent
franchise, WHY USA Real Estate Service; each party pays $625 per month.
As of February 1, 2000, WHY USA NA began operating out of Menomonie,
Wisconsin. It subleases 6,000 square feet of office space from Douglas
Larson, one of its former principals, for $2,500 a month. Larson's lease, and
therefore the Company's sublease, expires in October of 2000. The space is
sufficiently large for the conduct of WHY USA NA's business operations as
well as to accommodate up to 25 full-time telemarketing personnel. The Company
intends to negotiate for a lease directly with the owner once the existing
lease expires if the space proves to meet the Company's needs over the next
several months.
Also beginning in 2000, the Company's six (6) part time telemarketers work
out of a small office in Sebeka, Minnesota. The office space is in a building
owned by Donald Riesterer. The office is comprised of approximately 1,500
feet of space, and is rented on a month to month basis for $ 500 per month.
Prior to the Company's acquisition of NWF, NWF owned commercial property
in Minnesota which it leased. It was understood between the parties to the
acquisition agreement that the property would be quit claimed to Mr.
Riesterer, NWF's sole shareholder, prior to the acquisition and that the
property would not be a part of the assets of NWF being acquired by the
Company.
ITEM 4. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tables set forth: Table 1 - the amount and nature of
beneficial ownership of each person known to a beneficial owner of more than
five percent of the issued and outstanding shares of the Company and Table 2 -
the amount and nature of beneficial ownership of each of the executive
officers and directors of the Company. The following information is based on
31,400,460 shares issued and outstanding as of December 31, 1999 (and does not
include 550,000 shares subscribed for but not yet issued in its current
private placement offering).
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Table 1: SECURITY OWNERSHIP OF 5% BENEFICIAL OWNERS
_____________________________________________________________________________
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Owner(1) Class
- --------- ------------- -------------- ----------
Common Donald Riesterer 11,116,000(2) 35.40%
8301 Creekside
Unit 101
Bloomington MN 55437
Table 2: SECURITY OWNERSHIP OF MANAGEMENT
_____________________________________________________________________________
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Owner(1) Class
- -------- ------------------- ------------- ----------
Common Donald Riesterer 11,116,000(2) 35.40%
8301 Creekside
Unit 101
Bloomington MN 55437
Common Gregory Miller 300,000 0.95%
869 McDiarmad Dr
Hudson WI 54016
Common Leslie Pearson 500,000 1.59%
7710 Computer Ave #131
Edina MN 55435
Common Lisa A. Gunberg 1,100,000 3.50%
8025 Xerxes Ave So.
Bloomington MN 55431
Common David O. Thomas(4) 850,000(3) 2.71%
2110 US Highway 12
Menomonie WI 54751
- -------------
Officers and
Directors as a group (6 Persons) 13,866,000 44.15%
(1) The Company's officers and directors have the right to subscribe for Units
in the Company's current offering; as of this date, none of the those
individuals have subscribed for Units.
(2) Includes 5,116,000 shares held in the name of Northwest Financial Group,
Inc., a corporation which is controlled by Don Riesterer who is its sole
shareholder. Riesterer currently has 1,000,000 of his shares escrowed as
security on a promissory note; he still retains voting power over such shares.
(3) David O. Thomas' shares are his proportionate beneficial interest in a
certificate for 850,000 shares owned of record by David Thomas, Douglas
Larson, and Emil Gluck. Although Mr. Thomas' beneficial ownership is for
one-third of the certificate (283,333 shares) the three individuals have
combined voting power over 850,000 shares.
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Change in Control Arrangements
- ------------------------------
None.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Officers and Directors
- ----------------------
The names and ages of all directors and executive officers of the
Company, along with their respective positions, term of office and period such
position(s) was held, is as follows:
Name Age Positions Held (1) Director Since
____________________ ____ _____________________________ ______________
Donald Riesterer(2) 32 Chief Executive Officer, Dec. 31, 1999
Chairman of the Board of
Directors
Greg Miller (3) 31 President, Director Dec. 31, 1999
Leslie Pearson(4) 37 Secretary/Treasurer, Director Dec. 31, 1999
Lisa Gunberg 32 Vice President, Director Dec. 31, 1999
David Thomas (5) 59 Director Dec. 31, 1999
James Gessert 47 Director Dec. 31, 1999
(1) Each of the above individuals will serve in their respective capacities
until the next annual meeting of the shareholders or until a successor
is duly qualified and elected.
(2) Also a director of WHY USA NA and sole director, President and CEO of
NWF.
(3) Also Vice President and a director of WHY USA NA.
(4) Also Secretary/Treasurer and a Director of WHY USA NA and
Secretary/Treasurer of NWF.
(5) Also President, CEO and a Director of Why USA NA.
- ------------------------
Biographical Information for Officers and Directors
- ---------------------------------------------------
DONALD L. RIESTERER, is President and principal owner of Northwest
Financial Group, Inc., an affiliated entity based in Minneapolis, Minnesota.
Northwest Financial Group was originally formed to provide loan origination
services but now exists as a holding company for real estate. He was founder,
sole shareholder, and sole director of NWF from its inception in 1998 until
its acquisition by the Company in December of 1999. Mr. Riesterer has served
as Vice-President/Sales and Marketing for Display Carousels Inc. from 1993
through 1996, marketing firm. and as district manager of a financial service
firm, Primerica Financial Service where he was employed from 1991 to 1993. He
is a licensed real estate agent, a life/health insurance agent, and a loan
originator in several states. He devotes a majority of his time to the
Company. Mr. Riesterer attended College of St Thomas from 1986 through 1990
where he studied theology and communications.
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<PAGE>
GREG M. MILLER is a partner and shareholder in the law firm of Gregory
Miller and Associates, Ltd. of Minneapolis Minnesota which he founded on
January 1, 2000. Prior to that, from February of 1997 through December of
1999, he was a partner and shareholder of Davis, Dodd, Levine & Miller, Ltd.
of Minneapolis, Minnesota. Before 1997 he was a shareholder/partner in Levine
& Miller. Mr. Miller has practiced law in the Minneapolis/St Paul area since
1994. His principal areas of practice include commercial and residential real
estate transactions, and various corporate and business transactions. He
devotes approximately 30% of his time to the Company. Greg Miller received a
juris doctor degree from William Mitchell College of Law in 1994.
LESLIE M. PEARSON is a practicing attorney and is the owner of Leslie M.
Pearson Associates PA of Edina, Minnesota, which she founded in April of 1994.
Her principal areas of law practice include complex business and tax matters
for closely held businesses, personal estate planning, and various general
corporate matters. She devotes approximately 30% of her time to the Company.
Leslie Pearson received her Bachelor of Arts in Mathematics and History from
St. Olaf College in Northfield, Minnesota in 1985; in 1988 she received her
juris doctor degree from William Mitchell College of Law in St. Paul,
Minnesota.
LISA A. GUNBERG is a principal loan officer of Northwest Financial Ltd.
where she has served in such capacity since 1998. From 1997-1998, she was
employed as a proposal writer by Health Risk Management, Inc. of Bloomington,
Minnesota; during 1995-1996 she worked as a market development analyst for
Universal Hospital Services also located in Bloomington. For the four years
prior to that Ms. Gunberg was an insurance specialist at Park Nicollet Medical
Center in St. Louis, Minnesota. She is a licensed real estate agent in the
State of Minnesota as well as a loan originator in several states. Her
business experience includes all aspects of marketing, ranging from market
research to promotion of new business opportunities. Lisa Gunberg received a
Bachelor of Arts degree in Business Management from Gustavus Adolphus College
of St. Peter, Minnesota in 1990; she earned her masters degree in Business
Communications in 1998 from the University of St. Thomas of Minneapolis,
Minnesota.
DAVID O. THOMAS is President of the Company's subsidiary WHY USA NA, a
position held since its inception in July of 1998. Prior to its inception he
was president of its predecessors since 1996. Mr. Thomas owns and operates
three WHY USA franchise offices in northwest Wisconsin. He has 20 years of
experience in building and developing condos, homes and commercial real estate
and currently serves as President of Northern Waters Board of Realtors. Mr.
Thomas attended the University of Minnesota, and has been licensed to sell
real estate in Wisconsin since 1973. He has also taught Real Estate License
Law courses at the technical school in northwest Wisconsin. He devotes the
majority of his time to the Company's business.
JAMES H. GESSERT is Vice President of Commercial Loans of Liberty State
Bank of St. Paul, Minnesota where he manages a portfolio of $25,000,000 in
commercial loans. He has worked for Liberty State Bank since April of 1991.
Prior to that he held various management positions in the banking industry
including Vice-President/Branch Manager of First National Bank of Brooklyn
Park, Assistant Vice President/Commercial Loans of First National Bank in
Anoka, and a National Bank Examiner for the federal Controller of the
Currency.
Family Relationships
- --------------------
There are no familial relationships between the Company's officers and
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directors.
Significant Employees
- ---------------------
None
Involvement in Other Public Companies
- -------------------------------------
None of the Company's officer and directors hold any positions with any
companies which would be considered "reporting" public companies.
Involvement in Certain Legal Proceedings
- ----------------------------------------
Except as indicated below and/or hereinbefore, to the knowledge of
management, during the past five years, no present or former director,
executive officer, or person nominated to become a director or executive
officer of the Company:
(1) Filed a petition under federal bankruptcy laws or any state
insolvency law, nor had a receiver, fiscal agent or similar officer appointed
by a court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of such
filing, or any corporation or business association of which he was an
executive officer at or within two years before the time of such filing;
(2) Was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations and other minor
offences);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him or her from or
otherwise limiting his/her involvement in any type of business, securities or
banking activities;
(4) Was found by a court of competent jurisdiction in a civil
action, by the Securities and Exchange Commission or the Commodity Futures
Trading Commission, to have violated any federal or state securities law, and
the judgment in such civil action or finding by the Securities and Exchange
Commission has not been subsequently reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION
Executive officers of the Company were paid an aggregate of $56,400 in the
fiscal year ended December 31, 1999 of which the Company's CEO, Donald
Riesterer received $21,900. Compensation through December 31, 1999 was paid
by the Company's subsidiaries.
The following table sets forth certain information as to compensation
received by the Company's Chief Executive Officer, who is also a director of
the Company, as of December 31, 1997, 1998 and 1999. None the Company's
executive officers received more than $100,000 US per year. Don Riesterer is
also CEO of NWF. The CEO of WHY USA NA is David O. Thomas.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------------- ------------------------
Annual Compensation Awards Payouts
------------------------------- ---------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Re- All
Name Annual stricted Other
and Compensa- Stock Underlying LTIP Compensa-
Principal sation Awards Options/ Payouts tion
Position Year Salary($) Bonus($) ($) ($) SAR's(#) ($) ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald Riesterer(1) 1999 -0- -0- $ 21,900(1) -0- -0- -0- -0-
Chief Executive 1998 -0- -0- -0- -0- -0- -0- -0-
Officer, Director 1997 -0- -0- -0- -0- -0- -0- -0-
CEO, Director,
President of NWF
- ------------------------------------------------------------------------------------------------
(1) Mr. Riesterer became CEO of the Company on December 31, 1999. Compensation reported was
received from the Company's subsidiary prior to its acquisition by the Company. He did not
receive any compensation during 1998 and 1997. His compensation was received as a result of
services performed for NWF; there are no specific understandings with Riesterer as of this date
regarding compensation during 2000 although it is likely he will be compensated for any services
he provides to the Company.
</TABLE>
Options/SAR Grants
- ------------------
None.
Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Value Table
- --------------------------------------------------------------------------
None
Long Term Incentive Plans
- --------------------------
There are no long term incentive plans in effect and therefore no awards
have been given to any executive officer in the past year.
Compensation of Directors
- -------------------------
Beginning May 5, 2000, the Company's directors are paid $250 for each
Board of Directors meeting they attend; the Company pays no other fees to
members of the Board of Directors for the performance of their duties as
directors. It is anticipated that they may receive additional compensation in
the future for such service in the form of a stock option plan. The Company
has not established committees of the Board of Directors.
Employment Contracts and Termination of Employment
and Change in Control Arrangements
- -------------------------------------
There are no written employment contracts in effect nor are there any
termination of employment or change of control arrangements in effect. The
Company has an understanding with two of its executive officers, Leslie
Pearson and Greg Miller, who receive a monthly salary. In addition, Lisa
Gunberg originates loans for one of the subsidiaries and receive compensation
that is normal and usual for the work performed.
Future Compensation of Executive Personnel
- ------------------------------------------
Although it is likely that at some time in the future the Company will
enter into formal employment agreements with some or all of its executive
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<PAGE>
officers, or may initiate some form of compensation or incentive plan which
might include restricted stock awards or stock options, no such agreements or
understandings have been entered into.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two years, transactions or series of transactions or
currently proposed transactions, to which the Company, or any its subsidiaries
was or is to be a party, in which the amount exceeds $60,000 and in which any
executive officer or director or any 5% security holder or any member of the
immediate family of any of the foregoing persons had a material interest are
as follows:
WHY USA Note to Quality Investments.
Prior to the Company's acquisition of WHY USA NA, from December 1996
through February 1998, WHY USA NA's three founders, Douglas Larson, Emil Gluck
and David O. Thomas, contributed capital sufficient to purchase the WHY USA
System, copyrights, trademarks and existing franchise agreements equaling
approximately $1,300,000. Each of these gentlemen individually made a cash
contributions of $162,000; the balance of the funds contributed for the
franchise acquisition were loaned to WHY USA NA by Thomas/Larson/Gluck and
other persons through a separate entity, Quality Investments. In connection
with the loans, a promissory note was executed by WHY USA NA in the principal
amount of $847,500, payable to Quality Investments, Inc., dated April 15,
1999, with interest of 8%. The note was paid in full as of December 30, 1999.
Each of the principals of Quality Investments is therefore considered "paid"
for his proportionate share of the principal and interest due under the note,
including Mr. Thomas. Thomas is currently a director of the Company.
Share Issuance to Donald Riesterer as Part of the Acquisition of NWF and
Transfer to Other Affiliated Parties
On December 31, 1999, at the acquisition of NWF by the Company, Donald
Riesterer, NWF's sole shareholder, became the beneficial owner of 10,000,000
shares of the Company issued in exchange for all of the outstanding shares of
NWF. The certificate was issued to NWF on December 16, 1999, the date of the
Acquisition Agreement, although all of the transactions necessary to
consummate the acquisition were not accomplished until December 31, 1999. The
10,000,000 shares were transferred to Riesterer as NWF's sole shareholder in
January of 2000. Riesterer was elected to the Company's Board of Directors at
the consummation of the transaction and also serves as its CEO and is a
director of each of its subsidiaries.
Three other officer/directors of the Company derived benefit from the
Company acquisition transaction; each was given a portion of Riesterer's
10,000,000 shares. Leslie Pearson, Secretary/Treasurer and a director of the
Company received 500,000 shares. Gregory Miller, President and a director of
the Company received 300,000 shares. Lisa Gunberg, the Company's Executive
Vice President and a director received 1.1 Million Shares. Riesterer
transferred the shares as compensation for services provided by those
individuals in the transactions leading up to the acquisition transaction as
well as in the transition phases of the reorganized entity.
Castlewood Shares Transferred to Entity Controlled by Don Riesterer
Immediately subsequent to the Company's acquisition of NWF, Castlewood
Corporation, a majority shareholder of the Company prior to its acquisition,
transferred 5,116,000 of its shares to Northwest Financial Group, Inc., a
corporation 100% owned by Don Riesterer. Castlewood was an affiliate of the
Company up through the acquisition transaction. No consideration was paid by
Riesterer to Castlewood; Castlewood agreed to transfer the shares in order to
effect the change in control. The transfer reduced Castlewood's ownership to
222,232 shares.
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<PAGE>
Riesterer & Thomas: Their Relationships to the NWF Purchase of WHY USA NA
Background
On December 31, 1999, NWF, through its sole shareholder, Don Riesterer,
acquired WHY USA NA. The transaction was originally commenced between
Northwest Financial Group, Inc. (a company founded by Donald Riesterer who is
its sole shareholder) and WHY USA NA. Northwest Financial Group, Inc. was a
party to the Stock Purchase Agreement with WHY USA NA on September 24, 1999,
and a party to the amended agreement on December 30, 1999. On December 30,
1999, Northwest Financial Group, Inc. assigned its interest in the purchase
agreements to Donald Riesterer, its sole shareholder, who completed the
acquisition including the payment made to the three WHY USA NA shareholders.
The acquisition was accomplished through the purchase of all of the
outstanding shares of WHY USA NA from its three selling shareholders: Douglas
Larson, Emil Gluck and David O Thomas for a total of $2,026,400. (David O.
Thomas is a director of the Company and its subsidiaries.) Donald Riesterer
individually paid the $2,026,400 WHY USA NA purchase price in a combination of
$650,000 cash and three promissory notes. Two of the notes are made to the
original selling shareholders of WHY USA NA: Larson, Gluck and Thomas: one
for $500,000, and one for $850,000. The third note is to Riesterer for $26,400
and has been repaid. David O. Thomas' proportionate interest in the
transaction is $675,466. Thomas, who is a director of the Company, and an
officer and director of each of its subsidiaries, is one of the founders of
the initial WHY USA NA partnership in January 1997 (which funded the
acquisition of the WHY USA System), a principal in Mid America Realty (a
predecessor party in interest to the WHY USA franchise system acquisition),
and a founder of and principal in WHY USA NA, the corporation.
Immediately upon the completion of Riesterer's acquisition of WHY USA NA,
he contributed the acquired WHY USA NA shares to NWF for 90,000 of its shares;
all of his shares of NWF (which equaled all of NWF's outstanding shares) were
acquired by the Company in its acquisition of NWF, discussed above.
Riesterer's Promissory Notes to Larson/Gluck/Thomas
Donald Riesterer individually executed two notes on December 30, 1999 to
WHY USA NA's three selling shareholders including David O. Thomas, a current
Director of the Company.
The terms of the notes are as follows:
Note 1: is in the principal amount of $850,000 with an interest rate
of 8.75%. It is due and payable on December 31, 2000 and requires interest
only monthly payments of $6,197.92 until such date. The note is secured with
a mortgage on real property owned by Riesterer and is guaranteed by Northwest
Financial Group, Inc., a company in which Riesterer is the sole shareholder
but which is unaffiliated with the Company and its subsidiaries. As an
incentive to enter into the Note, Riesterer gave 850,000 shares of his stock
in the Company to the lenders. Thomas/Larson/Gluck also agreed that the
principal would be forgiven if at any time during the one year following the
date of the Note the bid price of the Company's common stock in the over-the-
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<PAGE>
counter market averages $1.00 for a 4 week period and a buyer is available for
the shares. There is no public market for the Company's common stock at this
date. Riesterer is current in his obligations under the Note.
Note 2: is in the principal amount of $500,000 and bears an interest rate
of 8.75%. Payments are interest only and are $3,645.83 per month. The
principal is due on December 31, 2000. The note is secured by 1,000,000 of
Riesterer's shares of the Company which are currently escrowed for this
purpose and may be sold by lenders if Riesterer defaults under the Note.
Riesterer is current with his obligations under this Note.
Ownership of WHY USA Franchises by David O. Thomas
David O. Thomas is the owner of Mid America Realty; Mid America Realty is
party to some of the agreements through which the rights to the WHY USA System
were initially acquired. Mid America is an independently owned and operated
franchise. Dave Thomas owns a total of three (3) WHY USA franchises in
Wisconsin. The three franchises generated less than 1% of total revenues from
transaction fees received by the Company in 1999 and less than 2% in 1998.
Compensation to Officers and Directors.
The Company has agreed to compensate David O. Thomas and Donald Riesterer
who are officers and/or directors of the Company and its subsidiaries $7,500
or 76% of the initial franchise fees for any franchise sold by them; the
Company, therefore, will compensate these individuals at a higher rate for
franchise sales then other sales representatives. Although the possibility
exists that these gentlemen could earn substantial compensation related to
such sales activities, they would need to sell more than eight (8) franchises
a year to earn $60,000 in franchise sales commissions; these individuals have
sold no franchises in 1999 and received no franchise commissions during 1999.
The Company also pays a monthly salary of $500 each to both Leslie Pearson and
Greg Miller. Miller and Pearson also provided legal services to the Company in
1999 for which they were compensated. These individuals will also likely
provide legal services for the Company or its subsidiaries in the future for
which they will be compensated at a rate that is standard for the type of
legal services performed.
Rents and Subleases
The Company subleases its office space in Menomonie from a former director
of WHY USA NA, Douglas Larson. Douglas Larson resigned as a director of WHY
USA NA on December 30, 1999. The Company rents office space from Donald
Riesterer for both the Company's office in Bloomington and a satellite
telemarketing office in Sebeka. The Company has not paid its rental payments
to date which are being accrued.
Affiliation of Northwest Financial Group, Inc. with NWF
Both Northwest Financial Group Inc. and NWF were founded by Donald
Riesterer who was also each corporation's sole shareholder. Up until the
acquisition of NWF on December 31, 1999, both entities were in the business of
loan origination; and, in fact, Northwest Financial Group Inc. was responsible
for payroll for both entities which has been repaid by NWF. The affiliation of
the two entities ceased on April 1,2000 when Northwest Financial Group, Inc.,
changed its business purpose to real estate holding, except that Donald
Riesterer remains Northwest Financial Group, Inc.'s sole shareholder.
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<PAGE>
Transactions with Promoters
- ---------------------------
None.
ITEM 8. DESCRIPTION OF SECURITIES
Authorized Capital
- ------------------
The authorized capital stock of the Company consists of 350,000,000 shares
of stock: 300,000,000 shares of common stock, par value $0.001 and 50,000,000
shares of preferred stock, no par value.
Common Stock
- ------------
The authorized common stock of the Company consists of 300,000,000 shares
of Common Stock, $0.001 par value per share. The holders of Common Stock (i)
have equal ratable rights to dividends from funds legally available therefore,
when, as and if declared by the Board of Directors of the Company; (ii) are
entitled to share ratably in all of the assets of the Company available for
distribution or winding up of the affairs of the Company; (iii) do not have
preemptive subscription or conversion rights and there are no redemption or
sinking fund applicable thereto; and (iv) are entitled to one non-cumulative
vote per share, on all matters which shareholders may vote on at all meetings
of shareholders.
Preferred Stock
- ----------------
The Company also has 50,000,000 Preferred Shares authorized, no par value,
and with no voting power. There are no preferred shares outstanding. As of
the date hereof, the Company has not designated a class or series of preferred
shares.
Non-Cumulative Voting
- ---------------------
The holders of shares of Common Stock of the Company do not have
cumulative voting rights which means that the holders of more than fifty
percent (50%) of such outstanding shares, voting for the election of
directors, can elect all of the directors to be elected, if they so choose,
and, in such event, the holders of the remaining shares will not be able to
elect any of the Company's directors. The Board of Directors holds
approximately 44% of the issued and outstanding shares of the Company.
Provisions Regarding Changes in Control
- ----------------------------------------
None.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information
- ------------------
The Company currently has no public market for its common stock. The
Company intends to apply for a listing on the National Association of
Securities Dealers ("NASD") Over-the-Counter Bulletin Board ("OTCBB"). Under
current NASD rules, an issuer cannot maintain or apply for a listing unless it
is current in its reporting obligations under Sections 13 or 15(d) of the
Securities and Exchange Act of 1934 (the "1934 Act"). The filing of this
registration statement will trigger reporting obligations for the Company
-37-
<PAGE>
under the 1934 Act sixty (60) days from the filing date. Once the Company
clears SEC comments it will be entitled to make application to the OTCBB.
Holders
- -------
At April 30, 2000, the Company had approximately 859 shareholders.
Dividends
- ---------
The payment by the Company of dividends, if any, in the future, rests
within the discretion of its Board of Directors and will depend among other
things, upon the Company's earnings, its capital requirements and its
financial condition, as well as other relevant factors. The Company has not
paid or declared any dividends to date due to its present financial status.
The Company does not anticipate paying dividends on its Common Stock in the
foreseeable future but plans to retain earnings, if any, for the operation and
expansion of its business.
Shares Subject to Rule 144
- --------------------------
Of the 31,400,460 common shares of the Company's common stock currently
issued and outstanding, 779,480 are owned by public investors and 30,620,980
shares are restricted. Of these restricted shares, 13,866,000 shares are held
by officers, directors and affiliates of the Company.
All of the currently issued and outstanding restricted shares were issued
in reliance on the "private placement" exemption of Section 4(2) of the
Securities Act of 1933, as amended. If a market for the Company's common
shares were to develop, such "restricted" shares would not be available for
sale in the open market without registration, except in reliance upon Rule 144
under the Act or some other applicable exemption. In general, under Rule 144,
a person or persons whose shares are aggregated, who beneficially owned shares
acquired in a non-public transaction for at least one year, including persons
who may be deemed "affiliates" of the Company as that term is defined under
the 1933 Act, would be entitled to sell within any three-month period a number
of shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly reported trading volume on all
national securities exchanges and through NASDAQ during the four calendar
weeks preceding such sale provided current public information is then
available.
Of the restricted shares owned by officer/directors/affiliates equaling
13,866,000 shares, none have been beneficially owned for more than one year.
The officer/director/affiliate shares will be eligible for resale under the
provisions of Rule 144 applicable to affiliate transactions beginning with
6,000,000 shares on December 31, 2000 with the balance being beneficially
owned for a year at the end of January 2001. The remaining restricted shares
are held by non-affiliates and equals 16,754,980 shares. 15,504,980 shares
are available for immediate resale in accordance with Rule 144 provisions
applicable to non-affiliate transactions, provided a public market exists; and
1,250,000 of these non-affiliate restricted shares are eligible for resale on
January 24, 2001.
In addition, there are 550,000 shares subscribed for in the Company's
current offering which are not yet issued. If the Company completes the
offering with all units offered and sold, the Company will have an additional
1,500,000 outstanding shares which are restricted and will be eligible for
resale one year from the issuance under Rule 144. The Company would also have
an additional 1,500,000 shares of common stock reserved for issuance to
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<PAGE>
warrant holders upon exercise of warrants.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened. None of the Company's officers, directors, or beneficial owners
of 5% or more of the Company's outstanding securities is a party to a
proceeding adverse to the Company nor do any of the foregoing individuals have
a material interest in a proceeding adverse to the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company has issued the following unregistered common shares in the
past three years.
Year April 1997 - April 1998
- ------------------------------
On June 30, 1997, the Company issued 1,982,000 at par value to Castlewood
Corporation for general administrative services performed. Castlewood
performed such services to the Company since 1987. The shares were issued
pursuant to Section 4(2) of the Securities Act of 1933 as amended as a
"transaction not involving a public offering."
