Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF EARLIEST REPORTED EVENT - APRIL 5, 1999
FAB GLOBAL, INC.
(Exact name of Registrant as specified in its charter)
Georgia 0-15900 #59-3461241
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification Number)
50 Broadway, 14th floor
New York, New York 10004
(Address of Registrant's principal executive offices)
(212) 785-5000
(Registrant's telephone number, including area code)
(212) 785-3232
(Registrant's facsimile number, including area code)
1612 OSCEOLA
CLEARWATER, FLORIDA
(Former name or former address, if changed since last report)
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INTRODUCTORY NOTE
Unless otherwise indicated, all information in this Current Report on Form
8-K (the "Report") has been adjusted to reflect a 1-for-18 reverse stock split
effected April 2, 1999 and a business combination that closed on April 5, 1999.
References to "Marci" refer to the company before the business combination and
references to "FAB Global," the "Company," "we," "us" and "our" refer to FAB
Global, Inc. and its subsidiaries after the combination.
Our quarterly and annual operating results will be affected by a wide
variety of factors that could materially and adversely affect our actual
results. These factors include, but are not limited to:
(1) Changes in general economic and market conditions; (2) Fluctuations in the
U.S. and foreign securities markets; (3) Changes in interest rates and the
demand for investment services; (4) Changes in the nature of our business
resulting from the introduction of
new products and services;
(5) Competition from other firms who offer competitive services or lower
commission rates;
(6) General declines in the market for venture capital and emerging company
investments;
(7) Changes in regulatory requirements; and (8) Risks related to the year 2000.
As a result of these factors and others, our future operating results may
fluctuate on a quarterly or annual basis. Such fluctuations could materially and
adversely affect our business, financial condition, operating results, and stock
price.
This report and other documents that we file with the Securities and
Exchange Commission (the "SEC") contain forward-looking statements about our
business. These forward-looking statements are subject to many risks and
uncertainties. Therefore, actual results may differ significantly from the
forward-looking statements. Except as specified in SEC regulations, we have no
duty to release information that updates the forward-looking statements
contained in this Report. An investment in our stock involves various risks,
including those mentioned above and described elsewhere in this Report.
Additional risks will be disclosed from time to time in our future SEC filings.
ITEM 1.CHANGE IN CONTROL OF REGISTRANT
General. FAB Global Inc. is a Georgia corporation formerly known as Marci
International Imports, Inc. Marci conducted an initial public offering in
February 1987 pursuant to a Form S-18 Registration Statement under the
Securities Act of 1933 (the "Securities Act"). In connection with an application
to list its Common Stock on the NASDAQ system, Marci also registered its Common
Stock pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act"). As a result of a 1989 bankruptcy proceeding, Marci became an
inactive shell that had with no material assets, liabilities or business
activities. Marci remained inactive until June 1998 when its stockholders
approved a plan of reorganization proposed by Capston Network Company of
Clearwater, Florida ("Capston"). This plan of reorganization authorized Capston
to seek a suitable business combination opportunity for Marci, authorized a
series of changes in Marci's corporate structure, and provided for stock-based
compensation to Capston and others for services rendered and to be rendered in
connection with the implementation of the plan of reorganization. Capston and
its president Sally A. Fonner, who also serves as our sole director, began
actively seeking a business combination opportunity for Marci in the summer of
1998. After investigating a number of potential opportunities for Marci, Capston
negotiated a business combination transaction (the "Transaction") with FAB
Capital Corporation, an Idaho corporation ("FAB Capital") and Western Union
Leasing Ltd., a trust organized under the laws of the United Kingdom
("Western"). Pursuant to the terms of a written reorganization agreement dated
April 5, 1999, FAB Capital agreed to transfer all of its interest in FAB
Securities of America, Inc. ("FAB Securities"), FAB Finanz- und Anlagen-
Beratung und Vermittlung GmbH ("FAB Germany"), FAB Corporate Funding, Inc. ("FAB
Corporate Funding"), FAB Capital Markets, Inc. ("FAB Capital Markets"), FAB
Futures, Inc. ("FAB Futures"), and Momentum Capital Funding Corp. ("Momentum"),
together with 775,180 shares of King's Road Entertainment, Inc. (Nasdaq: KREN),
to Marci in exchange for 10,000,000 shares of common stock. Concurrently,
Western agreed to transfer 266,418 shares of King's Road Entertainment and
500,000 shares of Metropolitan Worldwide, Inc. (OTC BB: MWWM) to Marci in
exchange for 1,400,000 shares of Common Stock. In this Report, the properties
transferred to Marci by FAB Capital and Western are sometimes referred to
collectively as the "Transaction Properties."
The Transaction. Marci acquired the Transaction Properties in a business
combination that was structured as a reverse takeover, or "RTO." In connection
with the Transaction, FAB Capital and Western Union agreed to exchange the
Transaction Properties for newly issued stock of Marci. Before the Transaction,
Marci had no material assets, liabilities or business operations. No
relationship existed between Marci and FAB Capital or Western before the
Transaction. No funds of Marci were spent to acquire the Transaction Properties.
As consideration for the Transaction Properties, Marci issued shares of Common
Stock to FAB Capital and Western. The number of shares issued by Marci in the
Transaction was determined by arms-length negotiation between the parties.
Until April 2, 1999, Marci had 5,181,085 shares of common stock ("Old
Common") issued and outstanding. In preparation for the Transaction, Marci
changed its name to FAB Global, Inc. It also effected a "reverse split" where
the Old Common was consolidated in the ratio of one post-consolidation share
("Common Stock") for every eighteen (18) shares of Old Common, provided, that no
stockholder's ownership was reduced to fewer than 100 shares of Common Stock if
that stockholder owned at least 100 shares of Old Common on April 2, 1999. In
connection with the Transaction, Marci agreed to acquire all of FAB Capital's
interest in the Transaction Properties in exchange for 10,000,000 shares of
Common Stock and all of Western's interest in the Transaction Properties in
exchange for 1,400,000 shares of Common Stock. In addition, Marci agreed to
issue 1,020,000 shares of Common Stock to certain consultants and advisors
(including 300,000 shares of Common Stock issued to persons designated by
Capston, 150,000 shares of Common Stock issued to legal counsel for the parties
and 570,000 shares of Common Stock issued to certain financial consultants). The
Transaction closed on April 5, 1999. Taking all of the stock issuances into
account, there are approximately 12,720,000 shares of Common Stock issued and
outstanding on the date of this Report. The shares of Common Stock issued to FAB
Capital and Western constitute approximately 90% of our outstanding Common
Stock.
Principal Stockholders. The following table sets forth the number of shares
of Common Stock owned, as of the date of this Report, by (i) each executive
officer and director, (ii) all executive officers and directors as a group, and
(iii) each other person who owns of record or own beneficially, more than five
percent (5%) of our outstanding Common Stock.
Name and Address of Beneficial Owner Shares Percent
Owned of Class
FAB Capital Corp. 10,000,000 78.6%
50 Broadway, 14th floor
New York, New York 10004
Western Union Leasing Corp. (1) 1,400,000 11.0%
10 Greycoat Place
1 Premier House
London SW1 England.
Christophe Martin, (1) 1,400,000 11.0%
Rothhaus Street 1
67348 Bad Hamburg Germany
Phillip G. Cook (1)(2)(3)(4) 12,000,000 90.1%
David W. Dube (2)(3) 10,000,000 89.6%
Randy M. Strausberg (2)(3) 10,000,000 89.6%
Executive Officers and Directors as a Group (4 persons) 12,000,000 90.1%
(1) Western is a trust organized under the laws of the United Kingdom.
Western's sole trustee is Christophe Martin, who disclaims any beneficial
interest in the Common Stock held by Western. Phillip G. Cook is a
reversionary beneficiary of the trust and may be deemed to be the
beneficial owner of the shares of Common Stock held by Western.
(2) c/o FAB Global, Inc., 50 Broadway, 14th floor, New York, New York 10004. (3)
Messrs. Cook, Dube and Strausberg are all directors and executive
officers of FAB Capital and may be deemed to be beneficial owners of the
shares of Common Stock held by FAB Capital.
(4) Includes presently exercisable options to purchase 600,000 shares of Common
Stock at a price of $1 per share that were granted in consideration of Mr.
Cook's agreement to reduce his cash salary to $100,000 per year until
January 1, 2000.
New Management Team. In connection with the closing of the Transaction,
Sally A. Fonner appointed six persons designated by FAB Capital and Western to
serve as executive officers of FAB Global. Our new executive officers, and the
positions held by each such executive officer are set forth below. It is
anticipated that our current executive officers will continue to serve in such
capacities for the foreseeable future.
Name Age Position
Phillip G. Cook........ 45 Chief Executive Officer
Randy M. Strausberg.... 50 Chief Operating Officer
David W. Dube.......... 43 Chief Financial Officer,
Treasurer
Steven Strauss......... 47 Controller
David Parsons.......... 46 General Counsel
Judith L. Kaufman...... 58 Secretary
Under the terms of the Transaction, FAB Capital and Western have the right
to replace the current board of directors with their own nominees. FAB Capital
and Western have nominated Phillip G. Cook, David W. Dube and Randy M.
Strausberg to serve as directors of FAB Global (the "New Directors"). The
proposed changes in our board of directors will not become effective and the New
Directors will not assume office until 10 days after we file an Information
Statement and Notice of Change in the Majority of the Board of Directors with
the SEC and send copies of the Notice to our stockholders. At that time, Sally
A. Fonner will appoint the New Directors and then resign as a director.
Thereafter, the New Directors will manage our business.
Phillip G. Cook was appointed Chief Executive Officer of our Company on
April 5, 1999. He has also been nominated to serve as a New Director. Mr.
Cook is an Australian national who has served as the president and chief
executive officer of FAB Capital since March 1998 and as a self-employed
investment banking consultant since 1986. Mr. Cook serves as chairman of the
board of directors of Essential Resources, Inc. (OTC BB: ESRS) since December
1995 and as chairman of the board of directors of King's Road Entertainment,
Inc. (Nasdaq: KREN) since November of 1998. Mr. Cook is also the licensed
principal of FAB Germany.
Randy M. Strausberg was appointed Chief Operating Officer of our Company on
April 5, 1999. He has also been nominated to serve as a New Director. Mr.
Strausberg has served as the chief operating officer of FAB Capital since
September 1998. Before joining FAB Capital, Mr. Strausberg served for one year
as the director of fixed income trading in the New York Office of Credit
Lyonnais, one year as a senior vice president, proprietary trading in the New
York office of HSBC Securities, one year as a senior vie president, manager of
fixed income in the New York office of Commerzbank Capital Markets and one year
as a vice president, treasury department in the New York office of Bank Austria.
Previously, Mr. Strausberg accumulated 14 years of experience as an employee
and/or principal of several securities firms. Mr. Strausberg is a 1970 graduate
of Brooklyn College, City University of New York (BS in Economics) and a 1974
graduate of New York University Graduate School of Business (MBA). Mr.
Strausberg holds various securities and commodities licenses including Series
3,4,7,24, 27, 53, 55 and 63.
David W. Dube was appointed Chief Financial Officer of our Company on
April 5, 1999. He has also been nominated to serve as a New Director. Mr.
Dube has served as the chief financial officer of FAB Securities and its
affiliates since September 1997. Before joining FAB Securities, Mr. Dube
served for one year as the president and chief executive officer of Optimax
Industries, Inc., a publicly-held company with interests in the
horticultural, decorative giftware and truck parts accessories industries.
Previously, Mr. Dube worked for six years as the principal of Dube & Company,
a financial consulting firm. Mr. Dube currently serves as a director of
King's Road Entertainment (Nasdaq: KREN), New World Wine Group, Ltd. (OTC BB:
CORK), Safe Science, Inc. (Nasdaq: SAFS) and Helmstar Group, Inc. (AMEX:
HLM). He also serves as a director of Meyers Capital Management LLC, a
privately-held registered investment advisory firm that manages the Meyers
Pride Value Fund ("MYPVX"). Mr. Dube is a 1977 graduate of Suffolk University
(BS in Business Administration), a 1980 graduate of Bentley College (MS in
Accountancy) and a 1995 graduate of Suffolk University (MS in Taxation). Mr.
Dube is licensed to practice as a Certified Public Accountant and holds
various general and principal securities licenses including Series 7, 24 and
63.
Steven Strauss was appointed Controller of our Company on April 5, 1999.
Before joining the Company, Mr. Strauss served for two years as an accounting
and internal control consultant for Majek Fire Protection, Inc. and for one year
as chief financial officer of Citizen's Mortgage Service Co., a subsidiary of
the publicly-held Helmstar Group, Inc. Previously, Mr. Strauss served for four
years as the treasurer and chief financial officer for Hart Mortgage Corp. Mr.
Strauss is a 1973 graduate of Pennsylvania State University (BA in Political
Science) and a 1975 graduate of Temple University (MBA in Accounting). Mr.
