UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
ADVANCED FINANCIAL, INC.
(Name of Issuer)
COMMON STOCK, $0.001 PAR VALUE
(Title of Class of Securities)
00753J602
(CUSIP Number)
PHILIP J. HOLTGRAVES
FIRST MORTGAGE INVESTMENT CO.
5425 MARTINDALE
SHAWNEE, KANSAS 66218
(913) 441-5600, ext. 3059
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
FEBRUARY 19, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP NO. 00753J602
1 Name of Reporting Person
IRS Identification Nos. of Above Person (entities only)
FIRST MORTGAGE INVESTMENT CO.
2. Check the appropriate Box if a Member of a Group (a) /X/
(b) / /
3. SEC Use Only
4. Source of Funds
OO
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization
MISSOURI
7. Sole Voting Power
-0-
NUMBER OF SHARES
8. Shared Voting Power
BENEFICIALLY OWNED 1,800,000
BY EACH REPORTING 9. Sole Dispositive Power
-0-
PERSON WITH
10. Shared Dispositive Power
1,800,000
11. Aggregate Amount Beneficially Owned by Each Reporting Person
4,800,000
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares / /
13. Percent of Class Represented by Amount in Row (11)
64%
14. Type of Reporting Person
CO
PAGE 2 OF 11 PAGES
<PAGE>
SCHEDULE 13D
1. Name of Reporting Person
IRS Identification Nos. of Above Person (entities only)
PHILIP J. HOLTGRAVES
2. Check the appropriate Box if a Member of a Group (a) /X/
(b) / /
3. SEC Use Only
4. Source of Funds
NOT APPLICABLE
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization UNITED STATES OF AMERICA
7. Sole Voting Power
0
NUMBER OF SHARES
8. Shared Voting Power
BENEFICIALLY OWNED 1,800,000
BY EACH REPORTING 9. Sole Dispositive Power
0
PERSON WITH
10. Shared Dispositive Power
1,800,000
11. Aggregate Amount Beneficially Owned by Each Reporting Person 4,800,000
(Includes shares beneficially owned by First Mortgage Investment Co.)
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares / /
13. Percent of Class Represented by Amount in Row (11) 64% (Includes shares
beneficially owned by First Mortgage
Investment Co.)
14. Type of Reporting Person
IN
PAGE 3 OF 11 PAGES
<PAGE>
SCHEDULE 13D
CUSIP NO. 00753J602
1 Name of Reporting Person
IRS Identification Nos. of Above Person (entities only)
THE PHILIP J. HOLTGRAVES REVOCABLE TRUST DATED JUNE 6, 1989
2. Check the appropriate Box if a Member of a Group (a) /X/
(b) / /
3. SEC Use Only
4. Source of Funds
NOT APPLICABLE
5. Check Box if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) / /
6. Citizenship or Place of Organization
Missouri
7. Sole Voting Power
-0-
NUMBER OF SHARES
8. Shared Voting Power
BENEFICIALLY OWNED 1,800,000
BY EACH REPORTING 9. Sole Dispositive Power
-0-
PERSON WITH
10. Shared Dispositive Power
1,800,000
11. Aggregate Amount Beneficially Owned by Each Reporting Person
4,800,000 (Includes shares beneficially owned by First
Mortgage Investment Co.)
12. Check Box if the Aggregate Amount in Row (11) Excludes
Certain Shares / /
13. Percent of Class Represented by Amount in Row (11)
64% (Includes shares beneficially owned by First Mortgage Investment Co.)
14. Type of Reporting Person
OO
PAGE 4 OF 11 PAGES
<PAGE>
ITEM 1. SECURITY AND ISSUER.
-------------------
The class of equity securities to which this statement relates is the
Common Stock, $0.001 par value per share, of Advanced Financial, Inc. (the
"Shares"). The principal executive offices of Advanced Financial, Inc. (the
"Issuer") are located at 5425 Martindale, Shawnee Kansas 66218.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
This statement is filed by First Mortgage Investment Co., a Missouri
corporation ("FMIC"), Mr. Philip J. Holtgraves, Chairman of the Board of
Directors and Chief Executive Officer of FMIC and The Philip J. Holtgraves
Revocable Trust dated June 6, 1989, a Missouri trust, (the "Trust") and the sole
stockholder of FMIC.
The principal business of FMIC is investing in the Issuer, real estate,
real estate mortgage transactions, and servicing and collection rights. The
address of FMIC's principal office is 5425 Martindale, Shawnee, Kansas 66218.