Year April 1998 - April 1999
- -----------------------------
On June 30, 1998, 1,492,000 shares of common stock to Castlewood
Corporation for services at par value. The shares were issued pursuant to
Section 4(2) of the Securities Act of 1933 as amended as a "transaction not
involving a public offering."
Year April 1999 - April 2000
- ----------------------------
On June 30, 1999, the Company issued 1,642,000 shares of the Company to
Castlewood Corporation for services rendered at par value. The shares were
issued pursuant to Section 4(2) of the Securities Act of 1933 as amended as a
"transaction not involving a public offering."
On December 16, 1999, the Company issued 10,000,000 shares of its common
stock to Northwest Financial, Ltd. in exchange for all the issued and
outstanding shares of NWF (100,000 shares at the closing of the transaction on
December 31, 1999). The shares were issued pursuant to Section 4(2) of the
Securities Act of 1933 as amended as a "transaction not involving a public
offering." The shares were beneficially owned by NWF's sole shareholder,
Donald Riesterer, and NWF transferred the shares to him in January of 2000.
Riesterer distributed 4,000,000 of the 10,000,000 shares to six (6) parties:
three of the parties are current officers and directors of the Company, Greg
Miller, Leslie Pearson, and Lisa Gunberg; two are business associates of Mr.
Riesterer, and the third party is comprised of three individuals who were the
selling shareholders of WHY USA NA. The individuals, one of whom is a
director of the Company, each beneficially own one-third of 850,000 shares in
their combined record name. Riesterer also relied upon Section 4(2) in his
transfer of the 4,000,000 shares.
The Company has received subscriptions for 550,000 Units in its current
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<PAGE>
private placement offering; the shares and warrants have not yet been issued.
The offering was scheduled to close on March 31, 2000 but has been extended by
the Board of Directors. The Company is relying on the exemption from
registration provided under Section 3(b) Regulation D, Rule 506 in the offer
and sale of the Units in the private placement. The Company believes it is
entitled to rely on the Regulation D Rule 506 exemption because it is not
publicly soliciting investors who are largely individuals or entities with a
business or personal association with management. The Company believes that
the investors: (1) have access to and have been provided with information
regarding the Company as set forth in a private placement offering memorandum;
(2) are aware that the securities are not being registered under US securities
laws; (3) are acquiring the securities for his/her own account for investment
purposes only; (4) understand that the securities may need to be held
indefinitely unless registered or unless an exemption from registration
applies to a proposed disposition; (5) are "accredited" and/or "sophisticated"
having sufficient knowledge of Company and sufficient investment experience to
make investment decisions, and (6) are aware that no public market exists for
the Company's securities. The Company is paying no commissions for sales of
the Units.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The only statutes, charter provisions, by-laws, contracts or other
arrangements under which any controlling person, director or officer of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such, are as follows:
Sections 78.037, 78.751 and 78.752 of the Nevada Revised Statutes offer
limitation of liability protection for officers and directors and/or
indemnification protection of officers, directors, employees and agents of the
Company, and provide as follows:
78.037. Articles of incorporation: Optional provisions.
The articles of incorporation may also contain:
1. A provision eliminating or limiting the personal liability of a
director officer to the corporation or its stockholders for damages for breach
of fiduciary duty as a director or officer, but such a provision must not
eliminate or limit the liability of a director or officer for:
(a) Acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law; or
(b) The payment of distributions in violation of NRS 78.300.
2. Any provision, not contrary to the laws of this state, for the
management of the business and for the conduct of the affairs of the
corporation, and any provision creating, defining, limiting or regulating the
powers of the corporation or the rights, powers or duties of the directors,
and the stockholders, or any class of the stockholders, or the holders of
bonds or other obligations of the corporation, or governing the distribution
or division of the profits of the corporation.
78.751. Indemnification of officers, directors, employees and agents;
advancement of expenses.
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
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<PAGE>
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with the action, suit or proceeding if he acted in good faith
and in a manner which is reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement of
the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense
of any claim, issue or matter therein, he must be indemnified by the
corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made:
a. By the stockholders;
b. By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding;
c. If a majority vote of a quorum consisting of directors who
were not parties to the act, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
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<PAGE>
d. If a quorum consisting of directors who were not parties to
the act, suit or proceeding cannot be obtained, by independent legal counsel
in a written opinion.
5. The articles of incorporation, the bylaws or an agreement made
by the corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must be
paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking
by or on behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than directors or officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
a. Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles
of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to subsection 2 or
for the advancement of expenses made pursuant to subsection 5, may not be made
to or on behalf of any director or officer if a final adjudication establishes
that his acts or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
b. Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs, executors
and administrators of such a person.
78.752. Insurance and other financial arrangements against liability of
directors, officers, employees and agents.
1. A corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise for
any liability asserted against him and liability and expenses incurred by him
in his capacity as a director, officer, employee or agent, or arising out his
status as such, whether or not the corporation has the authority to indemnify
him against such liability and expenses.
2. The other financial arrangements made by the corporation pursuant
to subsection 1 may include the following:
a. The creation of a trust fund.
b. The establishment of a program of self-insurance.
c. The securing of its obligation of indemnification by
granting a security interest or other lien on any assets of the corporation.
d. The establishment of a letter of credit, guaranty or surety.
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No financial arrangement made pursuant to this subsection may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a
person pursuant to this section may be provided by the corporation or any
other person approved by the board of directors, even if all or part of the
other person's stock or other securities is owned by the corporation.
4. In the absence of fraud:
a. The decision of the board of directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement made
pursuant to this section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
b. The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to
personal liability for his action, even if a director approving the insurance
or other financial arrangement is a beneficiary of the insurance or other
financial arrangement.
5. A corporation or its subsidiary which provides self-insurance for
itself or for another affiliated corporation pursuant to this section is not
subject to the provisions of Title 57 of NRS.
The Company's Articles of Incorporation have no specific indemnification
provisions.
Article IV, Section 11 of the Company's newly adopted Bylaws provide
indemnification as follows: that the Corporation shall indemnify each of its
Directors and Officers (and secure appropriate liability insurance) whether or
not the in office (and his/her executor, administrator and heirs), against all
reasonable expenses actually and necessarily incurred by him/her in connection
with the defense of any litigation to which he/she is or was a director or
officer of the Corporation. He/she shall have no right to reimbursement,
however, in relation to matters as to which he/she has been adjudged liable to
the Corporation for negligence or misconduct in the performance of his/her
duties. The right to indemnity for expenses shall also apply to the expenses
of suites that are compromised or settled if the court having jurisdiction of
the matter shall approve such settlement. This right of indemnification is in
addition to and not exclusive of all other rights to which such director or
officer may be entitled. The Company has not yet secured liability insurance.
PART F/S
The Company's audited financial statements including the consolidated
balance sheet as of December 31, 1999, and the related consolidated statements
of income and retained earnings and cash flows for the years ended December
31, 1999 and 1998 begin on the following page.
-43-
<PAGE>
Randy Simpson CPA, P.C.
11775 South Nicklaus Road
Sandy, Utah 84092
Fax & Phone (801) 572-3009
Board of Directors and Stockholders
WHY USA Financial Group, Inc.
Minneapolis, Minnesota
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of WHY USA
Financial Group, Inc., (a Nevada Corporation), as of December 31, 1999, and
the related consolidated statements of income and retained earnings and cash
flows for the years ended December 31, 1999 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit of the financial statements
provides a reasonable basis for our opinion.
In our opinion, based on our audit, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of WHY USA Group, Inc. as of December 31, 1999, and the results of its
consolidated operations and cash flows for the years ended December 31, 1999
and 1998 in conformity with generally accepted accounting principles.
/s/ Randy Simpson CPA PC
Randy Simpson CPA, P.C.
A Professional Corporation
April 5, 2000
Salt Lake City, Utah
<PAGE> 44
WHY USA FINANCIAL GROUP, INC.
Consolidated Balance Sheet
December 31,
1999
---------------
Assets
Current Assets:
Cash $ -
Accounts receivable 32,407
Notes receivable 3,210
---------------
Total Current Assets 35,617
Fixed Assets
Furniture and equipment 14,572
Accumulated depreciation (4,863)
---------------
Net Fixed Assets 9,709
Other Assets:
Franchise acquisition costs 1,968,189
Amortization of franchise costs -
---------------
Net Franchise Acquisition Cost 1,968,189
Patent application 5,000
Advances to former officer 70,619
---------------
Total Assets $ 2,089,134
===============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 200
Deferred revenue on future conference 5,729
Due to Northwest Financial Group, Inc. 18,391
Income taxes payable 3,000
Loan from officer 26,400
---------------
Total Current Liabilities 53,720
Shareholders' Equity
Preferred stock: no par value, authorized 50,000,000,
no shares issued and outstanding -
Common stock: $.001 par value, authorized 250,000,000,
31,400,460 issued and outstanding as of
December 31, 1999 31,400
Additional paid in capital 2,386,621
Retained earnings (382,607)
---------------
Total Shareholders' Equity 2,035,414
---------------
Total Liabilities and Shareholders' Equity $ 2,089,134
===============
See accompanying notes to consolidated financial statements
<PAGE> 45
WHY USA FINANCIAL GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Year Ended Year Ended
December 31, December 31,
1999 1998
------------- ------------
Revenue:
Mortgage loan originations $ 546,200 $ -
Franchise fees -real estate 366,830 289,635
New franchise sales 11,805 24,075
------------- ------------
Total revenue 924,835 313,710
Expenses:
General & administrative 281,166 94,853
Mortgage loan origination fees 399,230 -
Franchise costs- real estate 42,050 35,433
Marketing costs and travel 56,873 73,946
Interest expense 53,797 49,232
Depreciation 3,228 1,218
Amortization franchise acquisition cost 87,035 55,318
------------- ------------
Total expenses 923,379 310,000
------------- ------------
Income from continuing operations 1,456 3,710
Income from discontinued operations 9,372 -
Income taxes-continuing operations 600 -
------------- ------------
Net Income 10,228 3,710
Accumulated deficit, beginning of period (375,879) (401,283)
Distribution of Sub Chapter S Earnings (16,956) -
Loss incurred from 1/1/1998 to 6/30/1998
absorbed to partnership capital - 21,694
------------- ------------
Accumulated deficit, end of period $ (382,607) $ (375,879)
============= ============
Net loss per common share $ 0.00 $ 0.00
============= ============
Weighted average shares outstanding 21,247,857 20,579,460
============= ============
See accompanying notes to financial statements.
<PAGE> 46
<TABLE>
<CAPTION>
WHY USA FINANCIAL GROUP INC.
Consolidated Statement of Changes in Stockholders Equity
Common Common Accumu-
Stock Stock Paid-In lated Total
Shares Amount Capital Deficit Equity
------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1993 18,266,460 $ 18,266 $ 383,017 $(401,283) $ -
June 30,1998 common stock issued for
expenses of Company paid by
Castlewood Corporation 1,492,000 1,492 - - 1,492
Losses from 1/1/98 to 6/30/98 of
WHY USA North America (the partnership)
absorbed by partners prior to formation
of WHY USA North America, Inc. - - - 21,694 21,694
Net income for the year ended
December 31, 1998 - - - 3,710 3,710
Distribution of Sub Chapter S Earnings - - - (16,956) (16,956)
June 30, 1999 common stock issued for
expenses of Company paid by
Castlewood Corporation 1,642,000 1,642 - - 1,642
December 31, 1999 acquisition of
Northwest Financial, Ltd. after
contribution of Why USA North America,
Inc, to Northwest Financial, Ltd. 10,000,000 10,000 2,003,604 - 2,013,604
Net income for the year ended
December 31, 1999 - - - 10,228 10,228
------------ --------- ---------- ---------- -----------
Balances at December 31, 1999 31,400,460 $ 31,400 $2,386,621 $(382,607) $2,035,414
============ ========= ========== ========== ===========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE> 47
WHY USA FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended Year Ended
December 31, December 31,
1999 1998
------------- ------------
Cash Flows from Operating Activities:
Net income $ 10,228 3,710
Adjustments to reconcile net income to
net cash flow
Provision for depreciation and amortization 97,069 56,536
------------- ------------
Increase in Cash Flow from Operating Activities 107,297 60,246
Changes in Operating Assets and Liabilities:
Decrease (increase) in accounts & notes receivable 9,115 (44,732)
Increase in accounts payable 200 -
Increase (decrease) in accrued payroll liabilities (2,141) 2,141
Increase in income taxes payable 3,000 -
Increase in deferred conference revenues 5,729 -
------------- ------------
Total Change to Operating Assets and Liabilities 15,903 (42,591)
------------- ------------
Net Cash From Operations 123,200 17,655
Cash Flows Provided By (Used) in Investing Activities:
Patent application (5,000) -
Capital expenditures - computers (6,009) (6,479)
Capital expenditures - franchise cost (5,000) (675,000)
------------- ------------
Net Cash Provided by (Used)
in Investing Activities (16,009) (681,479)
Cash Flows Used in Financing Activities:
Payment of debt incurred in franchise
acquisition - 1998 debt incurred (300,316) 300,316
Loans from affiliate - Quality Investments 202,500
Advances from Northwest Financial Group, Inc. 18,391 -
Additional capital contributed by shareholders -
partners pre 6/30/98 178,952 244,365
Advances to ex-officers (49,573) (21,046)
Income distributed to shareholders - Sub
Chapter S Earnings (16,956) -
------------- ------------
Net Cash Used in Financing Activities (169,502) 726,135
------------- ------------
Net Increase (Decrease)in Cash and Cash Equivalents (62,311) 62,311
Cash and Cash Equivalents at Beginning of Period 62,311 -
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ 62,311
============= ============
<PAGE> 48
Supplemental Non-Cash Activities:
Contribution of WHY USA North America, Inc. assets
by Don Riesterer to Why USA Financial Group, Inc.
at cost of $ 2,026,400 net of a promissory loan
to Mr. Riesterer of $ 26,400 $ 2,000,000 $ -
============= =============
Supplemental Cash Flow Information:
Cash Paid During the Year for:
Interest expense $ 53,797 $ 49,232
============= ============
Income taxes $ - $ -
============= ============
See accompanying notes to consolidated financial statements.
<PAGE> 49
WHY USA FINANCIAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
WHY USA Financial Group, Inc. ("the Company") was incorporated as Black Butte
Petroleum, Ltd. on September 10,1980 as a Utah corporation. The Company's
incorporators received 4,500,000 shares for cash of $7,500. The Company
conducted an intrastate offering of its common stock in November, 1980,
selling 15,000,000 shares of its common stock for gross proceeds of $150,000
to the Company. On March 23,1983, the Company entered into a plan of
reorganization with Triam, Ltd., a Nevada Corporation, whereby Black Butte
Petroleum Ltd. conveyed its assets to Triam, Ltd. in exchange for shares of
Triam, Ltd. Black Butte Petroleum was dissolved in the reorganization and
Triam, Ltd. became the survivor entity, and the domicile of the Company became
Nevada. The original Black Butte shareholders received 19,500,000 shares of
Triam, Ltd. in connection with reorganization.
The Company acquired Northwest Financial, Ltd., (Northwest) a Minnesota
corporation, on December 31, 1999. The Company issued 10,000,000 shares to
acquire 100% of the outstanding shares of Northwest. In connection with the
acquisition, the name of the Company was changed to WHY USA Financial Group,
Inc. The acquisition included Northwest's ownership of WHY USA North America,
discussed below.
HISTORY OF NORTHWEST FINANCIAL LTD.
Northwest was organized in 1998, however, it did not commence operations until
1999. Northwest originates mortgage loans, principally for residential
housing, in the Minnesota and Wisconsin area, for which it receives service
release and or other origination fees. Typically, Northwest processes the loan
application, underwrites, and sells the loan to a third party who usually
funds the loan directly to the borrower. Northwest generally pays for the
credit report, appraisal of the property, and processing and underwriting of
the loan. Northwest does not service its loans, and in the majority of cases
may not be responsible for the underwriting or funding of the loan. Northwest
has applied for a provisional patent for its packaging process of combining
its mortgage underwriting process, with real estate brokerage operations,
appraisals, and insurance brokering, as it relates the process of a home buyer
acquiring a residency.
Northwest acquired 100% of the operations and stock of WHY USA North America
Inc. (WHY USA) on December 31,1999. WHY USA is engaged in the business of
selling franchises for the real estate brokerage businesses. Northwest
acquired the operations, stock, and assets of WHY USA via a contribution by
its sole shareholder, who paid $2,026,400 for the acquisition. He funded the
purchase via cash of $650,000 and two promissory notes, one for $850,000 and
one for $500,000. The paid in capital of the Company reflects this $2,000,000
contribution. The franchise value has been increased from $1,305,518 (the cost
basis of the prior owners)to $1,968,189 reflect the excess of the purchase.
<PAGE> 50
The principal components of the contribution are as follows:
WHY USA Assets and Liabilities
------------------------------
Accounts and notes receivable $ 35,617
Net fixed assets 1,923
Less: deferred revenues-liabilities (5,729)
Value assigned to franchise 1,968,189
------------
Total Contribution $ 2,000,000
============
Total Acquisition Price 2,026,400
Less: Note to contributor (26,400)
------------
Net Contribution $ 2,000,000
============
The franchise acquisition fee of $1,968,189 will be amortized over 15 years
under the straight-line method starting in the year 2000. The Company
depreciates its computers and office equipment under accelerated methods over
five years.
The financial statements presented reflect both the operations of WHY USA and
Northwest for 1999 and 1998 as if the Company had acquired the operations of
both Northwest and WHY USA on January 1,1998. The acquisition of Northwest by
the Company has been accounted for as reverse acquisition as the shareholders
of Northwest gained control of the officers and directors of the Company in
connection with the acquisition. The historical cost basis of the assets of
Northwest has been maintained and the accounting is similar to a pooling of
interests of the Company (which was essentially a shell at the time of
acquisition of Northwest). Due to the significance of the size of the
operations of WHY USA and Northwest, the operations of WHY USA and Northwest
have been presented in a consolidated format to more fully allow the reader of
the financial statements more information on the historical history of WHY
USA's and Northwest's operations. The contribution of WHY USA has been valued
at the cost to the contributor.
Since 1989 the Company's operations have been largely conducted by Castlewood
Corporation, which has taken shares in the Company as reimbursement for
conducting the operations of the Company. These activities have consisted of
filing annual reports, tax returns, preparing accounting records, and handling
other regulatory matters of the Company. Castlewood Corporation has charged
the Company based upon a pro rata share of the costs of maintaining its
office. Castlewood Corporation, Merit Stock Transfer, and the Company share
the same facilities.
HISTORY OF WHY USA NORTH AMERICA, INC.
The WHY USA real estate franchise was originally founded in Phoenix, Arizona
in the late 1980's. Approximately 75 franchises were sold throughout the
United States with a concentration in the Midwestern states of Minnesota,
Wisconsin, Nebraska and Iowa. The franchise emphasizes a reduced commission
structure if the individual listing their home participates in the sale of
their property. There are currently 71 active brokers (65 at December 31,
1999) operating under the WHY USA franchise. WHY USA's three founding
stockholders acquired the WHY USA franchise from the originator of the
franchise in December 1996. The originator of the franchise had sold various
<PAGE> 51
components/territories of the franchise to other individuals. The founders
have re-acquired various territories and other components of the franchise in
1997, 1998 and 1999 in an effort to consolidate the franchise into one entity.
WHY USA now controls over 95% of the franchise revenues and territories. WHY
USA operated as a partnership during 1997 and the first half of 1998. WHY USA
converted its operations into a Sub S corporation in the second half of 1998,
and operated in this entity form through December of 1999. WHY USA
stockholders sold their interests in the franchise on December 30, 1999 to
Donald Riesterer for $2,026,400. Mr. Riesterer contributed his interest in the
corporation to Northwest Financial Ltd. in exchange for 90,000 shares of
Northwest. Mr. Riesterer was the sole shareholder of Northwest until it was
acquired by the Company on December 31, 1999. The Company changed its name to
WHY USA Financial Group, Inc. in connection with the acquisition and is now
the sole shareholder of WHY USA.
Franchise - WHY USA acquired the rights to use the WHY USA trademark and the
franchising and real estate system from the founder of the franchise who
operated under an entity named USA, Inc. WHY USA originally acquired
components to the franchise for $625,518 in late 1996/ early 1997. WHY USA
acquired additional franchise rights from the founder in 1998 for $275,000.
WHY USA acquired a significant number of the other territories from an
unrelated individual in 1998 for $400,000. WHY USA acquired a portion of the
state of Arizona franchise rights in 1999 for $5,000. WHY USA now believes it
owns over 95% of the franchise rights and revenues, and has the ability
subject to the state franchise laws to sell the franchise in all 50 states.
The total acquisition price of the franchise is $1,305,518. WHY USA has
amortized its franchise acquisition costs for over 15 years on a straight-line
basis. WHY USA amortized to expense $87,035 in 1999, and $ 55,318 in 1998, and
has amortized on a cumulative basis, $163,207 of its franchise acquisition
costs. The value of the franchise was increased to $1,968,189 as the result of
its purchase and contribution by Mr. Riesterer on December 31, 1999.
Income taxes - Throughout 1998 and 1999, WHY USA operated as either a general
partnership or a Sub S corporation. Under both entity forms the
partners/stockholders are responsible for the income taxes attributable to the
operations of WHY USA. WHY USA has provided no income tax expense on the
income from its operations. The individual stockholders or partners are
individually liable for the income taxes of either the corporation or the
partnership. The individual partners or shareholders will make personal
payment for the related income tax liabilities of the Company or prior
partnership through December 31, 1999. Northwest and WHY USA's financial
statement and income tax accounting are identical. No deferred tax assets or
liabilities are necessary as there are no timing differences between reporting
of income or expense for income tax purposes. The parent company has a net
operating loss of approximately $380,000 which will be limited as to its
availability to off set future profitable operations. Therefore, no tax asset
has been established for the loss carry-forward of the parent.
Long-term debt - In connection with the sale of the WHY USA to Mr. Riesterer,
all debt owed to Quality Investments, Inc. was forgiven and reclassified as
contributed capital of the Company. WHY USA paid Quality Investments, Inc.
$50,464 in interest in 1999 and $49,232 in 1998 for loans advanced for the
purposes of acquiring the franchise rights. The debt bore interest at 6.0% to
8.0% and was unsecured. The majority control of Quality Investments, Inc. was
identical to the ownership of WHY USA. Northwest issued a promissory note to
Don Riesterer for $26,400 in connection with this contribution of WHY USA to
Northwest. The note bears interest at 8% and was repaid in early 2000.
Basis of presentation - WHY USA Operations - The Company operated as a general
partnership from its inception in December 1996 through June 30, 1998, when it
<PAGE> 52
converted its entity form from a general partnership to a corporation. The
assets, liabilities, equity and operations were directly transferred into the
corporation. The 1998 income statement includes both the operations of the
partnership for the first six months of the 1998 and the operations of the
corporation from July 1, 1998 through December 31, 1998. WHY USA's ownership
or the nature of its operations did not change as a result of the change in
entity form.
Discontinued operations - Northwest owned and operated an office building in
Minnesota during 1999. The building's ownership was transferred out of
Northwest just prior to its acquisition by the Company. The rental operations
have been accounted for as a discontinued operation. The results of the rental
activities for 1999 are summarized as follows: (Note: Northwest was not active
until 1999.)
Rental income $ 76,132
Rental expenses 43,924
Interest expenses 13,630
Depreciation expenses 6,806
-----------
Total expenses 64,360
Net income from discontinued operations 11,772
Income tax attributable to
discontinued operations 2,400
-----------
Net income - discontinued operations $ 9,372
===========
Related Party Transactions
WHY USA NA leased office facilities throughout 1999 and 1998 for $6,600 from
Douglas Larson, who owned 33 1/3% of WHY USA's stock prior to WHY USA's
acquisition. WHY USA sub-leases new office space in the year 2000 from Douglas
Larsen, for $2,500 per month until October 2000.
Northwest rented its office from an affiliated entity, Northwest Financial
Group, Inc. (NFG). Rent was charged at $2,000 per month, for a total rent
expense of $22,000. Rent expense was calculated at the same rate per square
foot as other tenants in the building. Northwest shared employees with NFG.
The entire payroll of Northwest was paid by NFG, and then reimbursed by
Northwest based upon utilization of employees by entity. Northwest's
operations include all of the mortgage loan originations generated by its
Woodlake office. Northwest and NFG competed for similar customers and
business. The revenue was allocated between the companies based upon the
employee who generated the business. The discontinued rental operations were
transferred to Mr. Riesterer, who was the sole shareholder of both Northwest
and NFG prior to Northwest's acquisition by the Company. Northwest also paid
$3,334 in interest to relatives of Mr. Riesterer for temporary funds advanced
to Northwest during 1999. Interest was paid at 8%.
Northwest has advanced $70,619 to a former officer of Northwest. These
advances are non-interest bearing and will be repaid via future services of
the ex-officer.
The previous owners of WHY USA owned and operated three franchises of WHY USA,
Inc., which represents less than 1% of the total revenues of WHY USA Group
Inc. in 1999 and less than 2% in 1998.
<PAGE> 53
Segment information - The Company operated in two very similar areas, real
estate franchising and mortgage loan originations. Both sales activities are
driven by activities within the residential real estate market. The Company's
mortgage activities are in Wisconsin and Minnesota. The Company's real estate
franchises are concentrated in the states of Minnesota, Wisconsin, Nebraska
and Iowa which generate (70%) of total franchise revenues.
Mortgage Loans Real Estate
Originations Franchising
-------------- ------------
Revenues $ 546,200 $ 378,635
-------------- ------------
Expenses:
General and Admin. 125,234 154,290
Franchising expenses - 42,050
Mortgage loan 399,230 -
Marketing 17,511 39,362
Franchise Amortization - 87,035
Depreciation expense 1,947 1,281
Interest expense 3,334 50,463
-------------- ------------
Total Segment Expense 547,256 374,481
-------------- ------------
Net income (loss) by segment $ (1,056) $ 4,154
============== ============
During 1998, only WHY USA - the real estate franchiser was in operations.
