U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1999
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to ____________________
Commission File Number 0-20922
-------
WHITEHALL ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 75-2274730
-------- ----------
(State or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
801 Brickell Avenue, 9th Floor, Miami, Florida 33131
----------------------------------------------------
(Address of principal executive offices)
(904) 409-0200
--------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements in the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 124,900,000 shares as of
December 31, 1999.
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
1
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - December 31, 1999 and September
30, 1999
Consolidated Statements of Operations -- Three Months Ended
December 31, 1999 and 1998
Statements of Cash Flows -- Three Months Ended December 31,
1999 and 1998
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Financial Statements, Pro Forma Financial Information and
Exhibits
2
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY TOTAL WORLD TELECOMMUNICATIONS, INC.
Consolidated Balance Sheet - Unaudited
December 31, 1999 and September 30, 1999
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, 1999 SEPTEMBER 30, 1999
-------------------- --------------------
<S> <C> <C>
Current Assets
Cash $8,507 $ 2,264
Accounts receivable $ 684,604 577,477
Inventories $ 391,613 448,361
Prepaid Expenses 100,429 73,949
---------- -----------
Total Current Assets 1,185,153 1,102,051
---------- -----------
Loans Receivable 1,608,853 1,608,853
---------- -----------
Deferred financing costs 386,444 279,337
---------- -----------
Property and Equipment 829,263 2,662,553
Less Accumulated Depreciation (120,609) (2,142,371)
---------- -----------
Property and Equipment - Net 708,654 520,182
---------- -----------
Other Assets
Patents 350,000 350,000
Deposits 1,166 1,166
---------- -----------
TOTAL ASSETS $4,240,270 $ 3,861,589
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current Liabilities
Capiltal lease obligations - current portion 92,899 --
Current portion of long term debt -- 536,510
Notes payable - bank 385,676 525,624
Income taxes payable -- 30,413
Accounts payable 1,117,277 995,586
---------- -----------
Total Current Liabilities 1,595,852 2,088,133
---------- -----------
Deferred Income Taxes 8,277 54171
Deferred gain on sale and leaseback transaction 176,380 --
Capiltal leases - non current portion 588,672 --
Long Term Debt 770,696 629,771
---------- -----------
Total Liabilities 3,139,877 2,772,075
---------- -----------
Shareholders' Equity
Preferred stock, $.001 par value,
4,000,000 million shares authorized, issued
and outstanding 4,000 4,000
Common Stock, $.0001 par value,
200,000,000 shares authorized, 124,900,000
shares issued and outstanding 12,493 12,493
Additional Paid In Capital 1,481,653 998,653
Retained earnings (397,753) 74,368
---------- -----------
Total Stockholders' Equity 1,100,393 1,089,514
---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $4,240,270 $3,861,589
========== ==========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
WHITEHALL ENTERPRISES, INC.
FORMERLY TOTAL WORLD TELECOMMUNICATIONS, INC.
Consolidated Statement of Operations - Unaudited
For the Quarter Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------- -------------------
<S> <C> <C>
Revenues from Operations
Sales $ 1,364,301 $ 423,393
Cost of Sales 1,083,906 330,866
------------ ------------
Gross Profit 280,395 92,527
Consulting Fees 40,000 --
------------ ------------
Total Operating Revenues 320,395 92,527
------------ ------------
Operating Expenses
Sales, General and Administration 714,474 89,329
Depreciation 34,582 11,233
------------ ------------
Total Operating Expenses 749,056 100,562
------------ ------------
Income (loss) from operations (428,661) (8,035)
------------ ------------
Other Expenses
Sundry Income -- --
Interest expense (43,460) 5,581
----------- ------------
Net Loss ($472,120) ($13,616)
============ ============
Net Loss Per Common Share (0.0038) (0.0001)
============ ============
Number of Shares Used in Computation 124,900,000 124,900,000
============ ============
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
WHITEHALL ENTERPRISES, INC.
TOTAL WORLD TELECOMMUNICATIONS, INC.
Consolidated Statement of Cash Flows - Unaudited
For the Quarter Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
--------------------- ---------------------
<S> <C> <C>
Cash flows form operating activities:
Net Loss ($472,121) ($13,615)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 34,582 11,233
Deferred gain on sale and leaseback transaction 176,380
Change in assets and liabilities
(Increase) decrease in receivable (107,127) (10,379)
(Increase) decrease inventory 56,749 58,779
(Increase) decrease in prepaid expenses 26,480 --
(Increase) decrease in loans reeceivable -- (20,201)
(Increase) decrease in other assets (160,067) 86,442
Increase (decrease) in accounts payable and accrued expenses 121,692 (110,971)
Stock options issued to officers, directors and others 483,000 --
Increase (decrease) in income tax accounts (76,307) --
--------- ---------
Total adjustments 555,382 14,903
--------- ---------
Net cash provided (used) by operating activities $83,261 $1,288
--------- ---------
Cash flows from investing activities
Acquisition of property and equipment -- (47,851)
Proceeds from sales of property and equipment -- 119,672
--------- ---------
Net cash provided (used) by investing activities -- $ 71,821
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of debt -- 11,000
Net activity in short term borrowings (77,018) (102,554)
--------- ---------
Net cash provided (used) by financing activities (77,019) (91,554)
--------- ---------
Net increase (decrease) in cash and cash equivalents 6,243 (18,445)
Cash and cash equivalents - beginning of year 2,264 22,695
--------- ---------
Cash and cash equivalents - end of period $ 8,507 $ 4,249
========= =========
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
WHITEHALL ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(UNAUDITED)
December 31, 1999
(1) GENERAL:
--------
The interim December 31, 1999 unaudited consolidated financial
statements, in the opinion of management, include all adjustments (consisting of
only normal recurring accruals) considered necessary for a fair presentation of
financial position as of such date and earnings and cash flows for the periods
then ended. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted and the Statements of Operations for
the three months ended December 31, 1998 have been reclassified for comparative
purposes. It is recommended that these interim financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended September 30,
1999.
The consolidated financial statements of the Company include those
accounts of Whitehall Enterprises, Inc., Hairbiotech, Inc. ("HBI"), a
development stage biotechnology company, and Mega Blow Plastics Limited ("MBM"),
a Canadian Plastics company. All significant intercompany transactions and
balances have been eliminated in the consolidation. The acquisition of Mega Blow
Plastics Limited was effective December 1, 1998. The acquisition of HBI was
effective September 30, 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Operating results for the three-month period ended December
31, 1999 are not necessarily indicative of the results that may be expected for
the year ending September 30, 2000.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
- -----------
Inventories from Mega Blow Moulding, Limited, consisting of raw materials,
packaging and skids, and finished goods, are valued at the lower of cost or
market. Cost is determined by the first-in first-out method (FIFO) except for
finished goods, which are accounted for on a retail method.
6
<PAGE>
Property and Equipment
- ----------------------
Property, machinery, and equipment are stated at cost, and are depreciated over
their estimated useful lives using accelerated and straight-line methods as
follows:
Useful Life
-----------
Office equipment 3-5 years
Machinery and equipment 5 years
Leasehold improvements 5 years
Deferred Cost
- -------------
Deferred costs include deferred financing costs and corporate transaction costs
and are stated at cost less accumulated amortization. These costs are amortized
between five and seven years using the straight-line method.
Patents
- -------
Patents for hair growth and hair loss prevention technologies owned by HBI are
recorded for their acquisition costs. Patents are amortized over their estimated
useful lives, approximately 17 years.
Accounting Pronouncements
- -------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 131, Disclosures About Segments of an Enterprise and
Related Information (SFAS No. 131) which established presentation of financial
data based on the "management approach". SFAS No. 131 is applicable for fiscal
years beginning after December 15, 1997.
Accounting Policies
- -------------------
MBM's products are manufactured to specific customer orders and revenues are
recognized when the products are shipped. Revenue is reduced for estimated
customer returns and allowances.
Income Taxes
- ------------
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 109 Accounting for Income Taxes, requiring
companies to use the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the consolidated
financial statement carrying amounts and the tax basis of existing assets and
liabilities. Pursuant to SFAS No. 109, the effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes the enactment
date. Under the deferred method, deferred taxes were recognized using the tax
rate applicable to the year of the calculation and were not adjusted for
subsequent changes in tax rates. The Company adopted SFAS No. 109 in 1993.
7
<PAGE>
Concentration of Credit Risk
- ----------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily cash and accounts receivable. The Company extends
credit based on an evaluation of the customer's financial condition, generally
(except for mortgages receivable) without requiring collateral. Exposure to
losses on receivables is principally dependent on each customer's financial
condition. The Company monitors its exposure for credit losses and maintains
allowances for anticipated losses.
In addition, at December 31, 1999, the Company had deposits with financial
institutions, which were insured for up to $100,000 by the U.S. Federal Deposit
Insurance Corporation. The Company believes it is not exposed to any significant
credit risk on cash and cash equivalents.
(2) AMENDED PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE UNITED STATES
--------------------------------------------------------------------
BANKRUPTCY COURT:
-----------------
The Company filed with the United States Bankruptcy Court for the
Southern District of Florida (the "Bankruptcy Court") its Amended Plan of
Reorganization dated July 2, 1998, under Chapter 11 of the United States
Bankruptcy Code.
The Plan had been approved by the Company's Board of Directors. In
addition, Advantage Fund Limited, formerly known as GFL Advantage Fund Limited
("Advantage"), which held in excess of 90% of the unsecured claims against the
Company, consented to the Plan as part of a settlement between the Company and
Advantage.
The Company's efforts resulted in (a) the Advantage Settlement
Agreement, which was approved by the Bankruptcy Court, and (b) an agreement for
the Company to acquire all of the stock of MBM, pursuant to which MBM became a
wholly-owned operating subsidiary of the Company. On August 28, 1998, the Plan
was confirmed by the Bankruptcy Court.