Strauss has been licensed to practice as a Certified Public Accountant since
1977 and is a member of the American and Pennsylvania Institutes of Certified of
Certified Public Accountants.
David W. Parsons was appointed General Counsel of our Company on April 5,
1999. Mr. Parsons has served as the general counsel of FAB Securities since July
of 1997. Before joining FAB Securities, Mr. Parsons served for three years as
general counsel for Marsh Block & Co. and he previously served as special
counsel for financial affairs at Antioch College. Mr. Parsons has twenty years
experience in the field of securities law including four years with the Division
of Enforcement of the Securities and Exchange Commission and three years with
the Antifraud Department of the National Association of Securities Dealers. Mr.
Parsons is a 1975 graduate of New College, Sarasota, Florida (BA in Political
Science) and a 1979 graduate of the Georgetown University Law Center (JD Cum
Laude).
Judith L. Kaufman was appointed Secretary of our Company on April 5,
1999. Ms. Kaufman has served as the secretary/treasurer of FAB Capital since
May 1998. Before joining FAB Capital, Ms. Kaufman served for one year as the
secretary/treasurer and human resources administrator for Manhattan Merchant
Funding Corp. Previously, Ms. Kaufman worked for 13 years as a licensed real
estate broker.
In connection with the plan of reorganization approved by Marci's
stockholders, certain persons designated by Capston received 300,000 shares of
Common Stock for administrative and management services. Ms. Fonner received
96,400 of shares of Common Stock for her personal account. In addition, 150,000
shares of Common Stock were issued to legal counsel for Capston for services
rendered since 1996. A total of 570,000 shares of Common Stock were issued to a
single finder who assisted in the identification of FAB Capital and Western as
potential business combination candidates, the introduction of FAB Capital and
Western to Marci, the collection and analysis of due diligence information on
FAB Capital and Western, and other financial consulting and advisory services.
All shares of Common Stock issued to designees of Capston, legal counsel for
Capston and the finder were registered prior to issuance on a Form S-8
Registration Statement under the Securities Act of 1933. We believe that each of
these transactions were on terms that were no less favorable than we could have
obtained in transactions with unrelated third parties.
ITEM 2....ACQUISITION OR DISPOSITION OF ASSETS
Summary Description of Transaction Properties
Marci acquired the Transaction Properties in exchange for 11,400,000 shares
of Common Stock. The following provide a summary description of the Transaction
Properties:
Transaction Properties Contributed by FAB Capital Corp.
in exchange for 10,000,000 shares of Common Stock
FAB Securities of America, Inc. 100% Equity Ownership
FAB Finanz- und Anlagen- Beratung und Vermittlung GmbH100% Equity Ownership
Momentum Capital Funding Corp. 100% Equity Ownership
FAB Capital Markets, Inc. 100% Equity Ownership
FAB Corporate Funding, Inc. 100% Equity Ownership
FAB Futures, Inc. 100% Equity Ownership
King's Road Entertainment (Nasdaq: KREN) 775,180 common shares
Transaction Properties Contributed by Western Union Leasing Ltd.
in exchange for 1,400,000 shares of Common Stock
King's Road Entertainment (Nasdaq: KREN) 266,418 common shares
Metropolitan Worldwide (OTC BB: MWWM) 500,000 common shares
FAB Securities is a full service NASD member broker-dealer with offices in
New York. FAB Securities has approximately 50 employees including 20
administrative and compliance staff members and approximately 30 registered
representatives.
FAB Germany is a German Broker/Dealer firm with offices in Frankfurt,
Dresden, Dusseldorf, Ausberg and Schoenberg. FAB Germany has approximately 270
employees including 20 administrative and compliance staff members and
approximately 250 retail brokers.
Momentum develops and implements training and support for all trading
platforms and provides Internet access to the clients of FAB Securities and FAB
Germany. In addition it is charged with developing our proposed on-line
day-trading system. Momentum has a full time staff of three and contracts with
third parties for additional staff when required.
FAB Capital Markets is a newly organized equity and fixed income research
organization that develops and distributes our market and corporate research
publications. In addition, this division functions as a conduit of information
and ideas to the institutional marketplace.
FAB Corporate Funding is a newly organized merchant banking concern that
will undertake the development of financial products (i.e. IPO's; Private
Placements; Secondary Offerings; etc.) that may be sold through FAB Securities
and FAB Germany. FAB Corporate Funding has offices in New York and San Diego and
currently employs a staff of eight persons.
FAB Futures is a newly organized derivative broker that is presently
inactive while awaiting the requisite licenses and establishing necessary
clearing arrangements.
Kings Road Entertainment develops, finances and produces motion pictures
for subsequent distribution in theaters, on pay-per view, network and
syndicated television, on home video, and in other ancillary media. The
shares of King's Road will be held for investment.
Metropolitan Worldwide is engaged in the business of providing management
services to fashion models, recording artists and commercial actors throughout
Germany and the rest of the world. The shares of Metropolitan Worldwide will be
held for investment.
Introduction to Our Business
FAB Global is a holding company that conducts its business activities
through six wholly-owned subsidiaries. FAB Securities and FAB Germany have been
actively involved in the securities brokerage business for several years. In the
fall of 1998, we developed a new business plan to meet the demanding
requirements of sophisticated individual and institutional investors worldwide.
Our principal goal is to establish FAB Global as a leader in the use of
information and Internet technology to facilitate capital formation and
investment transactions. Under the new business plan, our current and planned
activities have been organized into six principal operating units:
o Electronic Trading--Momentum has been organized to develop, operate and
manage a variety of proposed electronic stock trading platforms. The
first of the proposed electronic trading platforms, FABTRADE.com, will
compete in the rapidly evolving on-line discount brokerage market and
focus primarily on the needs of individual retail investors. Our second
proposed electronic trading platform, "FABSTOCKPRO.com", will provide
more robust information and order execution capabilities, and focus
primarily on the needs of professional "day traders." Initially,
FABSTOCKPRO will only be available to persons who choose to operate from
one of our 5 proposed day trading centers. Once FABSTOCKPRO is
thoroughly tested and refined, we intend to provide information and
order execution services to professional day-traders worldwide over the
Internet. We are also working to develop an information and order
execution system that will give institutional investors the power to
manage their own trading activities.
All of our electronic trading platforms are being developed in English,
German, French and Spanish and we intend to add Asian language capabilities
in the near future. Our ultimate goal is to create a series of user
specific on-line trading platforms that will give individual and
institutional investors real time access to the principal global financial
markets 24 hours a day. If we are successful in these efforts, we believe
we will be the only on-line brokerage firm with the ability to give our
customers immediate real time access to a global investment portfolio.
Given the competitive nature of online trading and the rapid advances in
Internet related technology, Momentum has acquired ownership of a number of
Internet domain names related to various classes of investments that will
be activated in the near future and used primarily as "harvesting tools"
that will direct potential clients to our principal trading sites. These
domain names include.
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Mutual Funds:
Mutualfundinvestments.net
Noloadmutualfunds.net
Loadmutualfunds.com
Fixed Income Securities:
USTreasuryzerocoupons.com
USTreasurybond.com
Mortgagebackedbonds.com
InterestIncome.com
InterestIncome.net
USTreasurystrips.com
Municipalbondmarket.com
Eurocurrencybonds.com
Equities and Options:
OTCmarketmaker.com
OTCequitytrading.com
Retirement Planning:
401kpensionplan.com
Lifeinsuranceannuity.com
Derivatives:
Oilderivatives.com
Crudeoilproducts.com
Eurocurrencytrading.com
<PAGE>
o Securities Brokerage--FAB Securities and FAB Germany provide traditional
brokerage and related services to retail and institutional investors in the
U.S. and Germany. FAB Securities of America, Inc. is a member of NASD and
Amex. FAB Securities of America, Inc. and FAB GmbH provide traditional
brokerage and related services to retail and institutional investors in the
U.S. and Germany. FAB Securities offers a wide range of investment services
at commission rates that are competitive with similarly situated brokerage
firms. We believe that the financial unification of Europe will create
significant opportunities for U.S. style retail securities brokerage firms.
Since April of 1998, FAB Germany has grown from a staff of 2 to over 250
retail brokers and we intend to establish additional European affiliates in
the United Kingdom, France and Spain within the next 12 months.
o Equity, Fixed Income and Market Research--FAB Capital Markets will
provide equity research and analysis that focuses on emerging companies
and growth industries in the U.S., Germany and other world markets. As a
boutique equity research and analysis organization, FAB Capital Markets
will strive to become an industry leader in the identification and
analysis of companies and industries that can be expected to achieve
above average rates of growth and equity appreciation. Additionally, FAB
Capital Markets will provide general research on macroeconomic factors
affecting interest rates and trade ideas to institutional investors.
o Investment Banking--FAB Corporate Funding will manage our worldwide
investment banking and merchant banking activities. FAB Corporate
Funding will be active in the development of a full range of investment
products focusing on emerging companies and growth industries including
Internet and computer technology, biotechnology and life sciences, media
and entertainment, and energy. These investment products, which will
include venture capital investments, private placements, initial public
offerings, secondary public offerings and managed investment funds, will
be offered for sale through FAB Securities, FAB Germany and our proposed
European subsidiaries, and may be offered through other foreign and
domestic brokerage firms.
o Derivative Brokerage--FAB Futures has been organized to provide full
service and on-line discount commodities brokerage services to
sophisticated individual and institutional investors world-wide.
o Principal Trading and Investments--The Registrant is actively involved in
merchant banking and principal trading for its own account. These
activities include venture capital investments in early stage companies,
merchant banking transactions, private placements, mergers and acquisitions
consulting, day trading on the principal world securities markets and
medium term investments in emerging companies and growth industries.
Through our six operating units, FAB Global intends to provide a full range
of office-based and on-line investment services to sophisticated individual and
institutional investors who require direct access to the world equity markets.
By focusing on emerging companies, growth industries and the global market, FAB
Global will endeavor to differentiate itself from its competitors and establish
a boutique clientele of high net worth individual and institutional investors
who require a wide variety of analytical and brokerage services, and demand
hands-on trading and order execution capabilities that are not generally
available through similar sized competitive firms in the securities brokerage,
commodities brokerage, merchant banking and investment banking industries
Certain Important Risk Factors.
We have a limited operating history and we may incur losses as our business
expands. We have a limited operating history upon which to evaluate the merits
of investing in our common stock. Our prospects are subject to the risks,
expenses and uncertainties encountered by companies in the new and rapidly
evolving markets for Internet-based investment products and services. These
risks include the failure to continue to develop and extend our on-line service
capabilities, the rejection of our services by Internet users or vendors, our
inability to maintain and increase traffic on our proprietary web-sites,
increased competition and the ability to attract, retain and motivate qualified
personnel. We may not be successful in addressing such risks, and our business
and financial condition could suffer. Our prospects are also subject to the
risks encountered by companies in the investment banking business.
Our limited operating history and the uncertain nature of the markets we
address make it difficult or impossible to predict future results of operations.
Therefore, our recent revenue growth should not be an indicator of the rate of
revenue growth, if any, we can expect in the future.
Our business may be adversely affected if our electronic trading platforms
do not become operational. The FABTRADE.com and FABSTOCKPRO.com electronic
trading platforms are not yet operational. The principal reason for this has
been that Momentum is still engaged in developing the technical capacity and
interfaces necessary to enable them to effectively operate and manage the
proposed trading platforms. There can be no assurance that Momentum will
successfully complete development of the FABTRADE.com and FABSTOCKPRO.com
electronic trading platforms, and the interfaces necessary to operate and manage
the proposed trading platforms.
We may incur losses and liabilities in the course of business that could
prove costly to defend or resolve. The brokerage and investment banking business
involves significant economic risks. Brokerage and investment banking firms face
significant legal risks in the U.S., and the volume and amount of damages
claimed in lawsuits against financial intermediaries are increasing. These risks
include potential liability under federal and state securities and other laws
for allegedly false or misleading statements made in connection with securities
offerings and other transactions. We also face the possibility that customers or
others will claim that we improperly failed to apprise them of applicable risks
or that they were not authorized or permitted under applicable corporate or
regulatory requirements to enter into transactions with us and that their
obligations to us are not enforceable. These risks often may be difficult to
assess or quantify and their existence and magnitude often remain unknown for
substantial periods of time. We may incur significant legal expenses in
defending against litigation. We expect to be active in the underwriting of
initial public offerings and follow-on offerings of the securities of emerging
and mid-size growth companies, which often involve a high degree of risk and
volatility. Substantial legal liability or a regulatory action against us could
have a material adverse financial effect on us.