<PAGE> 54
PART III
Item 1. Index to Exhibits
Exhibit No. Description
---------- ------------
2.1 Reorganization between the Black Butte Petroleum, Inc.
and Triam Ltd. dated March 23, 1983
2.2 Acquisition Agreement between Triam Ltd and Northwest
Financial Ltd., dated December 16, 1999
2.3 Acquisition Agreement Addendum, dated December 20, 1999
2.4 Stock Purchase Agreement dated September 24, 1999
between Northwest Financial Group, Inc.,WHY USA NA, and
its selling shareholders
2.5 Addendum to Stock Purchase Agreement, dated December 30,
1999 including Assignment to Donald Riesterer
3.1.1 Articles of Triam Ltd., dated January 6, 1983
3.1.2 Amendment to Articles of Incorporation, March 4, 1983
3.1.3 Amendment to Articles of Incorporation,
filed March 29,1983
3.1.4 Articles of Merger, filed on November 9, 1999
3.1.5 Amendment to Articles of Incorporation, Jan. 10, 2000
3.2 Bylaws
10.1 Sample Franchise Agreement
10.2 Sub-Lease on Menomonie Property
10.3 Donald Riesterer - Note for $500,000
10.4 Donald Riesterer - Note for $850,000
21 List of Subsidiaries
27 Financial Data Schedule
<PAGE> 55
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Why USA Financial Group, Inc.
(Registrant)
Date: May 11, 2000 By: /s/ Donald Riesterer
________________________________
Donald Riesterer
Chief Executive Officer
Chairman of the Board
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated this 7th day of March, 1983,
by and between Black Butte Petroleum, a Utah Corporation (hereinafter called
"Black Butte"), and Triam, Ltd., a Nevada Corporation (hereinafter called
"Triam").
PLAN OF REORGANIZATION
The reorganization will comprise in general the conveyance by Black Butte
to Triam, of all of the assets of Black Butte, the issuance by Triam, to Black
Butte of shares of Triam's common stock, as hereinafter set forth, and the
subsequent dissolution of Black Butte with the concomitant distribution of
Triam shares to stockholders. The company has set up a subsidiary, Triam,
Ltd., a corporation under the laws of the State of Nevada, in which Black
Butte owns all outstanding stock. The company proposes to sell all of its'
assets and liabilities to Triam in exchange for common stock, thereby changing
its domicile from the State of Utah to the State of Nevada. The change of
domicile will have the advantage of reducing the future taxes to the company.
The change in domicile is made pursuant to the provisions of Section
368(a)(1)(c) of the Internal Revenue Code of 1954, as amended, and in reliance
to the exemption provided by the Securities Act of 1933, as amended, Rule
145(a)(2) and 145(a)(3). The company proposes to sell its' assets and
liabilities for 19,500,000 shares of Triam, $0.001 (one tenth cent) par value
common stock. The company will then effect a distribution of the Triam shares
to its shareholders in exchange for their Black Butte stock. The 7,500,000
shares issued to Black Butte when it set up Triam as a subsidiary shall be
returned to the Triam treasury. Said shares, when issued, to be restricted and
issued for investment purposes only in compliance with Rule 144 of the
Securities and Exchange Act of 1933 as amended. The shareholders of Black
Butte would then own stock of Triam.
AGREEMENT
In order to consummate the foregoing plan of reorganization, and in
consideration of the promises and of the representations and undertakings
herein set forth, the parties agree as follows:
1. The reorganization, pursuant to the provisions of Section 368(a)(1)(c)
of the Internal Revenue Code of 1954, as amended, and the Securities Act of
1933, as amended, Rule 145(a)(2) and 145(a)(3), will involve the acquisition
by Triam of all of the property, assets, good will, name, business, and
19,500,000 outstanding common stock shares of Black Butte in exchange solely
for Nineteen Million Five Hundred Thousand (19,500,000) shares of one-tenth
cent par value common stock of Triam, representing then Seventy-two Percent
(72.2%) of Triam's outstanding stock.
2. Black Butte is a corporation duly organized and existing under the
laws of the State of Utah, with authorized capital stock consisting of
100,000,000 shares of common voting stock with a one tenth cent ($0.001) par
value per share. Nineteen Million Five Hundred Thousand (19,500,000) of Black
Butte's common shares will be duly issued and outstanding upon the
consummation of the proposed reorganization.
<PAGE> 1
3. It is understood by the parties that the balance sheet of Black Butte
as of March 7, 1983, will have no tangible assets and no liabilities other
than intangible assets, and Black Butte warrants that such balance sheet
fairly represents the financial position of Black Butte as of such date.
4. It is understood, and Black Butte hereby represents, that Black Butte
has good and marketable title to all the properties it purports to convey by
this agreement as described in the balance sheet as of March 7, 1983, referred
to in paragraph 3., above.
5. It is understood, and Black Butte represents, that Black Butte is not
a party to any pending or threatened litigation which might adversely affect
the assets of Black Butte which are to be transferred to Triam.
6. All taxes which Black Butte is required by law to pay in regard to the
assets to be transferred have been or will be duly paid for all periods up to
and including the date on which this agreement is signed.
7. It is understood, and Black Butte represents, that the assets to be
transferred by Black Butte have not, since negotiations commenced between the
parties, been materially or adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike, embargo,
confiscation of vital equipment, materials or inventory, or acts of God.
8. After acquiring 19,500,000 shares of approximately 72.2% of the voting
shares of Triam as herein agreed, Black Butte shall dissolve and distribute
such shares to its individual shareholders through the company's transfer
agent.
9. Black Butte will bear the cost of its own accounting and attorney's
fees, and administrative costs incurred in connection with this transaction.
10. Black Butte hereby warrants that Black Butte's stock has not been
recently listed and quoted in the inter-dealer quotation services, and that
the stock will not be listed and quoted at the time the reorganization is
completed and effected.
11. Triam is a corporation duly organized and existing under the laws of
the State of Nevada, with authorized capital stock consisting of 100,000,000
shares of common stock with a par value of $0.001 per share, all having full
voting power' and of which 7,500,000 shares will have been duly issued and
will be outstanding, fully paid and non-assessable on March 7, 1983, to one
shareholder, Black Butte, Petroleum, Ltd.
12. Triam has not caused, and will not cause, suffer nor permit prior to
the closing of this reorganization:
a. Any change in the condition (financial or otherwise) of its
assets, liabilities or business.
b. Any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the business or any of the properties of Triam
or of any item carried on the accounts of Triam.
c. Any declaration, setting aside a payment of any dividend or other
distribution in respect to any of Triam's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any such stock.
d. Any increase in the compensation payable or to become payable by
Triam to any of its officers, employees, or agents, or any bonus payment or
arrangement made with any or to any of them.
<PAGE> 2
e. Any event or condition of any character adversely affecting the
business or properties of Triam shall furnish a statement, which shall be a
true and complete statement of Triam's financial condition and of its assets
and liabilities, and warrants that no liabilities are outstanding which are
not reflected on said balance sheet, excepting liabilities such as attorney'
and accountants' fees and administrative costs incurred in connection with
this transaction.
13. Triam shall bear the costs of its own accountants' and attorneys'
fees, and its own administrative costs which it incurs in connection with this
transaction.
14. Prior to or at the time of the consummation of this transaction,
Black Butte shall furnish to Triam a complete and accurate list of its
shareholders and outstanding securities, certified by the transfer agent as of
the record date for its shareholders meeting held to consider this
transaction.
15. In exchange for all of the assets of Black Butte, Triam shall issue
to Black Butte 19,500,000 shares of its common stock, bringing the total of
issued and outstanding shares of Triam to not more than 27,000.000 shares, as
of the date the reorganization is to be affected. Upon dissolution, Black
Butte shall distribute the Triam shares to its shareholders at the rate of one
share of Triam for each one share of Black Butte. No fractional shares shall
be issued.
16. It is understood by and between all the parties hereto that the
representations made by the parties in negotiations leading up to this
Agreement and terms of this Agreement are material and that the parties have
entered into this Agreement in reliance on said representations. In the event
Black Butte is held liable for any damage or expense incurred due to Black
Butte's reliance on representations made by Triam, then Triam shall indemnify
and hold harmless Black Butte for any and all such damage and expenses
including, but not limited to, costs and attorney's fees. In the event Triam
is held liable for any damage or expense incurred due to Triam's reliance on
representations by Black Butte, then Black Butte shall indemnify and hold
harmless Triam for any and all such damage and expenses including, but not
limited to, costs and attorney's fees.
17. This agreement and Plan of Reorganization is made and entered into
subject to approval of the shareholders of Black Butte, and Triam. Each party
shall call a meeting of its shareholders on or before March 22, 1983, in order
to obtain shareholder ratification of the Agreement and Plan of
Reorganization. If a favorable vote of the shareholders of each party is
received at the March 22, 1983 meetings, then the reorganization shall be
effected on the 22nd day of March, 1983. If the shareholders of either or both
parties hereto shall fail to approve this Agreement and Plan of
Reorganization, the parties shall each bear their own costs and damages
resulting from the resultant failure of the reorganization. The above
timetable and dates may be extended at the request of either party, by mutual
agreement of the parties.
18. At any time prior to the consummation of the Plan of Reorganization
on March 22, 1983, the Board of Directors of any of the parties hereto may, by
formal resolution of the Board, withdraw from the Agreement and Plan of
Reorganization. Notice of such withdrawal, together with a copy of the
resolution, shall be served upon the other parties to the contract; and in the
event any party exercises its option to withdraw as set forth herein, it is
mutually agreed that neither of the parties shall seek to impose any liability
upon the other as a result of the failure of the reorganization. Each party
will bear its own costs and damages which may result from a
<PAGE> 3
failure of the reorganization for any reason whatsoever.
19. This Agreement has been signed by the officers of the respective
parties and is subject to approval by the respective Boards of Directors. Such
approval shall be by formal resolution, copies of which shall be exchanged by
the parties as soon as such approval is received. The Agreement is also
expressly made subject to compliance with federal and state laws.
IN WITNESS WHEREOF, the parties hereto executed this Agreement and Plan
of Reorganization on the day and year first written above.
BLACK BUTTE PETROLEUM, LTD., a Utah Corporation
by /s/ George S. Smith
President
TRIAM, LTD., a Nevada Corporation
by /s/ G. O'Brien Garrett
President-Director
<PAGE> 4
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (ACQUISITION), dated the 16th day of December, 1999
by and between Triam, Ltd., a Nevada Corporation (hereinafter called "Triam"
and Northwest Financial, Ltd., a Minnesota Corporation, (hereinafter called
Northwest).
ACQUISITION
The Acquisition will comprise in general the conveyance by Northwest to
Triam, of all of the assets, liabilities, and all the outstanding shares of
Northwest, the issuance by Triam to Northwest of 10,000,000 shares of Triam
INVESTMENT common stock, as hereinafter set forth, and the subsequent transfer
of ownership of Northwest with the concomitant distribution of Triam shares to
Northwest stockholders. Northwest proposes to sell its assets and liabilities,
and all its outstanding shares for 10,000,000 shares of Triam's $0.001 (one
tenth cent) par value Investment common stock. Northwest will then effect a
distribution of the Triam shares to its shareholders in exchange for their
Northwest stock through the Escrow Holder Merit Transfer Company. The
Acquisition will then be completed by Triam and Northwest will become a 100%
wholly owned subsidiary of Triam and change it's name to "WHY USA Mortgage
Services, Inc.", and continue to operate in the mortgage business. Said shares
when issued to be Restricted and issued for investment purposes only, and may
be sold only in compliance with Regulation D, Rule 144 of the Securities and
Exchange Act of 1933, as amended. The shareholders of Northwest would then own
investment stock of Triam, Ltd.
AGREEMENT
In order to consummate the forgoing Acquisition and in consideration of
the promises and of the representations and undertakings herein set forth, the
parties agree as follows:
1. The Acquisition Agreement will involve the Acquisition by Triam of all
of the property, assets, good will, name, business, and outstanding Common
Stock Shares of Northwest, in exchange solely for Ten Million Shares, of one-
tenth cent par value Investment stock of Triam and Northwest distributing the
shares to the shareholders of Northwest through the escrow holder Merit
Transfer Company.
2. Triam is a corporation duly organized and existing under the laws of
the State of Nevada, with authorized capital stock consisting of 100,000,000
shares of common voting stock with a par value of $0.001 per share. Twenty One
Million Four Hundred Thousand Four Hundred Sixty, (21,400,460) of Triam common
shares will be duly issued and outstanding, on the date of this Agreement.
Triam will amend its's Articles of Incorporation to change its' name to "WHY
USA Financial Group, Inc.
3. It is understood by the parties that the balance sheet of Triam as of
June 30, 1999, and
<PAGE> 1
as shown on the June 30, 1999 Federal Tax Return, were prepared by a Certified
Public Accountant, and Triam warrants that such balance sheets fairly
represent the financial position of Triam, and no assets have been acquired or
liabilities incurred since June 30, 1999.
4. It is understood, and Triam hereby represents, that Triam has good and
marketable title to all the properties it purports to own by this agreement as
described in the balance sheet as of June 30, 1999, referred to in paragraph
#3 above.
5. It is understood and Triam hereby represents, that Triam is not a
party to any pending or threatened litigation which might adversely affect the
assets of Triam.
6. All taxes which Triam is required by law have been or will be duly
paid for all periods up to and including the date on which this agreement is
signed.
7. It is understood, and Triam represents that the assets owned by Triam
have not, since negotiations commenced between the parties, been materially or
adversely affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike, embargo, confiscation of vital
equipment, materials or inventory, or acts of God.
8. Triam has not caused, and will not cause, suffer nor permit prior to
the closing of this Agreement:
a. Any change in the condition (financial or otherwise) of its
assets, liabilities or business.
b. Any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the business or any of the properties of Triam
or of any item carried on the accounts of Triam.
c. Any declaration, setting aside a payment of any dividend or other
distribution in respect to any of Triam capital stock, or any direct or
indirect redemption, purchase or other acquisition of any such stock.
d. Any increase in the compensation payable or to become payable by
Triam to any of its officers, employees, or agents or any bonus payment or
arrangement made with any or to any of them.
e. Any event or condition of any character adversely affecting the
business or properties of Triam. Triam has furnished a statement, which is a
true and complete statement of Triam's financial condition and of its assets
reflected on said balance sheet, excepting liabilities, such as attorneys',
consultants', and accountants' fees and administrative costs incurred in
connection with this transaction, which will be paid in full by Triam on
completion of this Agreement.
9. Triam shall bear the costs of its own accountants', consultants', and
attorneys' fees, and its own administrative costs which it incurs in
connection with this transaction.
<PAGE> 2
10. Prior to or at the time of the consummation of this transaction,
Triam shall furnish to Northwest a complete and accurate list of its
shareholders and outstanding securities, certified by the transfer agent as of
the record date for its shareholders meeting held to consider this
transaction.
11. Triam hereby warrants that Triam's stock is not listed or quoted in
the inter-dealer quotation services, and that the stock will be listed and
quoted after the Agreement is completed and effected.
12. Northwest is a corporation duly organized and existing under the laws
of the State of Minnesota with authorized capital stock consisting of 100,000
shares of common voting stock with no par value per share. One Hundred
Thousand (100,000) of Northwest common shares will be duly issued and
outstanding upon the consummation of the proposed Acquisition Agreement.
13. It is understood by the parties that the balance sheet of Northwest,
as of December 16, 1999, is unaudited, and Northwest warrants that such
balance sheets fairly represents the financial position of Northwest as of
such date.
14. It is understood, and Northwest hereby represents, that Northwest has
good and marketable title to all the properties it purports to convey by this
agreement as described in the balance sheet as of December 16, 1999, referred
to in paragraph #3 above.
15. It is understood and Northwest represents that Northwest is not a
party to any pending or threatened litigation which might adversely affect the
assets of Northwest which are to be transferred to Triam.
16. All taxes which Northwest is required by law to pay in regard to the
assets to be transferred have been or will be duly paid for all periods up to
and including the date on which this agreement is signed.
17. It is understood, and Northwest represents, that the assets to be
transferred by Northwest have not, since negotiations commenced between the
parties, been materially or adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike, embargo,
confiscation of vital equipment, materials or inventory, or acts of God.
18. Northwest has not caused, and will not cause, suffer nor permit prior
to the closing of this Agreement:
a. Any change in the condition (financial or otherwise) of its
assets, liabilities or business.
b. Any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the business or any of the properties of
Northwest or of any item carried on the accounts of Northwest.
c. Any declaration, setting aside a payment of any dividend or other
distribution in respect to any of Northwest's capital stock, or any direct or
<PAGE> 3
indirect redemption, purchase or other acquisition of any such stock.
d. Any increase in the compensation payable or to become payable by
Northwest to any of its officers, employees, or agents or any bonus payment or
arrangement made with any or to any of them.
e. Any event or condition of any character adversely affecting the
business or properties of Northwest. Prior to the signing of this agreement,
Northwest shall furnish a statement, which shall be a true and complete
statement of Northwest's financial condition and of its assets and
liabilities, and warrants that no liabilities are outstanding which are not
reflected on said balance sheet, excepting liabilities, such as attorneys' and
accountants' fees and administrative costs incurred in connection with this
transaction.
19. Northwest shall bear the costs of its own accountants' and attorneys'
fees, and its own administrative costs which it incurs in connection with this
transaction.
20. Prior to or at the time of the consummation of this transaction,
Northwest shall furnish to Triam a complete and accurate list of its
shareholders and outstanding securities, certified by the company agent as of
the record date for its shareholders' meeting held to consider this
transaction.
21. In exchange for all of the assets and outstanding common stock of
Northwest, Triam shall issue to Northwest, 10,000,000 shares of its investment
common stock, bringing the total of issued and outstanding shares of Triam to
not more than 31,400,460 shares, as of December 16, 1999, the date the
Acquisition is completed, at which time the shareholders of Northwest would
then own investment common stock of Triam. Upon completion of the Acquisition,
Northwest shall distribute the Triam issuance of 10,000,000 shares of
investment common stock to its shareholders at the rate of one hundred shares
of Triam for one share of Northwest. No fractional shares shall be issued. The
shares to be issued on December 16, 1999, will be issued by the transfer agent
Merit transfer Company, to the Northwest shareholders, in exchange for each
certificate of Northwest submitted, using the same ratio agreed to above. Each
certificate must be signed by the shareholder with a signature guarantee, by a
Bank or Stock Brokerage Firm. There is a charge of $20.00 per certificate.
22. It is understood by and between all the parties hereto that the
representations made by the parties in negotiations leading up to this
Agreement and terms of this Agreement are material and that the parties have
entered into this Agreement in reliance on said representations. In the event
Triam is held liable for any damage or expense incurred due to Triam's
reliance on representations made by Northwest, then Northwest shall indemnify
and hold harmless Triam for any and all such damage fees. In the event
Northwest is held liable for any damage or expense incurred due to Northwest's
reliance on representations by Triam then Triam shall indemnify and hold
harmless Northwest for any and all such damage and expenses including, but not
limited to, costs and attorneys' fees.
23. The Acquisition Agreement is made and entered into subject to
approval of the shareholders of Triam and Northwest. Each party shall call a
meeting of its shareholders on or
<PAGE> 4
before Thursday, December 16, 1999, in order to obtain shareholder
ratification of the Acquisition Agreement If a favorable vote of the
shareholders of each party is received on or before the December 16, 1999
meetings, then the Acquisition shall be effected on the 16th day of December
1999 If the shareholders of either or both parties hereto shall fail to
approve this Acquisition Agreement, the parties shall each bear their own
costs and damages resulting from the resultant failure of the Acquisition The
above time table and dates may be extended at the request of either party, by
mutual agreement of the parties.
24. At any time prior to the consummation of The Acquisition Agreement on
December 16, 1999 the Board of Directors of any of the parties hereto may, by
formal resolution of the Board, withdraw from the Acquisition Agreement.
Notice of such withdrawal, together with a copy of the resolution, shall be
served upon the other parties to the contract, and in the event any party
exercises its option to withdraw as set forth herein, it is mutually agreed
that neither of the parties shall seek to impose any liability upon the other
as a result of the failure of the Acquisition. Each party will bear its own
costs and damages which may result from a failure of the Acquisition for any
reason whatsoever.
25. This Acquisition Agreement has been signed by the officers of the
respective parties, and is subject to approval of the respective Boards of
Directors. Such approval shall be by formal resolution, copies of which shall
be exchanged by the parties as soon as such approval is received The Agreement
is also expressly made subject to compliance with federal and state laws.
IN WITNESS WHEREOF, the parties hereto executed this Acquisition
Agreement on the day and year first written above.
TRIAM, LTD
A Nevada Corporation
by:/s/ David H. Timms
President
NORTHWEST FINANCIAL, LTD.
A Minnesota Corporation
by:/s/ Donald L. Riesterer
President
<PAGE> 5
ACQUISITION AGREEMENT AMENDMENT
This Acquisition Agreement Amendment (Amendment), dated the 20th day of
December, 1999 by and between TRIAM, LTD, a Nevada Corporation (hereinafter
called "TRIAM" and NORTHWEST FINANCIAL, LTD, a Minnesota Corporation,
(hereinafter called NORTHWEST).
WITNESSETH
Whereas, an Acquisition Agreement (Acquisition) was agreed to and executed
between TRIAM and NORTHWEST on December 16, 1999 and approved by the Board of
Directors and Shareholders of both parties at meeting held for that purpose,
and,
Whereas, both parties mutually agree to an amendment to the Acquisition to
allow time for the WHY USA asset to be transferred to NORTHWEST as shown on
the unaudited Financial Statement referred to in Paragraphs 13 and 14 of the
Acquisition Agreement which will be completed on or before December 31, 1999,
and,
Whereas, Ten Million Shares of Investment Stock was issued by TRIAM to
NORTHWEST for the transfer of assets in December 16, 1999 as agreed to in the
Acquisition, and a Stop Transfer will be placed with Merit Transfer, the
Transfer Agent, until the transfer of assets is completed by N0RTHWEST.
Now, therefore, both Parties to this Agreement mutually agree to amend the
Acquisition by TRIAM from NORTHWEST as follows:
1. The date, of transfer of assets by NORTHWEST to TRIAM, is extended to
December 31, 1999 instead of December 16, 1999, as referred to in the
Acquisition Agreement.
2. All references in the Acquisition to a Balance Sheet dated December
16, 1999 are hereby retroactively amended to refer to an Unaudited
Balance Sheet dated December 31, 1999, to reflect the true assets
being acquired by TRIAM from NORTHWEST, which will include the
Franchises of WHY USA.
3. All other items in the Acquisition Agreement dated December 16, 1999
will remain in full effect for all purposes intended in the
Agreement.
4. TRIAM will instruct Merit Transfer, the Stock Transfer Agent, to
remove the Stop Transfer order on the stock issued to NORTHWEST
under the Acquisition Agreement, upon completion of the transfer of
assets by NORTHWEST to TRIAM on December 31, 1999.
This Amendment is agreed to by both parties to the Acquisition Agreement with
no other changes
<PAGE>
other than those herein above written.
Time is of the essence in the Amendment to Acquisition Agreement.
Dated December 20,1999 TRIAM, LTD.
A Nevada Corporation
By /s/ David H. Timms
President
NORTHWEST FINANCIAL, LTD.
A Minnesota Corporation
By: /s/ Donald Riesterer
President
<PAGE>
PURCHASE AGREEMENT
This agreement was entered into on September 24,1999, between WHY USA
North America, Inc., a corporation organized and existing under the laws of
Wisconsin, with its principal place of business at 1421 North Broadway, Suite
108, Menomonie, Wisconsin, referred to as seller-corporation, Douglas A.
Larson and Ann Y. Larson, Emil A. Gluck and Joanne M. Gluck of Menomonie, Dunn
County and David 0. Thomas and Debora Thomas of New Auburn, Chippewa County,
Wisconsin, referred to as seller-shareholders, and Northwest Financial Group,
Inc., a corporation organized and existing under the laws of Minnesota, with
its principal place of business at 1802 Wooddale Drive, Suite 100, Woodbury,
Minnesota, referred to as buyer.
WHEREAS,
(1) Seller-shareholders own all of the outstanding shares of capital
stock of seller-corporation; and
(2) Seller-corporation is engaged in the business of selling franchises
for real estate brokerage businesses.
(3) Buyer desires to enter the real estate brokerage business nationwide,
and to this end, desires to acquire the shares of capital stock of seller-
corporation on the terms and conditions set forth in this agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this agreement and other good and valuable consideration, it is agreed as
follows:
SECTION ONE
SALE OF STOCK
On the terms and subject to the conditions set forth in this agreement,
seller-shareholders agree to sell, transfer, assign and deliver to buyer, and
buyer agrees to purchase, all of the outstanding shares of capital stock of
seller-corporation, consisting of 3,000 shares of common nonpar stock.
SECTION TWO
CONSIDERATION FOR STOCK
On the terms and subject to the conditions set forth in this agreement,
buyer agrees to pay to seller-shareholders, as the purchase of the shares of
capital stock of seller-corporation, the sum of Two Million ($2,000,000.00)
Dollars as follows:
Fifty Thousand ($50,000.00) Dollars as nonrefundable earnest money at the
time of execution of this agreement ($10,000.00 of which has all ready been
paid), and the balance to be paid in full at the time of closing. In the event
Seller-corporation does not
<PAGE> 1
comply with the terms of Section Six (4) (execution of estoppel agreement),
prior to or at the time set for closing, the above-described earnest money
shall be refunded to buyer.
The seller-corporation is negotiating the repurchase of one of a regional
director's territory ("Joe O'Hern Territory") for an approximate purchase
price of Seventy-five Thousand ($75,000.00) Dollars. In the event this
territory purchase is closed prior to the closing described in SECTION FOUR,
the above purchase price shall be increased by the amount of consideration
paid by seller-corporation for the "Joe O'Hern Territory". Seller-corporation
shall notify buyer in the event that the purchase price of the "Joe O'Hern
Territory" exceeds $75,000.00.
SECTION THREE
CONDUCT OF BUSINESS BEFORE CLOSING
Seller-corporation and seller-shareholders covenant and agree that, from
the date of this agreement until the date of closing, seller-corporation will
at all times conduct its business in the usual and ordinary course and will
not, without the written consent of buyer, (a) purchase, sell, or otherwise
dispose of any property or services of any kind, other than purchase and sales
in the ordinary course of business and other than as noted in SECTION TWO
regarding the "Joe O'Hern Territory"; (b) mortgage, pledge, create security
interests in or otherwise encumber any of its properties or assets; (c) make
or incur any capital commitment or expenditures or any unusual or long term
commitment; (d) grant any increase in salary or other increased compensation
to any of its employees; (e) declare or pay any dividend or make any other
distribution to shareholders other than the distribution of accounts
receivables as stated in SECTION FIVE below; (f) reveal to third persons any
trade secrets, customer lists, or other confidential or proprietary
information, or act otherwise in any manner that may adversely affect its
rights, interests, assets, or business; or (g) issue or sell any additional
stock or other securities, or grant any rights to subscribe for or to
purchase, or any options or warrants for the purchase of, any additional stock
or other securities.