FMIC has not during the last five years been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors), nor during the last five
years has FMIC been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction resulting in any judgment, decree
or final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
Mr. Philip Holtgraves is an individual whose present principal occupation
is Chairman of the Board of Directors of Directors and Chief Executive Officer
of FMIC. Mr. Holtgraves' principal business office with FMIC is 5425 Martindale,
Shawnee, Kansas 66218. Mr. Holtgraves is a United States citizen. Mr. Holtgraves
has not during the last five years been convicted in any criminal proceeding
(excluding traffic violations or similar misdemeanors), nor during the last five
years has he been a party to a civil proceeding of any judicial or
administrative body resulting in any judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
The principal business of the Trust is investing in stocks, cash and other
personal property. The Trust's principal business office is 4407 W. 126th
Street, Leawood, Kansas 66209. The Trust has not during the last five years been
convicted in any criminal proceeding (excluding traffic violations or similar
misdemeanors), nor during the last five years has the Trust been a party to a
civil proceeding of any judicial or administrative body resulting in any
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
PAGE 5 OF 11 PAGES
<PAGE>
The Executive Officers and Directors of FMIC are:
Charles A. Holtgraves 5425 Martindale, President; Director
Shawnee, Kansas 66218
Philip J. Holtgraves 5425 Martindale, Chairman of the
Shawnee, Kansas 66218 Board and Chief
Executive Officer;
Director
Vesta M. Holtgraves 5425 Martindale, Director
Shawnee, Kansas 66218
To the knowledge of FMIC, Mr. Philip J. Holtgraves and the Trust, none of
the Executive Officers and Directors identified above has during the last five
years been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors), nor has any Executive Officer or Director identified
above during the last five years been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction resulting in any
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws. All Executive Officers and Directors
identified above are citizens of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
In 1997 and 1998, the Issuer and its wholly-owned subsidiary, AFI
Mortgage, Corp., filed for relief under Chapter 11 of the United States
Bankruptcy Code ("Bankruptcy Code") in the United States Bankruptcy Court,
District of Kansas, Topeka Division, Case Nos. 97-43122 and 98-41228. On
November 13, 1998, the United States Bankruptcy Court for the District of Kansas
entered an order (the "Confirmation Order") confirming the First Amended Joint
Plan of Reorganization dated July 29, 1998 of the Company and AFI Mortgage,
Corp. ("Plan of Reorganization").
Pursuant to the Plan of Reorganization, FMIC engaged in certain
transactions with the Issuer on February 19, 1999. FMIC purchased from the
Issuer for $1,030,000 in cash an office building and the land on which the
building sat located at 5425 Martindale, Shawnee, Kansas (the "Property"). FMIC
released its second mortgage on the Property having a principal balance of
$200,000. FMIC also entered into a Credit Agreement with the Issuer pursuant to
which FMIC agreed to loan the Issuer up to $875,000. The credit facility is for
a period of five years. Interest accrues on the principal balance at a rate of
7% per annum, and is payable quarterly. The principal balance of the loan is
payable at maturity.
PAGE 6 OF 11 PAGES
<PAGE>
Under the terms of the Plan of Reorganization, FMIC received 1,800,000
Shares of the Issuer in exchange for release of FMIC's second mortgage on the
Property. In order to encourage FMIC's participation in the Plan of
Reorganization and further investment in the Issuer, the Issuer entered into a
Stock Option Agreement with FMIC pursuant to the Plan of Reorganization,
granting FMIC an option to purchase an additional 3,000,000 Shares of the
Issuer. See Item 6 hereof for a description of the Stock Option Agreement.
This Item is inapplicable to the other Executive Officers and Directors of
FMIC.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
FMIC purchased the Shares on February 19, 1999 for investment purposes and
in order to obtain a significant ownership interest in the Issuer. Depending on
market conditions and other factors that FMIC may deem material to its
investment decision, FMIC may purchase additional Shares in the open market or
in private transactions or may dispose of all or a portion of the Shares that it
now owns or hereafter may acquire. While FMIC retains all options for potential
future actions, its present expectations are to remain a significant stockholder
of the Issuer, and as such to have influence upon future corporate development
of the Issuer.
Except as set forth in this Item 4, FMIC does not have any present plans
or proposals that relate to or that would result in any of the actions specified
in clauses (a) through (j) of Item 4 of Schedule 13D of the Act. FMIC reserves
the right to formulate such plans or proposals, and to take such action with
respect to any or all of such matters and any other matters as FMIC may
determine.
Under the terms of the Plan of Reorganization, upon confirmation of the
Plan of Reorganization on November 13, 1998, Phillip J. Holtgraves and his son,
Charles A. Holtgraves, became members of the Board of Directors of the Issuer.
Mr. Philip J. Holtgraves reserves the right to acquire or dispose of Shares,
depending upon circumstances existing from time to time, including market
conditions. While Mr. Holtgraves retains all options for potential future
actions, his present expectations are to maintain, as trustee of the Trust, his
controlling interest in FMIC and to remain a director of the Issuer, and as such
to have influence upon future corporate development of the Issuer.
Except as set forth in this Item 4, Mr. Holtgraves does not have any
present plans or proposals that relate to or that would result in any of the
actions specified in clauses (a) through (j) of Item 4 of Schedule 13D of the
Act. Mr. Holtgraves reserves the right to formulate such plans or proposals, and
to take such action with respect to any or all of such matters and any other
matters as Mr. Holtgraves may determine.
PAGE 7 OF 11 PAGES
<PAGE>
The Trustee reserves the right to acquire or dispose of Shares, depending
upon circumstances existing from time to time, including market conditions.
While the Trust retains all options for potential future actions, its present
expectations are to maintain its controlling interest in FMIC and as such to
have influence upon future corporate development of the Issuer.
Except as set forth in this Item 4, the Trust does not have any present
plans or proposals that relate to or that would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D of the Act. The
Trust reserves the right to formulate such plans or proposals, and to take such
action with respect to any or all of such matters and any other matters as the
Trust may determine.
This Item is inapplicable to the other Executive Officers and Directors of
FMIC.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
(a) FMIC beneficially owned 4,800,000 Shares on February 19, 1999, which
it believes to be 64% of the entire class of Shares of the Issuer. This amount
includes 3,000,000 Shares which FMIC has the present right to acquire pursuant
to the Stock Option Agreement dated February 19, 1999 between the Issuer and
FMIC. For a description of the Stock Option Agreement, see Item 6 hereof.
As Chairman of the Board of Directors of Directors and Chief Executive
Officer of FMIC and as trustee of the Trust, the sole stockholder of FMIC, Mr.
Holtgraves beneficially owned the 3,300,000 Shares beneficially owned by FMIC on
February 19, 1999.