Our planned electronic trading platforms are subject to risks associated
with development, enhancement and proper functioning, and may never meet their
performance expectations. We intend to invest substantial amounts of time and
capital in the development and introduction of our FABTRADE.com and FABPRO.com
electronic trading platforms. This investment is subject to the following risks:
o Our software is still in the development phase, and any delays in
development or problems discovered in the testing of the software could
result in significant delays. We cannot assure you that we will complete
development of a product that provides secure and dependable technology
and meets performance expectations. In addition, our technology will
require continual enhancements if we are to maintain a competitive edge.
Accordingly, we will need to make substantial ongoing investments in
software design and development.
o We cannot assure you our proposed electronic trading platforms will attract
a critical mass of trading activity to ensure a commercially viable
electronic trading operation.
o Our retail brokerage and investment banking groups currently focus on
raising capital from traditional institutional and venture capital
sources and strategic investors. In the future, we plan to offer a
variety of investment products to high net worth individuals and
institutional investors. This may not be feasible. In particular, our
proposed affiliates in the United Kingdom, France and Spain have not yet
been established and we cannot assure you as to how much money we can
raise or how quickly we can raise those funds. Once our proposed
affiliates are established, they may not be successful. Failure of our
proposed European affiliates may impair our ability to establish
additional offices in the future.
o We may not be able to expand our business internationally, and if we do, we
face risks relating to international operations and regulations.
o A component of our strategy is our planned increase in efforts to
attract more international customers and business partners. We are
currently exploring business opportunities in United Kingdom, France and
Spain, and intend to explore additional opportunities in Asia and
Europe. We cannot assure you that we will be able to successfully market
our services and products in international markets. In addition, in
doing business in international markets, we face risks, such as
unexpected changes in regulatory requirements, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations,
political instability, fluctuations in currency exchange rates, reduced
protection for intellectual property rights in some countries, seasonal
reductions in business activity during the summer months in Europe and
certain other parts of the world and potentially adverse tax
consequences, any of which could adversely impact our international
operations.
We may not be able to keep up in a cost-effective way with rapid
technological change. The financial services industry is characterized by rapid
technological change, changes in customer requirements, frequent new service and
product introductions and enhancements and evolving industry standards. Our
future success will depend, in part, on our ability to develop technologies and
enhance our existing services and products. We must also develop new services
and products that address the increasingly sophisticated and varied needs of our
customers and prospective customers. We must respond to technological advances
and evolving industry standards and practices on a timely and cost-effective
basis. The development and enhancement of services and products entails
significant technical and financial risks. We may not (1) effectively use new
technologies, (2) adapt services and products to evolving industry standards or
(3) develop, introduce and market service and product enhancements or new
services and products. In addition, we may experience difficulties that could
delay or prevent the successful development, introduction or marketing of these
services and products, and our new service and product enhancements may not
achieve market acceptance. If we encounter these problems, our business,
financial condition and operating results will be materially adversely affected.
Periods of declining prices, inactivity or uncertainty in the public or
private equity markets may adversely affect our revenues. Our revenues are
likely to be lower during periods of declining prices or securities market
inactivity in the sectors on which we focus. Our business is particularly
dependent on the public and private equity markets for companies in the
Internet, biotechnology, entertainment and energy industries. The public markets
have historically experienced significant volatility not only in the number and
size of share offerings, but also in the secondary market trading volume and
prices of newly issued securities. For example, the market for offerings by
companies in the Internet industry has recently experienced significant activity
while the market for offerings by energy companies has been almost non-existent.
This recent activity may not sustain its current levels. Activity in the private
equity markets frequently reflects the trends in the public markets. As a
result, our revenues from private capital raising activity may also be adversely
affected during periods of declining prices or inactivity in the public markets.
The growth in our revenues will depend largely on a significant increase in
the number and size of transactions by companies in our targeted industries and
by the related increase in secondary market trading for these companies.
Financing activity in these industries can decline for a number of reasons. Such
activity may also decrease during periods of market uncertainty occasioned by
concerns over inflation, rising interest rates and related issues.
Disappointments in quarterly performance relative to analysts' expectations or
changes in long-term prospects for an industry can also adversely affect capital
raising activities to a significant degree.
We may not be able to service and maintain marketing relationships with
portal entities and Web content companies, which may adversely affect our
business growth. Our strategy for expanding brand recognition and exposure
depends to some extent on the portal market and Web content companies. We plan
to enter into marketing agreements with portal entities and Web content
companies that will permit us to advertise our products and services on their
Web pages. We plan to access a larger and broader potential customer base by
disseminating proprietary information, such as our stock offerings, investment
research and the quote and execution streams for FABTRADE.com and FABPRO.com
over the Internet. If we cannot secure or maintain these marketing agreements on
favorable terms, our prospects could be harmed. Additionally, other online
brokers, which advertise on portals, may object to and attempt to undermine our
marketing agreements or relationships. If successful, the efforts of competing
brokers could materially and adversely affect our growth.
We may not be able to protect our intellectual property rights, which may
cause us to incur significant costs. Our business is dependent on proprietary
technology and other intellectual property rights. We rely primarily on
copyright, trade secret and trademark law to protect our technology. We
currently have no patents. These concepts and technologies may never be
patentable. In addition, effective trademark protection may not be available for
our concepts and technologies. Notwithstanding the precautions we have taken, a
third party may copy or otherwise obtain and use our software or other
proprietary information without authorization or may develop similar software
independently. Policing unauthorized use of our technology is difficult,
particularly because the global nature of the Internet makes it difficult to
control the ultimate destination or security of software or other data
transmitted. The laws of other countries may afford us little or no effective
protection of our intellectual property. The steps we have taken may not prevent
misappropriation of our technology or the agreements entered into for that
purpose may not be enforceable. In addition, litigation may be necessary in the
future to enforce our intellectual property rights, to protect our trade
secrets, to determine the validity and scope of the proprietary rights of others
or to defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversions of resources, either of which could
have a material adverse effect on our business, financial condition and
operating results.
Our success is dependent on our key personnel whom we may not be able to
retain, and we may not be able to hire enough additional qualified personnel to
meet our growing needs. Our business requires the employment of highly skilled
personnel. The recruitment and retention of experienced investment professionals
and proficient technologists are particularly important to our performance and
success. We have "key person" life insurance policies on Phillip G. Cook and
Randy M. Strausberg. The loss of the services of any of our key personnel or the
inability to recruit and retain experienced investment professionals and
proficient technologists in the future could have a material adverse effect on
our business, financial condition and operating results. We expect further
growth in the number of our personnel, particularly if markets remain favorable
to on-line investment transactions. Competition for such personnel is intense.
Our ability to compete effectively in our business depends on our ability to
attract and retain the quality personnel our operations and development require.
We may have difficulty effectively managing our growth. We expect our
business to develop rapidly both in the U.S. and international markets. Our
current senior management has limited experience managing a rapidly growing
enterprise and may not be able to manage our growth. The intensifying
competition we face from both established and recently formed entities may
adversely affect our revenues and profitability. We expect to encounter intense
competition in all aspects of our business, and we expect this competition to
increase. Our principal competitors include traditional investment banking and
brokerage firms, and a number of newly organized electronic brokerage firms,
many of which offer investment products through the Internet. In the context of
online distributions of public offerings, we expect to face significant
competition from brokerage firms such as Charles Schwab, Fidelity Brokerage
Services, E*Trade ("EGRD") and Wit Capital, among others, which offer equity
securities through the Internet. In our online brokerage business, we expect to
encounter direct competition from discount brokerage firms and online brokerage
firms, including Charles Schwab ("SCH"), Fidelity Brokerage Services ("FLCSX"),
Waterhouse Investor Services ("WTMXX"), Muriel Siebert ("SIEB") and Dateq Online
("DATQ"), and from full-service brokerage firms such as Morgan Stanley Dean
Witter ("AMVAX"), Paine Webber ("PFICX"), Donaldson, Lufkin & Jenrette ("DLJ")
and Merrill Lynch ("MRL"). Most of these investment banking and brokerage firms
have been established far longer and are far better capitalized and staffed than
we are, and have much larger, established customer bases than we do.
Operational risks may disrupt our business or limit our growth. Our
business is highly dependent on information processing and telecommunications
systems. We face operational risks arising from mistakes made in the
confirmation or settlement of transactions or from transactions not being
properly booked, evaluated or accounted for. Our business is highly dependent on
our ability, and the ability of our clearing firm, to process, on a daily basis,
a large and growing number of transactions across numerous and diverse markets.
Consequently, our clearing firm and we rely heavily on our respective financial,
accounting, telecommunications and other data processing systems. If any of
these systems do not operate properly or are unavailable due to problems with
our physical infrastructure, we could suffer financial loss, a disruption of our
business, liability to clients, regulatory intervention or damage to our
reputation. In addition, we face operational risks due to difficulties with our
telecommunications system's inability to handle the high level of customer
inquiries. The inability of our systems to accommodate an increasing volume of
transactions could also constrain our ability to expand our businesses. We have
experienced disruptions in our Web site service due to failures in our
telecommunications system and our Web servers, which have resulted in customer
frustration. We are currently upgrading and expanding the capabilities of our
data and telecommunications systems and other operating technology. We expect
that in the future we will need to continue to upgrade and expand our systems
infrastructure. We intend to expand our telecommunications system capacity in
order to better ensure customer satisfaction.
If we fail to comply with applicable laws and regulations, we may face
penalties or other sanctions that may be detrimental to our business. When
enacted, the Securities Act of 1933, which governs the offer and sale of
securities, and the Securities Exchange Act of 1934, which governs, among other
things, the operation of the securities markets and broker-dealers, did not
contemplate the conduct of a securities business through the Internet.
Uncertainty regarding the application of these laws and other regulations to our
business may adversely affect the viability and profitability of our business.
If we fail to comply with an applicable law or regulation, government regulators
and self regulatory organizations may institute administrative or judicial
proceedings against us that could result in censure, fine, civil penalties
(including treble damages in the case of insider trading violations), the
issuance of cease-and-desist orders, the loss of our status as a broker-dealer,
the suspension or disqualification of our officers or employees or other adverse
consequences. The imposition of any material penalties or orders on us could
have a material adverse effect on our business, operating results and financial
condition.
If we engage in market-making or proprietary trading activities in the
future, we will face increased risks, which could be harmful to our business. We
currently engage in market-making and proprietary trading for our own account.
These activities involve significant risks of changes in the market prices of
such securities and of decreases in the liquidity of the securities markets.
These risks, in turn, could limit our ability to resell securities purchased or
to repurchase securities sold short. In addition, our market making and trading
activities subject our capital to significant risks that other parties to the
transactions will fail to perform their obligations. From time to time, we may
establish short positions during the course of our trading activities. It is a
characteristic of short positions that any loss sustained on closing out the
position may exceed the liability related thereto as reflected on our financial
statements.
We may not be able to secure financing if we need it in the future. We may
require additional financing to support our planned expansion, develop new or
enhanced services and products, respond to competitive pressures, acquire
complementary businesses or technologies or respond to unanticipated
requirements. We can give stockholders no assurance that additional financing
will be available when needed on favorable terms, if at all.
Employee misconduct could harm us and is difficult to detect and deter.
There have been a number of highly publicized cases involving fraud or other
misconduct by employees in the financial services industry in recent years, and
we run the risk that employee misconduct could occur. Misconduct by employees
could include binding us to transactions that exceed authorized limits or
present unacceptable risks, or hiding from us unauthorized or unsuccessful
activities. In either case, this type of conduct could result in unknown and
unmanaged risks or losses. Employee misconduct could also involve the improper
use of confidential information, which could result in regulatory sanctions and
serious harm to our reputation. It is not always possible to deter employee
misconduct, and the precautions we take to prevent and detect this activity may
not be effective in all cases.
Despite our efforts, our systems as well as those of others may prove not
to be Year 2000 compliant, which could significantly disrupt our business. We
may realize exposure and risk if the systems on which we are dependent to
conduct our operations are not Year 2000 compliant. Because we are largely
dependent on our ability to conduct our operations through the Internet, any
significant disruption of this computer infrastructure caused by the Year 2000
problem could significantly interfere with our business operations. Our
potential areas of exposure include products purchased from third parties,
computers, software, telephone systems and other equipment used internally. If
our present efforts to address Year 2000 compliance issues are not successful,
or if trading counterparties, financial intermediaries and vendors with whom we
conduct business do not successfully address such issues, our business,
operating results and financial position could be materially and adversely
affected.
Our long-term success depends on the development of the Internet as a
commercial marketplace, which is uncertain. The markets for investment banking
and brokerage services through the Internet are at an early stage of development
and are rapidly evolving. Because the markets for our online services are new
and evolving, it is difficult to predict the future growth (if any) and the
future size of these markets. We cannot assure you that the markets for our
online services will continue to develop or become sustainable. A substantial
number of our clients have been Internet related companies. Sales of many of our
services and products will depend upon the acceptance of the Internet as a
widely used medium for commerce and communication. A number of factors could
prevent such acceptance, including the following:
o Electronic commerce is at an early stage and buyers may be unwilling to
shift their purchasing from traditional vendors to online vendors;
o The necessary network infrastructure for substantial growth in usage of the
Internet may not be adequately developed;
o Increased government regulation or taxation may adversely affect the
viability of electronic commerce;
o Insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times or
increased costs; and
o Adverse publicity and consumer concern about the security of electronic
commerce transactions could discourage its acceptance and growth.