(3) EARNINGS PER SHARE
------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
No. 128), which specifies the computation, presentation and disclosure
requirements for earnings per share. Basic earnings per share are computed by
dividing income available to common stockholders (the numerator) by the
weighted-average number of common shares (the denominator) for the period. The
computation of diluted earnings per share is similar to basic earnings per
share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potentially
dilutive common shares had been issued.
8
<PAGE>
The numerator in calculating basic earnings per share is reported net
income or (loss). The denominator is based on the following weighted-average
number of common shares:
1999 1998
---- ----
Basic 124,927,647 124,927,647
(4) EQUITY TRANSACTIONS
-------------------
A summary of the stock is as follows:
Common Stock - Authorized 200,000,000 shares, $.0001 par value per
share. Issued and outstanding 124,927,647 shares of common stock.
Preferred Stock - Authorized 4,000,000 shares of preferred stock at
$.001 par value per share. The stock is outstanding as part of the purchase of
MBM. On December 10, 1998, 4,000,000 shares of preferred stock with a par value
of $.001 were conditionally issued under a stock purchase agreement between the
Company and 1274328 Ontario. In exchange for these shares, the Company acquired
100% of the outstanding common stock of Mega Blow Moulding, Limited ("MBM").
There is a five (5) year restriction on the conversion of preferred shares to
common shares pursuant to the Agreement.
During July 1999, 1274328 Ontario issued to Luis Alvarez - CEO, an
irrevocable option to purchase the 4 million preferred shares for $310,400.
During October 1999 the Company's Board of Directors ratified
management's previous decision to decrease the conversion rate of the authorized
preferred stock. The rate in effect at the time of the meeting was 100 common
shares for each share of preferred stock. The new authorized conversion rate is
27 shares of common stock per each share of preferred stock leaving control in
the public's hands where it belongs, and thus not compromising the tax loss
carryforward.
During February 2000, the Company issued the preferred shares and is
holding them during the "Exercise Period," subject to the Irrevocable Option
Agreement between 1274328 Ontario, Inc. and Mr. Luis Alvarez. The "Exercise
Period" expires July 30, 2001. Mr. Alvarez is free to exercise said options at
any time prior to the expiration date.
Stock options - During the October 1999 Board of Directors meeting, the
Company approved the payment of fees to consultants, legal counsel and officers
and directors in the form of stock options. The following summarizes the fees
and the shares provided at a calculated price of $0.03 (consistent with the
closing share price of October 22, 1999, the date of the Board meeting) and an
exercise price of $0.30, expiring in five years. The Board deemed that using a
calculated price of $0.03 was fair for remunerating the Board members for their
efforts throughout the past years. However, with the best interests of both, the
shareholders and the Company as the recipient of the options proceeds in mind,
the Board set an exercise price of ten times the current price of $0.03 per
share as of the date of the meeting to $0.30.
9
<PAGE>
Option Shares Fees
------------- ----
Officers 18,000,000 $ 260,000
Directors 2,200,000 48,000
Consultants 4,334,000 130,000
Legal counsel 1,500,000 45,000
--------
Total expenses paid
with options $ 463,000
=========
Stock options were recorded as additional paid in capital in accordance with
SFAS No. 123.
(5) LEGAL PROCEEDINGS:
------------------
All legal proceedings were eliminated upon the certification of the
Plan of Reorganization by the Bankruptcy Court.
(6) PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment at December 31, 1999 and September 30, 1999
consisted of the following:
December 31 September 30
1999 1999
---- ----
Furniture and fixtures $ 143,751 $ 143,751
Machinery and equipment 681,570 2,514,860
Leasehold improvement 3,942 3,942
----------- -----------
829,263 2,662,553
Less: accumulated depreciation (120,609) (2,142,371)
----------- -----------
Total $ 708,654 $ 520,182
=========== ===========
Depreciation expense for the three months ended December 31, 1999 and 1998 was
$3,194 and $11,233, respectively.
(7) INVENTORY:
----------
At December 31, 1999 and September 30, 1999, inventory was as follows:
December 31 September 30
1999 1999
---- ----
Raw materials $128,171 $134,871
Packing and skids 30,277 23,062
Finished goods 233,165 290,428
-------- --------
$391,613 $448,361
======== ========
10
<PAGE>
(8) LOAN RECEIVABLE:
----------------
The loan receivable is due on demand and bears an interest rate varying
from 6.72% - bank prime plus 2%. The loan is secured by property with a market
value of approximately $5,000,000. (See Note 14: Measurement Uncertainty).
(9) BANK INDEBTEDNESS:
------------------
The bank indebtedness includes operating loans, due on demand, of $385,676
($402,126 as of September 30, 1999). The operating loans bear interest at rates
varying from prime + 1.25% to prime +1.75%. The bank indebtedness is secured by
a registered general assignment of book debts and a general security agreement,
a guarantee and postponement of claim in the amount of $1,465,376 by 129
Ontario, assignment of all shares of the company, postponement and assignment of
all shareholder debt and an assignment of Keyman insurance. As further explained
in Note 11, the bank indebtedness was refinanced with the proceeds of a capital
lease on manufacturing equipment.
MBM had violated certain covenants with respect to the operating loans. While
the bank has been advised of this, they have not expressly waived the
conditions.
(10) LONG TERM DEBT:
---------------
At December 31, 1999 and September 30, 1999, long-term debt consisted of the
following:
December 31 September 30
1999 1999
---- ----
Term loans (See Note 16) -- $ 536,510
Note payable with an interest rate of 12%
per annum; monthly interest consisting of
interest only; principal amount maturing
October 1, 2004.
770,696 629,771
--------- ----------
770,696 1,166,281
Less current portion -- (536,510)
--------- ----------
$ 770,696 $ 629,771
========= ==========
11
<PAGE>
Interest expense for the three months ended December 31, 1999 and 1998 was
$43,460 and $8,404, respectively.
(11) CAPITAL LEASE OBLIGATIONS:
--------------------------
On December 14, 1999, the term loan in the amount of $536,510 was repaid with
the proceeds from the sale of plastic injection molding equipment. MBM leased
back the equipment for a total amount of $681,570, at an interest rate of 9.35%
per annum, repayable in 72 monthly installments of $12,627, including principal
and interest. At December 31, 1999 capital lease obligations consisted of the
following:
December 31
1999
----
Total proceeds from capital leases $ 681,570
Current portion 92,898
---------
Non current portion $ 588,672
=========
(12) LEASE COMMITMENTS:
------------------
The minimum rentals payable under long-term operating leases, expiring December
31, 2003, exclusive of certain operating costs for which the Company is
responsible, are approximately $147,735 annually.
(13) RELATED PARTY TRANSACTIONS:
---------------------------
Pursuant to the Amended Plan of Reorganization (see Note 2), the bank
indebtedness and the long-term debt are guaranteed by 129 Ontario and a
beneficial shareholder of 129 Ontario.
12
<PAGE>
(14) MEASUREMENT UNCERTAINTY:
------------------------
MBM carries, as an asset, a loan receivable in the amount of $1,608,853. While
management of MBM does not believe the carrying value has been impaired, there
is uncertainty as to the final realization of this amount.
(15) UNCERTAINTY DUE TO YEAR 2000 ISSUE:
-----------------------------------
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems, which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on operations and financial
reporting may range from minor errors in significant systems failure, which
could affect an entity's ability to conduct normal business operations. It is
not possible to be certain that all aspects of the Year 2000 issued affecting
the entity, including those related to the efforts of customers, suppliers, or
other third parties will be fully resolved.
(16) INCOME TAXES:
-------------
The Company reduced taxable income for the year ended September 30,
1999, by applying federal net operating losses to pre-tax income, reducing
taxable income by $71,249,531. These losses were carried forward from prior
years.
The Company has a remaining federal net operating loss carry forward of
$71,650,735, of which $71,249,531 expires in 2014, and $401,204 expires in 2017.
(17) SIGNIFICANT SUBSEQUENT EVENTS:
------------------------------
The Alternative Lending Group Acquisition
-----------------------------------------
The Company recently entered into an agreement to purchase 100% of the
common stock of Alternative Lending Group ("ALG") and all its related assets.
Alternative Lending Group, Inc., is an Illinois corporation that is engaged in
the mortgage banking and brokerage business. The Company acquired 100% of the
shares of common stock of Alternative Lending Group, Inc. in exchange for
$950,000 of working capital for Alternative Lending Group, Inc., and 8,000,000
shares of common stock equivalent to 4% of 200,000,000 shares. In the event that
prior to one year to the date of closing, the amount of authorized common shares
of the Company exceed the 200,000,000 authorized shares, a proportional
adjustment shall be made to compensate the seller for the difference. The
transaction was closed on January 22, 2000. The acquisition of ALG will be
accounted for as a stock purchase under Accounting Principles Board Opinion No.
16.
13
<PAGE>
The C & M Oil Company, Inc. Acquisition
---------------------------------------
On June 12, 1999, the Company signed a letter of intent to acquire C & M
Oil Company, Inc., ("CMO") a Florida corporation. CMO is a bulk lubricant and
service station fuel and mobile on-site fueling business. On February 17, 2000,
the Company and CMO executed a stock purchase agreement for 100% of the shares
of CMO. The Company deposited $138,750 with its escrow agent pursuant to the
terms of the stock purchase agreement. The closing is to take place within 60
days subject to CITGO's approval.
Sale of MBM
-----------
The Company is currently negotiating an agreement to sell its ownership
interest in MBM. The proceeds from the sale will be utilized to meet the cash
flow necessary to finance the acquisition of CMO. The following conditions were
considered in moving forward with the decision to sell MBM.
o 129 Ontario's failure to comply with its responsibilities as
delineated by an agreement between the Company and 129 Ontario.
o The sale of MBM will provide sufficient cash to acquire CMO, a
business with approximately 3 times the sales of MBM and located
within the Company's geographical area. Proceeds from the sale of
MBM will leave a significant surplus of equity after the
acquisition commitments of CMO are funded.
o The uncertainty about the immediate collection of loans
receivable discussed in Notes 8 and 14.
o The Company's immediate need to receive cash to close its
acquisition of CMO without any further dilution of common
shareholders at the current stock prices. Whereas alternative
financing commitments for the CMO acquisition are in place, the
dilution results are not in the shareholders best interest.
o After one year of experience with the overview of MBM, management
of the Company concluded that the operations of MBM are not
sufficiently compatible and synergetic with HBI, ALG and CMO.
o The offers received for the sale of MBM far outweigh any benefits
to be derived from its retention.