SECTION FOUR
CLOSING
The closing of the purchase and sale provided for in this agreement shall
take place at 1421 North Broadway, Suite 108, Menomonie, Wisconsin, Dunn
County, at 10:00 A.M., on November 1, 1999. The closing date can be extended
to 12-31-99 or at such other time and place as may be mutually agreed to by
the parties, upon payment by Buyers of additional nonrefundable earnest money
of $50,000.00. At the closing, seller-shareholders shall deliver to buyer all
share certificates, assignments, and other instruments that may be necessary
to transfer and assign to buyer all of the outstanding shares of seller-
corporation, all in form satisfactory to buyer's counsel. Upon transfer of
such shares, buyer shall have full and complete ownership of WHY USA North
America, Inc. and thereby all interest in all of the assets of the corporation
(except for the accounts receivable accrued up to date of closing) and
responsibility for all of the corporate debt.
<PAGE> 2
SECTION FIVE
ACCOUNTS RECEIVABLE OF SELLER-CORPORATION
The uncollected accounts receivables which exist at the time of closing
shall belong solely to and be distributed to the seller-shareholders, and
shall not be conveyed with the other corporation assets to buyer.
SECTION SIX
REPRESENTATIONS AND WARRANTIES OF
SELLER-SHARE HOLDERS
Seller-shareholders represent and warrant to buyer as follows:
(1) Seller-corporation is a corporation organized, and in good standing
under the laws of Wisconsin, with full corporate power to carry on its
business as now being conducted and to own and operate the properties and
assets now owned and operated by it.
(2) The authorized capital stock of seller-corporation consists of 9,000
shares of common stock nonpar value of which 3,000 shares are issued and
outstanding as of the date of this agreement. All of the outstanding shares of
seller-corporation are validly issued, fully paid, and nonassessable.
(3) All business records, balance sheets, itemization of debts, franchise
registrations, trademark and copyright documentation, current contracts, and
other information provided by seller-corporation to buyer prior to the
execution of this agreement have been complete and accurate.
(4) Gregory Hague, WHY USA, Inc., WHY USA Franchise Corporation and WHY
USA Development Corporation have no interest in or claim to the trademarks
copyrighted materials, franchises or other assets owned by seller-corporation;
seller-corporation will obtain the signature of said parties to the Estoppel
Agreement which is attached hereto and made a part hereof.
(5) No litigation, is pending against seller-corporation before any court
or any governmental agency and, to the knowledge of the seller-shareholders,
no such litigation is threatened or anticipated. Seller-corporation has not
violated any laws, regulations, or orders applicable to its business or
activities.
(6) Seller-corporation has filed all federal, state, and other tax
returns that are required to be filed by it and has paid or made provision for
the payment of all taxes due pursuant to those returns.
(7) Seller-corporation has no debts, liabilities, or obligations that
will remain unpaid and/or owing at the time of closing. It is the interest of
the parties that Buyer I purchasing Seller-corporation in a "debt free
condition".
<PAGE> 3
SECTION SEVEN
NONCOMPETE CLAUSE
Seller-shareholders agree not to reestablish or reopen any business,
trade, or occupation similar to the business of seller-corporation, or in any
manner to become involved directly or indirectly as owner, partner, agent,
stockholder, officer or otherwise in any such business within North America
for a term of five years.
SECTION EIGHT
LEGAL FEES AND CHOICE OF LAW
If any party breaches this agreement, a party thereby damaged shall, in
addition to all other available legal or equitable remedies, be entitled to
recover reasonable attorneys fees.
This agreement shall be construed according to the laws of Wisconsin.
In witness whereof, the parties have executed this agreement at
Menomonie, Wisconsin, on the date first above written.
Dated this 24th day of September , 1999.
/s/ David O. Thomas /s/Douglas A. Larson
WHY USA North America, Inc. Seller-shareholder, Douglas A. Larson
By: David 0. Thomas
President
/s/Emil A. Gluck
Seller-shareholder, Emil A. Gluck
`
/s/ David O. Thomas
Seller-shareholder, David 0. Thomas
Northwest Financial Group, Inc.
By: /s/ Donald Riesterer
President
<PAGE> 4
ADDENDUM TO PURCHASE AGREEMENT
This addendum agreement was entered into on December 30, 1999, between
WHY USA North America, Inc., a corporation organized and existing under the
laws of Wisconsin, with its principal place or business at 1421 North
Broadway, Suite 108, Menomonie, Wisconsin, referred to as seller-corporation,
Douglas A. Larson and Ann Y. Larson, Emil A. Gluck and Joanne M. Gluck of
Menomonie, Dunn County and David 0. Thomas and Debora Thomas of New Auburn,
Chippewa County, Wisconsin, referred to as seller-shareholders, and Northwest
Financial Group, Inc., a corporation organized and existing under the laws of
Minnesota, with its principal place of business at 1802 Wooddale Drive, Suite
100, Woodbury, Minnesota, referred to as buyer.
WHEREAS, the above named parties entered into a Purchase Agreement on
September 24, 1999 whereby Seller-shareholders agreed to sell all of the
outstanding shares of capital stock of Seller-corporation to buyer; and
WHEREAS, the parties have agreed to modifications to such agreement, and
intend to herein state such modifications.
NOW THEREFORE, in consideration of the mutual covenants contained in this
agreement and other good and valuable consideration, it is agreed that the
September 24, 1999 Purchase Agreement is amended and modified as follows:
1. MANNER OF PAYMENT. Six Hundred Seventy-six Thousand Four Hundred
Dollars ($676,400.00) of the Two Million Twenty-Six Thousand Four Hundred
Dollar ($2,026,400.00) purchase price shall be paid on or before closing, and
the balance of One Million Three Hundred Fifty Thousand Dollars
($1,350,000.00) shall be paid pursuant to two promissory notes on the terms
and in the form as shown on Exhibit A and B which are attached hereto.
2. SECURITY. The promissory note attached as Exhibit A shall be
secured by a real estate mortgage on the terms and in the form as shown on
Exhibit C which is attached hereto. The promissory note attached as Exhibit B
shall be secured with One Million (1,000,000) shares of common stock of WHY
USA Financial Group, Inc., which stock shall be assigned to Seller-
shareholders for collateral purposes and held by Seller-shareholders pending
payment in full of the promissory note.
3. PURCHASE OF ADDED STOCK. Sellers shall have the right for a
period of one year after execution of this agreement, to purchase an
additional 650,000 shares of WHY USA Financial Group, Inc. common stock at a
purchase price of One Dollar ($1.00) per share.
<PAGE> 1
4. ADDED SALES REPRESENTAT IVES. Buyer acknowledges that at
Buyer's request, Seller-Corporation hired two additional sales
representatives, namely Ms. Donna Dwyer Van Zandt, and Mr. Chris Dooling.
Buyer hereby agrees to pay to Seller-shareholders the costs incurred in
interviewing said employees and the ongoing employment expenses of said
employees. In addition, Buyer will pay all recruitment fees due Mr. Jerry
Wilkerson for recruiting said employees.
5. DUE DILIGENCE. Buyer acknowledges receipt of all requested
records, reports and other information regarding the Seller-corporation, and
based on such information Buyer is satisfied that a fidl and complete
disclosure has been made of the Seller-corporation and its financial affairs.
Buyer does specifically acknowledge that the number of WHY USA real estate
offices serviced by Seller-corporation numbers approximately sixty (60).
6. BUYERS WARRANTEES. Buyer represents and warrants as follows:
(A). It holds clear fee simple title to the parcels of real
estate as described in the mortgage attached as Exhibit C;
(B). The sole debt applicable to the above real property is owed
to Liberty State Bank as more fully set forth in a title
insurance policy which is marked Exhibit D and attached
hereto;
(C). Such title insurance policy correctly sets forth the nature
of Buyer's interest in such property;
(D). The appraisal which is marked Exhibit E and attached hereto
is a correct and accurate statement of the value of the two
parcels of real estate which is part collateral for the payment
of the purchase price;
(E). Buyer's equity in the real estate subject to the mortgage is
approximately $703,000.00,
(F). Buyer holds free and clear title to 1,000,000 shares
of common stock of WHY USA Financial Group, Inc., and that Seller
shareholder's shall have the first lien thereon pursuant to the
terms of this Addendum Agreement;
<PAGE> 2
(G). Buyers will not allow any dilution of the value of the
common stock of WHY USA Financial Group, Inc. to occur during
the term of this agreement and/or until the $850,000.00
promissory note is paid in full. It is understood that at the
time of execution of this agreement thirty million (30,000,000)
shares of such corporation have been issued
7. The parties agree that Donald Riesterer may at any time make a bid of
$1.00 per share to Seller-Shareholder which will satisfy the provision of the
$850,000 note regarding four consecutive weeks of $ 1.00 bid necessary for
note forgiveness. Seller Shareholders shall thereafter have ten days to accept
such bid. In the event the bid is not accepted the note shall be forgiven
pursuant to the terns of such note.
All other terms of the September 24, 1999 Purchase Agreement shall remain
in full force and effect, except that the parties acknowledge that Northwest
Financial Group, Ltd has assigned its Buyers interest in said Purchase
Agreement to Donald Riesterer.
In witness whereof, the parties have executed this addendum agreement at
Menomonie, Wisconsin, on the date first above written.
Dated this 30th day of December 1999.
/s/David O. Thomas /s/ Douglas A. Larson
WHY USA North America, Inc. Seller-shareholder, Douglas A. Larson
By: David 0. Thomas
President
/s/ Emil A. Gluck
Seller-shareholder, Emil A. Gluck
/s/ Donald Riesterer
By: Donald Riesterer
<PAGE> 3
Assignment of Purchase Agreement
Northwest Financial Group, Inc. hereby conveys and assigns its interest
in that Purchase Agreement with WHY USA North America, Inc. and their
shareholders for the sale of 100% of the common stock of WHY USA of North
America, Inc. to Donald Riesterer.
Dated: December 30, 1999 NORTHWEST FINANCIAL GROUP, INC.
/s/ Don Riesterer
--------------------------
Don Riesterer, President
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JAN 6 1983
WM SWACKHAMER SECRETARY OF STATE
/s/ William Swackhamer
no. 84-83
ARTICLES OF INCORPORATION
OF
TRIAM, LTD.
We, the undersigned natural persons of the age of twenty-one years or
more, acting as incorporators of a corporation under the Nevada Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation:
ARTICLE I
NAME. The name of the corporation is Triam, Ltd.
ARTICLE II
DURATION. The period of its duration is perpetual.
ARTICLE III
BUSINESS. The pursuit of business and corporate powers agreed upon are as
follows:
(1) To carry on the business of share dealers or financial agents in
all transactions relating to the sale, transfer, or exchange of every
description of stocks, shares, commodities, debentures, bonds, mortgages,
freehold, or leasehold property, life interests, reversions or other
securities or investments for money, and all transactions and negotiations on
commission or otherwise to such business; and to
<PAGE> -2-
advance or negotiate the advance of money at interest on securities or
otherwise; and to carry on the business of stock and share brokers, land,
estate and mortgage agents, and brokers in all branches,
(2).To conduct the business of financing all types of business
activities, to purchase, finance, or discount commercial paper; to purchase or
otherwise acquire open accounts receivable, notes, drafts and acceptances from
manufacturers and jobbers and the instalment lien obligations, covering any
and all sales on any merchandise or other commodities; to purchase, loan upon,
acquire, or otherwise finances, sell and dispose of any and all insurance
contracts, installment lien obligations, or indebtedness incurred or to be
incurred by any written instruments, and to guarantee, pledge, borrow, finance
or raise money for any, such investment in any way and to do such other
financing as may be for the welfare of the corporation.
(3). To acquire by purchase or otherwise, property, real or personal,
and the good will, rights and assets of any person, firm or corporation, and
to pay for the same in cash, stocks, bond, or otherwise acquire, sell, assign,
transfer mortgage, pledge, and otherwise dispose of shares of the capital
stock, bonds, debentures, or other evidence of indebtedness created by any
person, firm, or corporation, and while the holder thereof to exercise the
rights and privileges of ownership, including the right to vote thereon; to
buy, own, use, mortgage, sell, lease, bond, or otherwise dispose of all
property, real or personal, necessary, useful or desirable for it to own, use
or dispose of for its purposes.
(4). To apply for, obtain, register, lease, purchase, or otherwise
acquire, and to hold, use, pledge, sell, assign, or otherwise acquire, and to
hold, use, pledge, lease, sell, assign, or otherwise dispose of distinctive
marks, improvements, processes, trade names, trade marks, copyrights, patents,
licenses, concessions, and the
<PAGE> -3-
like, whether used in connection with or secured under letters patented of or
issued in connection with or secured under any country or authority, or
otherwise; and to issue, exercise, develop and grant licenses in respect
thereof, or otherwise turn the same to account.
(5). To borrow money or raise monies for the business of
the corporation and all of its purposes and objects, upon such terms, as the
Board of Directors may determine and the Law permit.
(6). To enter into joint ventures or partnership with other persons,
firms, or corporations.
(7). To have and to exercise all the powers now or hereafter
conferred by the laws of the State of Nevada upon corporations organized under
the laws under which this corporation is organized and any and all
acts amendatory thereof and supplemental thereto.
(8). To make all such by-laws, rules and regulations not inconsistent
with law or with other corporate rights and vested privileges, as may be
necessary to carry into effect the objects of the corporation, and such by-
laws, rules and regulations may be made in a general meeting of the Board of
Directors, which rules, regulations or by-laws shall become effective upon
formal presentation by mailing to the stockholders of record.
ARTICLE IV
CAPITAL. The capital of this corporation is ($25,000) Twenty-Five
Thousand Dollars and is represented by (2,500,000) two Million Five Hundred
Thousand shares of common capital stock having a par value of (1) one cent per
share.
ARTICLE V
CAPITAL STOCK. Subject to the provisions of law, this corporation
<PAGE> -4-
shares of its capital stock.
ARTICLE VI
SHARES. The corporation will not commence business until consideration of
the value of at least One Thousand Dollars ($1,000.00) has been received for
the issuance of its shares.
ARTICLE VII
PRIVILEGES AND RESTRICTION TO SHAREHOLDERS. The privileges and
restrictions granted to or imposed upon each share or the holder thereof are
as follows:
(1). Each issued and outstanding share, not including treasury
shares, if any, shall be entitled to one vote at all shareholders' meetings;
(2). The right of cumulative voting shall not be allowed in the
election of directors.
(3). Each share shall entitle its holder to receive an equal
and a noncumnulative portion of dividends, if, when, and as declared by
the Board of Directors in accordance with law.
ARTICLE VIII
RESERVE POWER. Except as to Article IX herein, the corporation reserves
the rights to amend, alter, change, or repeal any provision contained in these
Articles of Incorporation, in the manner now or hereafter prescribed by law,
and all rights and powers, conferred herein on stockholders, directors, and
officers are subject to this reserve power.
<PAGE> -5-
ARTICLE IX
STOCK NON-ASSESSABLE. The stock of this corporation shall be non-
assessable.
ARTICLE X
BY-LAWS. The Board of Directors may make, amend, or repeat at pleasure,
by-laws of this corporation, not inconsistent with the provisions of these
Articles of Incorporation.
ARTICLE XI
MEETINGS. The annual meeting of the stockholders shall be held in the
month of June of each year at a place and a time to be designated by the Board
of Directors. Special meetings of the stockholders may be called by the
president, or by the Board of Directors, or by a majority of the stockholders
as shown by the records of tile corporation. Notice of special stockholders'
meetings shall be given by mailing a notice of the time and place and purpose
of the meeting to each stockholder of record, addressed to him at his address
as shown by the records of the corporation, not less than ten days prior to
the date of the meeting. Director's meetings shalt be held at such time and
place and upon such notice as the Board of Directors from time to time shall
determine. A majority of tile Board of Directors present and voting at a
directors meeting shall constitute a quorum for the transaction of business.
ARTICLE XII
ADDRESS OF CORPORATION AND REGISTERED AGENT IS: the
<PAGE> -6-
post office address of the initial registered office of the corporation and
registered agent is: 4530 Alpine Place, Las Vegas, Nevada 89107
ARTICLE XIII
OFFICERS. The number and kind of officers and directors of this
corporation shall be as follows: There shall be a board of directors
consisting of not less than three directors. The number thereof shall be fixed
from time to time, and shall be subject to change by the stockholders at any
stockholders' meeting held at which directors may be elected. There shall be a
president, who shall be a stockholder and a member of the board of directors,
one or more vice presidents, a secretary, and a treasurer, and such assistant
secretaries and assistant treasurers as the board of directors may from time
to time determine. Each of such officers other than the president may, but
need not be, a stockholder or a director of the corporation.
ARTICLE XIV
ELECTION OF DIRECTORS. The directors, except those named herein as such
and those chosen by the board to fill a vacancy for an unexpired term, shall
be elected by the stockholders at the regular annual stockholders' meeting, or
if it is not held, at any special meeting of the Stockholders called for that
purpose, and directors so elected shall serve until the next regular annual
stockholders' meeting or until their successors are elected and qualified.
<PAGE> -7-
ARTICLE XV
NAMED DIRECTORS. Directors who shall hold office until the first annual
stockholders' meeting as herein provided, unless vacancies by death,
resignation or removal shall sooner occur, and until the election and
qualification of their respective successors, are as follows:
Name Address
G. O'Brien Garrett 3465 Green Hills Way, Sandy, UT84092
Martin Ford 779 N. 800 E., Bountiful, UT 84010
Roy Barker 1157 S. 300 E., Salt Lake City, UT 84111
ARTICLE XVI
PRIVATE PROPERTY EXEMPT. Private property of the stockholders shall not
be liable for the debts of the corporation.
ARTICLE XVII
NAMED INCORPORATORS. The name and address of each incorporator is:
Name Address
G. O'Brien Garrett 3465 Green Hills Way, Sandy, UT 84092
Martin Ford 779 N. 800 E., Bountiful, UT 84010
Roy Barker 1157 S. 300 E., Salt Lake City, UT 84111
DATED this 21st day of December, 1982.
/s/ G. O'Brien Garrett
/s/ Martin Ford
/s/ Roy Barker
<PAGE> -8-
STATE OF UTAH
COUNTY OF SALT LAKE
I, Beth N. Wolf, a Notary Public, hereby certify that on the 21st day of
December, 1982, personally appeared before me G. O'Brien Garrett, Martin Ford,
and Roy Barker, who being by me first duly sworn, severally declared that they
are the persons who signed the foregoing documents as incorporators and that
the statements herein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal on the 21st day
of December, 1982
/s/ Beth N. Wolf
----------------
Notary Public
Salt Lake City UT
-----------------
Residing in
My Commission Expires:
7-15-86
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR-4 1983
WM SWACKHAMER SECRETARY OF STATE
/s/ William Swackhamer
no. 84-83
AMENDED AND REVISED ARTICLES OF INCORPORATION
OF
TRIAM, LTD.
Whereas, there was issued by the Secretary of State, a Charter dated
January 6, 1983, constituting and creating Triam, Ltd., a corporation
organized under the laws of this state of Nevada and capital stock of twenty-
five thousand ($25,000) dollars, divided into Two Million Five Hundred
Thousand (2,500,000) shares of par value of one cent ($0.01) each empowering
it to engage in business as noted in Article III of the Articles of
Incorporation.
And further, that the meeting was duly held and the following resolution
was offered and adopted by the majority of the outstanding shares entitled to
vote, to amend the Articles of Incorporation as follows:
Pursuant to Nevada Code, the undersigned Corporation adopts the following
Articles of Amendment to its Articles of Incorporation.
ARTICLE I
CAPITAL
-------
The aggregate number of shares which this Corporation shall have
authority to issue shall be One Hundred Million (100,000,000) shares of common
voting stock, having a par value of one-tenth cent ($0.001) per share and
capital of One Hundred Thousand ($100,000) dollars.
ARTICLE X
These Amended Articles of Incorporation were presented to the
shareholders of the Corporation for the purpose for amending and replacing the
Articles of Incorporation of this Corporation, at a special meeting of
shareholders held February 15, 1983. As of February 15, 1983, there were
700,000 shares of the Corporation's common stock outstanding and entitled to
vote on the amendment. The Amendment alters the amount of authorized capital
by changing it from Two Million Five Hundred (2,500,000) shares with a par
value of One Cent ($0.01) to One Hundred Million (100,000,000) shares with a
par value of one-tenth cent ($0.001) per share. There is only one class of
shares, that being common voting stock.
The number of shares voted for and against the adoption of these Amended
Articles of Incorporation to replace all previous Articles of Incorporation
and Amendments was:
700,000 - FOR NONE - AGAINST
Which is 100% of the shares entitled to vote.
<PAGE> Page one of two pages
Signed this 15th day of February, 1983
TRIAM, LTD.
By /s/ G. O'Brien Garrett
President
Attest:
By /s/ Roy Barker
Secretary
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On this 15th day of February, 1983, before me, a Notary Public,
personally appeared G. O'Brien Garrett, and Roy Barker known to me to be the
persons whose names are subscribed to the within document, and acknowledge
they executed the same.
/s/ <signature illegible>
Notary Public
Seal Expires 7-15-85
Page two of two pages
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAR 29 1983
WM SWACKHAMER SECRETARY OF STATE
/s/ William Swackhamer
no. 84-83
SECOND AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
TRIAM, LTD.
Whereas, there was issued by the Secretary of State, a charter dated
Januarv 6, 1983, constituting and creating Triam, Ltd, a corporation organized
under the laws of the State of Nevada, and,
Whereas, on February 15, 1983, a special Shareholder Meeting was held and
approved amending the Articles of Incorporation of Triam, Ltd. and said
amendment was filed with the Nevada Secretary of State on March 4, 1983. The
amendment was to Article I increasing the capitalization of the Corporation to
One Hundred shares of common voting stock, having a par value of one tenth
($0.01) per share and capital of One Hundred Thousand ($100,000) dollars.
And further, that another Special Shareholder Meeting was duly held and
the following resolution amending the Articles of Incorporation was offered
and adopted by the majority of the outstanding shares entitled to vote, to
amend the Articles of Incorporation as follows:
Pursuant to the Nevada Business Corporation Act; the undersigned
Corporation adopts the following addition to the Articles of Incorporation:
ARTICLE III
BUSINESS. The pursuit of business and corporate powers agree upon are as
follows:
(1). To carry on the business of share dealers or financial agents
in all transactions relating to the sale, transfer, or exchange of every
description of stocks, shares, commodities, debuntures, bonds, mortgages,
freehold, or leasehold property, life interests, reversions or other
securities or investments for money, and all transactions and negotiations on
commission or otherwise relating to such business; and to advance or negotiate
the advance of money at interest on securities or otherwise; and to carry on
the business of stock and share brokers, land, estate and mortgage agents, and
brokers in all branches,
(2). To conduct the business of financing all types of business
activities, to purchase, finance, or discount commercial paper; to purchase or
otherwise acquire open accounts receivable, notes, drafts and acceptance from
manufacturers and jobbers and the installment lien obligations, covering and
any all sales on any merchandise or other commodities; to purchase, loan upon,
acquire, or otherwise finances, sell and dispose of any and all insurance
contracts, installment lien obligations, or indebtedness incurred or to be
incurred by any written instruments, and to guarantee, pledge, borrow, finance
or raise money for any such investment in any way and to so such other
financing as my be for the welfare of the corporation.
(3). To acquire by purchasing or otherwise, property, real or
personal, and the good will, rights and assets of any person, firm or
corporation, and to pay for the same in cash, stocks, bond, or otherwise
acquire, sell, assign, transfer mortgage, pledge, and otherwise dispose of
shares of the capital stock, bonds, debentures, or other evidence of
indebtedness created by any person, firm or corporation, and while the holder
thereof to exercise the rights and priviledges of ownership, incloding the
right to vote thereon; to buy, own, use mortgage, sell, lease, bond, or
otherwise dispose of all property, real or personal, necessary, useful or
desireable for it to own, use or dispose of for its purposes.
(4). To apply for, obtain, register, lease, purchase, or
otherwise acquire, and to hold, use pledge, lease, sell assign, or otherwise
dispose of distinctive marks, improvements, processes, trade names, trade
marks, copyrights, patents, licenses, concessions, and the like, whether used
in connection with or secured under letters patented of or issued in
connection with or secured under any country or authority, or otherwise; and
to issue, exercise, develop and grant licenses in respect thereof, or
otherwise turn the same to account.
<PAGE> -1-
(5). To borrow maney or raise monies for the business of the
corporation and all of its purposes and abjects, upon such terms as the Board
of Directors may determine and the law permit.
(6). To enter into joint venture or partnership with other
persons, firms, or corporations.
(7). To acquire mineral properties and interests, including
uranium, oil and gas, and to acquire other real properties and interests
including undeveloped and income-producing properties; to conduct business
ventures, operations and dealings for profit in such properties, interests,
investments and rights and royalties thereunto appertaining, and including the
rendering for profit of services and performances to other business entities
by contract and other arrangement.
(8). To engage in any and other and all lawful business ventures,
purposes, acts or activity in various fields of business endeavor for which a
corporation may be organized and proceed under the Nevada Corporation Act.
(9). To have and to exercise all the powers now or hereafter
conferred by the laws of the State of Nevada upon corporations organized under
the laws which this corporation is organized and any and all acts amendatory
thereof and supplemental thereto.
(10). To make all such by-laws, rules and regulations not
inconsistant with law or with other corporate rights and vested priviledges,
as may be necessary to carry into effect the objects of the corporation, and
such by-laws, rules and regulations my by made in a general meting of the
Board of Directors, which rules, regulations or by-laws shall become effective
upon formal presentation by mailing to the stockholders of record.
These Amended Articles of Incorporation were presented to the
shareholders of the Corporation for the purpose of amending and replacing the
Articles of Incorporation of this Corporation, at a special meeting of
shareholders held March 7, 1983, there were 7,500,000 shares of the
Corporation's common stock outstanding and entitled to vote on the amendment.
The Amendment alters the amount of authorized capital by changing it from Two
Million Five Hundred (2,500,000) shares with par value of one Cent ($0.01) to
One Hundred Million (100,000,000) shares with par value of one-tenth cent
($0.001) per share. There is only one class of shares, that being common
voting stock.
The number of shares voted for and against the adoption of these Amended
Articles of Incorporation to replace all previous Articles of Incorporation
and Amendments was:
7,500,000 - FOR NONE- AGAINST
Which is 100% of the shares entitles to vote.
<PAGE> -2-
Signed this 7th day of March, 1983
Triam, Ltd.