Conducting investment-banking operations through the Internet involves a
new approach to the securities business. We may have to undertake intensive
marketing and sales efforts to educate prospective clients on the uses and
benefits of our services and products in order to generate demand. For example,
corporate issuers may be reluctant to accept our online underwriting
capabilities.
Questions related to the security of our systems and our ability to
transmit confidential information over the Internet may adversely impact our
business. The need to securely transmit confidential information over the
Internet has been a significant barrier to electronic commerce and
communications. We are potentially vulnerable to attempts by unauthorized
computer users to penetrate our network security. If successful, those
individuals could misappropriate proprietary information or cause interruptions
in our online services. We may be required to expend significant capital and
resources to protect against the threat of such security breaches or to
alleviate problems. In addition to security breaches, inadvertent transmission
of computer viruses could expose us to the risk of disruption of our business,
loss and possible liability. Continued concerns over the security of Internet
transactions and the privacy of its users may also inhibit the growth of the
Internet generally as a means of conducting commercial transactions.
Failure of our encryption technology could compromise the confidentiality
of our customer transactions and adversely affect our business. We rely upon
encryption and authentication technology, including public key cryptography
technology licensed from third parties, to provide the security and
authentication necessary to effect secure transmission of confidential
information over the Internet. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments could result in a
compromise or breach of the procedures we use to protect customer transaction
data. If any such compromise of our security occurs, our business, financial
condition and operating results could be materially adversely affected.
Shares eligible for future sale by our current stockholders may adversely
affect our stock price. A substantial amount of our Common Stock, including
shares issued upon the exercise of outstanding options, will eventually be
available for sale in the public market. The future sale of these shares by our
current stockholders may adversely affect our stock price.
We do not anticipate paying dividends. We have never declared or paid any
cash dividends on our Common Stock and do not expect to do so in the foreseeable
future. We currently intend to retain any earnings to finance the expansion and
development of our business. Any future payment of dividends will be made at the
discretion of our Board of Directors based upon conditions then existing,
including our earnings, financial condition and capital requirements as well as
such economic and other conditions as our Board of Directors may deem relevant.
Item 4.
CHANGES IN THE REGISTRANT'S CERTIFYING ACCOUNTANT.
The financial statements of Marci for the fiscal years ended May 1998 and
1997 were audited by the accounting firm of Want & Ender, New York, New York.
The financial statements of FAB Securities for the years ended December 31, 1998
and 1997 are being audited by the accounting firm of Marx Lange & Gutterman, LLP
Certified Public Accountants, New York, NY. The financial statements of FAB
Germany for the year ended December 31, 1998 were audited by the accounting firm
of Dewisa GmbH, Offenbach am Main, Germany. In connection with Transaction, the
firm of Richard A. Eisner & Co., LLP, Certified Public Accountants, has been
retained to audit the financial statements of FAB Global and its subsidiaries as
of April 30, 1999 and our related statements of income, cash flows and
shareholders equity for the fiscal year then ended. During the fiscal years set
forth above, and the subsequent interim periods preceding the appointment of
Richard A. Eisner & Co., LLP there have been no reportable disagreements between
Marci, FAB Securities or FAB Germany and their respective auditors on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
Item 5.
OTHER EVENTS
In connection with the Transaction, and at the request of FAB Capital and
Western, FAB Global will, effective April 30, 1999, change from a 52/53-week
accounting year to a fiscal year ended April 30.
Item 6.
RESIGNATIONS OF DIRECTORS.
No director has resigned or declined to stand for re-election to the Board
of Directors since the date of the last annual meeting of stockholders because
of any disagreement with Marci on any matter relating to Marci's operations,
policies or practices.
As a condition of the Transaction, Ms. Fonner agreed to resign as the
Company's sole director and appoint three New Directors nominated by FAB Capital
and Western. FAB Capital and Western have nominated Phillip G. Cook, David W.
Dube and Randy M. Strausberg to serve as New Directors of FAB Global. The
proposed changes in our board of directors will not become effective and the New
Directors will not assume office until 10 days after we file an Information
Statement and Notice of Change in the Majority of the Board of Directors with
the SEC and send copies of the Notice to our stockholders. At that time, Sally
A. Fonner will appoint the New Directors and then resign as a director of the
Company. Thereafter, the New Directors will manage our business.
Our Board does not currently have any committees. After the appointment of
the New Directors, the Board intends to form an Audit Committee and a
Compensation Committee. The Audit Committee will review the services provided by
our independent accountants, consult with our independent accountants on audits,
review certain filings with the SEC, assess need for internal auditing
procedures and assess the adequacy of internal controls. The Compensation
Committee will determine executive compensation and review transactions between
the Company and our affiliates, including any associates of affiliates.
Compensation of Executive Officers and Directors. Ms. Fonner has not
received any cash compensation for services performed during the two years
prior to the Transaction. In connection with the plan of reorganization
approved by Marci's stockholders, certain persons designated by Capston
received 300,000 shares of Common Stock for administrative and management
services. Ms. Fonner received 96,400 of these shares of Common Stock for her
personal account.
Executive Employment Contracts. Prior to the Transaction, FAB Capital had
authorized employment agreements between certain executives and key employees
and the companies that were transferred to Marci in connection with the
Transaction. These executives and key employees included Phillip G. Cook, Randy
M. Strausberg, David W. Dube, Judith L. Kaufman and Davis Parsons. These
agreements require the executives and key employees to devote substantially all
of their business time to the affairs of FAB Global and our subsidiaries,
establish standards of conduct, prohibit the solicitation of our existing
clients after termination, expressly affirm our rights respecting the ownership
and disclosure of confidential information, provide for the acts and events that
would give rise to termination of such agreements and provide express remedies
for a breach of the agreement by the employee or the Company. The following
table summarizes the compensation payable to executives and key employees under
the terms of their respective employment agreements.
<TABLE>
<CAPTION>
Initial Stock Options
Employee Position Term Salary Granted
<S> <C> <C> <C> <C>
Phillip G. Cook ... Chairman/CEO 5 years $100,000 600,000 shares (1)
Randy M. Strausberg Chief Operating Officer 5 years $180,000 250,000 shares (2)
David W. Dube ..... CFO/Treasurer 5 years $180,000 175,000 shares (2)
Judith L. Kaufman . Secretary 5 years $ 84,000 125,000 shares (2)
David W. Parsons .. General Counsel 5 years $102,000 125,000 shares (2)
<FN>
(1) The stock options granted to Mr. Cook are fully vested and immediately
exercisable at a price of $1 per share. These options were issued to Mr.
Cook in consideration of his agreement to reduce his cash salary to
$100,000 per year until January 1, 2000.
(2) The stock options granted to our other executives and key employees are
exercisable at a price of $1 per share and will vest at the rate of 20% per
year commencing on February 1, 2000.
</FN>
</TABLE>
In addition, each of the executives and key employees identified above will
participate, without cost, in our standard employee benefit programs, including
medial/hospitalization insurance and group life insurance, as in effect from
time to time.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of acquired businesses.
As permitted by Item 7(a)(4) of Form 8-K, the audited financial statements
of the acquired businesses will be filed within 60 days after the date of
this Report.
(b) Pro forma financial information.
An unaudited pro forma consolidated balance sheet of FAB Securities of
America, Inc. (formerly RAS Securities Corp.) and FAB Finanz- und Anlagen-
Beratung und Vermittlung GmbH as of December 31, 1998 and 1997, together
with the related unaudited pro forma consolidated statements of income for
the years then ended are included in this Current Report on Form 8-K. These
pro forma financial statements are based on the audited historical
financial statements of FAB Securities and FAB Germany and include all
required intercompany adjustments.
An unaudited pro forma consolidated balance sheet of FAB Securities of
America, Inc., FAB Finanz- und Anlagen- Beratung und Vermittlung GmbH, FAB
Corporate Funding, Inc., FAB Capital Markets, Inc., FAB Futures, Inc., and
Momentum Capital Funding Corp. as of April 5, 1998, together with the
related unaudited pro forma consolidated statements of income for the
period then ended are included in this Current Report on Form 8-K.
As permitted by Item 7(a)(4) of Form 8-K, complete pro forma financial
statements of the Registrant and its recently acquired subsidiaries will be
filed within 60 days after the date of this Report.
(c) Exhibits.
(2.1) Reorganization Agreement, dated April 5, 1999, between and among the
Registrant, FAB Capital Corporation and Western Union Leasing Ltd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FAB GLOBAL, INC., a Georgia corporation (formerly known as Marci International
Imports) April 20, 1999
By: /s/
Phillip G. Cook, Chief Executive Officer
<PAGE>
<TABLE>
<CAPTION>
FAB GLOBAL INC.
CONSOLIDATED BALANCE SHEET
1997-1998
(Pro-forma audited statements of predecessor entities)
ASSETS 12/31/97 12/31/98
<S> <C> <C>
Cash & cash equivalents .................................... $ 63,895 $ 76,564
Receivables from brokers & dealers ......................... 1,044,652 1,191,233
Receivables from others .................................... 1,180,656 148,220
Securities owned (at lower of cost or market) .............. 1,208,780 822,804
Real estate ................................................ 1,297,727 0
Total Current Assets .......................... 4,795,710 2,238,821
Investments ................................................ 0 0
Property & equipment, net .................................. 218,638 657,842
Other assets ............................................... 129,519 3,127,699
TOTAL ASSETS ............................................... $ 5,143,867 $ 6,024,362
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 12/31/97 12/31/98
<S> <C> <C>
Payable to brokers ........................................ $ 871,309 $ 969,609
Securities held and not yet purchased (at ................. 15,000 0
market)
Obligations under capitalized leases ...................... 16,241 7,469
Accounts payable and accrued expenses ..................... 5,057,402 3,668,953
Total Current Liabilities ....................... 5,959,952 4,646,031
Commitments and contingencies ............................. 0 0
Liabilities subordinated to claims of ..................... 490,000 490,000
general creditors
SHAREHOLDERS' EQUITY
Common stock, no-par value, 300,000 shares ................ 29,512 235,394
at December 31, 1997 and 1998 and 12,720,000
shares at April 5, 1999
Preferred stock ........................................... 0 383,700
Additional paid-in-capital ................................ 803,791 1,400,147
Retained earnings (deficit) ............................... (2,139,387) (1,130,910)
Total shareholders' equity ................................ (1,306,084) 888,331
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY .................. $ 5,143,868 $ 6,024,362
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
1997-1998
(Pro-forma audited statements of predecessor entities)
12/31/97 12/31/98
<S> <C> <C>
REVENUES
Commissions ................................................ $ 6,442,609 $ 4,765,080
Syndicate and underwriting income .......................... 2,256,436 824,555
Trading profit (loss) ...................................... 115,546 (196,633)
Other ...................................................... 2,093,128 937,474
TOTAL REVENUES ............................................. 10,907,719 6,330,476
EXPENSES
Salaries, commissions and employee benefits ................ 5,722,191 4,092,677
Clearing fees, including floor brokerage ................... 952,877 536,961
Communications ............................................. 721,308 674,006
Office expenses ............................................ 547,999 154,185
Regulatory fees and expenses ............................... 55,524 69,923
Interest expense ........................................... 313,258 22,881
Travel and entertainment ................................... 94,731 61,322
Occupancy and equipment rentals ............................ 396,553 337,501
Professional fees .......................................... 1,119,347 159,568
State and local income taxes ............................... 4,759 97,662
Other operating expenses ................................... 561,544 209,146
TOTAL EXPENSES ............................................. 10,490,091 6,415,832
NET INCOME (LOSS) .......................................... $ 417,628 $ (85,356)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FAB GLOBAL INC.