* * * * *
14
<PAGE>
Audited financial statements for the companies acquired or to be acquired along
with pro forma consolidated financial statements for the Company and the
acquired subsidiaries will be presented as soon as the information is available
from ALG and CMO, approximately within 45 days of this report.
Information relative to the disposal of MBM will be presented in an 8K
immediately after documents for the sale are signed.
Issuance of Preferred Stock Options
- -----------------------------------
During July 1999, 1274328 Ontario issued to Luis Alvarez - CEO, an
irrevocable option to purchase the 4 million preferred shares for $310,400.
During October 1999 the Company's Board of Directors ratified
management's previous decision to decrease the conversion rate of the authorized
preferred stock. The rate in effect at the time of the meeting was 100 common
shares for each share of preferred stock. The new authorized conversion rate is
27 shares of common stock per each share of preferred stock leaving control in
the public's hands where it belongs, and thus not compromising the tax loss
carryforward.
During February 2000, the Company issued the preferred shares and is
holding them during the "Exercise Period," subject to the Irrevocable Option
Agreement between 1274328 Ontario, Inc. and Mr. Luis Alvarez. The "Exercise
Period" expires July 30, 2001. Mr. Alvarez is free to exercise said options at
any time prior to the expiration date.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND SECTION 21F OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SPECIFICALLY, ALL STATEMENTS OTHER
THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS REPORT REGARDING THE
COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY AND PLANS AND OBJECTIVES OF
MANAGEMENT OF THE COMPANY FOR FUTURE OPERATIONS ARE FORWARD-LOOKING STATEMENTS.
THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF THE COMPANY'S
MANAGEMENT, AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE
TO THE COMPANY'S MANAGEMENT. WHEN USED IN THIS REPORT, THE WORDS "ANTICIPATE,"
"BELIEVE," "ESTIMATE," "EXPECT" AND "INTEND" AND WORDS OR PHRASES OF SIMILAR
IMPORT AS THEY RELATE TO THE COMPANY OR COMPANY'S MANAGEMENT, ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT VIEW OF
THE COMPANY WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS,
UNCERTAINTIES AND ASSUMPTIONS RELATED TO CERTAIN FACTORS INCLUDING, WITHOUT
LIMITATIONS, COMPETITIVE FACTORS, GENERAL ECONOMIC CONDITIONS, CUSTOMER
RELATIONS, RELATIONSHIPS WITH VENDORS, THE INTEREST RATE ENVIRONMENT, COST OF
CAPITAL, GOVERNMENTAL REGULATION AND SUPERVISION, CHANGES IN INDUSTRY PRACTICES,
DISRUPTIONS ASSOCIATED WITH EXPANSION, ONE-TIME EVENTS AND OTHER FACTORS
DESCRIBED HEREIN. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE
CORRECT. BASED UPON CHANGING CONDITIONS, SHOULD ANY ONE OR MORE OF THESE RISKS
OR UNCERTAINTIES MATERIALIZE, OR SHOULD ANY UNDERLYING ASSUMPTIONS PROVE
INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS
ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED OR INTENDED. ALL SUBSEQUENT WRITTEN
AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS
ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE APPLICABLE
CAUTIONARY STATEMENTS.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
- -----------------------------------------------------------
PLAN OF OPERATIONS
- ------------------
During the year ended September 30, 1999, the Company focused its
resources in the effort to successfully carry out the objectives approved by the
Bankruptcy Court in the Company's Chapter XI Bankruptcy Reorganization Plan. For
fiscal year 1999-2000 the Company's objectives for growth are as follows:
The most important goal was to oversee the operations of MBM, which was
the Company's only operating subsidiary during the quarter ended December 31,
1999. The Company evaluated in the course of the prior year whether the
operations of MBM were sufficiently compatible and synergetic with planned
acquisition candidates. Management determined that these operations were not
complementary, and is currently negotiating the sale or other disposition of MBM
and its operations.
16
<PAGE>
The Company's plan for growth during the prior fiscal year included the
acquisitions of MBM and Hairbiotech. The details of these acquisitions were
discussed in "Recent Developments" in Part I, Item 1 of Form 10-KSB for the year
ended September 30, 1999. Results of operations of MBM are discussed below.
HBI will continue its research and development relative to the
prevention of hair loss in conjunction with the University of Miami School of
Medicine. The Company and HBI are currently negotiating with multinational
industry leaders for the funding of clinical trials and ongoing research.
The Company expects that upon execution of an Option Agreement, a
leading pharmaceutical company will be responsible for funding 100% of
Hairbiotech's human clinical trials and ongoing research, as well as supplying
adequate bulk topical compound needed to complete the study. The term of the
study will commence within 30 days of the FDA's acceptance of the application.
Per the agreement, Hairbiotech is not required to pay for any of the research or
costs associated with the product. The pharmaceutical company will furnish
Hairbiotech with $1,200,000 in milestone payments. In exchange for the
pharmaceutical company's patronage, Hairbiotech will grant it an option to
acquire an exclusive worldwide license to the patent and all applications of the
study. The pharmaceutical company will utilize its resources to manufacture,
market and sell the product(s) and submit associated reports to Hairbiotech.
Upon commercialization, the pharmaceutical company is obligated to document
sales of the product(s) and submit royalty payments to Hairbiotech.
To achieve this growth and obtain the necessary working capital, the
Company will require additional funding. The Company has received preliminary
commitments from investors to arrange for future funding of acquisitions.
However, the Company does not want to further dilute the ownership interest of
the common shareholders. Additionally, the imminent collection of loans
receivable as part of the MBM Stock Purchase Agreement approved by the
Bankruptcy Court was expected to provide cash and capital for other
acquisitions. While the Company has reason to expect the completion of these
arrangements in the near future, no assurances can be given that such funds will
be available.
Because of the Company's vision relative to shareholders control and
the uncertainty relative to MBM loans, the Company is currently negotiating the
sale or other disposition of MBM and its operations to meet future cash flow
requirements.
The Company recently closed an agreement to purchase 100% of the common
stock of Alternative Lending Group ("ALG") and all its related assets. The Board
of Directors is currently studying several other acquisitions and specifically,
negotiating with the principals of CMO.
17
<PAGE>
The Alternative Lending Group Acquisition
- -----------------------------------------
The Company recently closed an agreement to purchase 100% of the common
stock of Alternative Lending Group ("ALG") and all its related assets.
In just six years, ALG has grown from a single-city mortgage company
based in Chicago - with $38 million first-year gross business - to a mortgage
bank covering nine states, with $93,592,399 in actual 1999 gross mortgage loans
originated and closed. The company has focused its mortgage origination through
a consumer direct marketing channel and has maintained steady growth and
profitability by providing mortgage loans to fit all types of consumers' needs.
With the added control that mortgage banking status provides, ALG is able to
make loans simultaneously profitable and competitive because of the reduction in
sales commissions and expenses associated with conventional mortgage brokerage
firms.
ALG recently created two new divisions: the Wholesale Division and the
Internet Online Mortgage Division. These divisions will help establish the
company's national presence and substantially increase gross production over the
next 12 months.
Mortgage financing has traditionally been a lengthy ordeal, lasting
weeks or sometimes even months. ALG offers the convenience of applying for all
types of loans via the Internet. ALG has utilized the Internet as a referral
source for the past three years, and has maintained a $2 million monthly average
loan volume from its previous website. The company has spent much of the past 10
months developing a new website, Alternativelending.com, and a new business plan
for the Internet Online Mortgage Division.
With the launch of its website, Alternativelending.com, ALG plans to
increase its market focus from nine states to nationwide, during the next 12
months. Alternativelending.com intends to become the place to shop online for a
home loan. ALG will continue its Internet marketing strategy direct to customers
and will compete directly with current online leaders E-loan and Mortgage.com to
provide a low cost mortgage option to all customers regardless of credit
history.
Alternativelending.com allows customers to find a product, choose the
rate and costs they want, and apply for a loan, all in about 10 minutes...and
from the comfort of their home computer. This feature allows ALG to have more
control over its Internet Online Mortgage loans, since they make the
determination to approve the customer or supply them with alternative loan
products to meet their needs. With other sites, those customers will simply be
approved or denied.
ALG is now a mortgage bank and will have more flexibility with pricing,
underwriting, closing times/locations and customer communication. ALG will
continue to provide more hands-on service to customers who request it, through
its traditional offices located in the Midwest and Southwest regions.
18
<PAGE>
With the addition of ALG's Wholesale Division, the company will not
only be marketing its Internet Online Mortgages, but also its mortgage banking
services to other mortgage brokers. The Wholesale Division has allowed ALG to
make every loan more profitable, thus allowing improved customer service and
more competitive rates, costs and closing times.
The C & M Oil Company Acquisition
- ---------------------------------
Whitehall recently executed a stock purchase agreement to purchase 100%
of the common stock of C & M Oil Company, Inc. ("CMO") and all its related
assets.
CMO has been a South Florida distributor of gasoline and oil related
products branded by CITGO. CMO operates under an agreement with CITGO supplying
several CITGO gasoline stations, as well as government and local and national
businesses with truck fleets in South Florida.
CMO has grown its sales from $6 million in 1990 to over $12 million in
1998 and $15 million in 1999. CMO's growth in its customer base has been steady,
especially if we account for a very steady price in gasoline and oil products
until the third quarter of 1999. The Company's marketing efforts have been in
expanding its service based revenues. These services consist of maintaining
truck fleets of governmental entities and local and national carriers
operational on a daily basis. This type of service provides CMO with a higher
profit margin than sales of gasoline to gas stations. CMO is the only
distributor providing this service in South Florida.