By /s/ G. O'Brien Garrett
President
Attest:
By /s/ Roy Barker
Secretary
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On this 7th day of March, 1983, before me, a Notary Public, personally
appeared G. O'Brien Garrett, and Roy Barker known to me to be the persons
whose names are subscribed to the within document, and acknowledge they
executed the same.
/s/ Beth N. Wolf
Notary Public
Seal Expires 7-15-86
Page three of three pages
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
NOV 09 1999
no. C-84-83
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
ARTICLES OF MERGER
TRIAM, LTD.
These Articles of Merger for TRIAM, LTD. are hereby respectively submitted for
filing by the Nevada Secretary of State as required under Sections 78.458 and
78.461 of the State of Nevada Domestic and Foreign Corporation Laws.
WITNESSETH
WHEREAS, an Agreement and Plan of Reorganization was entered into on March 7,
1983 by the following:
Constituent Corporation: BLACK BUTTE PETROLEUM, LTD., a Utah Corporation
Surviving Corporation: TRIAM, LTD., a Nevada Corporation (Wholly owned
Subsidiary of BLACK BUTTE PETROLEUM, LTD,) and,
WHEREAS, the Agreement and Plan of Reorganization was adopted by the Board of
Directors of BLACK BUTTE PETROLEUM, LTD., Utah Corporation and TRIAM, LTD.,
Nevada Corporation, on March 7, 1983; and,
WHEREAS, approval of the Agreement and Plan of Reorganization was required by
both the Shareholders of BLACK BUTTE PETROLEUM, LTD., and TRIAM, LTD. Notice
to the Shareholders was mailed on March 10, 1983, for meetings held on March
22, 1983 for both corporations.
BLACK BUTTE PETROLEUM, LTD., a Utah Corporation (Constituent)
-------------------------------------------------------------
(A) One class of Stock - Common Stock Authorized 100,000,000 Shares at
($0.001 par value)
Issued and Outstanding - 19,500,000
Number of Shares represented at meeting - 14,05O,000
Number of Shares voted for approval - 14,050,000
Number of Shares voted against - None
Shareholders unanimously approved Merger Agreement
TRIAM, LTD., Nevada Corporation (Survivor)
------------------------------------------
(B) One class of Stock - Common Stock
Common stock - Authorized 100,000,000 Shares ($0.001 par value)
Issued and Outstanding - 7,500,000 shares
Number of Shares represented at meeting - 7,500,000
Number of Shares voted for approval - 7,500,000
Number of Shares voted against - None
Shareholders unanimously approved Merger Agreement.
WHEREAS, the Boards of Directors and Shareholders of TRIAM, LTD.
<PAGE> 1
and BLACK BUTTE PETROLEUM, LTD. have resolved that BLACK BUTTE PETROLEUM, LTD.
be merged under and pursuant to the laws of the States of Utah and Nevada into
a single corporation existing under the laws of the State of Nevada, to wit:
TRIAM, LTD., which shall be the surviving corporation (the "Surviving
Corporation") in a transaction qualifying as a reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue code of 1986, as
amended, and qualifying as an exempt transaction in accordance with Rules
145(a)(2) and 145(a)(3) to the securities Act of 1933, as amended.
WHEREAS, Articles of Merger were prepared and executed by the Officers of both
Corporations and were inadvertently not filed with the State of Nevada, and
the State of Utah by legal consul for the Agreement and Plan of
Reorganization, and that said original documents were retained for filing by
legal consul, and that the omission of the filing was discovered on receipt of
the Corporate Filings from the Secretary of the State of Nevada on August 2,
1999; and,
WHEREAS, TRIAM, LTD., the survivor, has continued to operate its business
under the Agreement and Plan of Reorganization, and has fulfilled all its
requirements, and conducted all business as a survivor to the plan; and,
WHEREAS, the parties wish to retroactively file these Articles of Merger in
the State of Nevada, and the present Executive Officer of TRIAM, LTD. And the
Executive Officer of BLACK BUTTE PETROLEUM, LTD. at the time of the Merger
have been duly authorized to execute these Articles of merger to properly
reflect the Merger on the records thereof.
NOW THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants herein contained, the parties hereto hereby agree in
accordance with the laws of the States of Utah and Nevada, and that BLACK
BUTTE PETROLEUM, LTD. shall be, at the Effective Date (as hereinafter
defined), merged (hereinafter called "Merger") into a single Corporation, and
the parties hereto adopt and agree to the following agreements, terms and
conditions relating to the merger and the mode of carrying the same into
effect.
1. Stockholders' Meetings; Filings: Effects of Merger
1.1. BLACK BUTTE PETROLEUM. LTD. Stockholders, Meeting.
BLACK BUTTE PETROLEUM, LTD. called a meeting of its stockholders to be held on
March 22, 1983 in accordance with the laws of the State of Utah, upon due
notice mailed on March 10, 1983 to its stockholders to consider and vote upon,
among other matters, adoption of this Agreement.
1.2. Action by BLACK BUTTE PETROLEUM, LTD. as Sole Stockholder of
TRIAM, LTD., On or before March 22,1983, BLACK BUTTE PETROLEUM, LTD., as the
sole stockholder of TRIAM, LTD.
<PAGE> 2
adopted this Agreement in accordance with the laws of the State of Utah and
Nevada.
1.3. Filing of Certificate of Merger Effective Date. This Agreement was
adopted by the stockholders of BLACK BUTTE PETROLEUM, LTD. in accordance with
the laws of the state of Utah, (b) this Agreement was adopted by BLACK BUTTE
PETROLEUM, LTD. as the sole stockholder of TRIAM, LTD. in accordance with the
laws of the State of Utah and Nevada, and (c) this Agreement is not
thereafter, and has not theretofore been, terminated or abandoned as permitted
by the provisions hereof, then the merger Agreement shall be filed and
recorded in accordance with the laws of the State of Nevada and the State of
Utah. Such filings, it practicable, shall be made on the same day. The Merger
shall become effective retroactively on the calendar day following the day of
approval of the Agreement and Plan of Organization, which date and time are
herein above referred to as the "Effective Date."
1.4. Certain Effects of Merger. On the Effective Date, the separate
existence of BLACK BUTTE PETROLEUM, LTD. shall cease, and BLACK BUTTE
PETROLEUM, LTD. shall be merged into TRIAM, LTD. which, as the Surviving
Corporation, shall possess all the rights, privileges, powers, and franchises,
of a public as well as of a private nature, and be subject to all the
restrictions, disabilities, and duties of BLACK BUTTE PETROLEUM, LTD.; and all
and singular, the rights, privileges, powers, and franchises of BLACK BUTTE
PETROLEUM, LTD., and all property, real, personal, and mixed, and all debts
due to BLACK BUTTE PETROLEUM, LTD. on whatever account, as well as for stock
subscriptions and all other things in action or belonging to BLACK BUTTE
PETROLEUM, LTD., shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers, and franchises, and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of BLACK BUTTE PETROLEUM, LTD., and the title to any
real estate vested by deed or otherwise, under the laws of Utah or Nevada or
any other jurisdictions, in BLACK BUTTE PETROLEUM, LTD. shall not revert or be
in any way impaired; but all rights of creditors and all liens upon any
property of BLACK BUTTE PETROLEUM, LTD. shall be preserved unimpaired, and all
debts, liabilities, and duties of BLACK BUTTE PETROLEUM, LTD. shall
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same extent as if said debts, liabilities, and duties had been incurred
or contracted by it. At any time, or from time to time, after the Effective
Date, the last acting officers of BLACK BUTTE PETROLEUM, LTD. or the
corresponding officers of the Surviving Corporation, may in the name of BLACK
BUTTE PETROLEUM, LTD., execute and deliver all such property deeds,
assignments, and other instruments and take or cause to be taken all such
further or other action as the surviving Corporation may deed necessary or
desirable in order to vest, perfect, or confirm in the Surviving Corporation
title to and possession of all BLACK BUTTE PETROLEUM, LTD.'s property, right,
privileges, powers, franchises, immunities, and interests and otherwise to
carry out the purposes of this Agreement.
<PAGE> 3
2. Name of Surviving Corporation; Certificate of Incorporation; By-Laws
2.1. Name of Surviving Corporation. The name of TRIAM, LTD. shall be
the Surviving Corporation, from and after the Effective Date.
2.2. Certificate of Incorporation. The Certificate of Incorporation of
TRIAM, LTD. as in effect on the date hereof shall from and after the Effective
Date be, and continue to be, the Certificate of Incorporation of the Surviving
Corporation until changed or amended as provided by law.
2.3. By-Laws. The By-Laws of TRIAM, LTD. immediately before the
Effective Date, shall from and after the Effective Date be, and continue to
be, the By-Laws of the Surviving Corporation until amended as provided
therein.
3. Status and Conversion of Securities
The manner and basis of converting the shares of the capital stock of
BLACK BUTTE PETROLEUM, LTD. and the nature and amount of securities of TRIAM,
LTD. which the holders of shares of BLACK BUTTE PETROLEUM, LTD. Common Stock
are to receive in exchange for such shares are as follows:
3.1. BLACK BUTTE PETROLEUM LTD. Common Stock. Every one(1) shares of
BLACK BUTTE PETROLEUM, LTD. Common Stock which shall be issued and outstanding
immediately before the Effective Date shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted at the
Effective Date into one (1) fully paid share of TRIAM, LTD. Common Stock, and
outstanding certificates representing shares of BLACK BUTTE PETROLEUM, LTD.
Common Stock shall thereafter represent shares of TRIAM, LTD. Common Stock.
Such certificates may, but need not be, exchanged by the holders thereof after
the merger becomes effective for new certificates for the appropriate number
of shares bearing the name of the surviving Corporation. The exchange of
TRIAM, LTD. Common Stock for BLACK BUTTE PETROLEUM, LTD. common stock shall be
effectuated pursuant to Rules 145(a)(2) and 145(a)(3) to the Securities Act of
1933, a amended.
3.2. TRIAM, LTD. Common stock Held by BLACK BUTTE PETROLEUM LTD. All
issued and outstanding shares of TRIAM, LTD. Common Stock held by BLACK BUTTE
PETROLEUM, LTD. immediately before the Effective Date shall, by virtue of the
Merger and at the Effective Date, cease to exist and certificates representing
such shares shall be canceled and voided.
3.3. Directors and Officers Elected for TRIAM, LTD. The Directors and
Officers for the Surviving Corporation, TRIAM, LTD. are as follows:
G. O'Brien Garrett Director/President
Ronald G. George Director/Vice President
David H. Timms Director/Secretary-Treasurer
Glen A. Bryan Director
4. Miscellaneous
4.1. This Merger Agreement may be terminated and the
<PAGE> 4
proposed Merger abandoned at any time before the Effective Date of the Merger,
and whether before or after approval of this Merger Agreement by the
shareholders of BLACK BUTTE PETROLEUM, LTD., if the Board of Directors of
BLACK BUTTE PETROLEUM, LTD. or of the Surviving Corporation duly adopt a
resolution abandoning this Merger Agreement.
4.2. For the convenience of the parties hereto and to facilitate the
filing of this Merger Agreement, any number of counterparts hereof may be
executed; and each such counterpart shall be deemed to be an original
instrument.
IN WITNESS WHEREOF, these Articles of Merger have been executed by BLACK BUTTE
PETROLEUM, LTD. and TRIAM, LTD..
BLACK BUTTE PETROLEUM, LTD.
By:/s/ George S Smith
President
TRIAM, LTD.
By:/s/Duane Ford BY:/s/ David Timms
Vice-President Secretary
The original Plan and Agreement of merger is available for review at the
office of Triam, Ltd., the surviving corporation, at:
68 South Main St., Suite
#708 Salt Lake City, Utah 84101
5
<Stamped:
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JAN 10 2000
No. C84-83
DEAN HELLER, SECRETARY OF STATE>
AMENDMENTS TO THE ARTICLES OF INCORPORATION
OF
TRIAM, LTD.
Pursuant to Nevada Corporation Code N.R.S. 78-385, the undersigned
Corporation adopts the following Articles of Amendment to its Articles of
Incorporation.
ARTICLE I reads as follows:
ARTICLE I
NAME: The name of the Corporation is TRIAM, LTD.
AMENDMENT
ARTICLE I of the Articles of Incorporation is amended to read:
ARTICLE I
NAME: The name of the Corporation is WHY USA FINANCIAL GROUP, INC.
ARTICLE IV reads as follows:
ARTICLE IV
CAPITAL: The aggregate number of Shares which this Corporation shall have
authority to issue shall be One Hundred Million (100,000,000) Shares of common
voting stock, having a par value of One-tenth Cent ($0.001) per share and
Capital of One Hundred Thousand ($100,000.00) Dollars.
AMENDMENT
ARTICLE IV of the Articles of Incorporation is amended to read:
CAPITAL: The aggregate number of Shares which this Corporation shall have
authority to issue shall be Three Hundred Million (300,000,000) Shares of
common voting stock, having a par value of One-tenth Cent ($0.001) per share
and Capital of Three Hundred Thousand ($300,000.00) Dollars which shall be
non-assessable and with no pre-emptive rights thereon, and, Fifty Million
Shares of Preferred Stock, with no voting power.
These amended articles to the Articles of Incorporation were presented
to the Shareholders of the Corporation for the purpose of amending and
replacing certain articles in the Articles of Incorporation, at a Special
Meeting of Shareholders held December 16, 1999. As of December 16, 1999, there
were 21,400,460 Shares of the Corporation common stock outstanding
<PAGE>
and entitled to vote on the Amendment. The number of shares voted for and
against the adoption of these Amended Articles of Incorporation to replace
Article I and Article IV of the previous Articles of Incorporation and
Amendments was:
17,166,036 For -0- Against
---------- -------
Which is 80% of the shares entitled to vote, with 80% voting in favor of
the Amendments.
Signed this 5th Day of January, 2000
TRIAM, LTD.
By /s/ David H. Timms
President
attest:
By /s/ Ruston C. Ford
Secretary
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On this 5 Day of January, 2000, before me, a Notary Public, personally
appeared David H. Timms, known to me to be the person whose name is subscribed
to the within document, and acknowledge that he executed the same.
<Stamped:
Notary Public
LEONORA M. CARRASCO
445 Trolley Square
Salt Lake City, Utah 84102
My Commission Expires /s/ Leonora M. Carrasco
November 9, 2002 Notary Public
State of Utah>
Seal Expires November 9, 2002
<PAGE>
<stamped
STATE OF NEVADA
Secretary of State
I hereby certify that this is a
true and complete copy
of the document as filed in this
office.
JAN 11 00
/s/ Dean Heller
Dean Heller
Secretary of State
By D Farmer
BYLAWS
for
WHY USA FINANCIAL GROUP, INC.
ARTICLE I
OFFICES. THE PRINCIPAL OFFICE OF THE CORPORATION IN THE STATE OF NEVADA
SHALL BE LOCATED IN LAS VEGAS, NEVADA. THE CORPORATION MAY HAVE SUCH OTHER
OFFICES, EITHER WITHIN OR WITHOUT THE STATE OF NEVADA AS THE BOARD OF
DIRECTORS MAY DESIGNATE OR AS THE BUSINESS OF THE CORPORATION MAY FROM TIME TO
TIME REQUIRE.
THE REGISTERED OFFICE OF THE CORPORATION REQUIRED BY THE NEVADA BUSINESS
CORPORATION ACT TO BE MAINTAINED IN THE STATE OF NEVADA MAY BE, BUT NEED NOT
BE, IDENTICAL WITH THE PRINCIPAL OFFICE IN THE STATE OF NEVADA AND THE ADDRESS
OF THE REGISTERED OFFICE MAY BE CHANGED FROM TIME TO TIME BY THE BOARD OF
DIRECTORS.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. THE ANNUAL MEETING OF THE SHAREHOLDERS SHALL
BE HELD WITHIN 60 DAYS OF DECEMBER 31 OF EACH YEAR AT THE HOUR OF 7:00 P.M.
BEGINNING IN THE YEAR 2000. FOR THE PURPOSE OF ELECTING DIRECTORS AND FOR THE
TRANSACTION OF SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING. IF THE DAY
FIXED FOR THE ANNUAL MEETING SHALL FALL ON A LEGAL HOLIDAY IN THE STATE OF
NEVADA, SUCH MEETING SHALL BE HELD ON THE NEXT SUCCEEDING BUSINESS DAY. IF THE
ELECTION OF DIRECTORS SHALL NOT BE HELD ON THE DAY DESIGNATED HEREIN FOR ANY
ANNUAL MEETING OF THE SHAREHOLDERS, OR AT ANY ADJOURNMENT THEREOF, THE BOARD
OF DIRECTORS SHALL CAUSE SUCH ELECTION TO BE HELD AT A SPECIAL MEETING OF THE
SHAREHOLDERS AS SOON AS IT MAY BE CONVENIENTLY HELD THEREAFTER.
SECTION 2. SPECIAL MEETINGS. SPECIAL MEETINGS OF THE SHAREHOLDERS FOR ANY
PURPOSE OR PURPOSES UNLESS OTHERWISE DESCRIBED BY STATUTE, MAY BE CALLED BY
THE PRESIDENT, BY THE BOARD OF DIRECTORS, BY ANY TWO DIRECTORS, OR BY ANY
NUMBER OF SHAREHOLDERS WHOSE HOLDINGS SHALL NOT BE LESS THAN ONE-TENTH (1/10)
OF THE OUTSTANDING STOCK OF THE CORPORATION.
SECTION 3. PLACE OF MEETING. THE BOARD OF DIRECTORS MAY DESIGNATE ANY
PLACE, EITHER WITHIN OR WITHOUT THE STATE OF NEVADA AS THE PLACE OF MEETING
FOR ANY ANNUAL MEETING OR FOR ANY NOTICE SIGNED BY A MAJORITY OF ALL
SHAREHOLDERS ENTITLED TO VOTE AT A MEETING MAY DESIGNATE ANY PLACE EITHER IF
NO DESIGNATION IS MADE OR IF A SPECIAL MEETING IS OTHERWISE CALLED, THE PLACE
OF MEETING SHALL BE THE REGISTERED OFFICE OF THE CORPORATION IN THE STATE OF
NEVADA.
<PAGE> 1
SECTION 4. NOTICE OF MEETING. WRITTEN OR PRINTED NOTICE STATING THE
PLACE, DAY, AND HOUR OF THE MEETING AND IN CASE OF A SPECIAL MEETING, THE
PURPOSES FOR WHICH THE MEETING IS CALLED, SHALL BE DELIVERED NOT LESS THAN TEN
(10) NOR MORE THAN FIFTY (50) DAYS BEFORE THE DATE OF THE MEETING, EITHER
PERSONALLY OR BY MAIL, BY OR AT THE DIRECTION OF THE PRESIDENT, OR RECORD
ENTITLED TO VOTE AT SUCH MEETING. IF MAILED, SUCH NOTICE SHALL BE DEEMED TO BE
DELIVERED WHEN DEPOSITED IN THE UNITED STATES MAIL, ADDRESSED TO THE
SHAREHOLDER AT HIS/HER ADDRESS, AS IT APPEARS ON THE STOCK TRANSFER BOOKS FO
THE CORPORATION, WITH POSTAGE PREPAID.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. FOR THE
PURPOSE OF DETERMINING SHAREHOLDERS ENTITLED TO NOTICE OF OR TO VOTE AT ANY
MEETING OF SHAREHOLDERS, OR ANY ADJOURNMENT THEREOF, OR SHAREHOLDERS ENTITLED
TO RECEIVE PAYMENT OF ANY DIVIDEND, OR IN ORDER TO MAKE A DETERMINATION OF
SHAREHOLDERS FOR ANY OTHER PROPER PURPOSE, THE BOARD OF DIRECTORS OF THE
CORPORATION MAY PROVIDE THAT THE STOCK TRANSFER BOOKS SHALL BE CLOSED FOR A
STATED PERIOD BUT NOT TO EXCEED, IN ANY CASE, FIFTY (50) DAYS. IF THE STOCK
TRANSFER BOOKS SHALL BE CLOSED FOR THE PURPOSE OF DETERMINING STOCKHOLDERS
ENTITLED TO NOTICE OF, OR TO VOTE AT, A MEETING OF SHAREHOLDERS, SUCH BOOKS
SHALL BE CLOSED FOR AT LEAST TEN (10) DAYS IMMEDIATELY PRECEDING SUCH MEETING.
IN LIEU OF CLOSING THE STOCK TRANSFER BOOKS, THE BOARD OF DIRECTORS MAY FIX IN
ADVANCE A DATE AS A RECORD DATE FOR ANY SUCH DETERMINATION OF SHAREHOLDERS.
SUCH DATE IN ANY CASE SHALL NOT BE MORE THAN FIFTY (50) DAYS AND, IN CASE OF A
MEETING OF SHAREHOLDERS, NOT LESS THAN TEN (10) DAYS PRIOR TO THE DATE ON
WHICH THE PARTICULAR ACTION REQUIRING SUCH DETERMINATION OF SHAREHOLDERS IS TO
BE TAKEN. IF THE STOCK TRANSFER BOOKS ARE NOT CLOSED AND NO RECORD DATE IS
FIXED FOR THE DETERMINATION OF SHARE, HOLDERS ENTITLED TO NOTICE OF, OR TO
VOTE AT, A MEETING OF SHAREHOLDERS, OR SHAREHOLDERS ENTITLED TO RECEIVE
PAYMENT OF A DIVIDEND, THE DATE ON WHICH NOTICE OF THE MEETING IS MAILED OR
THE DATE ON WHICH THE RESOLUTION OF THE BOARD OF DIRECTORS DECLARING SUCH
DIVIDEND IS ADOPTED, AS THE CASE MAY BE, SHALL BE THE RECORD DATE FOR SUCH
DETERMINATION OF SHAREHOLDERS. WHEN A DETERMINATION OF SHAREHOLDERS HAS BEEN
MADE AS PROVIDED IN THIS SECTION, SUCH DETERMINATION SHALL APPLY TO ANY
ADJOURNMENT THEREOF.
SECTION 6. VOTING LISTS. THE OFFICER OR AGENT HAVING CHARGE OF THE STOCK
TRANSFER BOOKS FOR SHARES OF THE CORPORATION SHALL MAKE, AT LEAST TEN (10)
DAYS BEFORE EACH MEETING OF SHAREHOLDERS, A COMPLETE LIST OF THE SHAREHOLDERS
ENTITLED TO VOTE AT SUCH MEETING OR ANY ADJOURNMENT THEREOF ARRANGED IN
ALPHABETICAL ORDER, WITH THE ADDRESS OF AND THE NUMBER OF SHARES HELD BY EACH,
THAT LIST, FOR A PERIOD OF TEN (10) DAYS PRIOR TO SUCH MEETING, SHALL BE KEPT
ON FILE AT THE REGISTERED OFFICE OF THE CORPORATION AND SHALL BE SUBJECT TO
INSPECTION BY ANY SHAREHOLDER AT ANY TIME DURING USUAL BUSINESS HOURS. SUCH
LISTS SHALL ALSO BE PRODUCED AND KEPT OPEN AT THE TIME AND PLACE OF THE
MEETING AND SHALL BE SUBJECT TO THE ORIGINAL STOCK TRANSFER BOOKS SHALL BE
PRIMA FACIE EVIDENCE AS TO WHO ARE THE SHAREHOLDERS ENTITLED TO EXAMINE SUCH
LIST OR TRANSFER BOOKS OR TO VOTE AT ANY MEETING OF SHAREHOLDERS.
<PAGE> 2
SECTION 7. QUORUM. A QUORUM OF AT LEAST THIRTY PERCENT (30%) OF THE
OUTSTANDING SHARES MUST BE REPRESENTED AT STOCKHOLDER MEETINGS TO ACT AND
CONDUCT BUSINESS.
SECTION 8. PROXIES. AT ALL MEETINGS OF SHAREHOLDERS, A SHAREHOLDER MAY
VOTE IN PERSON OR BY PROXY EXECUTED IN WRITING BY THE SHAREHOLDERS OR BY
HIS/HER DULY AUTHORIZED ATTORNEY-IN-FACT. SUCH PROXY SHALL BE FILED WITH THE
SECRETARY OF THE CORPORATION BEFORE OR AT THE TIME OF THE MEETING. NO PROXY
SHALL BE VALID AFTER ELEVEN (11) MONTHS FORM THE DATE OF ITS EXECUTION, UNLESS
OTHERWISE PROVIDED FOR IN THE PROXY.
SECTION 9. VOTING OF SHARES. EACH OUTSTANDING SHARE ENTITLED TO VOTE
SHALL BE ENTITLED ONE (1) VOTE UPON EACH MATTER SUBMITTED TO A VOTE AT A
MEETING OF SHARE, HOLDERS.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. SHARES STANDING IN THE
NAME OF ANOTHER CORPORATION MAY BE VOTED BY SUCH OFFICER, AGENT, OR PROXY AS
THE BYLAWS OF SUCH CORPORATION MAY PRESCRIBE, OR, IN THE ABSENCE OF SUCH
PROVISION, AS THE BOARD OF DIRECTORS OF SUCH CORPORATION MAY DETERMINE.
SHARES HELD BY AN ADMINISTRATOR, EXECUTOR, GUARDIAN, OR CONSERVATOR MAY BE
VOTED BY HIM/HER EITHER IN PERSON OR BY PROXY, WITHOUT A TRANSFER OF SUCH
SHARES INTO HIS/HER NAME. SHARES STANDING IN THE NAME OF A TRUSTEE MAY BE
VOTED BY HIM/HER, EITHER IN PERSON OR BY PROXY, BUT NO TRUSTEE SHALL BE
ENTITLED TO VOTE SHARES HELD BY HIM/HER WITHOUT A TRANSFER OF SUCH SHARES INTO
HIS/HER NAME.
SHARES STANDING IN THE NAME OF A RECEIVER MAY BE VOTED BY SUCH RECEIVER,
AND SHARES HELD BY OR UNDER THE CONTROL OF A RECEIVER MAY BE VOTED BY SUCH
RECEIVER WITHOUT THE TRANSFER THEREOF INTO HIS/HER NAME OF AUTHORITY SO AS TO
BE CONTAINED IN AN APPROPRIATE ORDER OF THE COURT BY WHICH SUCH RECEIVER WAS
APPOINTED.
A SHAREHOLDER WHOSE SHARES ARE PLEDGED SHALL BE ENTITLED TO VOTE SUCH
SHARES UNTIL THE SHARES HAVE BEEN TRANSFERRED INTO THE NAME OF THE PLEDGEE,
AND THEREAFTER THE PLEDGEE SHALL BE ENTITLED TO VOTE THE SHARES SO
TRANSFERRED.