As sole shareholder of FMIC, the Trust beneficially owned the 4,800,000
Shares beneficially owned by FMIC on February 19, 1999.
FMIC, Mr. Holtgraves and the Trust are not aware of any ownership of
Shares by the other Executive Officers and Directors identified herein.
(b) As the Chairman of the Board of Directors of Directors and Chief
Executive Officer of FMIC and as trustee of the Trust, the sole stockholder of
FMIC, Mr. Holtgraves shares with FMIC and the Trust the power to vote, or to
direct the vote, and the power to dispose, or direct the disposition of the
Shares owned by FMIC.
(c) On February 19, 1999, (i) FMIC acquired 1,800,000 Shares from the
Issuer in a private transaction pursuant to the terms of the Plan of
Reorganization and (ii) FMIC and the Issuer entered into a Stock Option
Agreement, pursuant to which FMIC has the option to purchase 3,000,000 Shares
from the Issuer. For a description of the Stock Option Agreement, see Item 6
hereof. FMIC did not effect any other transactions in Shares of the Issuer
during the period beginning sixty days prior to February 19, 1999.
PAGE 8 OF 11 PAGES
<PAGE>
(d) No other person is known to have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
Shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
-------------------------------------------------------------
FMIC and the Issuer are parties to a Stock Option Agreement dated February
19, 1999, pursuant to which FMIC has the option to purchase 3,000,000 Shares of
the Issuer. The option exercise price is $0.50 per Share, payable in cash or
certified funds or by contribution of one or more business units at fair market
value. The option expires February 19, 2000, provided that FMIC may extend the
option under certain circumstances until February 19, 2001. The Stock Option
Agreement is attached hereto as Exhibit 2 and incorporated herein by reference.
FMIC is not a party to any contract, arrangement, understanding or
relationship (legal or otherwise) with any person with respect to the Shares
other than as described in Item 5 hereof and in this Item 6. None of the Shares
owned by FMIC are pledged or otherwise subject to any contingency the occurrence
of which would give another person voting power or investment power over such
Shares.
Neither Mr. Holtgraves nor the Trust are parties to any contract,
arrangement, understanding or relationship (legal or otherwise) with any person
with respect to the Shares, except as described in Item 5 hereof.
This Item is inapplicable to the Executive Officers and Directors of FMIC.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
Exhibit 1. Statement of Joint Filing.
Exhibit 2. Stock Option Agreement dated February 19, 1999 Advanced
Financial, Inc. and First Mortgage Investment Co.
PAGE 9 OF 11 PAGES
<PAGE>
Schedule 13D
Initial Filing
March 1, 1999
SIGNATURES
----------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
FIRST MORTGAGE INVESTMENT CO.
March 1, 1999 By: /s/ Philip J. Holtgraves
--------------------------------------
Philip J. Holtgraves
Chairman of the Board of Directors and
Chief Executive Officer
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
March 1, 1999 /s/ Philip J. Holtgraves
---------------------------------------
Philip J. Holtgraves
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
March 1, 1999 THE PHILIP J. HOLTGRAVES
REVOCABLE TRUST DATED JUNE 6,
1989
By: /s/ Philip J. Holtgraves
---------------------------------------
Philip J. Holtgraves,
Trustee
PAGE 10 OF 11 PAGES
<PAGE>
EXHIBIT INDEX
TO SCHEDULE 13D
---------------
No. Description of Exhibit
- --- ----------------------
1. Statement of Joint Filing
2. Stock Option Agreement dated February 19, 1999 between
Advanced Financial, Inc. and First Mortgage Investment Co.
PAGE 11 OF 11 PAGES
Schedule 13D
Initial Filing
March 1, 1999
EXHIBIT 1
---------
STATEMENT OF JOINT FILING
-------------------------
Pursuant to Reg. Section 240.13d-1(k)(1)(iii) of the Securities
Exchange Act of 1934, the foregoing Schedule 13D is filed on behalf of First
Mortgage Investment Co., Philip J. Holtgraves and The Philip J. Holtgraves
Revocable Trust dated June 6, 1989.
FIRST MORTGAGE INVESTMENT CO.
March 1, 1999 By: /s/ Philip J. Holtgraves
------------------------------
Philip J. Holtgraves
Chairman of the Board of Directors and
Chief Executive Officer
March 1, 1999 /s/ Philip J. Holtgraves
------------------------------------
Philip J. Holtgraves
March 1, 1999 THE PHILIP J. HOLTGRAVES
REVOCABLE TRUST DATED JUNE 6,
1989
By: /s/ Philip J. Holtgraves
---------------------------------------
Philip J. Holtgraves, Trustee
STOCK OPTION AGREEMENT
BETWEEN
FIRST MORTGAGE INVESTMENT CO.
AND
ADVANCED FINANCIAL, INC.
<PAGE>
Table of Contents
1. Capitalized Terms......................................................1
2. Grant of Option........................................................1
3. Option Exercise Price..................................................2
4. Exercise of Option.....................................................3
5. Term of Option.........................................................3
6. Expiration.............................................................4
7. Manner of Exercise.....................................................4
8. Stockholder Rights of Holder...........................................5
9. Amendment and Termination..............................................5
10. Transferability........................................................5
11. Adjustments of Shares Purchasable and Option Price.....................6
12. Rights of Holders and the Corporation..................................8
13. Other Provisions Relating to Rights of the Option Holder...............9
14. Dissolution or Liquidation............................................11
15. Compliance with Securities Act........................................11
16. Notices...............................................................11
17. Binding Effect........................................................12
18. Governing Law.........................................................12
19. Entire Agreement......................................................12
20. Modification..........................................................12
Table of Exhibits...........................................................15
i
<PAGE>
ADVANCE FINANCIAL, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into as of the 19th day of
February, 1999, by and between ADVANCED FINANCIAL INC., a Delaware corporation
(hereinafter sometimes referred to as "AFI" or the "Corporation") and FIRST
MORTGAGE INVESTMENT CO, a Missouri Corporation, (hereinafter sometimes referred
to as "FMIC" or the "Holder"). The Recitals are an integral part of this Stock
Option Agreement (hereinafter sometimes referred to as "Agreement").