As a commitment to the management of CMO, the Company will provide
working capital to aggressively pursue the distribution of gasoline to gas
stations. With the recent mergers of Mobil-Exxon, and Amoco-BP Oil, the South
Florida market presents a great opportunity for signing up gasoline stations
that lose their brand because of the mergers. CMO can also enter into joint
venture agreements with individuals willing to operate CMO owned gasoline
stations. Furthermore, CITGO's distribution agreement with CMO is not limited to
South Florida. This represents an unlimited growth potential consistent with
ALG's plans for national expansion.
CMO's management has over 40 years of experience in the industry and 10
years as CITGO distributors. The Company has obtained commitments through
employment agreements with senior management and sales executives to continue
the steady growth trends evident in CMO's history.
RESULTS OF OPERATIONS
- ---------------------
The Company's operations consists almost entirely of the operations of
MBM. Revenues consist of sales of finished inventory to customers. Cost of
inventory sold includes the purchased cost of raw materials, direct labor,
packaging and direct factory overhead.
19
<PAGE>
Revenues from sales for the three month period ended December 31, 1999,
were $1,364,301 representing a steady monthly performance since the acquisition
of MBM in November 30, 1998. MBM sales for the one month period ended December
31, 1998 were $423,393 representing a small increase on the monthly average for
the periods compared. Corresponding cost of sales for the same three and one
month periods ended in December 31, 1999 and 1998 were $1,083,905 and $330,886.
The gross margin for the three month period ended December 31, 1999 was 20.56%,
compared to 21.3% for the year ended September 30, 1999 and 21.85% for the month
ended December 31, 1998.
General and administrative expenses, exclusive of stock options of
$463,000 issued to directors and non employees for services rendered, amounted
to $251,474 or 17% of sales for the three month period ended on December 31,
1999. This amount is comparable to $89,329 and 21% for the month ended December
31, 1998. Total general and administrative expenses for the three months ended
December 31, 1999 were $714,474.
Improvements in results of operations is due from management's emphasis
in attaining greater profitability through cost cutting measures in the
subsidiary's operating methods.
Interest expense of $43,460 incurred in MBM was paid on loans due to
the Royal Bank of Canada during the period ended December 31, 1999.
The Company's consolidated net loss for the three months ended December
31, 1999 amounted to $(472,120) compared to net loss of $(13,615) for the
preceding one month period of operations ended December 31, 1998. Net losses
exclusive of expenses paid through stock options issued to directors and non
employees for services rendered aggregating $463,000, would become net income
approximating $10,880 for the three month period.
During the October 22, 1999 Board of Directors Meeting, Luis Alvarez,
CEO, introduced a discussion regarding his initial commitment to the Board when
he set forth the challenge they would be faced with and their acceptance of
their positions as directors, in September of 1997, to be compensated within two
years. The following options for shares were approved unanimously by the Board
of Directors as follows:
(1) Each of the directors were issued options to purchase 200,000 shares
of Common Stock at an exercise price of $0.30 per share ("computed at $0.03
which is consistent with the closing share price of October 22, 1999, the day of
the Board Meeting"), expiring in five years. The Board deemed that using a
calculated price of $0.03 was fair for remunerating the Board members efforts
throughout the past years. However, with the best interests of the shareholders
as a guide, the Board set an exercise price of ten times the current $0.03 share
price ($0.30) as of the date of the meeting. This amount would be received for
each of the fiscal years ended September 30, 1998 and 1999 and would receive an
additional 200,000 shares for fiscal year 2000. Joe Lebovics will receive
200,000 shares having only served as Director during the 1998 fiscal year. Ms.
Mary Lou Foy, in consideration for services to be rendered in the 2000 fiscal
year will receive 200,000 shares of Common Stock. Mr. Alvarez will not receive
any shares for his seat on the Board.
20
<PAGE>
(2) Carlos Trueba, CPA, was owed and due $65,000 for services rendered
during the last several fiscal years. Mr. Trueba, in lieu of cash, was issued
options to purchase 2,167,000 shares of Common Stock at an exercise price of
$0.30 per share expiring in five years. Services rendered included, but were not
necessarily limited to, the preparation of all financial documents for the
Company e.g. SEC FILINGS, Quarterly Reports, Annual Reports and Federal and
State Income Tax Reports, reviewing all financial documents of prospective
business acquisitions, that the Company considers. Mr. Trueba also prepared
valuations of potential acquisitions when necessary. During reorganization and
bankruptcy procedures of the former company, Total World Telecommunications, he
performed all financial reviews and analysis necessary for the court
proceedings.
(3) Atlas, Pearlman, Trop & Borkson, PA, was owed and due $45,000 for
legal services rendered for the last several fiscal years. In consideration for
their services the firm agreed to receive options to purchase 1,500,000 shares
of common stock at an exercise price of $0.30 per share expiring in five years.
The Firm, has served as securities and transactional counsel for the Company
since September 1997. Upon request by Mr. Alvarez, they assisted the Company
with all matters of legal advice and review and preparation of numerous legal
documents relevant to acquisitions and proposed acquisitions.
(4) Mr. Leslie Miller was owed and due $20,000 retainer for consulting
services rendered and for future services to be rendered on behalf of the
Company during the 2000 fiscal year. Mr. Miller, in lieu of cash, shall be
issued options to purchase 670,000 shares of Common Stock at an exercise price
of $0.30 per share expiring in five years. The activities surrounding these
services center on his accessibility to decision makers in the pharmaceutical
and cosmetic industries. These particular efforts have been of invaluable
service to HBI. Mr. Miller reports directly to Mr. Alvarez on the progress of
his efforts and all other acquisition engagements.
(5) Mr. Vincent Landis, in consideration for services rendered during
the last several fiscal years was owed and due $45,000.00. Mr. Landis, in lieu
of cash, will be issued options to purchase 1,500,000 shares of Common Stock at
an excise price of $0.30 per share expiring in five years. Mr. Landis has worked
in close relationship with Mr. Alvarez during the takeover, bankruptcy
procedures, and reorganization, attending all court hearings and relevant
meetings during that time. He assists Mr. Alvarez in the review and
investigation of written materials on proposed acquisitions and makes on site
inspections of proposed companies facilities. He attends and assists at
negotiation meetings relevant to proposed companies for acquisitions.
(6) Mr. Luis Alvarez, in consideration for services rendered during the
last several fiscal years has been issued options to purchase 18,000,000 shares
of Common Stock at an exercise price of $0.30 per share expiring in 5 years.
These shares were based on Mr. Alvarez only accepting a one-year salary of
$260,000 for his services since July 1997. Prior to the Board of Directors
approving, a lengthy discussion ensued as to the enormous amount of time, work,
effort, personal and monetary sacrifice expended by Mr. Alvarez, without any
compensation by the Company, from the time of takeover, bankruptcy procedures,
reorganization, SEC compliance, trading and acquisitions. The Board concurred
that if it was not for Mr. Alvarez' foresight, tenacity and negotiating
abilities the former company (Total World Telecommunications) would have never
emerged from bankruptcy proceedings. When the former company was forced into
Involuntary Chapter Seven Bankruptcy everyone involved with that company
(management, board of directors, and creditors) considered this to be the only
option. Mr. Alvarez worked diligently with all creditors, private investors and
attorneys to come up with a viable reorganization plan. Mr. Alvarez had a strong
commitment to two central elements of this plan. One, the plan would insure
equity in the reorganized company for its thousands of common shareholders, and
two, place the new company in a position to maintain a $71,000,000 plus tax loss
carryforward. Due to Mr. Alvarez' efforts, the Company made the acquisitions
necessary for this to come to fruition. Additionally, he has made several more
acquisitions and now the Company is a viable entity. At present, Mr. Alvarez is
working closely with the Company's Board of Directors on several more
acquisitions.
OPTION EXERCISES AND VALUES AT YEAR END
- ---------------------------------------
The following table summarizes the options awarded during the year. The options
are exercisable at $0.30 per share for a five year period (computed based on
$0.03 which was consistent with the closing price per share on October 22, 1999,
the day of the Board Meeting).
Aggregated Option/SAR Exercises in Last Fiscal Year
---------------------------------------------------
and FY-End Option/SAR Values
----------------------------
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Option/SARs Option/SARs
at FY-End (#) at FY-End
Shares
Acquired on Value Exercisable/ Exercisable
Name Exercise (#) Realized Unexercisable Unexercisable
---- ------------ -------- ------------- -------------
<S> <C> <C> <C> <C>
Joe Lebovics - - 200,000 -0-
Mary Lou Foy - - 200,000 -0-
Carlos M. Trueba - - 600,000 -0-
Rodriguez, Trueba & Co. - - 2,167,000 -0-
Atlas, Pearlman, Trop
& Borkson, PA - - 1,500,000 -0-
Leslie Miller - - 1,267,000 -0-
Vincent Landis - - 2,100,000 -0-
Luis Alvarez - - 18,000,000 -0-
----------
26,034,000
==========
</TABLE>
21
<PAGE>
Except for the options presented above, the following table sets forth Common
Stock ownership as of December 31, 1999 and through the date of this report with
respect to (i) each person known to the Company to be the beneficial owner of
five (5%) percent or more of the Company's outstanding Common Stock, (ii) each
director of the Company and (iii) all executive officers and directors of the
Company as a group. This information as to beneficial ownership was furnished to
the Company by or on behalf of the persons named. Unless otherwise indicated,
the business address of each person listed is 801 Brickell Avenue, 9th Floor,
Miami, Florida, 33131. Information with respect to the percent of class is based
on 124,927,647 shares of the Company's Common Stock issued and outstanding at
December 31, 1999.
Shares
Beneficially Percent
Name Owned (1) of Class
---- ------------ --------
Luis Alvarez 0 0
Mary Lou Foy 0 0
Carlos M. Trueba 0 0
Vince Landis 0 0
Leslie Miller 0 0
All executive officers and
Directors as a group (5 persons) 0 0
During October 1999, the Company's Board of Directors ratified
management's previous decision to decrease the conversion rate of the authorized
preferred stock. The rate in effect at the time of the meeting was 100 common
shares for each share of preferred stock. The new authorized conversion rate is
27 shares of common stock per each share of preferred stock leaving control in
the public's hands where it belongs, and thus not compromising the tax loss
carryforward.