4/5/99
CONSOLIDATED BALANCE SHEET
(Pro-forma unaudited statement)
ASSETS 4/5/99
<S> <C>
Cash & cash equivalents .................................... $ 521,604
Receivables from brokers & dealers ......................... 58,558
Receivables from others .................................... 541,751
Securities owned (at lower of cost or market) .............. 7,309,605
Real estate ................................................ 0
Total Current Assets .......................... 8,431,518
Investments ................................................ 872,427
Property & equipment, net .................................. 196,373
Other assets ............................................... 681,801
TOTAL ASSETS ............................................... $10,182,119
LIABILITIES AND SHAREHOLDERS' EQUITY
Payable to brokers ........................................ $ 557,834
Securities held and not yet purchased (at ................. 6,093
market)
Obligations under capitalized leases ...................... 5,189
Accounts payable and accrued expenses ..................... 1,188,458
Total Current Liabilities ....................... 1,757,574
Commitments and contingencies ............................. 0
Liabilities subordinated to claims of ..................... 0
general creditors
SHAREHOLDERS' EQUITY
Common stock, no-par value, 300,000 shares .............. 1,021,971
at December 31, 1997 and 1998 and 12,720,000
shares at April 5, 1999
Preferred stock ........................................... 508,650
Additional paid-in-capital ................................ 6,839,856
Retained earnings (deficit) ............................... 54,070
Total shareholders' equity ................................ 8,424,547
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY .................. $10,182,121
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME
Period Ended 4/5/99
(Pro-forma unaudited statement)
4/5/99
<S> <C>
REVENUES
Commissions ................................................ $3,961,190
Syndicate and underwriting income .......................... 261,869
Trading profit (loss) ...................................... 250,916
Other ...................................................... 80,798
TOTAL REVENUES ............................................. 4,554,773
EXPENSES
Salaries, commissions and employee benefits ................ 1,717,129
Clearing fees, including floor brokerage ................... 127,383
Communications ............................................. 150,121
Office expenses ............................................ 139,768
Regulatory fees and expenses ............................... 11,865
Interest expense ........................................... 11,430
Travel and entertainment ................................... 89,036
Occupancy and equipment rentals ............................ 85,721
Professional fees .......................................... 177,960
State and local income taxes ............................... 868
Other operating expenses ................................... 711,746
TOTAL EXPENSES ............................................. 3,223,027
NET INCOME (LOSS) .......................................... $1,331,746
</TABLE>
PAGE 1 of 1
REORGANIZATION AGREEMENT
This Reorganization Agreement ("Agreement") is made and entered into this
5th day of April, 1999, between and among FAB Global, Inc., a Georgia
corporation formerly known as Marci International Imports, Inc. (the "Company"),
FAB Capital Corporation, an Idaho corporation, (the "FAB Capital") and Western
Union Leasing Ltd., a trust organized under the laws of the United Kingdom
("Western").
WHEREAS, FAB Capital owns, and has the unrestricted right to sell, transfer
and convey to the Company, one hundred percent (100%) of the issued and
outstanding common stock of FAB Securities of America, Inc.; FAB Finanz- und
Anlagen- Beratung und Vermittlung GmbH; FAB Corporate Funding, Inc.; FAB Capital
Markets, Inc.; FAB Futures, Inc.; and Momentum Capital Funding Corp. (the "FAB
Companies"), each of which is described in detail in Exhibit "A" attached hereto
and incorporated herein by reference; and
WHEREAS, FAB Capital owns, and has the unrestricted right to sell, transfer
and convey to the Company a total of 775,180 shares of the $0.01 par value
common stock of King's Road Entertainment, Inc., a Delaware corporation (the
"FAB Properties"),
WHEREAS, Western owns, and has the unrestricted right to sell, transfer and
convey to the Company a total of 266,418 shares of the $0.01 par value common
stock of King's Road Entertainment, Inc., a Delaware corporation and 500,000
shares of the $0.01 par value common stock of Metropolitan Worldwide, Inc. (the
"Western Properties"),
WHEREAS, the Company wishes to acquire the FAB Companies, the FAB
Properties and the Western Properties, solely in exchange for Company
Securities; and
WHEREAS, the Company's stockholders previously approved, subject only to
the closing of this Reorganization Agreement, a reverse stock split which has
positioned the Company to complete the transactions contemplated by this
Agreement; and
WHEREAS, the Company's stockholders have previously approved, subject only
to the closing of this Reorganization Agreement, a change in the name of the
Company to FAB Global, Inc.
NOW, THEREFORE, in consideration of the mutual covenants, obligations and
benefits hereinafter set forth, the parties hereto agree as follows:
1-A. REPRESENTATIONS AND WARRANTIES BY FAB CAPITAL. FAB Capital hereby
represents and warrants to the Company:
a. Authority and Corporate Action. FAB Capital has all requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated herein.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate action and no other corporate proceeding on the part of any FAB
Company is necessary to authorize this Agreement or to consummate the
transactions contemplated herein. The Board of Directors of FAB Capital has, by
the unanimous vote of all directors present, determined that the transaction
contemplated hereby is advisable and fair and in the best interests of FAB
Capital and its stockholders, and expressly approved the transactions
contemplated hereby in accordance with applicable law. This Agreement has been
duly executed and delivered by FAB Capital and, assuming the due authorization,
execution and delivery thereof by the Company and Western, constitutes the
legal, valid and binding obligation of FAB Capital enforceable in accordance
with its terms. When delivered to the Company in accordance with the terms of
this agreement, the FAB Companies and the FAB Properties will be free and clear
of any security interests, liens, claims, pledges, agreements, limitations on
voting rights, charges or other encumbrances of any nature whatsoever
("Encumbrances").
b. Organization and Qualification. FAB Capital is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Idaho, has all requisite corporate or other power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing to do business in the
State of Idaho and each other jurisdiction in which the nature of the business
conducted by it or the ownership or leasing of its properties makes such
qualification necessary.
Each of the FAB Companies is a corporation duly organized, validly existing
and in good standing under the laws of its state or other jurisdiction of
incorporation, has all requisite corporate or other power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing to do business in the
state or other jurisdiction of incorporation and each other jurisdiction in
which the nature of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary. The FAB Companies have no
directly or indirectly owned subsidiaries.
c. Articles of Incorporation and By-Laws. Each of the FAB Companies has
heretofore furnished to the Company complete and correct copies of its' Articles
of Incorporation and By-Laws, or equivalent corporate documents, including all
amendments thereto or restatements thereof. None of the FAB Companies are in
violation of any of the provisions of their respective Articles of Incorporation
and By-Laws, or equivalent corporate documents.
All original documents and other information relating to each of the FAB
Companies' affairs has been made available to all parties to this Agreement.
Included within the documents made available have been at least the Articles of
Incorporation or equivalent corporate documents and any amendments thereto,
By-laws or equivalent corporate documents and any amendments thereto, Minutes of
all of the meetings of the Incorporators, Directors and stockholders, all
financial statements and copies of all contracts, leases, patents, copyrights,
licenses, trademarks or agreements to which any of the FAB Companies is a party
or in which any of the FAB Companies has an interest.
d. Capitalization of FAB Companies. Exhibit "A-1" attached hereto and
incorporated herein by this reference sets forth detailed information respecting
the capital structure of each of the FAB Companies. Such information includes
but is not limited to: a description of the authorized, issued and outstanding
capital stock of each FAB Company; a description of the authorized, issued and
outstanding convertible equity and/or debt securities, if any, of each FAB
Company; a description of the authorized, issued and outstanding non-convertible
debt securities, if any, of each FAB Company; and a description of all options,
warrants, calls or other rights, agreements, arrangements or commitments
presently outstanding obligating any FAB Company to issue, deliver or sell
shares of its equity or debt securities, or obligating any FAB Company to grant,
extend or enter into any such option, warrant, call or other such right,
agreement, arrangement or commitment (collectively "FAB Company Securities").
Exhibit A-1 sets forth detailed information respecting the identity and holdings
of each owner of FAB Company Securities, showing for each such holder the type,
number and percentage of class of FAB Company Securities owned by such holder as
of the date hereof.
All of the issued and outstanding FAB Company Securities are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Articles of Incorporation, By-Laws or
equivalent organizational documents of any FAB Company or any agreement to which
any FAB Company is a party or bound. All outstanding FAB Company Securities
owned by FAB Capital are owned free and clear of any Encumbrances. FAB Capital
is the sole owner (both legal and equitable) of and has good and marketable
title to the FAB Properties, and has or will have at the Closing Date, the
absolute right to sell, assign, transfer, convey and deliver the FAB Properties
to the Company.
e. FAB Properties. Exhibit "B-1" attached hereto and incorporated herein by
this reference sets forth detailed information respecting the capital structure
of each issuer of securities included in the FAB Properties. Such information
includes but is not limited to: a description of the authorized, issued and
outstanding capital stock of the Issuer of such securities; a description of the
authorized, issued and outstanding convertible equity and/or debt securities, if
any, of the Issuer of such securities; a description of the authorized, issued
and outstanding non-convertible debt securities, if any, of the Issuer of such
securities; and a description of all options, warrants, calls or other rights,
agreements, arrangements or commitments presently outstanding obligating the
Issuer of such securities to issue, deliver or sell shares of its equity or debt
securities, or obligating the Issuer of such securities to grant, extend or
enter into any such option, warrant, call or other such right, agreement,
arrangement or commitment.
All of the securities included in the FAB Properties are duly authorized,
validly issued, fully paid, nonassessable and not subject to preemptive rights
created by statute, the Articles of Incorporation, By-Laws or equivalent
organizational documents of the Issuer of such securities or any agreement to
which the Issuer of such securities is a party or bound. All of the securities
included in the FAB Properties are owned by FAB Capital free and clear of any
Encumbrances. FAB Capital is the sole owner (both legal and equitable) of and
has good and marketable title to the FAB Properties, and has or will have at the
Closing Date, the absolute right to sell, assign, transfer, convey and deliver
the FAB Properties to the Company.
f. No Conflict; Required Filings and Consent. The execution and delivery of
this Agreement by FAB Capital does not, and the performance of this Agreement by
FAB Capital will not (i) conflict with or violate the Articles of Incorporation
or By-Laws of FAB Capital or any of the FAB Companies, (ii) conflict with or
violate any federal, state, or local law, statute, ordinance, rule, regulation,
order, judgment or decree (collectively, "Laws") in effect as of the date of
this Agreement and applicable to FAB Capital or any of the FAB Companies or by
which their respective properties are bound or subject, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of an Encumbrance on, any of the properties or
assets of any of the FAB Companies pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which any FAB Company is a party or by which any of
the FAB Companies or its properties are bound or subject except for breaches,
defaults, events, rights of termination, amendment, acceleration or
cancellation, payment obligations or liens or Encumbrances that would not have a
material adverse effect on the business, properties, assets, condition
(financial or otherwise) operations or prospects of any of the FAB Companies,
taken as a whole (a "FAB Company Material Adverse Effect").
The execution and delivery of this Agreement by FAB Capital does not, and
the performance of this Agreement by FAB Capital will not, require FAB Capital
or any of the FAB Companies to obtain any consent, approval, authorization or
permit of, or to make any filing with or notification to, any governmental or
regulatory authority ("Governmental Entities") based on laws, rules, regulations
and other requirements of Governmental Entities in effect as of the date of this
Agreement, except for applicable requirements, if any, of (i) federal or state
securities laws and the filing and recordation of certain corporate documents
and (ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not, either
individually or in the aggregate, prevent FAB Capital from performing its
obligations under this Agreement or have a FAB Company Material Adverse Effect.
g. Permits; Compliance. Each of the FAB Companies is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "FAB Company Permits"), and there is no action,
proceeding or investigation pending or, to the knowledge of FAB Capital,
threatened, regarding suspension or cancellation of any of the FAB Company
Permits. None of the FAB Companies are in conflict with, or in default or
violation of (a) any Law applicable to any FAB Company or by which any of their
respective properties are bound or subject or (b) any of the FAB Company
Permits, except for any such conflicts, defaults or violations which would not
have a FAB Company Material Adverse Effect.
h. Financial Statements. Exhibits "C-1 to C-6" which are attached hereto
and incorporated herein by reference, contain (1) the audited financial
statements of each FAB Company as of the end of its most recent fiscal year
containing a balance sheet and the related statements of operations, cash flows
and shareholders' equity for the period then ended, together with the report
thereon of an independent certified public accountant or equivalent
professional, and (2) unaudited interim financial statements of each FAB Company
as of the end of its most recent fiscal quarter containing a balance sheet and
the related statements of operations, cash flows and shareholders' equity for
the period then ended (the "FAB Company Financial Statements"). To the best of
FAB Capital's knowledge, the FAB Company Financial Statements have been prepared
in accordance with generally accepted accounting principles and practices
consistently followed by each of the FAB Companies throughout the periods
indicated, and fairly present the financial position of each of the FAB
Companies as of the date thereof. Except as described in the notes to the FAB
Company Financial Statements, the FAB Companies have not:
(1) issued any FAB Company Securities;
(2) paid or declared any dividends or distributions of capital, surplus, or
profits with respect to issued and outstanding FAB Company Securities;
(3) paid or agreed to pay any consideration in redemption of any issued and
outstanding FAB Company Securities; or
(4) entered into any other transaction or agreement which would, or might,
materially impair its shareholders' equity of any FAB Company as reflected
in its financial statements.
i. No Undisclosed Liabilities. There are no liabilities of any FAB Company
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances which could reasonably be expected to result in such a
liability, other than liabilities fully reflected or reserved against on the FAB
Company Financial Statements; and liabilities which, individually or in the
aggregate, would not have a FAB Company Material Adverse Effect.