RECITALS
WHEREAS, Corporation is entering a Plan of Reorganization under Chapter
11 of Title 11 of the United States Code;
WHEREAS, the parties are simultaneously entering into an Acquisition
Agreement;
WHEREAS, as a condition of the Plan of Reorganization, the Corporation
hereby grants Holder an Option to acquire voting common stock in the
Corporation;
WHEREAS, upon confirmation of the Plan of Reorganization, it is expected
and anticipated that the Corporation will have issued and outstanding the sum of
3,000,000 Common Shares, being the only class of stock of Corporation, of which
FMIC will own 1,800,000 shares;
NOW THEREFORE, in consideration of the premises and of the respective
covenants and agreements of the parties herein contained, and of other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties, intending legally to be bound, agree as follows:
1. Capitalized Terms. Capitalized terms not otherwise defined herein have
the meaning given them under the Acquisition Agreement.
2. Grant of Option. For value received, the Corporation hereby grants Holder a
voting common stock Option (hereinafter sometimes referred to as "Option")
subject to the terms set forth below, to subscribe for and purchase from the
Corporation the number of shares determined in this paragraph, each of which
shares shall be fully paid and non-assessable shares (hereinafter sometimes
referred to as "Option Shares"), of voting common stock of the Corporation.
1 of 15
<PAGE>
2.1 FMIC is granted the right to acquire that number of shares of AFI's
common capital stock necessary to increase FMIC's ownership from sixty percent
(60%) to eighty percent (80%) of the issued and outstanding shares of common
capital stock of AFI. Assuming that upon Confirmation of the Plan of
Reorganization, the then aggregate outstanding stock totals 3,000,000 shares and
that FMIC then owns 1,800,000 shares, as set forth in the recitals, then such
Option shall grant FMIC the right to acquire an additional Three Million
(3,000,000) shares, to increase its ownership from one million eight hundred
thousand (1,800,000) shares to four million eight hundred thousand shares
(4,800,000), thereby increasing the percentage of issued and outstanding shares
owned by FMIC from 60% to 80%; provided however,
2.2 The number of shares provided in paragraph 2.1 above shall be limited
to that number of shares of AFI's common stock which, when taken together with
all other transactions relevant to a "change of control" under ss. 382(g) of the
Internal Revenue Code, would be one share less than that number which would
trigger such a "change in control."
2.3 The number of Option Shares and the Option Price per Option Share are
subject to adjustment pursuant to paragraph 11 of this Agreement.
2.4 This Option shall be registered in the Holder's name on the books of
the Corporation at its principal executive office to be maintained by the
Corporation and such Option shall be transferable only as provided herein. Until
this Option is transferred on the books of the Corporation, the Corporation
shall treat the registered Holder hereof as absolute owner of this Option for
all purposes, notwithstanding any notice to the contrary.
3. Option Exercise Price. The Option Exercise Price for the Option Shares shall
be One Million Five Hundred Thousand and No/100 Dollars ($1,500,000) for the
number of shares described in paragraph 2.1 above. Such price may be payable in
whole or in part as follows:
3.1 In the form of one or more business units which had an accumulated net
fair market value at their respective dates of contribution of One Million Five
Hundred Thousand and No/100 Dollars ($1,500,000.00); or
3.2 By cash or certified funds equal the difference between One Million
Five Hundred Thousand and No/100 Dollars ($1,500,000.00) and the fair market
value of any business units, Option payments or the Extension Consideration
previously contributed by FMIC to AFI or AFIM.
3.3 In the event FMIC contributes one or more businesses with an aggregate
net fair market value less than One Million Five Hundred Thousand and No/100
Dollars ($1,500,000), then FMIC shall receive a pro rata portion of the maximum
number of shares available under paragraph 2.1 above. Such pro rata portion
shall include pro rata portion of stock for the Extension Consideration, if any
was paid pursuant to paragraph 5.2.2 below.
2 of 15
<PAGE>
3.4 In the event FMIC contributed cash in exercise of the Option, no
appraisal shall be required. In the event FMIC acquired one or more business
units in an arms length acquisition within sixty (60) days of contribution, no
appraisal shall be required. The amount paid for such business shall be its fair
market value for the purpose of determining net fair market value. In the event
FMIC contributes a business unit which it did not purchase in an arm's length
transaction within sixty (60) days of such contribution, an appraisal of such
business unit shall be obtained at FMIC's expense to determine net fair market
value.
3.5 In the event that the fair market value of a business unit contributed
by FMIC shall, when taken in conjunction with all prior transfers of cash and/or
business units pursuant to the Option Agreement, exceed $1,500,000, then AFI
shall issue its promissory note to FMIC for the difference between the actual
fair market value of property and cash contributed and $1,500,000.
The terms of such a note, if any, shall be as follows;
3.5.1 It shall be for a term of five years, with interest payable
quarterly in arrears for the first two years and thereafter principal and
interest payments quarterly which are sufficient to amortize the balance of the
note by the end of its term.