PART II.
22
<PAGE>
ITEM 1. LEGAL PROCEEDINGS
-----------------
For information concerning current litigation regarding the Company,
see Note 5 in the Notes to Financial Statements.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None
ITEM 5. OTHER INFORMATION
-----------------
SIGNIFICANT SUBSEQUENT EVENTS:
------------------------------
The Alternative Lending Group Acquisition
-----------------------------------------
The Company recently entered into an agreement to purchase 100% of the
common stock of Alternative Lending Group ("ALG") and all its related
assets. Alternative Lending Group, Inc., is an Illinois corporation
that is engaged in the mortgage banking and brokerage business. The
Company acquired 100% of the shares of common stock of Alternative
Lending Group, Inc. in exchange for $950,000 of working capital for
Alternative Lending Group, Inc., and 8,000,000 shares of common stock
equivalent to 4% of 200,000,000 shares. In the event that prior to one
year to the date of closing, the amount of authorized common shares of
the Company exceed the 200,000,000 authorized shares, a proportional
adjustment shall be made to compensate the seller for the difference.
The transaction was closed on January 22, 2000. The acquisition of ALG
will be accounted for as a stock purchase under Accounting Principles
Board Opinion No. 16.
23
<PAGE>
The C & M Oil Company, Inc. Acquisition
---------------------------------------
On June 12, 1999, the Company signed a letter of intent to acquire C &
M Oil Company, Inc., ("CMO") a Florida corporation. CMO is a bulk
lubricant and service station fuel and mobile on-site fueling business.
On February 17, 2000, the Company and CMO executed a stock purchase
agreement for 100% of the shares of CMO. The Company deposited $138,750
with its escrow agent pursuant to the terms of the stock purchase
agreement. The closing is to take place within 60 days subject to
CITGO's approval.
Sale of MBM
-----------
The Company is currently negotiating an agreement to sell its
ownership interest in MBM. The proceeds from the sale will be utilized
to meet the cash flow necessary to finance the acquisition of CMO. The
following conditions were considered in moving forward with the
decision to sell MBM:
o MBM management's failure to comply with its responsibilities as
delineated by an agreement between the Company and MBM management.
o The sale of MBM will provide sufficient cash to acquire CMO, a
business with approximately 3 times the sales of MBM and located
within the Company's geographical area. Proceeds from the sale of
MBM will leave a significant surplus of equity after the acquisition
commitments of CMO are funded.
o The uncertainty about the immediate collection of loans receivable
discussed in Notes 8 and 14.
o The Company's immediate need to receive cash to close its
acquisition of CMO without any further dilution of common
shareholders at the current stock prices. Whereas alternative
financing commitments for the CMO acquisition are in place. The
dilution results are not in the shareholders' best interest.
o After one year of experience with the overview of MBM, management of
the Company concluded that the operations of MBM are not
sufficiently compatible and synergetic with HBI, ALG and CMO.
o The offers received for the sale of MBM far outweigh any benefits to
be derived from its retention.
* * * * *
24
<PAGE>
Audited financial statements for the companies acquired or to be
acquired along with pro forma consolidated financial statements for the
Company and the acquired subsidiaries will be presented as soon as the
information is available from ALG and CMO, approximately within 45 days
of this report.
Information relative to the disposal of MBM will be presented in an 8K
immediately after documents for the sale are signed.
Issuance of Preferred Stock Options
-----------------------------------
During July 1999, 1274328 Ontario issued to Luis Alvarez - CEO, an
irrevocable option to purchase the 4 million preferred shares for
$310,400.
During October 1999 the Company's Board of Directors ratified
management's previous decision to decrease the conversion rate of the
authorized preferred stock. The rate in effect at the time of the
meeting was 100 common shares for each share of preferred stock. The
new authorized conversion rate is 27 shares of common stock per each
share of preferred stock leaving control in the public's hands where it
belongs, and thus not compromising the tax loss carryforward.
During February 2000, the Company issued the preferred shares and is
holding them during the "Exercise Period," subject to the Irrevocable
Option Agreement between 1274328 Ontario, Inc. and Mr. Luis Alvarez.
The "Exercise Period" expires July 30, 2001. Mr. Alvarez is free to
exercise said options at any time prior to the expiration date.
On August 11, 1999 the Company's common stock was listed for inclusion
in the OTC Bulletin Board and continues to utilize the symbol "WTHL".
ITEM 6. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
------------------------------------------------------------------
(a) See Exhibit 1.
Audited financial statements of ALG as of and for the year ended
December 31, 1999 and 1998 will be provided in Form 8K within 45 days
of the issuance of this Form 10-QSB.
Pro-forma combined financial data of the Company and ALG will be
provided in Form 8K within 45 days of the issuance of this Form 10-QSB.
Details of the sale of MBM and the acquisition of CMO will be available
through an 8K as soon as the transaction is closed.
25
<PAGE>
(b) The Company filed Form 8K reports dated February 10, 1999, May 10,
1999 and June 16, 1999.
(c) Exhibits
Exhibit
Number Description of Exhibit Filing status
1. (10.48) Stock Purchase Agreement for the purchase of all
issued and outstanding shares of ALG from Jeffrey
Mertz Jr.
Filed hereinwith
26
<PAGE>
SIGNATURE
---------
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 as a duly authorized officer and as the chief financial officer of
the Registrant.
WHITEHALL ENTERPRISES, INC.
FORMERLY KNOWN AS
TOTAL WORLD TELECOMMUNICATIONS, INC.
(Registrant)
Date: February 22, 2000 By: /s/ Luis Alvarez
--------------------------------
Luis Alvarez, President
27
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated and effective
as of this 22nd day of December, 1999 by and between WHITEHALL ENTERPRISES,
INC., a Delaware corporation ("Purchaser" or "Whitehall"), ALTERNATIVE LENDING
GROUP, INC., an Illinois corporation ("ALG"), R. JEFFREY MERTZ ("Mertz" or
"Shareholder"), an individual and the holder of all of the outstanding capital
stock of ALG.
WITNESSETH:
A. ALG is engaged in the mortgage banking and brokerage business, the
principal office of which business is located at 1430 East Missouri, Suite 125,
Phoenix, Arizona 85014.
B. Shareholder owns all of the outstanding shares of the issued and
outstanding shares of capital stock of ALG (the "ALG Shares"); and
C. Purchaser desires to acquire and the Shareholder desires to sell to
Purchaser all of the ALG shares, which acquisition shall be upon such terms and
subject to such conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties hereto
agree as follows:
SECTION 1. SALE AND PURCHASE OF ALG AND PURCHASER SHARES AND OTHER AGREEMENTS.
1.1 SALE AND PURCHASE OF ALG AND PURCHASER SHARES. The Shareholder
hereby agrees to sell and transfer to the Purchaser all of the ALG shares, and
the Purchaser hereby agrees to purchase from the shareholders all of the ALG
shares. Purchaser agrees to issue to Mertz and deliver to the escrow agent
pursuant to Section 1.3 Eight Million (8,000,000) shares of Common
1
<PAGE>
Stock of the Purchaser (the "Purchaser Shares") at the Closing (as hereinafter
described) which shall take place on or before December 22, 1999 (the "Closing
Date").
1.2 OTHER AGREEMENTS. In addition to the consideration referred to
above, the parties agree to the following additional agreements and covenants.
(i) the Purchaser agrees to provide to ALG working capital of One Hundred Fifty
Thousand Dollars ($150,000.00) at the close of escrow which shall be paid at
closing by certified or cashier's check. Installments of $100,000 each of
working capital shall be paid on the same day of each subsequent calendar month
for a total of eight (8) payments of $100,000. The working capital will be used
to implement the marketing strategies formulated by Mertz in his capacity as
Chief Executive Officer of ALG. Subject to the foregoing schedule, the parties
may agree from time to time to make changes I the capital contribution
requirements set forth in this agreement. (ii) Mertz, who serves as ALG's chief
executive officer, will enter into the employment agreement at closing in the
form of Exhibit "A" attached hereto and made a part hereof. (iii) There shall be
no distribution of ALG net income to Purchaser until such time as the ALG shares
are distributed to Purchaser pursuant to the Escrow Agreement provided for in
Section 1.3; (iv) Purchaser will secure the services of a marketing firm in
order to provide marketing support for ALG; (v) in the event that Purchaser does
not provide the working capital commitments as referred to above, Mertz shall
have the right to reacquire the ALG shares by notifying the Escrow Agent in
accordance with the Escrow Agreement provided in Paragraph 1.3 of this
Agreement; (vi) in the event that at any time on or prior to January 15, 2005,
Purchaser shall transfer the ALG business or a majority in interest of the
capital stock of ALG, the Shareholder shall receive 25% of the net proceeds
derived from such sale; and (vii) in the event that prior to one year from the
date of Closing,
2
<PAGE>
the amount of common stock of the Purchaser outstanding shall be more than Two
Hundred Million (200,000,000) shares, an appropriate adjustment shall be made
proportionately in the number of the shares issued to the Shareholder, in order
to maintain the same ratio of shares issued to Shareholder to the total
outstanding shares of Purchaser, as the eight million (8,000,000) shares bears
to Two Hundred Million (200,000,000) shares.