SHARES OF ITS OWN STOCK BELONGING TO THE CORPORATION OR HELD BY IT IN A
FIDUCIARY CAPACITY SHALL NOT BE VOTED, DIRECTLY OR INDIRECTLY, AT ANY MEETING,
AND SHALL NOT BE COUNTED IN DETERMINING THE TOTAL NUMBER OF OUTSTANDING SHARES
AT ANY GIVEN TIME.
SECTION 11. INFORMAL ACTION BY SHAREHOLDERS. ANY ACTION REQUIRED TO BE
TAKEN AT A MEETING OF THE SHAREHOLDERS, OR ANY OTHER ACTION THAT MAY BE TAKEN
AT A MEETING OF THE SHAREHOLDERS, MAY BE TAKEN WITHOUT A MEETING IF A CONSENT
IN WRITING, SETTING FORTH THE ACTION SO TAKEN, SHALL BE SIGNED BY ALL FO THE
SHAREHOLDERS ENTITLED TO VOTE WITH RESPECT TO THE SUBJECT MATTER THEREOF.
<PAGE> 3
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. THE BUSINESS AND AFFAIRS OF THE CORPORATION
SHALL BE MANAGED BY ITS BOARD OF DIRECTORS. THE BOARD OF DIRECTORS IS VESTED
WITH THE COMPLETE AND UNRESTRAINED AUTHORITY IN THE MANAGEMENT OF ALL THE
AFFAIRS OF THE COMPANY, AND IT MAY ADOPT SUCH RULES AND REGULATIONS FOR THE
CONDUCT OF ITS MEETINGS AND THE MANAGEMENT OF THE COMPANY, AS THE DIRECTORS
MAY DEEM PROPER, NOT INCONSISTENT WITH THE LAWS OF THE STATE OF NEVADA, UNDER
THEIR AUTHORITY THE BOARD OF DIRECTORS MAY, BUT ARE NOT LIMITED TO THE,
ACQUISITION THROUGH PURCHASE BY CONTACT, CASH, OR ANY OTHER LEGAL DEVICE
AVAILABLE, ANY ASSETS FOR THIS CORPORATION, AND THE BOARD MAY MORTGAGE,
HYPOTHECATE, DISPERSE, OR PLEDGE THE ASSETS OF THIS CORPORATION THAT IN THE
BOARD'S DISCRETION IS IN THE BEST INTEREST OF THIS CORPORATION.
SECTION 2. NUMBER, TENURE, AND QUALIFICATIONS. THE NUMBER OF DIRECTORS OF
THE CORPORATION SHALL NOT BE LESS THAN THREE (3) NOR MORE THAN ELEVEN (11)
MEMBERS AS THE BOARD OF DIRECTORS MAY FROM TIME TO TIME DETERMINE. THE INITIAL
NUMBER OF DIRECTORS SHALL BE THREE (3). EACH DIRECTOR SHALL HOLD OFFICE UNTIL
THE NEXT ANNUAL MEETING OF SHAREHOLDERS OR UNLESS TERMINATED EARLIER BY BOARD
ACTION AND UNTIL HIS/HER SUCCESSOR SHALL HAVE BEEN ELECTED AND QUALIFIED.
DIRECTORS NEED NOT BE RESIDENTS OF THE STATE OF NEVADA OR SHAREHOLDERS OF THE
CORPORATION.
SECTION 3. REGULAR MEETINGS. A REGULAR MEETING OF THE BOARD OF
DIRECTORS SHALL BE HELD WITHOUT OTHER NOTICE THAN THIS BYLAW IMMEDIATELY
AFTER, AND AT THE SAME PLACE AS, THE ANNUAL MEETING OF SHAREHOLDERS. THE BOARD
OF DIRECTORS MAY PROVIDE, BY RESOLUTION, THE TIME AND PLACE, EITHER WITHIN OR
WITHOUT THE STATE OF NEVADA FOR TH HOLDING OF ADDITIONAL REGULAR MEETINGS
WITHOUT OTHER NOTICE THAN SUCH RESOLUTION.
SECTION 4. SPECIAL MEETINGS. SPECIAL MEETINGS OF THE BOARD OF DIRECTORS
MAY BE CALLED BY OR AT THE REQUEST OF THE PRESIDENT OR ANY TWO DIRECTORS. THE
PERSON OR PERSONS AUTHORIZED TO CALL SPECIAL MEETINGS OF THE BOARD OF
DIRECTORS MAY FIX ANY PLACE EITHER WITHIN OR WITHOUT THE STATE OF NEVADA AS
THE PLACE FOR HOLDING ANY SPECIAL MEETING OF THE BOARD OF DIRECTORS CALLED BY
THEM.
SECTION 5. NOTICE. NOTICE OF ANY SPECIAL MEETING SHALL BE GIVEN AT LEAST
TWO (2) DAYS PREVIOUSLY THERETO BY WRITTEN NOTICE DELIVERED PERSONALLY OR
MAILED TO EACH DIRECTOR TO HIS/HER BUSINESS ADDRESS OR BY TELEGRAM. IF MAILED,
SUCH NOTICE SHALL BE DEEMED TO BE DELIVERED WHEN DEPOSITED IN THE UNITED
STATES MAIL SO ADDRESSED, WITH POSTAGE PAID THEREON. IF NOTICE IS GIVEN BY
TELEGRAM, SUCH NOTICE SHALL BE DEEMED TO BE DELIVERED WHEN THE TELEGRAM IS
DELIVERED TO THE TELEGRAPH COMPANY. ANY DIRECTOR MAY WAIVE NOTICE OF SUCH
MEETING. THE ATTENDANCE OF A DIRECTOR AT A MEETING SHALL CONSTITUTE A WAIVER
OF NOTICE OF SUCH MEETING, EXCEPT CIRCUMSTANCES IN WHICH A DIRECTOR ATTENDS A
MEETING FOR THE EXPRESS PURPOSE OF OBJECTING TO THE TRANSACTION OF ANY
BUSINESS BECAUSE THE MEETING IS NOT LAWFULLY CALLED OR CONVENED. NEITHER THE
BUSINESS TO BE TRANSACTED AT, NOR THE PURPOSE OF, ANY REGULAR OR SPECIAL
MEETING OF THE BOARD OF DIRECTORS NEED BE SPECIFIED IN THE NOTICE OF WAIVER OF
NOTICE OF SUCH MEETING.
<PAGE> 4
SECTION 6. QUORUM. A MAJORITY OF THE NUMBER OF DIRECTORS FIXED BY SECTION
2 OF THIS ARTICLE III SHALL CONSTITUTE A QUORUM FOR THE TRANSACTION OF
BUSINESS AT ANY MEETING OF THE BOARD OF DIRECTORS, BUT IF LESS THAN SUCH
MAJORITY IS PRESENT AT A MEETING, A MAJORITY OF THE DIRECTORS PRESENT MAY
ADJOURN THE MEETING FROM TIME TO TIME WITHOUT FURTHER NOTICE.
SECTION 7. COMMITTEES. (A) THE BOARD OF DIRECTORS BY A RESOLUTION OR
RESOLUTIONS ADOPTED BY A MAJORITY OF THE MEMBERS OF THE WHOLE BOARD, MAY
APPOINT AN EXECUTIVE COMMITTEE AND SUCH OTHER COMMITTEES AS IT MAY DEEM
APPROPRIATE. EACH SUCH COMMITTEE SHALL CONSIST OF AT LEAST TWO (2) MEMBERS OF
THE BOARD OF DIRECTORS. EACH COMMITTEE SHALL HAVE AND MAY EXERCISE SUCH POWERS
AS SHALL BE CONFERRED OR AUTHORIZED BY THE RESOLUTION APPOINTING IT. A
MAJORITY OF ANY SUCH COMMITTEE MAY DETERMINE ITS ACTION AND MAY FIX THE TIME
AND PLACE OF ITS MEETINGS, UNLESS PROVIDED OTHERWISE BY THE BOARD OF
DIRECTORS. THE BOARD OF DIRECTORS SHALL HAVE THE POWER AT ANY TIME TO FILL
VACANCIES IN, TO CHANGE THE SIZE OR MEMBERSHIP OF, AND TO DISCHARGE ANY SUCH
COMMITTEE.
(B) EACH SUCH COMMITTEE SHALL KEEP A WRITTEN RECORD OF ITS ACTS AND
PROCEEDINGS AND SHALL SUBMIT SUCH RECORD TO THE BOARD OF ITS DIRECTORS AT EACH
REGULAR MEETING THEREOF AND AT SUCH OTHER TIMES AS REQUESTED BY THE BOARD OF
DIRECTORS. FAILURE TO SUBMIT SUCH RECORD, OR FAILURE OF THE BOARD TO APPROVE
ANY ACTION INDICATED THEREIN WILL NOT, HOWEVER, INVALIDATE SUCH I ACTION TO
THE EXTENT IT HAS BEEN CARRIED OUT BY THE CORPORATION PRIOR TO THE TIME THE
RECORD OF SUCH ACTION WAS, OR SHOULD HAVE BEEN, SUBMITTED TO THE BOARD OF
DIRECTORS AS HEREIN PROVIDED.
SECTION 8. MANNER OF ACTING. THE ACT OF THE MAJORITY OF THE DIRECTORS
PRESENT AT A MEETING AT WHICH A QUORUM IS PRESENT SHALL BE THE ACT OF THE
BOARD OF DIRECTORS.
SECTION 9. VACANCIES. ANY DIRECTOR MAY BE TEMPORARILY SUSPENDED OR
REINSTATED EITHER WITH OR WITHOUT CAUSE FROM THE BOARD OF DIRECTORS BY THE
AFFIRMATIVE NOTE OF A MAJORITY OF THE BOARD OF DIRECTORS AT ANY REGULAR
MEETING OR SPECIAL MEETING CALLED FOR THAT PURPOSE, AND THE TEMPORARY
SUSPENSION OR REINSTATEMENT SHALL CONTINUE UNTIL A MEETING OF THE STOCKHOLDERS
HOLDING A MAJORITY OF THE STOCK CAN HOLD A MEETING, ANNUAL OR SPECIAL, TO
REMOVE OR REINSTATE SAID DIRECTOR. ANY VACANCY OCCURRING IN THE BOARD OF
DIRECTORS MAY BE FILLED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE REMAINING
DIRECTORS THOUGH LESS THAN A QUORUM OF THE BOARD OF DIRECTORS. A DIRECTOR
ELECTED TO FILL A VACANCY SHALL BE ELECTED FOR THE UNEXPIRED TERM OF HIS/HER
PREDECESSOR IN OFFICE. ANY DIRECTORSHIP TO BE FILLED BY REASON OF AN INCREASE
IN THE NUMBER OF DIRECTORS SHALL BE FILLED BY ELECTION AT ANY ANNUAL MEETING
OR AT A SPECIAL MEETING OF SHAREHOLDERS CALLED FOR THAT PURPOSE.
SECTION 10. COMPENSATION. BY RESOLUTION OF THE BOARD OF DIRECTORS, THE
DIRECTORS MAY BE PAID THEIR EXPENSES, IF ANY, FOR A-17ENDANCE AT EACH MEETING
OF THE BOARD OF DIRECTORS, AND MAY BE PAID A FIXED SUM FOR ATTENDANCE AT EACH
MEETING OF THE BOARD OF DIRECTORS OR A STATED SALARY AS A DIRECTOR, OR BOTH.
NO SUCH PAYMENT SHALL PRECLUDE ANY DIRECTOR FROM SERVING THE CORPORATION IN
ANY OTHER CAPACITY AND RECEIVING COMPENSATION THEREFORE.
<PAGE> 5
SECTION 11. PRESUMPTION OF ASSENT. A DIRECTOR SHALL BE PRESUMED TO HAVE
ASSENTED TO AN ACTION TAKEN UNLESS HIS DISSENT SHALL BE ENTERED INTO THE
MINUTES OF THE MEETING OR UNLESS HE SHALL FILE HIS WRITTEN ASSENT TO SUCH
ACTION WITH THE PERSON ACTING AS THE SECRETARY OF THE MEETING BEFORE THE
ADJOURNMENT THEREOF OR SHALL FORWARD SUCH DISSENT BY REGISTERED MAIL TO THE
SECRETARY OF THE CORPORATION IMMEDIATELY AFTER THE ADJOURNMENT OF THE MEETING.
SUCH RIGHT TO DISSENT SHALL NOT APPLY TO A DIRECTOR WHO VOTED IN FAVOR OF SUCH
ACTION.
SECTION 12. ACTION WITHOUT MEETING. ANY ACTION REQUIRED OR PERMITTED TO
BE TAKEN BY THE BOARD OF DIRECTORS UNDER THE PROVISIONS OF THE GENERAL
CORPORATION LAW OF THE SATE OF NEVADA MAY BE TAKEN WITHOUT A MEETING, IF ALL
MEMBERS OF THE BOARD SHALL INDIVIDUALLY OR COLLECTIVELY CONSENT IN WRITING TO
SUCH ACTION. SUCH WRITTEN CONSENT OR CONSENTS SHALL BE FILED WITH THE MINUTES
OF THE PROCEEDINGS OF THE BOARD. SUCH ACTION BY WRITTEN CONSENT SHALL HAVE THE
SAME FORCE AND EFFECT AS A UNANIMOUS VOTE OF SUCH DIRECTORS.
ARTICLE IV
OFFICERS.
SECTION 1. NUMBER. THE OFFICERS OF THE CORPORATION SHALL BE A PRESIDENT,
ONE OR MORE VICE PRESIDENTS (THE NUMBER HEREOF TO BE DETERMINED BY THE BOARD
OF DIRECTORS), A SECRETARY, AND A TREASURER, EACH OF WHOM SHALL BE ELECTED BY
THE BOARD OF DIRECTORS. SUCH OTHER OFFICERS AND ASSISTANT OFFICERS AS MAY BE
DEEMED NECESSARY MAY BE ELECTED OR APPOINTED BY THE BOARD OF DIRECTORS. THE
OFFICES OF THE SECRETARY AND TREASURER MAY BE HELD BY THE SAME PERSON.
SECTION 2. ELECTION AND TERM OF OFFICE. THE OFFICERS OF THE CORPORATION
TO BE ELECTED BY THE BOARD OF DIRECTORS SHALL BE ELECTED ANNUALLY BE THE BOARD
OF DIRECTORS SHALL BE ELECTED ANNUALLY BY THE BOARD OF DIRECTORS AT THE FIRST
MEETING OF THE BOARD OF DIRECTORS HELD AFTER EACH ANNUAL MEETING OF THE
SHAREHOLDERS. IF THE ELECTION OF OFFICERS SHALL NOT BE HELD AT SUCH MEETING,
SUCH ELECTION SHALL BE HELD AS SOON THEREAFTER AS CONVENIENTLY MAY BE. EACH
OFFICER SHALL HOLD OFFICE UNTIL HIS/HER SUCCESSOR SHALL HAVE BEEN DULY ELECTED
AND SHALL HAVE BEEN QUALIFIED OR UNTIL HIS/HER DEATH OR UNTIL HE/SHE SHALL
RESIGN OR SHALL HAVE BEEN REMOVED IN THE MANNER HEREINAFTER PROVIDED.
SECTION 3. REMOVAL. ANY OFFICER OR AGENT ELECTED OR APPOINTED BY THE
BOARD OF DIRECTORS MAY BE REMOVED BY THE BOARD OF DIRECTORS WHENEVER IN ITS
JUDGMENT THE BEST INTERESTS OF THE CORPORATION WILL BE SERVED THEREBY. BUT
SUCH REMOVAL SHALL BE WITHOUT PREJUDICE TO THE CONTRACT RIGHTS, IF ANY, OF THE
PERSON SO REMOVED. THE ELECTION OR APPOINTMENT OF AN OFFICER OR AGENT SHALL
NOT OF ITSELF CREATE CONTRACT RIGHTS.
SECTION 4. VACANCIES. A VACANCY IN THE OFFICE BECAUSE OF DEATH,
RESIGNATION, REMOVAL, DISQUALIFICATION, OR OTHERWISE MAY BE FILLED BY THE
BOARD OF DIRECTORS FOR THE UNEXPIRED PORTION OF THE TERM.
<PAGE> 6
SECTION 5. PRESIDENT. THE PRESIDENT SHALL BE THE PRINCIPAL EXECUTIVE
OFFICER OF THE CORPORATION AND, SUBJECT TO THE CONTROL OF THE BOARD OF
DIRECTORS, SHALL IN GENERAL SUPERVISE AND CONTROL ALL OF THE BUSINESS AFFAIRS
OF THE CORPORATION. HE/SHE SHALL, WHEN PRESENT PRESIDE AT ALL MEETINGS OF THE
SHAREHOLDERS AND OF THE BOARD OF DIRECTORS. HE/SHE MAY SIGN, WITH THE
SECRETARY OR ANY OTHER PROPER OFFICER OF THE CORPORATION THEREUNTO AUTHORIZED
BY THE BOARD OR DIRECTORS, CERTIFICATES FOR SHARES OF THE CORPORATION, ANY
DEEDS, MORTGAGES, BONDS, CONTRACTS, OR OTHER INSTRUMENTS THAT THE BOARD OF
DIRECTORS HAS AUTHORIZED TO BE EXECUTED, EXCEPT IN CASES IN WHICH THE SIGN AND
EXECUTION THEREOF SHALL BE EXPRESSLY DELEGATED BY THE BOARD OF DIRECTORS OR BY
THESE BYLAWS SOME OTHER OFFICER OR AGENT OF THE CORPORATION, OR SHALL BE
REQUIRED BYLAW TO BE OTHERWISE SIGNED OR EXECUTED; AND IN GENERAL SHALL
PERFORM ALL DUTIES INCIDENT TO THE OFFICE OF THE PRESIDENT AND SUCH OTHER
DUTIES AS MAY BE PRESCRIBED BY THE BOARD OF DIRECTORS FROM TIME TO TIME.
SECTION 6. THE VICE PRESIDENTS. IN THE ABSENCE OF THE PRESIDENT OR IN THE
EVENT OF HIS/HER DEATH, INABILITY, OR REFUSAL TO ACT, THE VICE PRESIDENT (OR
IN THE EVENT THAT THERE BE MORE THAN ONE VICE PRESIDENT, THE VICE PRESIDENTS
IN THE ORDER DESIGNATED AT THE TIME OF THEIR ELECTION) SHALL PERFORM THE
DUTIES OF THE PRESIDENT, AND WHEN SO ACTING, SHALL HAVE ALL THE POWERS OF AND
BE SUBJECT TO ALL THE RESTRICTIONS UPON THE PRESIDENT. ANY VICE PRESIDENT MAY
SIGN, WITH THE SECRETARY OR AN ASSISTANT SECRETARY, CERTIFICATES FOR SHARES OF
THE CORPORATION; AND SHALL PERFORM SUCH OTHER DUTIES AS FROM TIME TO TIME MAY
BE ASSIGNED TO HIM/HER BY THE PRESIDENT OR BY THE BOARD OF DIRECTORS.
SECTION 7. THE SECRETARY. THE SECRETARY SHALL:
(A) KEEP THE MINUTES OF SHAREHOLDERS' AND BOARD OF DIRECTORS'
MEETINGS IN ONE OR MORE BOOKS PROVIDED FOR THAT PURPOSE;
(B) ENSURE THAT ALL NOTICES ARE DULY GIVEN IN ACCORDANCE WITH THE
PROVISIONS OF THESE BYLAWS OR AS REQUIRED BY LAW;
(C) BE CUSTODIAN OF THE CORPORATE RECORDS AND OF THE SEAL OF THE
CORPORATION AND SEE THAT THE SEAL OF THE CORPORATION IS AFFIXED UPON
ALL DOCUMENTS, THE EXECUTION OF WHICH ON BEHALF OF THE CORPORATION
UNDER ITS SEAL IS DULY AUTHORIZED;
(D) MAINTAIN A REGISTER OF THE POST OFFICE ADDRESS OF EACH SHAREHOLDER
THAT SHALL BE FURNISHED TO THE SECRETARY BY SUCH SHAREHOLDER;
(E) SIGN WITH THE PRESIDENT, OR VICE PRESIDENT, CERTIFICATES FOR
SHARES OF THE CORPORATION, THE ISSUANCE OF WHICH SHALL HAVE BEEN
AUTHORIZED BY RESOLUTION OF THE BOARD OF DIRECTORS;
(F) HAVE GENERAL CHARGE OF THE STOCK TRANSFER BOOKS OF THE CORPORATION;
(G) IN GENERAL PERFORM ALL DUTIES INCIDENT TO THEO OFFICE OF SECRETARY
AND SUCH OTHER DUTIES AS FROM TIME TO TIME MAY BE ASSIGNED TO HIM BY
THE PRESIDENT OR BY THE BOARD OF DIRECTORS; AND
<PAGE> 7
(H) UNLESS OTHERWISE ORDERED BY THE BOARD OF DIRECTORS, THE SECRETARY
SHALL HAVE FULL POWER AND AUTHORITY ON BEHALF OF THE COMPANY TO
ATTEND AND TO ACT AND TO VOTE AT ANY MEETINGS OF THE STOCKHOLDERS OF
ANY CORPORATION IN WHICH THE COMPANY MAY HOLD STOCK, AND AT ANY SUCH
MEETINGS, SHALL POSSESS AND MAY EXERCISE ANY AND ALL RIGHTS AND
POWERS INCIDENT TO THE OWNERSHIP OF SUCH STOCK, AND WHICH AS THE NEW
OWNER THEREOF, THE COMPANY MIGHT HAVE POSSESSED AND EXERCISED IF
PRESENT.
SECTION 8. THE TREASURER. IF REQUIRED BY THE BOARD OF DIRECTORS, THE
TREASURER SHALL GIVE A BOND FOR THE FAITHFUL DISCHARGE OF HIS DUTIES IN SUCH
SUM AND WITH SUCH SURETY OR SURETIES AS THE BOARD OF DIRECTORS SHALL
DETERMINE. THE TREASURER SHALL:
(A) HAVE CHARGE AND CUSTODY OF AND BE RESPONSIBLE FOR ALL FUNDS
AND SECURITIES OF THE CORPORATION; RECEIVE AND GIVE RECEIPTS FOR
MONIES DUE AND PAYABLE TO THE CORPORATION FROM ANY SOURCE WHATSOEVER,
AND DEPOSIT ALL SUCH MONIES IN THE NAME OF THE CORPORATION IN SUCH
BANKS, TRUST COMPANIES, OR OTHER DEPOSITORIES AS SHALL BE SELECTED IN
ACCORDANCE WITH THE PROVISIONS OF ARTICLE V OF THESE BYLAWS; AND
(B) IN GENERAL PERFORM ALL OF THE DUTIES INCIDENT TO THE OFFICE OF
THE TREASURER AND SUCH OTHER DUTIES AS FROM TIME TO TIME MAY BE
ASSIGNED TO HIM BY THE PRESIDENT OR BY THE BOARD OF DIRECTORS.
SECTION 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. THE ASSISTANT
SECRETARIES, WHEN AUTHORIZED BY THE BOARD OF DIRECTORS, MAY SIGN WITH THE
PRESIDENT OR A VICE PRESIDENT CERTIFICATES FOR SHARES OF THE CORPORATION, THE
ISSUANCE OF WHICH SHALL HAVE BEEN AUTHORIZED BY A RESOLUTION OF THE BOARD OF
DIRECTORS. THE ASSISTANT TREASURERS SHALL RESPECTIVELY, IF REQUIRED BY THE
BOARD OF DIRECTORS, GIVE BONDS FOR THE FAITHFUL DISCHARGE OF THEIR DUTIES IN
SUCH SUMS AND WITH SUCH SURETIES AS THE BOARD OF DIRECTORS SHALL DETERMINE.
THE ASSISTANT SECRETARIES AND THE ASSISTANT TREASURERS IN GENERAL, SHALL
PERFORM SUCH DUTIES AS SHALL BE ASSIGNED TO THEM BY THE SECRETARY OR THE
TREASURERS, RESPECTIVELY, OR BY THE PRESIDENT OR THE BOARD OF DIRECTORS.
SECTION 10. SALARIES. THE SALARIES OF THE OFFICERS SHALL BE FIXED FROM
TIME TO TIME BY THE BOARD OF DIRECTORS AND NO OFFICER SHALL BE PREVENTED FROM
RECEIVING SUCH SALARY BY REASON OF THE FACT THAT HE/SHE IS ALSO A DIRECTOR OF
THE CORPORATION.
<PAGE> 8
SECTION 11. INDEMNIFICATION.
(A) THE CORPORATION SHALL INDEMNIFY EACH OF ITS DIRECTORS AND
OFFICERS (AND SECURE APPROPRIATE LIABILITY INSURANCE), WHETHER OR NOT
THEN IN OFFICE (AND HIS/HER EXECUTOR, ADMINISTRATOR AND HEIRS),
AGAINST ALL REASONABLE EXPENSES ACTUALLY AND NECESSARILY INCURRED BY
HIM/HER IN CONNECTION WITH THE DEFENSE OF ANY LITIGATION TO WHICH
HE/SHE MAY HAVE BEEN MADE A PARTY BECAUSE HE/SHE IS OR WAS A DIRECTOR
OR OFFICER OF THE CORPORATION. HE/SHE SHALL HAVE NO RIGHT TO
REIMBURSEMENT, HOWEVER, IN RELATION TO MATTERS AS TO WHICH HE/SHE
HAS BEEN ADJUDGED LIABLE TO THE CORPORATION FOR NEGLIGENCE OR
MISCONDUCT IN THE PERFORMANCE OF HIS/HER DUTIES. THE RIGHT TO
INDEMNITY FOR EXPENSES SHALL ALSO APPLY TO THE EXPENSES OF SUITS
THAT ARE COMPROMISED OR SETTLED IF THE COURT HAVING JURISDICTION OF
THE MATTER SHALL APPROVE SUCH SETTLEMENT.
(B)THE FOREGOING RIGHT OF INDEMNIFICATION SHALL BE IN ADDITION TO,
AND NOT EXCLUSIVE OF, ALL OTHER RIGHTS TO WHICH SUCH DIRECTOR OR
OFFICER MAY BE ENTITLED.
SECTION 12. REMOVAL OF OFFICERS. THE BOARD OF DIRECTORS MAY REMOVE ANY
OFFICER, BY A MAJORITY VOTE, AT ANY TIME WITH OR WITHOUT CAUSE.
ARTICLE V.
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 1. CONTRACTS. THE BOARD OF DIRECTORS MAY AUTHORIZE ANY OFFICE OR
OFFICER'S AGENT OR AGENTS, TO ENTER INTO ANY CONTRACT OR EXECUTE AND DELIVER
ANY INSTRUMENT IN THE NAME OF AND ON BEHALF OF THE CORPORATION AND SUCH
AUTHORITY MAY BE GENERAL OR CONFINED TO SPECIFIC INSTANCES.