3.5.2 It shall bear interest at the prime rate of NationsBank for
its best 90 day commercial borrowers plus two percent, said rate to be adjusted
on the first day of each calendar quarter to the rate prevailing at the close of
NationsBank's business on the immediately preceding business day.
3.5.3 It shall be secured by a lien against the assets which were
transferred which gave rise to the existence of the note.
4. Exercise of Option. This Option is exercisable at any time during its term
and before its expiration at 5:00 p.m., Kansas City, Missouri time on the date
determined under paragraph 6 below, upon tender of the Option Exercise Form,
attached as Exhibit A, and payment thereof of the Option Exercise Price as set
forth in paragraph 3.
This Option may be exercised in whole or in part at any time during its
term. Upon partial exercise, the number of shares represented by the
consideration tendered shall be issued as provided herein.
5. Term of Option. The term of the Option shall be as follows:
5.1 During a one year period commencing upon the Closing Date, ("First
Option Year") FMIC may exercise the Option, or any part thereof, upon payment of
the relevant Option Exercise Price as set forth in paragraph 3.
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<PAGE>
5.2 FMIC may extend the term of the Option for one additional year
("Second Option Year") if during the First Option Year, it has done one of the
following:
5.2.1 Under the terms described herein, FMIC has contributed to AFI
or AFIM a business unit with a fair market value of not less than Five Hundred
Thousand Dollars ($500,000); or
5.2.2 FMIC has contributed One Hundred Thousand Dollars ($100,000)
in cash or certified funds to AFI or AFIM as non-refundable consideration
("Extension Consideration") to extend the Option for one additional year.
6. Expiration. The Option shall expire by its terms if it has not been exercised
during the First Option Year, or if extended, during the Second Option Year.
7. Manner of Exercise. Within ten (10) business days of the exercise of all or
any part of this Option by the Holder, as herein provided, the Corporation shall
cause to be issued in the name of and delivered to the Holder a certificate or
certificates for the Option Shares of voting common stock so purchased. The
Corporation covenants and agrees that all the Option Shares of the voting common
stock which may be issued and delivered upon the due exercise of this Option by
the Holder shall, upon such issuance and delivery, be fully paid and
non-assessable. The Corporation agrees at all times to reserve and hold
available a sufficient number of Option Shares of the authorized but unissued
voting common stock of the Corporation, or the voting common stock of the
Corporation held as treasury stock, to cover the Option Shares of the voting
common stock issuable upon the exercise of this Option.
The Holder by acceptance of this Option hereby agrees that at the
time of any exercise of this Option he will sign a written agreement with the
Corporation in which he represents that he is then purchasing the Option Shares
of the voting common stock being thus purchased for investment and not with a
view to the offer for sale or the distribution thereof and agrees not to assign,
hypothecate, pledge, sell or otherwise transfer with or without consideration
such Option Shares except pursuant to an effective registration statement (which
shall be effective with the United States Securities and Exchange Commission
and/or any applicable laws of any State) or in a transaction which is exempt
from registration.
In order to enforce the restrictions imposed upon any Option Shares
issued by the Corporation pursuant to this Agreement, the Corporation may cause
a legend(s) to be placed on any certificate representing Option Shares, which
legend(s) shall make appropriate reference to the restrictions imposed upon the
Option Shares. The legend(s) shall substantially conform to the following
legend:
THE HOLDER OF THESE SHARES ACKNOWLEDGES AND AGREES THAT HE HAS REQUESTED
AND HAS RECEIVED ALL FINANCIAL AND OTHER INFORMATION ON THE CORPORATION
WHICH HOLDER DEEMS NECESSARY; THAT HE IS ACQUIRING SHARES FOR HIS OWN
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ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR RESALE
THEREOF; THAT THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE BLUE SKY LAWS; THAT THE SHARES MAY NOT BE SOLD,
PLEDGED, ASSIGNED OR TRANSFERRED EXCEPT UPON THE TERMS AND THE CONDITIONS
OF THE VOTING COMMON STOCK OPTION AGREEMENT BETWEEN CORPORATION AND HOLDER
AND UNLESS EITHER SUCH SHARES ARE REGISTERED UNDER THE SECURITIES ACT OF
1933 AND THE APPROPRIATE STATE BLUE SKY LAWS OR, IN THE OPINION OF
COUNSEL, SATISFACTORY TO THE CORPORATION, SUCH TRANSACTION INVOLVING THE
SHARES IS EXEMPT FROM THE REGISTRATION PROVISIONS OF SUCH LAWS.
An Option shall be exercisable by delivery of (1) a duly signed
subscription form in writing, generally conforming to the notice set out in
Exhibit A which is incorporated herein by reference, to such effect and (2) the
full purchase price of the number of Option Shares being purchased pursuant to
the exercise of the Option to the treasurer of the Corporation or to any other
officer of the Corporation appointed for the purpose of receiving the same;
provided, however, that this Option may not be exercised at any time when the
exercise thereof violates any law or governmental order or regulation.
8. Stockholder Rights of Holder. The Holder does not have any rights or
privileges of a stockholder of the Corporation with respect to any Option Shares
issuable upon the exercise of such Option until certificates representing such
Option Shares shall have been issued and delivered to such person.
9. Amendment and Termination. In the event that this Option has not been
exercised on or before two years from the date of the Closing, the Option shall
terminate and shall no longer be exercisable. In no event may the Option be
exercised after the expiration of this term.
The termination of the Option shall not affect any restrictions previously
imposed on Option Shares issued pursuant to the Option.
10. Transferability. The transferability of the Option and Option Shares are
governed by the provisions of this paragraph 10.