1.3 ESCROW OF ALG SHARES. The shares of ALG required to be delivered by
Mertz at Closing and the Purchaser shares required to be issued to Mertz shall
be delivered to Jerome L. Froimson at Closing as the Escrow Agent, with the
certificate for the ALG shares either endorsed in blank or accompanied by a
stock power. The parties agree to execute the Escrow Agreement attached hereto
as Exhibit B.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ALG AND MERTZ
ALG and Mertz (to the best of Mertz's knowledge) jointly and severally
represent and warrant to Purchaser as follows:
2.1 ORGANIZATION AND GOOD STANDING: OWNERSHIP OF ALG SHARES. ALG is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Illinois, and is entitled to own or lease its properties and to
carry on its business as and in the places where such properties are now owned,
leased or operated. ALG is duly licensed or qualified and in good standing as a
foreign corporation where the character of the properties owned by it or the
nature of the business transacted by it make such licenses or qualifications
necessary. ALG does not have any subsidiaries. There are no outstanding
subscriptions, rights, options, warrants or other agreements obligating ALG to
issue, sell or transfer any stock or other securities of ALG.
2.2 OWNERSHIP OF ALG SHARES. Shareholder is the owner of record and
beneficially of all
3
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of the shares of the capital stock of ALG free and clear of all rights, claims,
liens and encumbrances, and which shares have not been sold, pledged, assigned
or otherwise transferred or subject to an option to purchase except pursuant to
this Agreement.
2.3 OUTSTANDING CAPITALIZATION. As of the date hereof, ALG has,
outstanding, 600,000 shares of its Class A common stock, all of which is held by
Mertz. There are no other issued or outstanding shares of capital stock of ALG
as to the date hereof. As of such date, there were also issued and outstanding
no options, rights, warrants, commitments to issue or other derivative
securities which are issuable upon exercise or conversion of such securities
into common stock of ALG.
2.4 ARTICLES OF INCORPORATION AND BY-LAWS. The copy of the Articles of
incorporation or Certificate of Incorporation and By-Laws of ALG and any
amendments to each, copies of which have been delivered to Purchaser, are true,
correct and complete. The minute book of ALG contains true and complete records
of all meetings and consents in lieu of meetings of its Board of Directors and
shareholders, to the extent that they are available, since its date of
incorporation and accurately reflects all transactions referred to therein.
2.5 FINANCIAL STATEMENTS, BOOKS AND RECORDS. Schedule 2.5 consists of
the audited balance sheet of ALG as at December 31, 1998 and the unaudited
balance sheet of ALG as at October 31,1999 (the "Balance Sheet") and the related
statements of operations for the year and period then ended (collectively the
"Financial Statements"). The Financial Statements fairly represent the financial
position of ALG as at such dates and the results of its operations for the year
and period then ended. The Financial Statements were prepared in accordance with
generally accepted
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accounting principles applied on a consistent basis with prior periods except as
otherwise stated therein. The books of account and other financial records of
ALG, financial or otherwise, are in all material respects complete and correct
and are maintained in accordance with good business and accounting practices.
2.6 NO MATERIAL ADVERSE CHANGES. Since the date of the Balance Sheet
there has not been:
(a) any material adverse change in the assets, operations,
condition (financial or otherwise) or prospective business of ALG;
(b) any incurrence by ALG of any indebtedness for borrowed money;
(c) any damage, destruction or loss materially affecting the
assets, prospective business, operations or condition (financial or otherwise)
of ALG, whether or not covered by insurance;
(d) any declaration, setting aside or payment of any dividend or
distribution with respect to any redemption or purchase of capital stock of ALG;
(e) any sale of an asset (other than in the ordinary course of
business) or any mortgage or pledge by ALG of any properties or assets;
(f) termination or failure to renew, or receipt of any threat (that
was not subsequently withdrawn) to terminate or fail to renew, any contract or
other agreement; or
(g) except in the ordinary course of business, any contract,
agreement or transaction consummated.
2.7 TAXES. ALG has prepared and filed all appropriate federal, state
and local tax returns
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of every kind and category (including, without limitation, income taxes,
estimated taxes, excise taxes, sales taxes, inventory taxes, use taxes, gross
receipt taxes, franchise taxes and property taxes) for all periods prior to and
through the date hereof for which any such returns have been required to be
filed by it or the failure to make such filings and resulting liability would
not be material relative to the results of operations of ALG. ALG has paid all
taxes shown to be due by said returns or on any assessments received by it or
has made adequate provision for the payment thereof except as set forth on the
Balance Sheet.
2.8 COMPLIANCE WITH LAWS. ALG has complied in all material respects
with all federal, state, county and local laws, ordinances, regulations,
inspections, orders, judgments, injunctions, awards or decrees applicable to it
or its business which, if not complied with, would materially and adversely
affect the business of ALG. All mortgage loans of ALG are in compliance with all
applicable federal, state and local statutes, ordinances, laws and regulations,
including, but not limited to, The Equal Credit Opportunity Act, The Real Estate
Settlement Procedures Act, The Truth in Lending Act, The Fair Credit Reporting
Act, The Financial Privacy Act, The Flood Disaster Protection Act and any other
federal, state or local act or regulations thereunder.
2.9 NO BREACH. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not:
(a) violate any provision of the Articles or Certificate of
Incorporation or By-Laws of ALG;
(b) violate, conflict with or result in the breach of any of the
terms of, result in a material modification of, otherwise give any other
contracting party the right to terminate, or constitute
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(or with notice or lapse of time or both constitute) a default under, any
contract or other agreement to which ALG is a party or by or to which it or any
of its assets or properties may be bound or subject;
(c) violate any municipal, state or federal law or ordinances in
connection with the use of ALG's facilities whereat ALG conducts its business or
in connection with the operation of the business of ALG (the foregoing
representation being limited solely to the knowledge and belief of ALG and
Mertz).
(d) violate any statute, law or regulation of any jurisdiction
applicable to the transactions contemplated herein.
2.10 ACTIONS AND PROCEEDINGS. There is no outstanding order, judgment,
injunction, award or decree of any court, governmental or regulatory body or
arbitration tribunal against or involving ALG. There is no action, suit or claim
or legal, administrative or arbitral proceeding or any investigation (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) pending or, to the best knowledge of ALG and Mertz, threatened
against or involving ALG, or any of its properties or assets. There is no fact,
event or circumstances known to ALG or Mertz that may give rise to any suit,
action, claim, investigation or proceeding that would be required to be set
forth on Schedule 2.10 if currently pending or threatened.
2.11 AGREEMENTS. Schedule 2.11 sets forth any material contract or
arrangement to which ALG is a party or by or to which it or its assets,
properties or business are bound or subject, whether oral or written, including
(but not limited to) any:
(a) contract or other agreement with any current or former officer,
director, shareholder, employee, consultant or agent;
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(b) voting trust agreement or shareholders agreement;
(c) agreement or contract relating to any present indebtedness of
ALG, including (but not limited to) any bond, debenture, loan, deed of trust,
guarantee, security agreement, pledge, mortgage or other document granting a
security interest in or lien on any asset of ALG;
(d) lease of real property;
(e) loan, advance or forgiveness of debt by ALG;
(f) lease of equipment, machinery, airplanes or any other goods;
(g) settlement agreement;
(h) service, distribution or supply agreement;
(i) broker, finder or agent agreement;
(j) any employment agreement, independent agents agreement or
agreement not-to-compete;
(k) employee benefit plan, including (but not limited to) pension,
profit sharing, retirement, deferred compensation, stock purchase, stock
ownership, savings and investment trust, bonus, severance pay or similar plan,
agreement, arrangement or understanding; and
(l) other material contract, agreement or arrangement whether or
not made in the ordinary course of business involving payments or commitments
for services or products amounting to in excess of $10,000.
All of the agreements set forth on Schedule 2.11 (except as otherwise
set forth on Schedule 2.11) are valid binding, enforceable, subsisting
agreements, in full force and effect. ALG is not in default under any of them
(nor is any other party to any of such agreements, nor does any condition exist
which with notice or lapse of time or both would constitute a default
thereunder) except as
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otherwise set forth on Schedule 2.11.
2.12 INSURANCE. Schedule 2.12 sets forth a list and brief description
of all policies or binders of insurance, including (but not limited to) key-man
insurance, workmen's compensation and employer liability, automobile insurance,
product liability and title insurance (the "Policies"). The Policies on Schedule
2.12 are valid and enforceable in accordance with their terms and are in full
force and effect.
2.13 BROKERS OR FINDERS. No broker's or finder's fee will be payable by
ALG in connection with the transactions contemplated by this Agreement, nor will
any such fee be incurred as a result of any actions by ALG or the Shareholder.
2.14 REAL ESTATE. Schedule 2.14 sets forth a description of all real
property leases to which ALG is a party. ALG is the owner of no real property.
The present use by ALG of its facilities and the conduct by ALG of its business
does not violate in any material respect any laws, regulations or orders. To the
knowledge of ALG and Mertz, there is no pending legislation, regulation,
ordinance or interpretation under consideration which precludes or will preclude
ALG from continuing to operate its business in the same manner as heretofore
conducted.
2.15 TANGIBLE ASSETS. Schedule 2.15 sets forth all machinery,
equipment, furniture, leasehold improvements, fixtures, vehicles, structures,
any related capitalized items or other tangible property material to the
business of ALG (the "Tangible Assets"). Except as set forth on Schedule 2.15,
ALG holds all right, title and interest in all the properties, interests in
properties and assets, real, personal and mixed reflected as being owned by it
on the Balance Sheet or acquired by it after the date of the Balance Sheet free
and clear of all liens, pledges, mortgages, security interests, conditional
sales contracts or any other encumbrances except as set forth on Schedule 2.15.
All of the Tangible
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Assets are in good operating condition and repair and are usable in the ordinary
course of business of ALG and, to the best of ALG's and the Mertz' knowledge,
conform to all applicable laws, ordinances and governmental orders, rules and
regulations relating to their construction and operation.
2.16 INTANGIBLE PROPERTY. Schedule 2.16 sets forth all intangible
property including, without limitation, any patent, trademark, service mark,
trade name, copyright, franchise and any application for any of the foregoing
owned by or used in the business of ALG and which is material to the business of
the ALG (the "Intangible Property") and, with respect to any federally
registered trademarks or service marks used in connection with the business of
ALG. All Intangible Properties of ALG are subsisting and have not been
abandoned. All required annuities, renewal fees, maintenance fees, royalty
payments, amendments and/or other filings or payments which are necessary to
preserve and maintain the Intangible Property have been filed and/or made.