j. Absence of Certain Changes or Events. Except as disclosed in Exhibit
"C-7," there has not been any significant change by any FAB Company in its
accounting methods, principles or practices or any circumstance that would
constitute a FAB Company Material Adverse Effect.
k. Absence of Litigation. Except as disclosed in the notes to the FAB
Company Financial Statements there is no claim, action, suit, litigation,
proceeding, arbitration or investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief), pending or
threatened against any of the FAB Companies or any properties or rights of any
FAB Company and no FAB Company is subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement with, or
continuing investigation by, any Governmental Entity, or any judgment, order,
writ, injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease-and-desist or other orders.
l. Taxes. Each of the FAB Companies has filed all federal, state and local
tax returns required by law, or has filed proper extensions, and has paid all
taxes, assessments and penalties due and payable. The provisions for taxes, if
any, reflected in the most recent balance sheets included in the FAB Company
Financial Statements are adequate for any and all federal, state, county and
local taxes for the period ending on the date of that balance sheet and for all
prior periods, whether or not disputed. There are no present disputes as to
taxes of any nature payable by any of the FAB Companies.
m. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated in this Agreement based upon arrangements made by or
on behalf of FAB Capital and Western except for fees consisting of 570,000
shares of the Company's common stock that will be issued to certain financial
consultants and other professionals as payment for services rendered in
connection with the transaction contemplated hereby.
n. Intellectual Property Rights. Each of the FAB Companies has good and
marketable title to all patents, know-how, trade secrets, trademarks and other
intellectual properties required for its business as presently conducted. Such
intellectual properties are free and clear of all liens, charges, encumbrances,
or restrictions, however characterized. All of the contracts, leases, subleases,
patents, copyrights, licenses and agreements, however characterized, under which
any of the FAB Companies holds any such intellectual properties are in full
force and effect. None of the FAB Companies are in default under any of the
material terms or provisions of any contracts, leases, subleases, patents,
copyrights, licenses or agreements under which such FAB Company holds its
intellectual properties. There are no known claims against any FAB Company
concerning its rights under the leases, subleases, patents, copyrights, licenses
and agreements and concerning its right to continued possession of the
intellectual properties.
o. Necessary Contracts. Each of the FAB Companies has entered into and
validly holds all necessary agreements for the operation of their respective
Businesses (the "Necessary Contracts"). All Necessary Contracts are in full
force and effect, without any pending (or to the best of FAB Capital's
knowledge, threatened) modification, amendment or termination of such Necessary
Contracts. The FAB Companies have performed all of their obligations under the
Necessary Contracts. The FAB Companies are not in default under any Necessary
Contract, nor is there any condition, event or occurrence existing, nor is any
proceeding pending (or, to the best of FAB Capital's knowledge, threatened) or
being conducted by any governmental authority or any other party, which would
cause the termination, suspension or cancellation of any Necessary Contract. FAB
Capital has no knowledge of any material breach or anticipated material breach
by the other parties to the Necessary Contracts. The operation of the FAB
Companies have been and are being conducted in accordance with all applicable
provisions of such Necessary Contracts.
p. Investment Intent. FAB Capital is acquiring the Common Stock of the
Company solely for its own account, for investment, and not with a view to any
subsequent "distribution" thereof within the meaning of that term as defined in
the Securities Act of 1933, as amended (said Act and rules and regulations
promulgated thereunder being hereinafter referred to as the "Securities Act").
FAB Capital understands that the Common Stock of the Company has not been
registered under the Securities Act or securities laws of any State ("State
Act") by reason of the specific exemptions therefrom, which exemptions depend in
part upon the subjective investment intent of FAB Capital as expressed herein.
q. Survival of Representations and Warranties. All of the representations
and warranties set forth above are true as of the date of this Agreement, shall
be true at the Closing Date and shall survive the closing for a period of three
(3) years from the Closing Date.
1-B. REPRESENTATIONS AND WARRANTIES BY WESTERN. Western hereby
represents and warrants to the Company:
a. Authority and Corporate Action. Western has all requisite power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated herein. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary action and no
other proceeding on the part of any other person is necessary to authorize this
Agreement or to consummate the transactions contemplated herein. The Trustee of
Western has determined that the transaction contemplated hereby is advisable and
fair and in the best interests of Western and its beneficiaries, and expressly
approved the transactions contemplated hereby in accordance with applicable law.
This Agreement has been duly executed and delivered by Western and, assuming the
due authorization, execution and delivery thereof by the Company, constitutes
the legal, valid and binding obligation of Western enforceable in accordance
with its terms. When delivered to the Company in accordance with the terms of
this Agreement, the Western Properties will be free and clear of any
Encumbrances.
b. Organization and Qualification. Western is a trust duly organized,
validly existing and in good standing under the laws of the United Kingdom, has
all requisite corporate or other power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in the United Kingdom and
each other jurisdiction in which the nature of the business conducted by it or
the ownership or leasing of its properties makes such qualification necessary.
c. Declaration of Trust. Western has heretofore furnished to the Company
complete and correct copies of its' Declaration of Trust, or equivalent
documents, including all amendments thereto or restatements thereof. Western is
not in violation of any of the provisions of its Declaration of Trust, or
equivalent corporate documents.
d. Western Properties. Exhibit "B-2" attached hereto and incorporated
herein by this reference sets forth detailed information respecting the capital
structure of each issuer of securities included in the Western Properties. Such
information includes but is not limited to: a description of the authorized,
issued and outstanding capital stock of the Issuer of such securities; a
description of the authorized, issued and outstanding convertible equity and/or
debt securities, if any, of the Issuer of such securities; a description of the
authorized, issued and outstanding non-convertible debt securities, if any, of
the Issuer of such securities; and a description of all options, warrants, calls
or other rights, agreements, arrangements or commitments presently outstanding
obligating the Issuer of such securities to issue, deliver or sell shares of its
equity or debt securities, or obligating the Issuer of such securities to grant,
extend or enter into any such option, warrant, call or other such right,
agreement, arrangement or commitment.
All of the securities included in the Western Properties are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Articles of Incorporation, By-Laws or
equivalent organizational documents of the Issuer of such securities or any
agreement to which the Issuer of such securities is a party or bound. All of the
securities included in the Western Properties are owned by Western Capital free
and clear of any Encumbrances. Western Capital is the sole owner (both legal and
equitable) of and has good and marketable title to the Western Properties, and
has or will have at the Closing Date, the absolute right to sell, assign,
transfer, convey and deliver the Western Properties to the Company.
e. No Conflict; Required Filings and Consent. The execution and delivery of
this Agreement by Western does not, and the performance of this Agreement by
Western will not (i) conflict with or violate its Declaration of Trust, (ii)
conflict with or violate any Laws in effect as of the date of this Agreement and
applicable to Western or by which its properties are bound or subject, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under any agreement to which
Western is a party or by which the Western Properties are bound.
The execution and delivery of this Agreement by Western does not, and the
performance of this Agreement by Western will not, require Western to obtain any
consent, approval, authorization or permit of, or to make any filing with or
notification to, any Governmental Entities based on laws, rules, regulations and
other requirements of Governmental Entities in effect as of the date of this
Agreement, except for applicable requirements, if any, of (i) federal or state
securities laws and the filing and recordation of certain corporate documents
and (ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not, either
individually or in the aggregate, prevent Western from performing its
obligations under this Agreement.
f. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated in this Agreement based upon arrangements made by or
on behalf of FAB Capital and Western except for fees consisting of 570,000
shares of the Company's common stock that will be issued to certain financial
consultants and other professionals as payment for services rendered in
connection with the transaction contemplated hereby.
g. Investment Intent. Western is acquiring the Common Stock of the Company
solely for its own account, for investment, and not with a view to any
subsequent "distribution" thereof within the meaning of that term as defined in
the Securities Act. Western understands that the Common Stock of the Company has
not been registered under the Securities Act or any State Act by reason of the
specific exemptions therefrom, which exemptions depend in part upon the
subjective investment intent of Western as expressed herein.
h. Survival of Representations and Warranties. All of the representations
and warranties set forth above are true as of the date of this Agreement, shall
be true at the Closing Date and shall survive the closing for a period of three
(3) years from the Closing Date.
2. AFFIRMATIVE COVENANTS.
(a) SEC Reporting Obligations. For so long as the Company's common stock is
registered under the Securities Exchange Act of 1934, as amended (said Act and
rules and regulations promulgated thereunder being hereinafter referred to as
the "Exchange Act"), the Company (i) will file all forms, reports, statements
and other documents required to be filed with (A) the Securities and Exchange
Commission ("SEC"), including, without limitation (1) all Annual Reports on Form
10-KSB, (2) all Quarterly Reports on Form 10-QSB, (3) all proxy statements
relating to meetings of stockholders (whether annual or special), (4) all
Reports on Form 8-K, (5) all other reports or registration statements and (6)
all amendments and supplements to all such reports and registration statements
and (B) any state, local or other governmental authority pursuant to applicable
laws regulating the offer and sale of securities (the "Blue Sky Laws") and (C)
all forms, reports, statements and other documents required to be filed with any
other applicable federal or state regulatory authorities. The Company Reports
shall be prepared in all material respects in accordance with the requirements
of applicable Law (including, the Securities Act and Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Company Reports) and shall not at the time they are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
(b) Reports to Stockholders. For so long as the Company's common stock is
registered under the Exchange Act, the Company will hold an annual meeting of
shareholders for the election of directors within 180 days after the end of each
of the Company's fiscal years and, within 180 days after the end of each of the
Company's fiscal years, will provide the Company's shareholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements shall be those required by
Rule 14a-3 under the Securities Exchange Act, and shall be included in an annual
report meeting the requirements of the Rule. Further, the Company agrees to make
available to the Company's shareholders in printable form within 60 days after
the end of each fiscal quarter of the Company (other than the last fiscal
quarter in any fiscal year) reasonably itemized financial statements of the
Company and its subsidiaries, if any, for the fiscal quarter just ended and a
narrative discussion of such financial statements and the business conducted by
the Company and its subsidiaries, if any, during such quarter.
3. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company hereby
represents and warrants to FAB Capital and Western:
a. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia, has all requisite corporate or other power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary. The
Company has no directly or indirectly owned subsidiaries.
b. Articles of Incorporation and By-Laws. The Company has heretofore
furnished to FAB Capital and Western complete and correct copies of its'
Articles of Incorporation and By-Laws, including all amendments thereto or
restatements thereof. The Company is not in violation of any of the provisions
of its Articles of Incorporation, By-Laws.
c. Capitalization. The Company has the corporate authority to issue a total
of 25,000,000 shares of $0.01 par value Common Stock and 5,000,000 shares of
$0.01 par value Preferred Stock, of which 5,181,085 shares were issued and
outstanding on April 1, 1999. The beneficial owners of such shares, as reflected
on the records of the Company, are identified in Exhibit "D" to this Agreement.
On April 2, 1999, the Corporation filed an amendment to its Certificate of
Incorporation that (i) changed the name of the Corporation from "Marci
International Imports, Inc." to "FAB Global Inc."; (ii) effected a reverse stock
split in the ratio of one (1) share of the $0.01 par value common stock of FAB
Global, Inc. ("New Common") for every eighteen (18) shares of the $0.01 par
value common stock of Marci International Imports, Inc. ("Old Common") currently
issued and outstanding; and (iii) increased its authorized capital stock to
25,000,000 shares of $0.01 par value Common Stock and 5,000,000 shares of $0.01
par value preferred stock.
No fractional shares of New Common will be issued in connection with the
reverse split and all calculations that would result in the issuance of a
fractional share will be rounded up to the nearest whole number. In addition, no
stockholder who was the beneficial owner of at least 100 shares of Old Common on
the date of the Amendment, will receive fewer than 100 shares of the New Common
of FAB Global, Inc. in connection with the implementation of the reverse split
and all calculations that would result in the issuance of fewer than 100 shares
of New Common to such a stockholder will be rounded up to 100 shares. As a
result of the amendment, the 5,181,085 issued and outstanding shares of Old
Common will be consolidated into approximately 300,000 shares of New Common
issued and outstanding, all of which are fully paid, validly issued and
nonassessable. Except as specifically provided herein and in certain agreements
between the parties and their respective legal counsel, no other capital stock
of the Company or any rights whatsoever to purchase additional capital stock of
the Company will be outstanding on the Closing Date. Except as specifically
provided herein and in such agreements with legal counsel, no Shareholder of the
Company will have or obtain any registration rights with respect to any shares
of the Company's capital stock that are issued and outstanding on the Closing
Date.