10.1 This Option shall be freely transferable provided the Transferee
honors all terms and conditions hereof and provided that the Transferee may not
obtain any more shares than FMIC would have been entitled to. The Corporation
may treat the registered Holder of this Option as the absolute owner hereof for
all purposes notwithstanding any notice to the contrary.
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11. Adjustments of Shares Purchasable and Option Price. In order to prevent
dilution of the rights granted hereunder, the Option Price as set forth above
and the number of Option Shares shall be subject to adjustment from time to time
in accordance with this paragraph 11.
11.1 Appropriate and equitable adjustment shall be made in the number of
Option Shares of voting common stock subject to each outstanding Option or the
Option Price or both, in the event of any changes subsequent to the effective
date hereof in the outstanding voting common stock by reason of stock dividends,
stock splits, recapitalizations, reorganizations, mergers, or consolidations, it
being the purpose of this provision to insure that, in the event of an
occurrence of such nature, the terms of the Option shall be adjusted to give the
Holder, upon exercise of the Option, rights equivalent to the rights of a person
who had held Shares of the Corporation's voting common stock in the amount
subject to the Option immediately prior to the effective date of such
occurrence. This paragraph shall apply, if equitable, in addition to paragraph
11.3 with respect to any transaction described therein.
11.2 Upon any adjustment of the Option Price per share pursuant to
paragraph 11.1, this Option shall thereupon evidence the right to purchase that
number of Option Shares (calculated to the nearest hundredth) obtained by
multiplying the number of Option Shares immediately prior to such adjustment by
the Option Price per share in effect immediately prior to such adjustment and
dividing the product so obtained by the Option Price per share in effect
immediately after such adjustment.
11.3 Change in Corporation or Shares.
11.3.1 In case of any consolidation with or merger of the
Corporation into another entity (other than a merger or consolidation in which
the Corporation is the continuing entity), such successor shall execute in favor
of the Holder hereof a supplement to this Option:
(a) providing that the Holder of this Option shall receive,
upon exercise of this Option, in lieu of each Option Share of the Corporation
deliverable upon such exercise immediately prior to such event, the kind and
amount of property (or securities or cash, if any) receivable upon such
consolidation or merger, by a holder of each share of the Corporation;
(b) setting forth the Option Price for the property (or
securities or cash, if any so receivable for each Option Share of the
Corporation, which (except as contemplated by paragraph 11.1) shall be an amount
equal to the Option Price per Option Share immediately prior to such event; and
(c) providing that such successor entity assumes the due
and punctual performance and observance of each and every covenant and condition
of this Option to be performed or observed by the Corporation (including,
without limitation, provisions for adjustment of the Option Price), as nearly as
may be in relation to any Option Shares of stock, securities, or property
thereafter deliverable upon the exercise hereof.
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11.3.2 In case of any reclassification or change of the shares or in
case of any consolidation or merger of another entity into the Corporation in
which the Corporation is the continuing entity and in which there is a
reclassification or change of the shares, the Corporation shall execute in favor
of the Holder hereof a supplement to this Option:
(a) providing that the Holder of this Option, upon exercise
of this Option, in lieu of each Option Share of the Corporation deliverable upon
such exercise immediately prior to such event, shall receive the kind and amount
of property (or securities or cash, if any) receivable upon such
reclassification, change, consolidation or merger by a holder of one share of
the Corporation; and
(b) setting forth the Option Price for the property (or
securities or cash, if any) so issuable for each Option Share of the
Corporation, which (except as contemplated by paragraph 11.1) shall be an amount
equal to the Option Price per Option Share immediately prior to such event.
11.3.3 A copy of the supplement referred to in subsections (a) and
(b) of this paragraph 11.3 shall be sent by the Corporation to the Holder of
this Option as soon as practicable but no longer than 60 days after the
execution thereof.
11.4 Whenever the Option is adjusted as herein provided, the Corporation
shall compute an adjusted Option Price and the adjusted number of Option Shares
in accordance with this paragraph 11 and prepare a certificate setting forth the
adjusted Option Price and the adjusted number of Option Shares based upon such
computation, showing in reasonable detail the facts (and computations) upon
which such adjustments are based, and the Corporation shall cause to be mailed
to the Holder hereof a notice stating that the Option Price and the number of
Option Shares have been adjusted, with a copy of such certificate attached. If
the Holder disagrees with the computations made by the Corporation, the Holder
may request a nationally recognized public accounting firm ("Holder's Accounting
Firm") to confirm such computations and to prepare and mail to the Corporation
and the Holder its results. In the event such results agree with the
Corporation's computations, the expense of the computations prepared by the
Holder's Accounting Firm shall be borne by the Holder. If the Holder's
Accounting Firm's computations disagree with the computations prepared by the
Corporation, the Corporation's regular public accounting firm ("Corporation's
Accounting Firm") and the Holder's Accounting Firm shall appoint another
nationally recognized public accounting firm ("Third Party Accounting Firm") to
verify the computations. The Third Party Accounting Firm decision shall be
final. If the Third Party Accounting Firm verifies the Corporation's
computations, the Holder shall be responsible for the expense of the
computations of the Holder's Accounting Firm and the Third Party Accounting
Firm. If, however, the Third Party Accounting Firm agrees with the computation
prepared by the Holder's Accounting Firm, the Corporation shall bear the expense
of the preparation of the computations by the Holder's Accounting Firm and the
Third Party Accounting Firm.