SECTION 2. LOANS. NO LOANS SHALL BE CONTRACTED ON BEHALF OF THE
CORPORATION AND NO EVIDENCES OF INDEBTEDNESS SHALL BE ISSUED IN ITS NAME
UNLESS AUTHORIZED BY A RESOLUTION OF THE BOARD OF DIRECTORS. SUCH AUTHORITY
MAY BE GENERAL OR CONFINED TO SPECIFIC INSTANCES.
SECTION 3. CHECKS, DRAFTS, ETC. ALL CHECKS, DRAFTS, OR OTHER ORDERS
FOR THE PAYMENT OF MONEY, NOTES, OR OTHER EVIDENCES OF INDEBTEDNESS ISSUED IN
THE NAME OF THE CORPORATION AND IN SUCH MANNER, AS SHALL FROM TIME TO TIME BE
DETERMINED BY RESOLUTION OF THE BOARD OF DIRECTORS.
SECTION 4. DEPOSITS. ALL FUNDS OF THE CORPORATION NOT OTHERWISE
EMPLOYED SHALL BE DEPOSITED FROM TIME TO TIME TO THE CREDIT OF THE CORPORATION
IN SUCH BANKS, TRUST COMPANIES, OR OTHER DEPOSITORIES AS THE BOARD OF
DIRECTORS MAY ELECT.
<PAGE> 9
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER.
SECTION 1. CERTIFICATES FOR SHARES. CERTIFICATES REPRESENTING SHARES OF
THE CORPORATION SHALL BE IN SUCH FORM AS SHALL BE DETERMINED BY THE BOARD OF
DIRECTORS. SUCH CERTIFICATES SHALL BE SIGNED BY THE PRESIDENT OR A VICE
PRESIDENT AND BY THE SECRETARY OR AN ASSISTANT SECRETARY. ALL CERTIFICATES FOR
SHARES SHALL BE CONSECUTIVELY NUMBERED OR OTHERWISE IDENTIFIED. THE NAME AND
ADDRESS OF THE PERSON TO WHOM THE SHARES REPRESENTED THEREBY ARE ISSUED, WITH
THE NUMBER OF SHARES AND DATE OF ISSUE, SHALL BE ENTERED ON THE STOCK TRANSFER
BOOKS OF THE CORPORATION. ALL CERTIFICATES SURRENDERED TO THE CORPORATION FOR
TRANSFER SHALL BE CANCELLED AND NO NEW CERTIFICATE SHALL BE ISSUED UNTIL THE
FORMER CERTIFICATE FOR A LIKE NUMBER OF SHARES SHALL HAVE BEEN SURRENDERED AND
CANCELLED, EXCEPT THAT IN CASE OF A LOST, DESTROYED, OR MUTILATED CERTIFICATE
A NEW ONE MAY BE ISSUED THEREFORE UPON SUCH TERMS AND INDEMNITY TO THE
CORPORATION AS THE BOARD OF DIRECTORS MAY PRESCRIBE.
SECTION 2. TRANSFER OR SHARES. TRANSFER OF SHARES OF THE CORPORATION
SHALL BE MADE ONLY ON THE STOCK TRANSFER BOOKS OF THE CORPORATION BY THE
HOLDER OF RECORD THEREOF OR BY HIS/HER LEGAL REPRESENTATIVE, WHO SHALL FURNISH
PROPER EVIDENCE OF AUT11ORlTY TO TRANSFER, OR BY HIS/HER ATTORNEY DULY
EXECUTED AND FILED WITH THE SECRETARY OF THE CORPORATION, AND ON SURRENDER FOR
CANCELLATION OF THE CERTIFICATE FOR SUCH SHARES. THE PERSON IN WHOSE NAME
SHARES STAND ON THE BOOKS OF THE CORPORATION SHALL BE DEEMED BY THE
CORPORATION TO BE THE OWNER THEREOF FOR ALL PURPOSES.
ARTICLE VII
ACCOUNTING YEAR. THE CORPORATION WILL USE THE FISCAL YEAR AS ITS ACCOUNTING
YEAR FOR TAX PURPOSES, ENDING EACH DECEMBER 31.
ARTICLE VIII
DIVIDENDS. THE BOARD OF DIRECTORS MAY FROM TIME TO TIME DECLARE, AND THE
CORPORATION MAY PAY, DIVIDENDS ON ITS OUTSTANDING SHARES IN THE MANNER AND
UPON THE TERMS AND CONDITIONS PROVIDED BY LAW AND ITS ARTICLES OF
INCORPORATION.
ARTICLE IX
CORPORATE SEAL. THE BOARD OF DIRECTORS SHALL PROVIDE A CORPORATE SEAL THAT
SHALL BE CIRCULAR IN FORM AND SHALL HAVE INSCRIBED THEREON THE NAME OF THE
CORPORATION AND THE STATE OF INCORPORATION AND THE WORDS "CORPORATE SEAL."
<PAGE> 10
ARTICLE X
WAIVER OF NOTICE WHENEVER ANY NOTICE IS REQUIRED TO BE GIVEN TO ANY
SHAREHOLDER OR DIRECTOR OF THE CORPORATION UNDER THE PROVISIONS OF THESE
BYLAWS OR UNDER THE PROVISIONS OF THE NEVADA BUSINESS CORPORATION ACT, 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.
ARTICLE XI
AMENDMENT. THE BYLAWS MAY BE ALTERED, AMENDED, OR REPEALED AND NEW BYLAWS MAY
BE ADOPTED BY THE BOARD OF DIRECTORS AT ANY REGULAR OR SPECIAL MEETING OF THE
BOARD OF DIRECTORS.
BYLAWS FOR WHY USA FINANCIAL GROUP, INC.
KNOW ALL MEN BY THESE PRESENTS: THAT WE THE UNDERSIGNED, BEING THE BOARD OF
DIRECTORS OF WHY USA FINANCIAL GROUP, INC. DO HEREBY CONSENT TO THE FOREGOING
BYLAWS AND ADOPT THE SAME AS AND FOR THE BYLAWS OF SAID CORPORATION.
IN WITNESS WHEREOF WE SET OUR HAND AND SEAL THIS 31ST DAY OF DECEMBER 1999.
/s/ Don Riesterer
Chairman of the Board
THESE BYLAWS FOR WHY USA FINANCIAL GROUP, INC.
APPROVED BY MAJORITY. BOARD OF DIRECTORS AT
MEETING DATED DECEMBER 31,1999.
ATTEST:
/s/Leslie M. Pearson
SECRETARY
<PAGE> 11
WHY USA
NORTH AMERICA, INC.
REAL ESTATE FRANCHISE AGREEMENT
<PAGE>
Table of Contents
Section Page
RECITALS:..................................................................1
A. THE WHY USA SYSTEM ..................................................1
B. THE TRADEMARKS.......................................................1
AGREEMENTS:................................................................1
1. GRANT OF A FRANCHISE.................................................1
2. TERM OF FRANCHISE; RENEWAL OPTIONS...................................2
3. FRANCHISEE'S TRADE NAME..............................................2
4. LOCATION AND OPENING.................................................2
5. OBLIGATIONS OF WHY USA...............................................3
6. FEES PAID BY FRANCHISEE..............................................4
7. OTHER OBLIGATIONS OF FRANCHISEE......................................5
8. TRADE SECRETS AND CONFIDENTIALITY....................................6
9. REPRESENTATIONS BY FRANCHISEE........................................7
10. TERMINATION OF AGREEMENT.............................................7
11. COVENANT NOT TO COMPETE..............................................9
12. SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF FRANCHISE.........9
13. SALE, ASSIGNMENT OR TRANSFER OF THIS AGREEMENT BY WHY USA............9
14. COVENANTS FROM INDIVIDUALS...........................................10
<PAGE>
15. INTEGRATION/MODIFICATION.............................................10
16. WAIVER...............................................................10
17. DISPUTE RESOLUTION...................................................10
18. SEVERABILITY.........................................................11
19. NOTICES..............................................................11
20. BINDING ON SUCCESSORS................................................12
21. INFORMATION..........................................................12
22. INDEPENDENT CONTRACTOR AND INDEMNIFICATION...........................12
23. ELECTIVE PROVISIONS..................................................12
24. APPROVAL AND GUARANTEE OF SHAREHOLDERS OR PARTNERS...................14
<PAGE>
REAL ESTATE FRANCHISE AGREEMENT
THIS REAL ESTATE FRANCHISE AGREEMENT ("Franchise Agreement" or "Agreement") is
made and entered into by and between WHY USA NORTH AMERICA, INC., a Wisconsin
corporation (WHY USA), having its principal offices at 2110 US Highway 12,
Menomonie, Wisconsin 54751, and that party designated as "Franchisee" in
Section 23.1 herein. WHY USA and Franchisee are collectively referred to as
the "Parties."
RECITALS:
A. THE WHY USA SYSTEM
WHY USA has developed a unique and proprietary plan of operation to assist
independent real estate brokers and sales agents (the "System"). The System
consists of listing, selling, marketing and management techniques developed by
WHY USA supported by assistance that includes an ongoing sequence of training
programs and a variety of copyrighted marketing and educational materials.
These techniques are frequently supplemented with new techniques or
refinements which then become part of the System.
The System involves use of the "WHY USA" name and service marks. Franchisees
may also participate in joint marketing and educational programs and receive
access to newly developed WHY USA promotional and training materials.
References to "Franchisee" hereinafter will be deemed to include the
Franchisee and its franchised business operation.
WHY USA does not set or dictate fees or commissions charged by Franchisee.
Such fees are set by each Franchisee individually.
B. THE TRADEMARKS
WHY USA has the right to license use of the trade name and service mark "WHY
USA." The mark was registered by the U.S. Patent and Trademark Office on
February 14, 1989, registration number 1,524,821. WHY USA owns rights to
other marks, names and logos which are or may be used in the operation of the
System. These marks, names and logos may be added to, discontinued or changed
from time to time by WHY USA. All such marks names and logos will hereafter
be referred to as the "Trademarks."
AGREEMENTS:
1. GRANT OF A FRANCHISE
In consideration of Franchisee's payment of the Initial Franchise Fee and the
promises contained in this Agreement, WHY USA hereby grants to Franchisee and
Franchisee accepts, a nonexclusive license to use the WHY USA System,
Trademarks and copyrighted materials pursuant to the terms of this Franchise
Agreement.
2. TERM OF FRANCHISE; RENEWAL OPTIONS
2.1 Initial Term. The initial term of this Franchise Agreement will commence
on the date it is executed by WHY USA and expire three years thereafter,
unless terminated earlier as provided herein.
2.2 Renewal Option and Manner of Exercise. Franchisee may renew this
Agreement, with no additional Franchise or Renewal Fee, for three (3)
additional consecutive three year terms, provided that prior to the
commencement of any renewal term, Franchisee has fulfilled the following
preconditions: (i) Franchisee has fully complied with its obligations under
this Agreement throughout the then-current term; and (ii) Franchisee gives WHY
USA written notice of its decision to renew no earlier than six (6) months and
no later than thirty (30) days prior to expiration. Upon renewal, Franchisee
agrees, at WHY USA=s request, to execute a Real Estate Franchise Agreement in
the same form as WHY USA is, at the time of such renewal, offering to new
Franchisees or Franchisees who are likewise renewing their Franchise except
that the number of renewal terms remaining shall be reduced by one at each
renewal, so that, in the aggregate, the maximum length of any franchise
relationship shall be 12 years (one initial and three renewal terms). The
revised Real Estate Agreement may contain terms different from those contained
in this Franchise Agreement, except that no additional initial Franchise Fee
will be payable. WHY USA, may at its option, require Franchisee to execute a
Renewal Agreement instead of a new Franchise Agreement.
3. FRANCHISEE'S TRADE NAME
Franchisee will operate the Real Estate Franchise only under a trade name
approved in writing by WHY USA. Franchisee agrees that during and after the
term of this Agreement, it will not use the words "WHY" or "USA" in the
corporate or "real" business name of any real estate entity in which
Franchisee is involved.
4. LOCATION AND OPENING
4.1 Office Location. Franchisee is entitled to operate one WHY USA Office
within Franchisee's Protected Area at a location approved by WHY USA. WHY USA
has the right to disapprove an office location if, in WHY USA's reasonable
judgment, the location is not suitable for a WHY USA real estate office.
4.2 Protected Area. Franchisee receives a protected area as specified in
Section 21.4 of this Agreement. The grant of a Protected Area only prohibits
WHY USA from granting any other Franchisee an office location within that
Protected Area. All WHY USA Franchisees may engage in the listing, marketing,
advertising, sale, leasing or exchange of real property anywhere permitted by
law, including the Protected Area, and WHY USA may engage in any other
activities itself or through others within and outside of the Protected Area,
other than the conduct of the business contemplated by the Franchise
Agreement.
4.3 Opening. Franchisee agrees to open its WHY USA Office within one hundred
twenty days (120) from the date of this Agreement.
5. OBLIGATIONS OF WHY USA
In addition to its other obligations set forth in this agreement, WHY USA
agrees as follows:
5.1 Manual. WHY USA will provide Franchisee with the use of a confidential
operations/procedures manual ("Manual"), agent training video/audio tapes and
sample marketing materials.
5.1.1. WHY USA reserves the right to modify the quantity and content of the
Manual and other training materials and tapes from time to time. All training
manuals, tapes and related materials shall remain the property of WHY USA and
shall be promptly returned to WHY USA upon termination of this Agreement.
5.2 Franchise System Training. WHY USA will provide Franchisee with an
Initial Training Library of videotapes or audio tapes and manuals and
supervise Franchisee's progress with respect to the comprehension and
application of the material presented therein. WHY USA also shall provide an
Initial Franchise Training Seminar of 1-2 days at a location selected by WHY
USA. WHY USA does not charge for providing training but Franchisee pays
travel, lodging and incidental expenses to attend. Training includes detailed
instruction on the operation of a WHY USA Franchise.
5.3 Other Materials. WHY USA may, but is not required, to provide new and/or
supplemental marketing, educational and advertising materials to Franchisee
from time to time during the term of this Agreement.
5.4 Other Assistance. WHY USA shall provide such initial and continuing
advisory assistance to Franchisee as WHY USA, in its sole and absolute
discretion, shall deem advisable.
5.5 Advertising Funds. WHY USA shall have the right to establish and operate
a national and/or one or more regional advertising funds and to require
Franchisee to contribute to such funds. The purpose of any national and/or
regional fund shall be to promote the System and the WHY USA offices. Any
such fund(s) shall operate in accordance with rules and procedures specified
by WHY USA in its Manual or otherwise in writing, provided, however, that (i)
aggregate monthly contributions shall not be less than $50 or more than 10% of
Franchisee's transaction fees for the month; and (ii) any WHY USA office owned
or operated by WHY USA shall contribute to the fund(s) on the same basis as
franchisees.
5.6 Delegation of Obligations. Franchisee acknowledges and agrees that any
duty or obligation imposed on WHY USA may be performed by any designee of WHY
USA, as WHY USA may direct.
6. FEES PAID BY FRANCHISEE
6.1 Initial Franchise Fee. Franchisee agrees to pay a nonrefundable Initial
Franchise Fee as indicated in Section 23.2.
6.2 Transaction Fees. Franchisee agrees to submit reporting forms and pay
non-refundable monthly transaction fees to WHY USA in an amount equal to $95
per transaction or six percent of the revenue received from each transaction,
whichever is less. All payments required by this Section 6 shall be paid by
the tenth day of each month, calculated on revenues received from transactions
in the preceding month, and shall be submitted to WHY USA, together with any
reports or statements required under this Agreement. Any payment or report
not actually received by WHY USA on or before such date shall be deemed
overdue. WHY USA shall have the right to require that payments be made by
means of electronic fund transfer, pre-authorized auto-draft, or such other
means as WHY USA may specify. If any payment under this Agreement is overdue,
Franchisee shall pay to WHY USA, immediately upon demand, in addition to the
overdue amount, interest on such amount from the date it was due until paid,
at the rate of 18% per annum, calculated monthly, or the maximum rate
permitted by law, whichever is greater, plus a one-time late charge of $50.00.
Entitlement to such interest shall be in addition to any other remedies WHY
USA may have. Franchisee shall not be entitled to setoff any payments
required to be made under this Section 6 against any monetary claim it may
have against WHY USA. Where Franchisee allows its account with WHY USA to
fall in arrears in excess of 60 days they will remit the required transaction
fees and reporting forms on a weekly basis until such time as WHY USA provides
written approval to return to the monthly transaction fees schedules. A
transaction is defined as including any of the following:
(i). a commission received upon any closing as listing agency;
(ii). a commission received upon any closing as selling agency;
(iii). a referral fee received;
(iv). a retainer or advance fee received from a prospective seller or
buyer of real estate. If franchisee pays a transaction fee upon receipt of an
advance fee, said amount may be deducted from the 'final' transaction fee paid
upon the closing of the related transaction;
(v). Franchisee shall pay a 1 1/2 % transaction fee on commission received
on the sale of all non-residential property.
Franchisee agrees to pay a minimum of $325 in fees each month. Said monthly
minimum shall commence at the beginning of the fourth (4th) full month of
operation following the date of this Franchise Agreement.
6.3 Transfer Fee. Upon the approved transfer of the Real Estate Franchise,
Franchisee agrees to pay WHY USA a nonrefundable Transfer Fee of $2,500.
7. OTHER OBLIGATIONS OF FRANCHISEE
7.1 Startup Obligations. Prior to commencing business and utilizing the WHY
USA Trademarks or the System, Franchisee must complete the Initial Franchise
Training Seminar and thoroughly study the manuals and video training tapes to
the reasonable satisfaction of WHY USA.
7.2 Continuing Obligations. Franchisee, at its expense, agrees to:
7.2.1 Operate the Franchise continuously in accordance with reasonable
standards of WHY USA as may be modified from time to time and in accordance
with all applicable laws;
7.2.2 Assist WHY USA in the protection of its Trademarks and implement
substitute marks or changes to the marks at Franchisee's expense within a
reasonable period (not to exceed one year);
7.2.3 Include the WHY USA logo, 990 Sells Homes logo and the slogan
"INDEPENDENTLY OWNED AND OPERATED" on promotional materials, including signs,
billboards, Internet sites, and other materials used to promote the
franchisee;
7.2.4 At its expense, Franchisee must purchase or lease, and thereafter
maintain, computer hardware, software and firmware, dedicated telephone and
power lines, modem(s), printer(s), and other computer-related accessories or
peripheral equipment specified by WHY USA. Franchisee's computer system must
have Internet access capability. WHY USA will have the unlimited right to
access, retrieve, and use all data and information from Franchisee's computer
system relating to the parties' rights and obligations under this Agreement.
Franchisee must keep its computer system in good repair, and at its expense,
must promptly install additions, changes, modifications, substitutions, and/or
replacements to the computer hardware, software, firmware, telephone and power
lines, and other computer-related facilities, as requested by WHY USA;
provided, however, that Franchisee shall not be required to spend more than
$2,500 on hardware and software modifications. Franchisee shall not create or
maintain any "Web page" or other similar Internet presence in connection with
the WHY USA business contemplated herein without WHY USA's prior written
consent as to use and content.
7.2.5 Act as or designate and maintain a licensed real estate broker for the
Franchise Office;
7.2.6 Make an independent determination that any marketing, advertising or
other materials provided by WHY USA to Franchisee comply with applicable laws,
rules and regulations before utilizing same;
7.2.7 Maintain and report listings sold, sales and financial information as
reasonably prescribed by WHY USA;
7.2.8 Permit WHY USA to inspect Franchisee's business premises and business
records upon reasonable notice. WHY USA shall also have the right to audit
Franchisees books and records for the purpose of determining amounts due WHY
USA under this Agreement. Franchisee shall pay costs of the audit if the
audit establishes a 10% or more underpayment of fees due; however, the cost of
the audit shall not exceed Five Hundred Dollars ($500).
7.2.9 Secure and maintain at its expense, comprehensive public liability
insurance, covering all of the actions which are subject to Franchisee's
indemnification obligation set forth in Section 22.4 of this Agreement.
Coverage will be in the minimum amount of $500,000 bodily injury liability and
$100,000 property damage liability. WHY USA shall be designated as an
additional named insured. In addition, Franchisee shall furnish WHY USA with
all Certificates of Insurance evidencing the proper types and minimum amounts
of required coverage. All Certificates shall expressly provide that no less
than 30 days' prior written notice shall be given to WHY USA in the event of
material alteration to or cancellation or nonrenewal of the coverages
evidenced by such Certificates. Certificates shall name WHY USA as an
additional insured, and shall expressly provide that any interest of WHY USA
shall not be affected by any breach by Franchisee of any policy provisions for
which such Certificates evidence coverage.
7.2.10 WHY USA shall have the right to appoint approved suppliers and/or
establish minimum specifications for suppliers, materials and services used by
WHY USA offices. Franchisee's purchases shall be in accordance with any
approved suppliers or minimum specifications.
8. TRADE SECRETS AND CONFIDENTIALITY
8.1 Proprietary Nature of System. Franchisee acknowledges that WHY USA has
expended considerable time and monies in the development and refinement of a
unique, proprietary and confidential System.
8.2 Confidentiality. Franchisee acknowledges that all information delivered
to Franchisee by WHY USA, except information specifically designed to be
promoted to the public, constitutes proprietary and confidential information
and Franchisee agrees not to disclose such information except as authorized by
WHY USA.
8.3 Property of WHY USA. Franchisee acknowledges that the Trademarks,
System, and other information or property provided to Franchisee by WHY USA
are the exclusive property of WHY USA and that Franchisee acquires no interest
therein, except for Franchisee's right to use same in the manner prescribed by
WHY USA. Franchisee agrees to use the marks, copyrighted materials and WHY
USA System, only as set forth in the Franchise Agreement and the Manual as it
may be updated and modified from time to time. Franchisee further agrees that
it will not contest WHY USA's ownership, title, right or interest in and to
the Trademarks, nor WHY USA's right to register, use or license others to use
the Trademarks, nor do anything which would jeopardize or diminish WHY USA's
right to or the value of the Trademarks.
9. REPRESENTATIONS BY FRANCHISEE
Franchisee represents to WHY USA that the following statements are accurate:
9.1 Disclosure. Franchisee received a copy of the WHY USA Franchise Offering
Circular and all attachments thereto, including the Franchise Agreement, at
the earlier of: (1) the first personal meeting between Franchisee and any
representative of WHY USA; (2) ten business days before the signing of any
Franchise or related agreement, including the Franchise Agreement; and (3) ten
business days before payment of any consideration in connection with the sale
of the Franchise. Franchisee received a copy of this Franchise Agreement,
containing all material terms and any amendments thereto, at least five
business days prior to signing the same.
9.2 Earnings. Franchisee acknowledges that neither WHY USA nor anyone of its
employees or agents has made any representations or statements regarding the
past, current or projected revenue, profits or expected earnings of
franchisee's WHY USA business or any other WHY USA-owned or franchised
business. Franchisee acknowledges that the success of the franchise is
dependent upon the personal efforts of franchisee and market forces, and that
WHY USA has no control over these factors.
10. TERMINATION OF AGREEMENT
This Franchise Agreement and the Franchise, in addition to being terminated by
expiration of the term, may be terminated only as follows:
10.1 Mutual Consent. Upon the mutual written consent of the Parties.
10.2 Termination After Fifteen (15) Days Notice. WHY USA may suspend ongoing
services and/or terminate the Franchise Agreement fifteen (15) days after
sending by certified mail to Franchisee written notice specifying Franchisee's
default of any material provision(s) of this Franchise Agreement, if one or
more of those defaults remain uncured at the end of the fifteen day period.
Among the acts constituting a default of a material provision is the failure
to make any payment due under this Agreement or any ancillary agreement (such
as, for example, a Promissory Note) at the time such payment is due.
10.3 Immediate Termination. WHY USA may terminate the Franchise Agreement
and the Franchise without advance notice, without refund of any Fees and
without being deemed to have elected its remedies for any of the following
reasons:
(a) Franchisee is adjudicated a bankrupt or becomes insolvent;
(b) Franchisee is convicted of or pleads guilty or nolo contendre to any
felony or criminal misconduct relevant to the operation of a real estate
business.
(c) Franchisee makes any material misrepresentation or omission in this
Franchise Agreement or on its application for the Franchise.
(d) Franchisee breaches any provision of the Covenant Not to Compete, Section
11, or the Confidentiality provision, Section 8.2.
(e) Franchisee fails on three or more occasions during any twelve month
period to timely submit reports or payments as required herein.
(f) Franchisee abandons or closes the business.
10.4 Procedures After Expiration or Termination. Upon expiration or
termination of this Franchise Agreement, the Franchise granted herein will
automatically terminate and revert back to WHY USA and Franchisee will cease
to be a Franchisee of WHY USA. All money owed by Franchisee to WHY USA or its
designees, including Fees and the balance of promissory notes, if any, shall
become immediately due and payable and Franchisee will at its own cost and
expense:
(a) Discontinue use of the System, the Trademarks and similar names or marks
indicating that Franchisee is or was a Franchisee.
(b) Return to WHY USA all training and education materials, customer lists,
manuals, forms, brochures or any other information on hand which contain WHY
USA's Trademarks or which are part of the System and immediately delete and
disconnect any Web-sites whose creation and presence may have been permitted
under Section 7.2.4.
(a) Promptly pay all sums owing from Franchisee to WHY USA or its designees.
(b) Maintain books and records required by WHY USA pursuant to this
Agreement for a period of one (1) year and allow WHY USA to inspect and audit
such books and records upon reasonable notice during such period for the
purposes of verifying amounts payable to WHY USA by Franchisee.
(c) Abide by all provisions of the Covenant Not to Compete, Trade Secrets and
confidentiality Sections of this Agreement and by all other terms which
survive the termination or expiration hereof.
(d) Immediately take such actions as may be required to cancel all assumed
names or equivalent registrations relating to the use of any name or Trademark
of WHY USA.
(e) Comply with all obligations to clients under existing listing agreements.
10.5 Limited Power of Attorney. Franchisee irrevocably appoints WHY USA as
its attorney-in-fact, to take all actions necessary to cause Franchisee to
cease using WHY USA trademarks. Franchisee agrees that the terms and
conditions of Sections 10.4 and 10.5 will survive any termination or
expiration of this Agreement.
10.6 Injunctive Relief. Franchisee acknowledges that if Franchisee breaches
this Agreement or continues to utilize the System or Trademarks at such times
when Franchisee is not legally entitled to use them or breaches the provisions
of the Covenant Not to Compete as set forth in Section 11, WHY USA may have no
adequate remedy at law. Therefore, Franchisee expressly agrees that WHY USA
may, in addition to other available remedies, obtain an injunction or
temporary restraining order to prevent the continuation of any existing
default of this Franchise Agreement.