Except as set forth on Schedule 2.16, ALG holds all right, title and interest in
all the Intangible Property reflected as being owned by it on the Balance Sheet
or acquired by it after the date of the Balance Sheet free and clear of all
liens, pledges, mortgages, security interests, conditional sales contracts or
any other encumbrances except as set forth on Schedule 2.16.
2.17 MARKETABLE SECURITIES. ALG owns no Marketable Securities and none
are listed or reflected on the balance sheet, nor have any been acquired after
the date of the balance sheet.
2.18 LIABILITIES. As at August 30, 1999, except as set forth on the
Balance Sheet, ALG does not have any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, which is material
to its operations, whether known or unknown, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued or absolute, contingent or
otherwise,
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including, without limitation, any liability on account of taxes, any other
governmental charge or lawsuit brought, whether or not of a kind required by
generally accepted accounting principles to be set forth on a financial
statement (all of the foregoing collectively defined to as "Liabilities"), which
were not fully, fairly and adequately reflected on the Balance Sheet. As of the
Closing Date, ALG will not have any Liabilities, other than Liabilities fully
and adequately reflected on the Balance Sheet or on Schedule 2.18, except for
Liabilities incurred since September 1, 1999, in the ordinary course of
business.
2.19 RECEIVABLES. All outstanding accounts receivables (trade or other)
of ALG shown in the Financial Statements are bona fide, arose in the ordinary
course of business at the aggregate amounts thereof and, to the knowledge of ALG
and Mertz, they have no reason to believe that such receivables are not current
and collectable in full within ninety (90) days of the date hereof. No account
is more than ninety (90) days overdue, except as disclosed on Schedule 2.19. In
addition, except as otherwise set forth on Schedule 2.19, to the knowledge of
ALG and Mertz, none of such accounts receivable is subject to any stated claim
or offset, recoupment, setoff or circumstances giving rise to any such claims
against it. No such accounts receivable are contingent upon the performance by
ALG of any obligation or contract and, no person has any lien on such
receivables, or any part thereto, and no agreement for deduction or discount has
been made with respect to any of such receivables.
2.20 LICENSES AND APPROVED STATUS. ALG is duly licensed by and is in
compliance with all applicable federal, state and local laws and regulations and
is duly qualified to do business in all states where such qualification is
required for the purpose of originating and making mortgage loans. ALG is an FHA
approved mortgagee or loan correspondent and a VA approved lender.
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2.21 MORTGAGE LOANS. ALG is not holder of any mortgage loans.
2.22 PENSION PLANS. ALG does not have any employee benefit plan,
including but not limited to pension, profit sharing, retirement, deferred
compensation, stock purchase, stock ownership, savings and investment trust,
bonus, severance, profit sharing or deferred compensation, or similar plan,
agreement, arrangement or understanding in existence for the employees of ALG
and no commitment has been made to the employees of ALG to provide a pension,
retirement, profit sharing or deferred compensation plan, except for a medical
and hospitalization insurance plan for employees for which ALG pays a portion of
the employee's premiums and a 401K Plan to which ALG provides no matching
contributions and is not obligated to do so.
2.23 EMPLOYMENT MATTERS. ALG is not a party to any written employment
agreement or agreement to lend to, or guarantee any loan to an employee, except
as set forth on Schedule 2.11(j). To the best of the ALG's and Mertz' knowledge,
ALG has incurred no liability, or taken or failed to take, any action which will
result in any liability in respect of any failure to comply with the Fair Labor
Standards Act or any other applicable laws dealing with minimum wages or maximum
hours for ALG employees, and all payments due from ALG on account of ALG
employee health and welfare insurance, holiday and vacation pay and similar
benefits have been paid.
2.24 POTENTIAL CONFLICTS OF INTEREST. No affiliate of ALG and no family
member thereof ("family member" defined as spouse, child, parent or sibling):
(a) owns, directly or indirectly, any interest in (excepting not
more than 1 % stock holdings for investment purposes in securities of publicly
held and traded companies) or is an officer, director, employee or consultant of
any person which is a competitor, lessor, lessee, customer or supplier of ALG;
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(b) owns, directly or indirectly, in whole or in part, any
copyright, trademark, trade name, service mark, franchise, patent, invention,
permit, license or secret or confidential information which ALG is using or the
use of which is material to the business of ALG;
(c) has any cause of action or other claim whatsoever against, or
owes any amount to, ALG, except for claims in the ordinary course of business;
or
(d) has made any payment to or commitment to pay any commission,
fee or other amount to, or purchase or obtain or otherwise contract to purchase
or obtain any goods or services from, any corporation or other person of which
any such affiliate or family member, is a partner or shareholder (except stock
holdings solely for investment purposes in securities of publicly held and
traded companies).
2.25 ENVIRONMENT, HEALTH AND SAFETY. ALG has complied with all material
environmental, health and safety laws, and no action, suit proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against it alleging any failure so to comply. Without limiting the
generality of the preceding sentence, ALG has obtained and been in compliance in
all material respects with the terms and conditions of all permits, licenses and
other authorizations which are required under, and has complied in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables which are
contained in applicable environmental, health and safety laws.
2.26 (Omitted)
2.27 LOANS IN PROGRESS. Schedule 2.27 is a listing of ALG's loan
pipeline or loans in progress. There are no mortgage loans currently serviced by
ALG.
2.28 WAREHOUSE CREDIT LINES. Schedule 2.28 is a listing of all
warehouse lines of credit
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currently established by ALG. ALG is in compliance with the terms and conditions
of such lines of credit, is not in default of any of the conditions relating
thereto and knows of no facts or circumstances which upon provision of notice by
any provider of such lines of credit would constitute ALG in default thereunder.
2.29 RELATIONSHIPS WITH PRINCIPAL CUSTOMERS. No customer of ALG which
accounts for in excess of 10% of its revenues or group of customers which
account in the aggregate for in excess of 20% of the revenues of ALG, has
expressed any intention to terminate, curtail or otherwise limit their
relationship with ALG or the level of mortgage loans placed with ALG.
2.30 NO MODIFICATIONS. ALG has not modified any mortgage note or
Mortgage Loan in any respect, nor has it satisfied, canceled, or subordinated
the related mortgage note in whole or in part, nor released the mortgaged
property in whole or in part from the lien on the related mortgage, nor has it
executed any instrument of release, cancellation, modification or satisfaction.
2.31 BURDENSOME AGREEMENTS. ALG is not a party to, nor are the assets
of ALG subject to or bound by or affected by, any provision of any order of any
court or other agency of government or any indenture, agreement or other
instrument or commitment which adversely affects the operations of the ALG.
2.32 FULL DISCLOSURE. No representation or warranty by ALG or Mertz in
this Agreement or in any document or schedule to be delivered by it pursuant
hereto, and no written statement, certificate or instrument furnished or to be
furnished to Purchaser pursuant hereto or in connection with the negotiation,
execution or performance of this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any fact necessary
to make any statement
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herein or therein not materially misleading or necessary to a complete and
correct presentation of all material aspects of the business of ALG. To the best
knowledge of ALG and Mertz, there is no fact, development or threatened
development (except for general economic conditions affecting business
generally) which ALG and Mertz have not disclosed to Purchaser in writing and
which materially adversely affects the business of ALG.
2.33 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties contained in this Section 2 shall be true and
complete on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to ALG and the Shareholders
as follows:
3.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is entitled to own or lease its properties and to carry on its
business as and in the places where such properties are now owned, leased, or
operated and such business is now conducted. Purchaser is duly licensed or
qualified and in good standing as a foreign corporation where the character of
the properties owned by Purchaser or the nature of the business transacted by it
make such license or qualification necessary.
3.2 OWNERSHIP OF PURCHASER SHARES. Purchaser has the right to issue
all the shares of the capital stock of Purchaser to be issued to Mertz, free and
clear of all rights, claims, liens and encumbrances.
3.3 OUTSTANDING CAPITALIZATION OF PURCHASER. As of the date hereof,
the capitalization of Purchaser is as set forth on Schedule 3.3 hereof. There
are no other issued or outstanding shares of capital stock of Purchaser as to
the date hereof. As of such date, there were also issued and
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outstanding the options, rights, warrants, commitments to issue and other
derivative securities which are issuable upon exercise or conversion of such
securities into common stock of Purchaser as listed on Schedule 3.3.
3.4 FINANCIAL STATEMENTS, BOOKS AND RECORDS. The audited consolidated
balance sheet of Purchaser as at September 30, 1998 and the unaudited
consolidated balance sheet of Purchaser as at June 30, 1999 (the "Balance
Sheet") and the related consolidated statements of operations for the year and
period then ended (collectively the "Financial Statements") fairly represent the
financial position of Purchaser as at such dates and the results of their
respective operations for the year and period then ended. The Financial
Statements were prepared in accordance with generally accepted accounting
principles applied on a consistent basis with prior periods except as otherwise
stated therein. The books of account and other financial records of Purchaser,
financial or otherwise, are in all material respects complete and correct and
are maintained in accordance with good business and accounting practices.
3.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. The copy of the
Certificate of Incorporation and By-Laws of Purchaser, and any amendments to
each, which have been delivered to ALG are true, correct and complete. The
minute book of Purchaser contains true and complete records of all meetings and
consents in lieu of meetings of their respective Board of Directors and
shareholders, to the extent that they are available, for the past two (2) years
(or date of incorporation, whichever is earlier) and accurately reflects all
transactions referred to therein.
3.6 TAXES. Except as set forth on Schedule 3.6, Purchaser has prepared
and filed all appropriate federal, state and local tax returns of every kind and
category (including, without
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limitation, income taxes, estimated taxes, excise taxes, sales taxes, inventory
taxes, use taxes, gross receipt taxes, franchise taxes and property taxes) for
all periods prior to and through the date hereof for which any such returns have
been required to be filed by it or the failure to make such filings and
resulting liability would not be material relative to the results of operations
of Purchaser. Purchaser has paid all taxes shown to be due by said returns or on
any assessments received by it or have made adequate provision for the payment
thereof except as set forth on the Balance Sheet.