Immediately after the closing of this Agreement, the Company will have
approximately 12,720,000 shares of Common Stock issued and outstanding which
will be held beneficially and of record by the following classes of persons:
10,000,000 shares held by FAB Capital;
1,400,000 shares held by Western
300,000 shares, more or less, held by the original shareholders of
the Company;
300,000 shares held by Capston or its designees; 150,000 shares held by
legal counsel for the parties hereto; and 570,000 shares held by
certain financial consultants and other
professionals who introduced FAB Capital and Western to the
Company and assisted in the negotiation and documentation of
the transactions contemplated hereby.
d. Authority. Each of the Company, Capston Network Company and Sally A.
Fonner has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated herein. The execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action and no other corporate proceeding
on the part of the Company (including, without limitation, any approval by the
shareholders of the Company of this Agreement or the transactions contemplated
herein) is necessary to authorize this Agreement or to consummate the
transactions contemplated herein. This Agreement has been duly executed and
delivered by the Company, Capston Network Company and Sally A. Fonner and,
assuming the due authorization, execution and delivery hereof by FAB Capital and
Western, constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its terms.
e. No Conflict; Required Filings and Consents. The execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not (i) conflict with or violate the Certificate of
Incorporation or By-Laws, as amended or restated, of the Company, (ii) conflict
with or violate any Laws in effect as of the date of this Agreement applicable
to the Company or by which any of its properties is bound, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a lien or Encumbrance on, any of the
properties or assets of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the Company
or any of its properties is bound or subject except for breaches, defaults,
events, rights of termination, amendment, acceleration or cancellation, payment
obligations or liens or Encumbrances that would not have a material adverse
effect on the business, properties, assets, condition (financial or otherwise)
operations or prospects of the Company, taken as a whole, or on the transactions
herein contemplated ("Company Material Adverse Effect").
The execution and delivery of this Agreement by the Company and the
performance of this Agreement by the Company does not require the Company to
obtain any consent, approval, authorization or permit of, or to make any filing
with or notification to, any Governmental Entities, except for applicable
requirements, if any, of (i) the Securities Act, the Exchange Act, the Blue Sky
Laws, the National Association of Securities Dealers, and the filing and
recordation of appropriate such documents as required by General Corporation Law
of Georgia and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
either individually or in the aggregate, prevent the Company from performing its
obligations under this Agreement or have a Company Material Adverse Effect.
f. Permits; Compliance. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted
(collectively, the "Company Permits"), and there is no action, proceeding or
investigation pending or, to the knowledge of the Company, threatened, regarding
suspension or cancellation of any of the Company Permits. The Company is not in
conflict with, or in default or violation of (a) any Law applicable to the
Company or by which any of its properties is bound or subject or (b) any of the
Company Permits, except for any such conflicts, defaults or violations which
would not have a Company Material Adverse Effect. The Company has not received
from any Governmental Entity any written notification with respect to possible
conflicts, defaults or violations of Laws.
g. Reports; Financial Statements. The Company filed a voluntary petition
under Chapter 11 of the Bankruptcy Act on March 16, 1989 in the U.S. Bankruptcy
Court for the Northern District of Georgia (Case # 89-02801). On September 10,
1990, the Company's Chapter 11 case was converted by order of the Court into a
case in Chapter 7 which subsequently closed on July 14, 1995. As a result of the
Bankruptcy, the Company was inactive and engaged in no business activities
between September 10, 1990 and January 3, 1997 when its corporate charter was
restored. On August 18, 1997 the Company filed with the Securities and Exchange
Commission an omnibus Annual Report on Form 10-K for the fiscal years ended May
1989 through May 1997, together with quarterly reports for the periods ended
June 30 and September 30, 1996. Since May 1997, the Company has filed (i) all
forms, reports, statements and other documents required to be filed with (A) the
Securities and Exchange Commission ("SEC"), including, without limitation (1)
all Annual Reports on Form 10-KSB, (2) all Quarterly Reports on Form 10-QSB, (3)
all proxy statements relating to meetings of stockholders (whether annual or
special), (4) all Reports on Form 8-K, (5) all other reports or registration
statements and (6) all amendments and supplements to all such reports and
registration statements (collectively, the "Company SEC Reports") and (B) any
applicable Blue Sky Laws and (ii) all forms, reports, statements and other
documents required to be filed with any other applicable federal or state
regulatory authorities (all such forms, reports, statements and other documents
being referred to herein, collectively, as the "Company Reports"). The Company
Reports were prepared in all material respects in accordance with the
requirements of applicable Law (including, with respect to the Company SEC
Reports, the Securities Act and Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such the Company SEC
Reports) and (y) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Each of the financial statements (including, in each case, any related
notes thereto) contained in the Company SEC Reports filed prior to or on the
date of this Agreement (i) have been prepared in accordance with, and complied
as to form with, the published rules and regulations of the SEC and generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as otherwise noted therein) and (ii) fairly present the
financial position of the Company as of the respective dates thereof and the
results of its operations and cash flows for the periods indicated.
The Company's auditors have issued no management letters in connection with
the Company's financial statements.
Attached hereto as Exhibit "E", the text of which is hereby incorporated
herein by reference, are (1) the audited financial statements of the Company as
of May 4, 1998, containing the balance sheet and related statements of
operations, cash flow and shareholders' equity for the period then ended,
together with the report thereon of an independent certified public accountant,
and (2) unaudited interim financial statements of the Company as of February 6,
1999 containing a balance sheet and the related statements of operations, cash
flows and shareholders' equity for the period then ended (the "Company Financial
Statements"). To the best of the Company's knowledge, the Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles and practices consistently followed by the Company throughout the
period indicated, and fairly present the consolidated financial position of the
Company as of the date thereof. Except as described in the notes to the Company
Financial Statements, the Company has not
(1) issued any shares of its capital stock, or any options or rights to
acquire such securities, to any person;
(2) paid or declared any dividends or distributions of capital, surplus, or
profits with respect to any of its issued and outstanding shares of capital
stock;
(3) paid or agreed to pay any consideration in redemption of any of its
issued and outstanding capital stock; or
(4) entered into any other transaction or agreement which would, or might,
materially impair its shareholders' equity as reflected in such financial
statements.
h. No Undisclosed Liabilities. There are no liabilities of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, other than (a)
liabilities fully reflected or reserved against on the balance sheet contained
in the Company's 1998 Annual Report on Form 10-KSB for the fiscal year ended May
4, 1998 or in the unaudited consolidated balance sheet contained in the
Quarterly Reports on Form 10-QSB for the fiscal quarters ended August 5, 1998,
November 5, 1998 and February 6, 1999; (b) liabilities under this Agreement and
fees and expenses related thereto; and (c) liabilities which, individually or in
the aggregate would not have a Company Material Adverse Effect.
i. Absence of Certain Changes or Events. Except as disclosed in SEC Reports
filed prior to or on the date of this Agreement, there has not been any
significant change by the Company in its accounting methods, principles or
practices.
j. Absence of Litigation. There is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of the Company, investigation of
any kind, at law or in equity (including actions or proceedings seeking
injunctive relief), pending or, to the knowledge of the Company, threatened
against the Company or any properties or rights of the Company and the Company
is not subject to any continuing order of, consent decree, settlement agreement
or other similar written agreement with, or, to the knowledge of the Company,
continuing investigation by, any Governmental Entity, or any judgment, order,
writ, injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease and desist or other orders.
k. Taxes. The Company has filed all federal, state and local tax returns
required by law, or has filed proper extensions, and has paid all taxes,
assessments and penalties due and payable. The provisions for taxes, if any,
reflected in the most recent balance sheet included in the Company Financial
Statements are adequate for any and all federal, state, county and local taxes
for the period ending on the date of that balance sheet and for all prior
periods, whether or not disputed. There are no present disputes as to taxes of
any nature payable by the Company.
l. Brokers. Except as specifically disclosed to FAB Capital and Western, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated in this
Agreement based upon arrangements made by or on behalf of the Company.
m. Company Corporate Action. The stockholders of the Company have approved
the transaction contemplated hereby in accordance with the applicable provisions
of Georgia law.
n. Environmental Laws and Regulations. The Company is in material
compliance with all applicable Environmental Laws, which compliance includes,
but is not limited to, the possession by the Company of all material permits and
other governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof and compliance with
notification, reporting and registration provisions under applicable
Environmental Laws; the Company has not received notice of, or, to the knowledge
of the Company, is the subject of any Environmental Claim; and to the knowledge
of the Company, there are no circumstances that are reasonably likely to prevent
or interfere with such material compliance in the future, or to require material
expenditures to maintain such material compliance in the future.
There are no Environmental Claims that are pending or, to the knowledge of
the Company, threatened against the Company or, to the knowledge of the Company,
against any person or entity whose liability for any Environmental Claim the
Company has or may have retained or assumed either contractually or by operation
of law.
To the knowledge of the Company, there are no circumstances that could form
the basis for an Environmental Claim against the Company, or against any person
or entity whose liability for any Environmental Claim the Company has or may
have retained or assumed either contractually or by operation of law.
o. Contract Rights. Except for this Agreement and the agreements
contemplated herein, the Company is not a party to or bound by any contract or
agreement, whether written or oral, including, without limitation, any contract
or agreement for employment, consulting or similar services, for capital
expenditures or the acquisition or construction of fixed assets, which
constitutes any note, bond, indenture or other evidence of indebtedness or
guaranty or security for indebtedness of others, for the sale of any asset, or
the grant of any right or option to purchase such asset, which constitutes a
lease, which purports to limit the freedom of the Company to compete in any line
of business or in any geographic area or to borrow money or incur indebtedness.
p. Employee Benefit Plans.
Except for its' Incentive Stock Plan, the Company does not have, and has
not had any employee benefit plan (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of the ERISA), or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, insurance or other plan, arrangement
or understanding (whether or not legally binding). No incentive grants of any
type or nature are outstanding under the Company's Incentive Stock Plan and no
person has any right to require the Company to issue any such incentive grant in
the future.
The Company is not party to any collective bargaining agreement.
The Company has no obligation for retiree health, medical or life insurance
benefits under any plan or arrangement.
The Company has no employees other than Sally A. Fonner.
q. Public Offering. The initial public offering of the Company was a bona
fide offering to the "public" as such term is used and defined in connection
with offerings of securities subject to the Securities Act in material
compliance with the Securities Act and the rules and regulations promulgated
thereunder. The Common Stock of the Company which was issued and outstanding
prior to the Closing Date of this Agreement has been (a) issued pursuant to a
valid claim of exemption under Section 4(2) of the Securities Act, (b) issued
pursuant to an effective registration statement under the Securities Act, or (c)
issued in violation of the applicable registration requirements of the
Securities Act, but at a date sufficiently remote from the Closing Date that the
purchasers of such shares are precluded from initiating or maintaining an action
in law or in equity based on the sale and issuance of such shares.
r. Transfer Agent. The Company has appointed American Stock Transfer &
Trust Company, 40 Wall Street, New York, New York as the Company's transfer
agent. The Company will continue to retain a transfer agent reasonably
satisfactory to FAB Capital and Western for so long as the Company is subject to
the reporting requirements under Section 12(g) or Section 15(d) of the Exchange
Act. The Company will make arrangements to have available at the office of the
transfer agent sufficient quantities of the Company's common stock certificates
as may be needed for the quick and efficient transfer of the Shares.
s. Survival of Representations and Warranties. All of the representations
and warranties set forth above are true as of the date of this Agreement, shall
be true at the Closing Date and shall survive the closing for a period of three
(3) years from the Closing Date.
4. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company hereunder shall be subject to the following conditions:
a. The Company shall not have discovered any material error, misstatement
or omission in any of the representations and warranties made by FAB Capital or
Western herein and all the terms and conditions of this Agreement to be
performed and complied with have been performed and complied with.
b. There shall have been no material adverse changes in the financial
condition, business or operations of any of the FAB Companies taken as a whole
from the end of their most recently completed fiscal quarters until the Closing
Date, except for changes resulting from operations in the usual and ordinary
course of business, and between such dates no business and assets of any FAB
Company shall have been materially adversely affected as the result of any fire,
explosion, earthquake, flood, accident, strike, lockout, combination of the
workmen, condemnation of any assets by any governmental authorities, riot,
activities of armed forces, or Acts of God or of the public enemies.
c. There shall have been no material adverse changes in the financial
condition, business or operations of any FAB Company, except for immaterial
changes resulting from operations in the usual ordinary course of the business.
d. The Company shall have received the opinion of Davis W. Parsons, Esq.,
legal counsel for FAB Capital, to the effect that as of the Closing Date:
(1) Each of the FAB Companies is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the power and authority to own its properties and to
carry on its business as it is now being conducted in each jurisdiction
where such qualification is necessary;
(2) The securities included in the FAB Properties and the Western
Properties are validly issued, fully paid and nonassessable;
(3) This Agreement has been duly executed and delivered by FAB Capital and
Western and constitutes a legal, valid and binding obligation of FAB
Capital and Western enforceable in accordance with its terms.