11.5 If at any time after the date of this Option:
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11.5.1 the Corporation shall declare a distribution on its shares,
other than a distribution of cash out of its undistributed net income paid at an
established annual or quarterly rate; or
11.5.2 the Corporation shall authorize the granting to the holders
of its shares of rights to subscribe for or purchase any shares of any class or
of any other rights; or
11.5.3 there is a reclassification of the shares, or any
consolidation or merger to which the Corporation is a party, or any lease, sale
or conveyance to another entity of the property of the Corporation as an
entirety or substantially as an entirety and for which approval of any
stockholders of the Corporation is required; or
11.5.4 there is a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; or
11.5.5 the Corporation proposes to take any other action which would
require an adjustment of the Option Price pursuant to paragraph 11 hereof; then
the Corporation shall cause to be mailed to the Holder of this Option at least
twenty (20) days prior to any applicable record date specified by the
Corporation, a notice stating:
(a) the date on which a record is to be taken for the
purpose of such distribution or rights, or, if a record is not to be taken, the
date as of which the holders of shares of record to be entitled to such
distribution or rights are to be determined; or
(b) the date on which such distribution, reclassification,
consolidation, merger, lease, sale, conveyance, dissolution, liquidation or
winding up is expected to become effective; and
(c) the date as of which it is expected that holders of
shares as shown on registration books maintained by the Corporation shall be
entitled to receive such distribution or exchange their shares for securities
or other property, deliverable upon such distribution, reclassification,
consolidation, merger, lease, sale, conveyance, dissolution, liquidation or
winding up; and the date on which it shall be determined which stockholders of
record are entitled to vote on such transaction.
12. Rights of Holders and the Corporation. Except as provided in paragraph 11, a
Holder shall have no rights by reason of any subdivision, or consolidation of
shares of stock of any class of stock or the payment of any stock dividend or
any other increase or decrease in the number of shares of stock of any class or
by reason of any dissolution, liquidation, merger or consolidation or spin-off
of assets or stock of another corporation, and any issuance by the Corporation
of shares of stock of any class or securities convertible into shares of stock
of any class.
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The grant of an Option pursuant to this Agreement shall not affect in any
way the right or power of the Corporation to make adjustments, reclassification,
reorganizations, or changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate, or sell or transfer all or any part of its
business or assets.
13. Other Provisions Relating to Rights of the Option Holder.
13.1 No Holder of this Option, as such, shall be entitled to vote, to
receive distributions or to be deemed the Holder of Option Shares of the
Corporation nor shall anything contained in this Option be construed to confer
upon the Holder hereof, as such, any of the rights of a stockholder of the
Corporation, except as specifically provided herein, or any right to vote for
the election of the board of directors of the Corporation or upon any matters
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any action of the Corporation (whether upon any recapitalization, issue of
shares, reclassification of shares, consolidation, merger, sale, lease,
conveyance or otherwise), receive notice of meetings or other action affecting
stockholders (except for notices expressly provided for in this Option), receive
distribution or subscription rights, or otherwise (except as provided for in the
Option) until this Option shall have been exercised and the Option Shares shall
have been issued and delivered as provided in this Option; provided, however,
that the Corporation acknowledges the Option Holder's right to acquire voting
common stock of the Corporation pursuant to the terms hereof and agrees that
until the expiration, cancellation or exercise hereof the rights of such Holder
to acquire voting common stock of the Corporation shall be recognized and shall
entitle such Holder to the same general protections afforded a stockholder of
the Corporation against the breach of any fiduciary or other duty of good faith
and fair dealing owed to a stockholder of the Corporation, by the Corporation,
its officers or its directors.
13.2 Corporation Registration.
13.2.1 Tag Along Rights. If the Corporation determines to register
any of its securities either for its own account or the account of any security
holder or holders, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a transaction pursuant to Rule 145
of the Commission (or substantially similar successor rule) or a registration on
any registration form which does not permit secondary sales or does not include
substantially the same information regarding the Corporation as would be
required to be included in a registration statement covering the sale of the
Option Shares, the Corporation will:
(a) promptly give to the Holder written notice thereof
(which shall include the name of the managing underwriter or underwriters, if
any, of the offering); and
(b) use its best efforts to include in such registration
all Option Shares, as specified in a written request or requests given by the
Holder of Option Shares within 15 days after such written notice from the
Corporation described in clause (i) above is given, except as set forth in
paragraph 13.2.2 below.
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13.2.2 Underwriting. The right of the Holder to include Option
Shares in a registration pursuant to paragraph 13.2 involving an underwritten
public offering shall be conditioned upon the inclusion of such securities in
the underwriting to the extent provided herein. Notwithstanding any other
provision of this paragraph 13.2, if the managing underwriter or underwriters
determine that marketing factors require a limitation on the number of shares to
be underwritten, the underwriter may exclude from such registration and
underwriting some or all of the Option Shares requested to be included by the
Holder. In such event, the Corporation shall so advise the Holder, and the
Option Shares held by the Holder shall, to the extent necessary, be excluded
from such registration. If the Holder disapproves of the terms of any such
underwriting, the Holder may elect to withdraw therefrom by written notice to
the Corporation and the underwriter. Any Option Shares excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
13.2.3 Expenses of Registration. The Corporation shall bear all
registration expenses incurred in connection with all registrations pursuant to
paragraph 13.2, except expenses described as professional fees and related
expenses customarily paid for by such Shareholders who participate in such
registrations.
13.2.4 Information by Holders of Securities. The Holder shall
furnish to the Corporation such information regarding the Holder and the
proposed distribution, and execute any and all necessary documents and
indemnifications, as the Corporation may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in paragraph 13.2.