11. COVENANT NOT TO COMPETE
Franchisee shall not directly or indirectly have any legal or financial
interest in or association with, or provide any assistance to, any other
residential real estate brokerage business during the term of this Agreement,
without the prior written consent of WHY USA, Inc. For two years following
the date of the expiration or termination of this Agreement, Franchisee shall
not directly or indirectly have any legal or financial interest in or
association with, or provide any assistance to, any business which copies or
imitates the names, method or discount plan of WHY USA, its fee structure or
the System.
12. SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF FRANCHISE
Upon payment of the Transfer Fee of $2,500 and any other financial obligations
to WHY USA, Franchisee may sell the Franchise to a qualified Franchisee after
receiving WHY USA's prior written approval, which approval shall not be
unreasonably withheld; provided that: the transferee signs WHY USA's current
form of Franchise Agreement and assumes all obligations of Franchisee;
Franchisee is not in default and is current in all monies due WHY USA; and the
transferee meets WHY USA's criteria for new Franchisees. Upon the sale,
assignment or transfer of the Franchise Agreement, Franchisee will cease to be
a Franchisee of WHY USA. In lieu of approving a transfer, WHY USA shall have
the right to acquire the interest being transferred by Franchisee, under
reasonably similar terms and in accordance with procedures set forth in the
Manual.
13. SALE, ASSIGNMENT OR TRANSFER OF THIS AGREEMENT BY WHY USA
WHY USA shall have the right to transfer or assign all or any part of its
rights or obligations under this Agreement to any person or legal entity.
With respect to any assignment which results in the subsequent performance by
the assignee of all of WHY USA's obligations under this Agreement, the
assignee shall expressly assume and agree to perform such obligations, and
shall become solely responsible for all obligations of WHY USA under this
Agreement from the date of assignment. In addition, and without limitation to
the foregoing, Franchisee expressly affirms and agrees that WHY USA may sell
its assets, its Trademarks, or its System; may sell its securities in a public
offering or in a private placement; may merge, acquire other corporations, or
be acquired by another corporation; and may undertake a refinancing,
recapitalization, leveraged buy-out, or other economic or financial
restructuring.
14. COVENANTS FROM INDIVIDUALS
Franchisee shall obtain and furnish to WHY USA executed covenants from all
officers and directors; and any employee or other individual associated with
Franchisee who may have access to any confidential information regarding the
WHY USA business, that such individuals shall comply with and be personally
bound by the covenants applicable to Franchisee concerning confidentiality and
non-competition, as set forth in Sections 8.2 and 11. Every covenant required
by this Section 14 shall be on a form provided by WHY USA, which form shall,
among other things, designate WHY USA as a third party beneficiary of such
covenants with the independent right to enforce them.
15. INTEGRATION/MODIFICATION
This Franchise Agreement shall constitute the entire agreement between the
Parties, supersede any prior understandings and may not be modified or amended
other than by mutual written agreement of the Parties. In the event of a
conflict between provisions in the Franchise Agreement and the Offering
Circular, the terms of the Franchise Agreement shall prevail.
16. WAIVER
No delay, waiver, omission, or forbearance on the part of WHY USA to exercise
any right, option, duty, or power arising out of any breach or default by
Franchisee, or by any other franchisee, of any of the terms, provisions, or
covenants thereof, and no custom or practice by the parties at variance with
the terms hereof, shall constitute a waiver by WHY USA to enforce any such
right, option, or power as against Franchisee, or as to a subsequent breach or
default by Franchisee. Subsequent acceptance by WHY USA of any payments due
to it hereunder shall not be deemed to be a waiver by WHY USA of any preceding
or succeeding breach by Franchisee of any terms, covenants, or conditions of
this Agreement.
17. DISPUTE RESOLUTION
17.1 Choice of Law. This Agreement shall be construed according to the laws
of the State of Wisconsin without giving effect to the choice of law
provisions thereof.
17.2 Arbitration. Any dispute or claim between the Parties and/or their
employees and agents, relating in any way to this Agreement or the franchise
relationship, shall be submitted to arbitration in accordance with the rules
of the American Arbitration Association ("AAA"). If such rules are in any way
contrary to or in conflict with this Agreement, the terms of this Agreement
shall control and the law of the State of Wisconsin shall govern the
construction and interpretation of this Agreement in arbitration. Any award,
decision or judgment from such arbitration shall be binding upon the Parties.
Any arbitration shall take place in Dunn County, Wisconsin and shall be
subject to the jurisdiction of the Superior Court of Dunn County, Wisconsin or
the Federal District Court for Wisconsin. Each party in the arbitration shall
be obligated to pay for its respective costs and attorneys' fees, regardless
of outcome. Any arbitration proceeding shall be limited to controversies
between WHY USA and Franchisee and shall not be expanded to include any other
franchisee as a party, or include the adjudication of class action claims.
17.3 Limitations on Action. Any and all disputes or claims arising out of or
relating to this Agreement, the relationship of Franchisee and WHY USA, or
Franchisee's operation of the WHY USA office, brought by any Party against the
other, shall be commenced within two years from the occurrence of the facts
giving rise to such claim or action, or such claim or action shall be barred.
WHY USA and Franchisee hereby waive to the fullest extent permitted by law any
right to or claim of any punitive or exemplary damages against the other and
agree that in the event of a dispute between them, each shall be limited to
the recovery of any actual damages sustained by it.
18. SEVERABILITY
In the event all or part of any provision of this Franchise Agreement is
declared invalid or unenforceable, said provision or part thereof will be
deemed modified to the extent necessary to make it valid and enforceable, or
if it cannot be so modified, then severed. The remainder of the Agreement
will continue in full force and effect, provided, however, that if any part of
this Agreement relating to payments to WHY USA is declared unenforceable or
invalid, then WHY USA may terminate this Agreement upon written notice to
Franchisee.
19. NOTICES
Any and all notices furnished pursuant to this Agreement shall be in writing
and shall be personally delivered, sent by telecopier, or dispatched by
overnight delivery envelope to the respective parties at the following
addresses, unless and until a different address has been designated by written
notice to the other party:
Notices to WHY USA: WHY USA North America, Inc.
2110 US Highway 12
Menomonie, Wisconsin 54751
Notices to Franchisee: __________________________________
__________________________________
__________________________________
Notices shall be deemed to have been received as follows: by personal
delivery or telecopier -- at time of delivery; by overnight delivery service
- -- on the first business day following the date on which the Notice was given
to the overnight delivery service. Notices furnished by telecopier shall be
confirmed by overnight delivery service.
20. BINDING ON SUCCESSORS
This Agreement is binding upon and will inure to the benefit of the Parties,
their heirs, successors and assigns.
21. INFORMATION
Franchisee agrees that information provided by and data, suggestions, forms,
sales tools, etc., developed by Franchisee may be used, reprinted and
published by WHY USA without compensation to Franchisee.
22. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
22.1 It is understood and agreed by the parties hereto that this Agreement
does not create a fiduciary relationship between them; that Franchisee shall
be an independent contractor; and, that nothing in this Agreement is intended
to constitute either party an agent, legal representative, subsidiary, joint
venturer, partner, employee, or servant of the other for any purpose
whatsoever.
22.2 At all times during the term of this Agreement and any extensions
hereof, Franchisee shall hold itself out to the public as an independent
contractor operating the business pursuant to a franchise from WHY USA.
Franchisee agrees to take such action as may be necessary to do so, including,
without limitation, exhibiting a notice of that fact in a conspicuous place at
the Office Location, the content of which WHY USA reserves the right to
specify.
22.3 It is understood and agreed that nothing in this Agreement authorizes
Franchisee to make any contract, agreement, warranty, or representation on WHY
USA's behalf, or to incur any debt or other obligation in WHY USA's name; and
that WHY USA shall in no event assume liability for, or be deemed liable
hereunder as a result of, any such action; nor shall WHY USA be liable by
reason of any act or omission of Franchisee in its conduct of WHY USA's real
estate franchise or for any claim or judgment arising therefrom against
Franchisee or WHY USA.
22.4 Franchisee shall indemnify and hold WHY USA, WHY USA's owners and
affiliates, and their respective officers, directors, employees, and agents
harmless against any and all claims arising directly or indirectly from, as a
result of, or in connection with Franchisee's operation of its WHY USA real
estate franchise, as well as the costs, including attorneys' fees, of
defending against them.
23. ELECTIVE PROVISIONS
23.1 Franchisee's Legal Name:
Franchisee is an individual (__), a partnership (___, or corporation (___).
Mailing Address: _____________________________________________________
_____________________________________________________
Home Address : _____________________________________________________
_____________________________________________________
Home Phone Number: ___________________________________________________
SHAREHOLDERS/PARTNERS
NUMBER OF PERCENT
NAME ADDRESS SHARES INTEREST
- ----- --------- ---------- -----------
23.2 Initial Franchise Fee.
The Initial Franchise Fee shall be $_______________________.
23.3 Other Provisions.
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
23.4 Protected Area.
Franchisee's Protected Area shall be the following geographic territory:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
The sole protection granted by the Protected Area is WHY USA's agreement not
to establish or franchise anyone else to establish a WHY USA office within the
Protected Area for the purpose of conducting the business contemplated by the
Franchise Agreement.
24. APPROVAL AND GUARANTEE OF SHAREHOLDERS OR PARTNERS
If Franchisee is a corporation or partnership, all shareholders/partners of
the Franchisee hereby guarantee the performance of franchisee under this
agreement.
_________________________________
Guarantor Signature (Personally) Interest in Franchisee:
_________________________________
Guarantor (Spouse Personally)
_________________________________
Guarantor Signature (Personally) Interest in Franchisee:
_________________________________
Guarantor (Spouse Personally)
IN WITNESS WHEREOF, the Parties have executed this Real Estate Franchise
Agreement.
WHY USA NORTH AMERICA, INC. FRANCHISEE
By:_____________________________ By:__________________________
Its:____________________________ Its:_________________________
Date:____________________________ Date: ________________________
SUBLEASE
from
METATEC INTERNATIONAL CORP.
to
WHY USA NORTH AMERICA, INC.
Northlake Building, Highway 12 West, Menomonie, Wisconsin
January 31, 2000
SUBLEASE
This sublease is made on Feb. 01, 2000 between Metatec International
Corp., an Ohio corporation, with a principle office at 7001 Metatec Boulevard,
Dublin, Ohio 43017 ("Sublessor"), and WHY USA North America Inc., a(n) real
estate brokerage and telemarketing firm,Whose address is 1421 N. Broadway,
Suite 108, Menomonie, Wisconsin 54751 ("Sublessee"), who hereby agree as
follows:
<PAGE> 1
Section 1. Sublease of Premises. On the terms and subject to the
conditions described in this agreement, Sublessor hereby subleases to
Sublessee, and Sublessee hereby subleases from Sublessor the approximate 6,000
square feet of space, as outlined on the attached Exhibit A (the "Premises"),
located in the building known as the Northlake Building on Highway 12 West,
City of Menomonie, County of Dunn, State of Wisconsin, together with the
appurtenances thereto.
Sublessor leases the Building pursuant to that certain lease (the "Base
Lease") dated is of September 24, 1998, between Sublessor "Tenant", and
Douglas A. Larson, as "Landlord," a copy of which is attached hereto as
Exhibit B. Tenant acknowledges that all provisions of this sublease are
subject to the provisions of the Base Lease. Except as expressly provided in
this sublease, Subleasee shall comply with all terms and conditions of the
Base Lease as if Subleasee were the tenant under such Base Lease and Sublessor
were the landlord.
Section 2. Term. The term of this sublease shall commence on Feb 1, 2000
(the "Commencement Date") and shall continue in accordance with the term of
the Base Lease; provided, however, that Sublessor shall reserve the right
under Section 17 of the Base Lease to exercise its option to terminate the
Base Lease early, in which event this sublease shall so terminate.
Section 3. Rent. The annual rent payable by Sublessee to Sublessor shall
be $30,000, payable in equal monthly installments in the amount of $2,500, in
advance, on the first day of every month, commencing on the Commencement Date,
at the address of Sublessor set forth above or at such other place as
Sublessor may designate by notice to Sublessee from time to time. If the
Commencement Date is not the first day of a calendar month, Sublessee's rent
for the first and last months of the term shall be prorated on a daily basis.
In the event that rent is not paid by the first day of every month, Sublessee
shall be charged a late charge in the amount of $125.
Section 4. Security Deposit. Upon execution of this sublease, Sublessee
has deposited with Sublessor the sum of $2,500, as a security deposit, receipt
of which is hereby acknowledged by Sublessor. Such security deposit shall be
held by Sublessor, without liability for interest, as security for the
faithful performance by Sublessee of all the terms, covenants, and conditions
of this sublease to be kept and performed by Sublessee. If at any time during
the term of this sublease any of the rent herein reserved shall be overdue and
unpaid, or any other sum payable by Sublessee to Sublessor hereunder shall be
overdue and unpaid, then Sublessor may, at the its option, appropriate and
apply any portion of such security deposit to the payment of any such overdue
rent or other sum and require Sublessee to pay to Sublessor the amount so
applied so that the security deposit will at all times be in the amount set
forth above.
Section 5. Use of Premises. Sublessee shall use the Premises for Real
estate and Telemarketing and uses incidental thereto, and shall not permit the
Premises to be used for any other purpose without first obtaining Sublessor's
express written consent to that specific use. Sublessee shall occupy and use
the Premises only in a careful, safe, and proper manner and shall not commit
or permit any waste of or on the Premises.
<PAGE> 2
Section 6. Condition of Premises. Sublessor has made no representation or
warranty, express or implied, with respect to the condition of the Premises or
the fitness of the Premises for any particular use. Sublessee acknowledges
that it has fully investigated and is familiar with the size, dimensions, and
physical condition of the Premises and is accepting the Premises "as is".
Sublessor shall not be obligated to perform any work on the Premises in order
to make them suitable for Sublessee's use.
Section 7. Indemnification. Sublessee shall indemnify and save harmless
Sublessor from and against any and all claims, liabilities, losses, damages,
injuries, costs, and expenses that hereafter may occur or arise from or out
of: (a) any failure by Sublessee to make any payment to be made by Sublessee
hereunder or fully to perform or observe any obligation or condition to be
performed or observed by Sublessee hereunder, (b) any cause whatsoever in,
about, or relating to the Premises during the term of this sublease, however
or by whomever caused, including without limitation any use, misuse,
possession, occupancy, or unoccupancy of the Premises by anyone during, the
term of this sublease, or any failure by Sublessee to perform and observe all
obligations and conditions to be performed and observed by it under this
sublease, or the condition of the Premises, and (c) any costs or expenses,
incurred or paid by Sublessor in connection with the foregoing, including
reasonable attorneys' fees and other costs and expenses in prosecuting or
defending any of the foregoing whether litigated or unlitigated.
Section 8. Cumulative Rights and Remedies. Each right or remedy of
Sublessor under this agreement or now or hereafter available to Sublessor by
statute, at law, in equity, or otherwise shall be cumulative and concurrent
and shall be in addition to every other such right or remedy, and neither the
existence, availability, nor exercise of any one or more of such rights or
remedies shall preclude or otherwise affect the simultaneous, or later
exercise by Sublessor of any or all such other rights or remedies.
Section 9. Survival of Obligations. No termination of this sublease and
no repossession of the Premises or any part thereof shall relieve Sublessee of
its liabilities and obligations hereunder all of which shall survive such
termination or repossession.
Section 10. Assignment or Sublease. Sublessee shall neither assign this
sublease nor sublease all or any part of the Premises without first obtaining
Sublessor's express written consent to such assignment or sublease.
Section 11. Sublessor's Access. Sublessor and its designees shall have
the right to enter the Premises at any reasonable times for the purposes of
inspecting the Premises or performing any work which the Sublessor elects to
undertake. Nothing herein shall imply any duty upon Sublessor to do any such
work which under any provision of this sublease Sublessee is required to
perform, and the performance thereof by Sublessor shall not constitute a
waiver of Sublessee's default.
Section 12. Notices. Any notice or request required or desired to be
given to either party shall be in writing and shall be deemed given when
delivered personally to that party's address set
<PAGE> 3
forth at the beginning of this sublease or when deposited in the United States
mail, postage prepaid, addressed to that party at that address or, in either
case, at such other address as that party may theretofore have designated in
notice to the party giving notice.
Section 13. Complete Agreement. This document (with its exhibits, which
are hereby incorporated herein by reference) contains the entire agreement
between the parties and supersedes any prior discussions representations,
warranties, or agreements between them respecting the subject matter. No
changes, alterations, modifications, additions, or qualifications to this
agreement shall be made or be binding unless made in writing and signed by
each of the parties.
Section 14. Counterparts. This agreement may be executed in several
counterparts, and each executed counterpart shall be considered as an original
of this agreement.
Section 15. Brokers. The parties to this sublease acknowledge that no
broker has been involved with the transaction contemplated by this sublease
except for <space left blank> and that each of the parties shall be
responsible for paying all commissions and fees due to any broker engaged by
either of the parties.
Section 16. Phone System. Sublessee has agreed to purchase from Sublessor
the phone system and office furniture that Sublessor has had installed in the
Premises for a purchase price of $22,000, due and payable in cash or other
funds readily convertible to cash upon the signing of this lease. Sublessor
shall deliver to Sublessee a bill of sale evidencing such purchase in form
mutually acceptable to Sublessor and Sublesee. At the expiration of this
sublease, Sublessee shall remove the phone system from the Premises and shall
be responsible to restore the Premises to the condition they were in
immediately prior to such removal.
Section 17. Consent by Landlord. This sublease shall not be effective
until it is consented to by the Landlord under the Base Lease, and a copy of
such consent shall be attached to this sublease.
METATEC INTERNATI0NAL CORP.
By/s/Barbara Derrow 2/1/2000
WHY USA NORTH AMERICA, INC
By/s/ Don Riesterer 2-16-2000
<PAGE> 4
PROMISSORY NOTE
$500,000.00 December 30, 1999
FOR VALUE RECEIVED, the undersigned, Donald Riesterer, (hereinafter
"Borrower"), (if more than one, then jointly and severally), as maker promises
to pay to the order of Dave Thomas, Emil A. Gluck, and Douglas A. Larson and
their successor (hereinafter the "Lender"), or order at 1421 North
Broadway, Suite 108, Menomonie, Wisconsin, 54751, or at any other place
designated by the holder hereof, in lawful money of the United States of
America, the principal sum of Five Hundred Thousand dollars and 00/100
($500,000.00 ) together with interest at a rate of eight and 3/4 (8.75%)
percent annum on the principal balance outstanding from time to time
hereunder.
EVERY MONTH payments consisting of interest only in the amount of
interest only in the amount of Three Thousand Six Hundred Forty-five & 84
cents Dollars ($3645.84) each shall be made commencing on January 31, 2000 and
on intervals of every month thereafter until December 31, 2000, at which time
the principal balance, shall be paid in full. Interest shall be calculated
from the date hereon.
The Lender acknowledges that as additional incentive to lend, Borrower
shall escrow 1,000,000 shares of WHY USA Financial Group, Inc, common stock as
collateral for this loan. These shares shall be escrowed for the term of this
loan and shall be sold in sufficient amounts to pay the loan at the end of the
term upon the default of Borrower. During the term of this loan Borrower shall
have the option, at his sole discretion, to instruct that the shares be sold
in sufficient amounts as necessary to prepay the principal balance of the loan
and any interest then due. Any unsold shares shall be released to Borrower
after repayment of the loan.
This Promissory Note may be prepaid, in full or in part (but if is part,
in multiples of no less than $100.00), at any time, or from time to time
hereafter, without premium or penalty. Interest shall be computed on the
unpaid principal balance at the end of each day as follows: The rate of
interest shall be divided by 365 and the unpaid principal balance of this Note
shall be multiplied by the percentage so obtained. Payments hereunder shall be
applied first to accrued but unpaid interest and the excess, if any, to the
principal.
This Promissory Note is secured by the escrowed shares of WHY USA
Financial Group, Inc. stock, that shall be escrowed as stated above.
In the event of any default in the terms hereof or the payment of any
principal when due hereunder, then the entire unpaid principal balance of this
Promissory Note shall, at the option of the holder hereof, become immediately
due and payable, in full, without presentment or other notice or demand of any
kind. Failure to exercise such option, however often, shall not constitute a
waiver of the right to exercise it thereafter.
The following events shall constitute a default:
1.) The apparent insolvency of the Borrower;
2.) Appointment of a Receiver for Borrower's property and business
operations;
3.) The commencement of bankruptcy proceedings, voluntary or involuntary by
or on behalf of the Borrower;
<PAGE>
4.) The failure to timely make payments as set forth herein;
5.) Failure to timely make payments for merchandise received on credit from
Lender;
6.) The sale of all or substantially all of Borrower's assets;
7.) A default as defined by documents executed concurrently herewith; and
8.) The failure to abide by any of the terms set forth herein.
The Borrower agrees to pay all costs of collection, including reasonable
attorney's fees and expenses, incurred by the holder hereof at any times in
the event this Promissory Note is not duly paid or a default exists. The
Borrower agrees to submit to the jurisdiction of the Hennepin County District
Court, State of Minnesota, in the event a dispute arises herein. The holder's
rights or remedies hereunder shall be cumulative and in addition to other
remedies which may be available at law.
In the event any provision(s) herein becomes enforceable as a matter of
law, said provision(s) shall be stricken and the remaining provisions shall be
valid and enforceable.
Presentment or other demand for payment, notice of dishonor and protest
are hereby expressly waived.
This Promissory Note shall be governed by the laws of the State of Minnesota.
BORROWER
/s/ Donald Riesterer /s/ signature illegible
Donald Riesterer (Witness)
<PAGE>
PROMISSORY NOTE
$850,000.00 December 30, 1999
FOR VALUE RECEIVED, the undersigned, Donald Riesterer, (herinafter
"Borrower"), (if more than one, then jointly and severally), as maker promises
to pay to the order of Dave Thomas, Emil A. Gluck, and Douglas A. Larson and
their successor (herinafter the "Lender"), or order at 1421 North Broadway,
Suite 108, Menomonie, Wisconsin, 54751, or at any other place designated by
the holder hereof, in lawful money of the United States of America, the
principal sum of Eight Hundred Fifty Thousand dollars and 00/100 ($850,000.00)
together with interest rate of Eight and three quarters percent (8.75 %) per
annum on the principal balance outstanding from time to time hereunder.
EVERY MONTH payments consisting of interest only in the amount of Six
Thousand One Hundred Ninety Seven dollars and 92/100 ($6,197.92) each shall be
made commencing on January 31, 2000 and on intervals of every month thereafter
until December 31, 2000, at which time the principal balance shall be paid in
full. Interest shall be calculated from the date hereon.
The lender acknowledges that certain shares of stock were given by
Borrower as an additional incentive to lend. A further condition of this note
shall be that the principal balance of $850,000 shall be forgiven if, at any
time during the one year term herein, the bid price for the stock averages
$ 1.00 for a 4 week period and a buyer is available for the 850,000 shares
referenced herein.
This Promissory Note may be prepaid, in full or in part (but if is part,
in multiples of no less than ($100.00), at any time, or from time to time
hereafter, without premium or penalty. Interest shall be computed on the
unpaid principal balance at the end of each day as follows: The rate of
interest shall be divided by 365 and the unpaid principal balance of the Note
shall be multiplied by the percentage so obtained. Payments hereunder shall be
applied first to accrued by unpaid interest and the excess, if any, to the
principal.
This Promissory Note is secured by a mortgage of even date in property
commonly described as 1800 and 1802 Wooddale Drive, Woodbury, Minnesota
In the event of any default in the terms hereof or the payment of any
principal when due hereunder, then the entire unpaid principal balance of this
Promissory Note shall, at the option of the holder hereof, become immediately
due and payable, in full, without presentment or other notice or demand of any
kind. Failure to exercise such option, however often, shall not constitute a
waiver of the right to exercise it thereafter.
The following events shall constitute a default:
1.) The apparent insolvency of the Borrower;
2.) Appointment of a Receiver for Borrower's property and business operations;
3.) The commencement of bankruptcy proceedings, voluntary or involuntary by or
on behalf of the Borrower;
4.) The failure to timely make payments set forth herein;
5.) Failure to timely make payments for merchandise received on credit from
lender;
6.) The sale of all or substantially all of Borrower's assets;
7.) A default as defined by documents executed concurrently herewith; and
8.) The failure to abide by any of the terms set forth herein.
<PAGE>
The Borrower agrees to pay all cost of collection, including reasonable
attorney's fees and legal expenses, incurred by the holder hereof at any time
in the event this Promissory Note is not duly paid or a default exists. The
Borrower agrees to submit to the jurisdiction of the Hennepin County District
Court, State of Minnesota, in the event a dispute arises herein. The holder's
rights or remedies hereunder shall be cumulative and in addition to other
remedies which may be available at law.
In the event any provision(s) herein becomes enforceable as a matter of
law, said provision(s) shall be stricken and the remaining provisions shall be
valid and enforceable.
Presentment or other demand for payment, notice of dishonor and protest
are hereby expressly waived.
This Promissory Note shall be governed by the laws of the State Minnesota.
BORROWER
/s/Donald Riesterer /s/signature illegible
Donald Riesterer (Witness)
/s/William R. Rieser
(Witness)
GUARANTY
Northwest Financial Group, Inc., through the undersigned officer, does hereby
guaranty payment of the above debt and pledges its assets, as described in
that Mortgage of even date, toward full payment thereon.
Northwest Financial Group, Inc.
/s/Donald Riesterer
Donald Riesterer, President
<PAGE>
Subsidiaries
Name Domicile Formation date
- ---- --------- ---------------
WHY USA North America, Inc. Wisconsin July 1, 1998
Northwest Financial, Ltd. Minnesota October 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 35,617
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,617
<PP&E> 14,572
<DEPRECIATION> (4,863)
<TOTAL-ASSETS> 2,089,134
<CURRENT-LIABILITIES> 53,720
<BONDS> 0
0
0
<COMMON> 31,400
<OTHER-SE> 2,004,014
<TOTAL-LIABILITY-AND-EQUITY> 2,089,134
<SALES> 924,835
<TOTAL-REVENUES> 924,835
<CGS> 441,280
<TOTAL-COSTS> 482,099
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,797
<INCOME-PRETAX> 1,456
<INCOME-TAX> 600
<INCOME-CONTINUING> 856
<DISCONTINUED> 9,372
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,288
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