5. CONDITIONS TO THE OBLIGATIONS OF FAB CAPITAL AND WESTERN. The
obligations of FAB Capital and Western hereunder are subject to the following
conditions:
a. FAB Capital and Western shall not have discovered any material error or
misstatement in any of the representations and warranties made by the Company
herein and all the terms and conditions of this Agreement to be performed and
complied with by the Company have been performed and complied with.
b. There shall have been no material adverse changes in the financial
condition, business or operations of the Company, from February 6, 1999 until
the Closing Date, except for changes resulting from those operations in the
usual ordinary course of the business.
c. FAB Capital and Western shall have received the opinion of John L.
Petersen, Esq. legal counsel for the Company, to the effect that as of the
Closing Date:
(1) The Company is a corporation duly organized and validly existing under
the laws of the State of Georgia and has the power and authority to own its
properties and to carry on its business as it is now being conducted in
each jurisdiction where such qualification is necessary;
(2) The execution, delivery and performance of this Agreement by the
Company has been duly authorized by all necessary corporate action and
constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms;
(3) When delivered to FAB Capital and Western pursuant to the terms of this
Agreement, the Common Stock of the Company will be validly issued, fully
paid and nonassessable;
(4) The Common Stock of the Company which was issued and outstanding prior
to the Closing Date of this Agreement has been (a) issued pursuant to a
valid claim of exemption under Section 4(2) of the Securities Act, (b)
issued pursuant to an effective registration statement under the Securities
Act, or (c) issued in violation of the applicable registration requirements
of the Securities Act, but at a date sufficiently remote from the Closing
Date that the purchasers of such shares are precluded from initiating or
maintaining an action in law or in equity based on the sale and issuance of
such shares; and
(5) The Common Stock of the Company is fully registered under the Exchange
Act and the Company has, for the preceding 12 months, filed all reports
required to be filed under Sections 12 and 15 of the Exchange Act.
6. CLOSING DATE. The final closing of this Agreement shall take place in
New York, New York on April 5, 1999, or at such other reasonable time and place
as the parties hereto shall agree upon.
7. ACTIONS AT CLOSING. At the time of the closing set forth in Section 6
the Company shall issue and deliver to FAB Capital share certificates evidencing
the ownership of 10,000,000 shares of the Company's Common Stock; the Company
shall issue and deliver to Western share certificates evidencing the ownership
of 1,400,000 shares of the Company's Common Stock; and FAB Capital and Western
shall deliver to the Company (a) certificates evidencing the ownership of all
issued and outstanding FAB Company Securities, duly endorsed to the Company, (b)
certificates evidencing the ownership of the FAB Properties, duly endorsed to
the Company, (c) certificates evidencing the ownership of the Western
Properties, duly endorsed to the Company, (d) such deeds, bills of sale,
assignments, endorsements, checks and other good and sufficient instruments of
sale, transfer and conveyance, in such form and substance as the Company shall
reasonably request and consistent with all applicable law, as shall be effective
to vest in the Company all right and title to, and interest in, the FAB
Properties and Western Properties free and clear of all Encumbrances, and (e)
all contracts and commitments, instruments, books and records and other data
being conveyed hereunder and relating to the FAB Companies, and, simultaneous
with such delivery, FAB Capital will take such steps as may be reasonably
required to put the Company in actual possession and operating control of the
FAB Companies. At any time and from time to time after the Closing Date, on the
Company's reasonable request, FAB Capital and Western will execute, acknowledge
and deliver such further deeds, assignments and transfers and take such actions
as may be required in conformity with this Agreement for the adequate
assignment, transfer, and grant to the Company of the FAB Companies, the FAB
Properties and the Western Properties.
8. ISSUANCE OF SECURITIES. At or subsequent to the Closing, the Company
will issue and deliver share certificates evidencing the ownership of the
Company's Common Stock in the following amounts to the following parties:
a. 300,000 Company's Common Shares to Capston Network Company or its
designees as compensation for services rendered to the Company in connection
with its business activities, including the transaction contemplated by this
Agreement. Such shares shall be registered under the Securities Act prior to
issuance.
b. 570,0000 Company's Common Shares to be issued in lieu of a Finder's Fee.
Such shares shall be registered under the Securities Act prior to issuance.
Notwithstanding the foregoing, no finder's fees will be paid to Capston Network
Company, Sally A. Fonner or any of their respective employees, agents or
affiliates without the prior consent of FAB Capital.
c. 150,0000 Company's Common Shares to be issued to legal counsel for the
parties as compensation for services rendered in connection with the transaction
contemplated hereby. Such shares shall be registered under the Securities Act
prior to issuance. Notwithstanding the foregoing, no finder's fees will be paid
to Capston Network Company, Sally A. Fonner or any of their respective
employees, agents or affiliates without the prior consent of FAB Capital.
9. ACTIONS AT THE CLOSING. At the final closing of this Agreement, the
Company, FAB Capital and Western will each deliver, or cause to be delivered to
the other, the shares of stock to be exchanged in accordance with Section 7 of
this Agreement and each party shall pay any and all federal and state taxes
required to be paid in connection with the issuance and the delivery of their
own securities. All stock certificates shall be in the name of the party to
which the same are deliverable, as specified herein. In addition to the
above-mentioned exchange of certificates, the following transactions will take
place at the final closing.
FAB Capital and Western will deliver to the Company:
(1) The opinion of Davis W. Parsons, Esq., legal counsel for FAB Capital,
as provided for in Section 4(d) hereof;
(2) A certificate of corporate good standing or equivalent document for
each of the FAB Companies from the appropriate governmental authority in
its jurisdiction of incorporation which shall be dated no more than sixty
(60) days prior to the Closing Date;
(3) A certificate by a principal officer of FAB Capital that each of the
representations and warranties of FAB Capital are true and correct as of
the Closing Date and that all of the conditions to the obligations of the
Company which are to be performed by FAB Capital have been performed as of
the Closing Date; and
(4) A certificate by the Trustee of Western that each of the
representations and warranties of Western are true and correct as of the
Closing Date and that all of the conditions to the obligations of the
Company which are to be performed by Western have been performed as of the
Closing Date; and
(5) The deeds, bills of sale and other instruments of transfer specified in
Section 7 of this Agreement.
The Company will deliver to FAB Capital and Western:
(1) Duly certified copies of corporate resolutions and other corporate
proceedings taken by the Company to authorize the execution, delivery and
performance of this Agreement;
(2) The opinion of John L. Petersen, Esq. legal counsel for the Company, as
provided for in Section 5(c) hereof;
(3) A certificate executed by a principal officer of the Company attesting
that the foregoing representations and warranties of the Company are true
and correct as of the Closing Date and that all of the conditions to the
obligations of FAB Capital and Western which are to be performed by the
Company have been performed as of the Closing Date;
(4) A certificate of corporate good standing for the Company from the
Georgia Secretary of State which shall be dated no more than 60 days prior
to the Closing Date; and
(5) Certificates for the shares of Common Stock specified in Section 7 of
this Agreement.
10. CONDUCT OF BUSINESS. Between the date hereof and the Closing Date, the
Company, FAB Capital, Western and each of the FAB Companies shall conduct its
business in the same manner in which it has heretofore been conducted and FAB
Capital will not permit any FAB Company to (1) enter into any contract, other
than in the ordinary course of business, or (2) declare or make any distribution
in the nature of a dividend or return of capital to FAB Capital without first
obtaining the written consent of the Company. Likewise, the Company will not (1)
enter into any contract, other than in the ordinary course of business, or (2)
declare or make any distribution in the nature of a dividend or return of
capital to its shareholders without first obtaining the written consent of FAB
Capital and Western.
11. BOARD OF DIRECTORS. Promptly after compliance with Section 14(f) of the
Exchange Act, the Board of Directors of the Company shall have a meeting, at
which all of the present directors of the Company shall resign, and they shall
elect as members of the Company's Board of Directors, in accordance with the
By-Laws of the Company, such individuals as FAB Capital and Western shall
designate to the Company in writing.
12. FUTURE REGISTRATION OF COMMON STOCK. FAB Capital and Western understand
that because the Common Stock has not been registered under the Securities Act
or any State Act, they must hold the Common Stock indefinitely, and cannot
dispose of any or all of the Common Stock unless such Common Stock is
subsequently registered under the Securities Act and any applicable State Act,
or exemptions from registration are available. FAB Capital and Western
acknowledge and understand that they have no independent right to require the
Company to register the shares of Common Stock. FAB Capital and Western further
understand that the Company may, as a condition to the transfer of any of the
Common Stock, require that the request for transfer by FAB Capital and/or
Western be accompanied by an opinion of counsel in form and substance
satisfactory to the Company, provided at such Shareholder's expense, to the
effect that the proposed transfer does not result in violation of the Securities
Act or any applicable State Act, unless such transfer is covered by an effective
registration statement under the Securities Act and is in compliance with all
applicable State Acts.
13. TRANSFERABILITY. All certificates for shares of Common Stock which are
issued to FAB Capital and Western pursuant to the terms of this Agreement shall
be restricted securities within the meaning of Regulation D promulgated under
Section 4(2) of the Securities Act. The Company shall issue stop transfer
instructions to the transfer agent for its Common Stock with respect to the
transfer of the Common Stock and shall place the following legend on the
certificates representing such of Common Stock:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED PURSUANT TO
A TRANSACTION EFFECTED IN RELIANCE UPON AN EXEMPTION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND HAVE NOT BEEN THE SUBJECT OF A
REGISTRATION STATEMENT UNDER THE ACT OR ANY STATE SECURITIES ACT. THE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR APPLICABLE EXEMPTION THEREFROM UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES ACT."
14. ACCESS TO INFORMATION. Either previously or concurrently herewith, the
Company has delivered to FAB Capital and Western correct and complete copies of
all documents and records requested by FAB Capital and/or Western. In addition,
FAB Capital and Western have had the opportunity to ask questions of, and
receive answers from, officers and directors of the Company, and persons acting
on its behalf concerning the terms and conditions of the Agreement, and has
received sufficient information relating to the Company to enable them to make
an informed decision with respect to the acquisition of the Common Stock.
15. NO SOLICITATION. At no time was FAB Capital or Western presented with
or solicited by any leaflet, public promotion meeting, circular, newspaper or
magazine article, radio or television advertisement, or any other form of
general advertising in connection with its acquisition of the Common Stock.
16. EXPENSES. FAB Capital, Western and the Company shall each pay their
respective expenses incident to this Agreement and the transactions contemplated
hereby, including all fees of their counsel and accountants, whether or not such
transactions shall be consummated. FAB Capital and Western shall pay all other
fees and expenses incurred by the FAB Companies by reason of this Agreement and
the proposed transactions contemplated hereby.
17. ATTORNEYS FEES. In the event of any litigation among the parties
related to this Agreement, the prevailing party shall be entitled to reasonable
attorneys fees and costs to be fixed by the Court, said fees to include appeal
and collection of judgment.
18. ARBITRATION. All disputes concerning this Agreement or the transactions
contemplated herein will be submitted to binding arbitration in New York, New
York, in accordance with the rules of the American Arbitration Association. The
decisions of the Arbitrator must be delivered in writing accompanied by written
findings of fact and conclusions of law. Any court of competent jurisdiction may
enter judgment upon the Arbitrator's awards. The prevailing party, as part of
its damages, shall be entitled to recover its reasonable attorneys fees and
expenses incurred in such arbitration from the losing party.
19. MISCELLANEOUS.
a. This Agreement shall be controlled, construed and enforced in accordance
with the laws of the State of New York without giving effect to conflict of laws
principles thereof.
b. This Agreement shall not be assignable by any party without prior
written consent of the others.
c. All Section headings herein are inserted for convenience only. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, which together shall constitute one and the same instrument.
Facsimile signatures shall constitute original signatures.
d. This Agreement sets forth the entire understanding between the parties
and no amendments hereto shall be valid unless made in writing and signed by the
parties hereto.
e. This Agreement shall be binding upon and shall inure to the benefit of
the heirs, executors, administrators and assigns of FAB Capital and Western and
upon the successors and assigns of the Company.
f. All notices, requests, instructions, or other documents to be given
hereunder shall be in writing and sent by registered mail:
If to FAB Capital: with copies to
FAB Capital Corp. Davis W. Parsons, Esq.
50 Broadway, 14th floor 50 Broadway, 14th floor
New York, New York 10004 New York, New York 10004
If to Western: with copies to
Western Union Leasing, Ltd.. Davis W. Parsons, Esq.
10 Greycoat Place 50 Broadway, 14th floor
1 Premier House New York, New York 10004
London SW1 England
If to the Company: with copies to:
c/o Capston Network Company John L. Petersen, Esq.
1612 Osceola 5616 San Felipe
Clearwater, Florida 33755 Houston, Texas 77056
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
For:
FAB Capital Corp.
and Western Union Leasing, Ltd.
By:
Phillip Cook, President
For:
FAB Global, Inc.
By:
Sally A. Fonner, President