13.2.5 Transfer of Registration Rights. The rights to cause the
Holder to register the Option Shares under paragraph 13.2 may be assigned by the
Holder to assignees of the Option Shares provided, however, that such assignees
in the aggregate must, after giving effect to such transfer, hold or demand to
hold at least Ten Thousand (10,000) shares of Option Shares; and provided,
further, that the Corporation is given written notice at the time of or within a
reasonable time after such transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned; and provided, further, that any such
transferee or assignee of such rights assumes the obligations of the transferor
under paragraph 13.2.
13.2.6 "Market Stand-Off" Agreement. The Holder, if requested by the
Corporation and the underwriter of any public offering of the Corporation, shall
agree not to sell or otherwise transfer or dispose of any Option Shares during a
reasonable period following the effective date of the registration statement
covering the public offering. Such agreements shall be in writing in a form
satisfactory to the Corporation and such underwriter. The Corporation may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restrictions until the end of said period.
13.3 The Corporation shall at all times have reserved and kept available
an authorized number of Option Shares sufficient to permit the exercise in full
of this Option.
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13.4 Notwithstanding anything contained herein to the contrary, the
Corporation shall not be required to issue any fraction of an Option Share in
connection with the exercise of this Option. All fractional share amounts shall
be rounded off to the nearest whole share.
14. Dissolution or Liquidation. Except as otherwise provided herein, a
dissolution or liquidation of the Corporation shall cause each outstanding
Option to terminate. At least twenty (20) days notice of the record date for
determining stockholders entitled to participate in such liquidation or
dissolution shall be given the Holder as required in paragraph 11.5.5.
15. Compliance with Securities Act. Notwithstanding anything contained herein to
the contrary, no Option granted under this Agreement shall be exercised, and the
Corporation may postpone the issuance and delivery of shares upon any purported
exercise of an Option, until (a) the completion of a registration with the
Securities and Exchange Commission or other qualification of such shares under
any state or federal law, rule or regulation as the Corporation shall determine
to be necessary or advisable, or (b) counsel for the Corporation shall have
opined that the issuance of such Option Shares does not require registration
under any Federal Securities Act, and, insofar as any local Blue Sky law might
affect the issuance of such Option Shares, either the local Blue Sky
Commissioner shall have ruled or counsel for the Corporation shall have opined
that the issue is not subject to such local law or that such Option Shares shall
have been duly qualified under such law. Any person exercising an Option shall
make such representations and furnish such information as may in the opinion of
counsel for the Corporation be appropriate to permit the Corporation, in the
light of the then existence or non-existence of an effective Registration
Statement under the Securities Act of 1933, as from time to time amended, with
respect to such Option Shares, to issue the Option Shares in compliance with the
provisions of that or any comparable law. The Corporation shall not have any
liability with respect to any Option the exercise of which is delayed in good
faith by the provisions of this paragraph 15.
16. Notices. Any notice or other communication to the Corporation or to the
Holder of this Option shall be in writing and such notice or communication shall
be deemed duly given or made if mailed by registered or certified mail, return
receipt requested, postage prepaid and if to such Corporation to:
Advanced Financial, Inc.
5425 Martingale
Shawnee, Kansas 66218
or such other address as the Corporation may designate by notice to the Holder
and if to such Holder to:
First Mortgage Investment Co
5425 Martingale
Shawnee, Kansas 66218
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cc: Steven H. Goodman
Shughart Thomson & Kilroy, PC
120 W. 12th St.
Kansas City, MO 64105
or at such other address as the Holder may designate by notice to the
Corporation.
17. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Corporation and Holder and his respective heirs, executors,
administrators, legal representatives and successors.
18. Governing Law. This Agreement shall be governed by and be construed in
accordance with the laws of the state of Delaware.
19. Entire Agreement. This Agreement constitutes the entire Agreement between
the parties, and supersedes all prior Agreements and understandings relating to
the subject matter of this Agreement.
20. Modification. This Agreement may be amended or modified only by written
instrument executed by both Corporation and Holder.
IN WITNESS WHEREOF, Corporation has caused this Agreement to be signed in
its corporate name under its corporate seal by its president and its corporate
seal to be hereunto affixed and the execution hereof to be attached by its
secretary as of this _____ day of ______________, 1998
ADVANCED FINANCIAL, INC.
ATTEST:
______________________________ By:______________________________
Secretary William B. Morris
Senior Vice President
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HOLDER:
ATTEST: FIRST MORTGAGE INVESTMENT CO
______________________________ By:__________________________
Secretary Charles Holtgraves,
Vice President
ACKNOWLEDGMENT
STATE OF ________________ )
) ss:
COUNTY OF ______________ )
On this ____ day of ________, 1998, before me, the undersigned, a Notary
Public in and for said County and State personally appeared William B. Morris
and ___________________________________, the Senior Vice President and
Secretary, respectively, of ADVANCED FINANCIAL, INC., known to me to be the
persons who executed the within instrument in behalf of said Corporation and
acknowledged to me that they executed the same for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
---------------------------------
Notary Public within and for said
My Commission Expires: County and State
- --------------------- ---------------------------------
Type Notary's Name Here
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ACKNOWLEDGMENT
STATE OF ________________ )
) ss:
COUNTY OF ______________ )
On this ____ day of ________, 1998, before me, the undersigned, a Notary
Public in and for said County and State personally appeared Charles A.
Holtgraves and ________________ _____________________, the Vice President and
Secretary, respectively, of FIRST MORTGAGE INVESTMENT CO, known to me to be the
persons who executed the within instrument in behalf of said Corporation and
acknowledged to me that they executed the same for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
---------------------------------
Notary Public within and for said
My Commission Expires: County and State
- --------------------- ---------------------------------
Type Notary's Name Here
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