3.7 COMPLIANCE WITH LAWS. Purchaser has complied in all material
respects with all federal, state, county and local laws, ordinances,
regulations, inspections, orders, judgments, injunctions, awards or decrees
applicable to it or its business which, if not complied with, would materially
and adversely affect the business of Purchaser.
3.8 NO BREACH. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not:
(a) violate any provision of the Certificate of Incorporation or
By-Laws of Purchaser;
(b) violate, conflict with or result in the breach of any of the
terms of, result in a material modification of, otherwise give any other
contracting party the right to terminate, or constitute (or with notice or lapse
of time or both constitute) a default under, any contract or other agreement to
which either Purchaser is a party or by or to which it or any of its assets or
properties may be bound or subject;
(c) violate any municipal, state or federal law or ordinances in
connection with the use of Purchaser's facilities whereat Purchaser conducts its
business or in connection with the operation of the business of Purchaser (the
foregoing representation being limited solely to the knowledge and belief of
Purchaser).
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(d) violate any statute, law or regulation of any jurisdiction
applicable to the transactions contemplated herein.
3.9 ACTIONS AND PROCEEDINGS. Except as set forth on Schedule 3.9, there
is no outstanding order, judgment, injunction, award or decree of any court,
governmental or regulatory body or arbitration tribunal against or involving
Purchaser. There is no action, suit or claim or legal, administrative or
arbitral proceeding or any investigation (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) pending or, to the best
knowledge of Purchaser, threatened against or involving Purchaser, or any of its
properties or assets. There is no fact, event or circumstances known to
Purchaser that may give rise to any suit, action, claim, investigation or
proceeding that would be required to be set forth on Schedule 3.8 if currently
pending or threatened.
3.10 BROKERS OR FINDERS. No broker's or finders fee will be payable by
Purchaser in connection with the transactions contemplated by this Agreement,
nor will any such fee be incurred as a result of any actions by Purchaser.
3.11 LIABILITIES. As at June 30, 1999, except as set forth on Schedule
3.11, Purchaser does not have any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, which are
material to its operations, whether known or unknown, fixed or unfixed,
liquidated or unliquidated, secured or unsecured, accrued or absolute,
contingent or otherwise, including, without limitation, any liability on account
of taxes, any other governmental charge or lawsuit brought, whether or not of a
kind required by generally accepted accounting principles to be set forth on a
financial statement (all of the foregoing collectively defined to as
"Liabilities"), which
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were not fully, fairly and adequately reflected on the Balance Sheet. As of the
Closing Date, Purchaser will not have any Liabilities, other than Liabilities
fully and adequately reflected on the Balance Sheet or on Schedule 3.10, except
for Liabilities incurred since June 30, 1999, in the ordinary course of
business.
3.12 LICENSES AND APPROVED STATUS. Purchaser is duly licensed by and is
in compliance with all applicable federal, state and local laws and regulations
and is duly qualified to do business in all states where such qualification is
required for the purpose of originating and making mortgage loans.
3.13 BURDENSOME AGREEMENTS. Purchaser is not a party to, nor are the
assets of Purchaser subject to or bound by or affected by, any provision of any
order of any court or other agency of government or any indenture, agreement or
other instrument or commitment which adversely effects the operations of the
Purchaser.
3.14 FULL DISCLOSURE. No representation or warranty by Purchaser in
this Agreement or in any document or schedule to be delivered by it pursuant
hereto, and no written statement, certificate or instrument furnished or to be
furnished to ALG pursuant hereto or in connection with the negotiation,
execution or performance of this, Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any fact necessary
to make any statement herein or therein not materially misleading or necessary
to a complete and correct presentation of all material aspects of the business
of Purchaser. To the best knowledge of Purchaser, there is no fact, development
or threatened development (except for general economic conditions affecting
business generally) which Purchaser has not disclosed to ALG and Mertz in
writing and which materially adversely affects the business of Purchaser.
3.15 REPRESENTATIONS AND WARRANTIES ON CLOSING DATE. The
representations and warranties
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contained in this Section 3 shall be true and complete on the Closing Date with
the same force and effect as though such representations and warranties had been
made on and as of the Closing Date.
SECTION 4. COVENANTS
4.1 CORPORATE EXAMINATIONS AND INVESTIGATIONS. (a) ALG shall cause its
officers, directors, employees and agents (including attorneys and independent
accountants) to permit Purchaser, its representatives, its accountants and its
legal counsel to undertake a due diligence investigation (hereinafter referred
to as the "Purchaser Investigation") of the assets, liabilities, and financial
business of ALG as Purchaser may deem necessary. In connection with the
Purchaser Investigation, (i) Purchaser and its respective representatives,
accountants and legal counsel shall be allowed full and complete access to the
books, records and facilities of ALG and to all working papers of the
independent accountants of ALG as to ALG, (ii) ALG shall make available its
respective officers, directors, employees, agents (including attorneys and
independent accountants) and other representatives to discuss with Purchaser its
respective representatives, accountants and legal counsel all such information
relating to the business of ALG as Purchaser reasonably deem material, and (iii)
ALG shall keep Purchaser fully apprised and informed of material developments
with respect to the business activities, financial condition, earnings and
prospects of the business of ALG. If by December 22, 1999 Purchaser is not
satisfied with the results of the Purchaser Investigation, Purchaser shall so
notify ALG, and if Purchaser's concerns cannot be resolved to Purchaser's
satisfaction by such date, the parties shall terminate the Agreement.
(b) Purchaser shall cause its officers, directors, employees and
agents (including attorneys and independent accountants) to permit ALG and its
accountants and its legal counsel to undertake a due diligence investigation
(hereinafter referred to as the "ALG Investigation") of the
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assets, liabilities, and financial business of Purchaser as ALG may deem
necessary. In connection with the ALG Investigation, (i) ALG, its
representatives, its accountants and its legal counsel shall be allowed full and
complete access to the books and records of Purchaser, (ii) Purchaser shall make
available its officers, directors, employees, agents (including attorneys and
independent accountants) and other representatives to discuss with ALG, its
representatives, its accountants and its legal counsel all such information
relating to the business of Purchaser as ALG reasonably deems material, and
(iii) Purchaser shall keep ALG fully apprised and informed of material
developments with respect to the business activities, financial condition,
earnings and prospects of the business of Purchaser. If by December 22, 1999,
ALG is not satisfied with the results of the Investigation, ALG shall so notify
Purchaser and if ALG's concerns cannot be resolved to ALG's satisfaction by such
date, the parties shall terminate the Agreement.
(c) Purchaser Investigation and ALG Investigation are sometimes
collectively referred to as the "Investigation."
4.2 EXPENSES. If for any reason the Acquisition does not close, each
party shall bear its own expenses in connection therewith except that all
reasonable out-of-pocket expenses incurred by ALG in connection with its
attorneys and independent accountants responding to Purchaser's Investigation
shall be borne by Purchaser.
4.3 FURTHER ASSURANCES. The parties shall execute such documents and
other papers and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
hereby. Each such party shall use its best efforts to fulfill or obtain the
fulfillment of the conditions to the Closing, including, without limitation, the
execution and delivery of any documents or other papers, the execution and
delivery of which are conditions
21
<PAGE>
precedent to the Closing.
4.4 CONFIDENTIALITY. In the event the transactions contemplated by this
Agreement are not consummated, Purchaser and ALG agree to keep confidential any
information disclosed to each other in connection therewith for a period of two
(2) years from the date hereof; provided, however, such obligation shall not
apply to information which: (i) at the time of disclosure was public knowledge;
(ii) after the time of disclosure becomes public knowledge (except due to the
action of the receiving party); or (iii) the receiving party had within its
possession at the time of disclosure. No party shall use any documents, material
or other information disclosed that is detrimental to any other party. In the
event that the transaction contemplated by this Agreement is not consummated,
each party shall return to the appropriate parties all originals and copies of
non-public documents and materials which shall have been furnished in connection
with the Investigation or otherwise.
4.5 NO SOLICITATION. Neither ALG nor any of its affiliates or the
Shareholder shall solicit nor accept from any other person or entity any offer
or expression of interest in or with respect to an acquisition, combination or
similar transaction involving the business of ALG or substantially all of its
assets or stock, subject to satisfactory completion of the Investigation;
provided, however, that if this Agreement has not been executed by December 22,
1999, or if the parties shall mutually agree in writing to abandon the
transactions contemplated herein, the restriction on ALG and its affiliates set
forth in this Section 4.5 shall cease to be binding upon them.
4.6 ACCURACY OF INFORMATION.
(a) The only representations and warranties that will be binding on
ALG and Mertz will be those representations and warranties set forth in Section
2 of this Agreement. Purchaser agrees that neither ALG, Mertz nor any of their
respective representatives shall have any liability hereunder to
22
<PAGE>
Purchaser, or any of its representatives resulting from the use of such
materials by Purchaser or its representatives.
(b) The only representations and warranties that will be
binding on Purchaser will be those representations and warranties set forth in
Section 3 of this Agreement. ALG and Mertz agree that neither Purchaser nor any
of its respective representatives shall have any liability hereunder to ALG,
Mertz, Shareholder or any of their representatives resulting from the use of
such materials by Purchaser or its representatives.
4.7 REGISTRATION OF SECURITIES.
The parties hereto agree to execute the Agreement attached hereto and
marked Exhibit "C" with respect to the registration of Purchaser's shares.
4.8 The shares of Purchaser to be issued by Purchaser to Mertz are
being acquired by Mertz for investment purposes and not with a view to
distribution of such shares.
4.9 The Whitehall Common Stock to be issued to Mertz pursuant to this
Agreement will not be registered under the Securities Act of 1933 or the laws of
any state at the time of issuance and will be issued pursuant to an exemption
from registration.
4.10 In certain circumstances after the expiration of the registration
rights provided for herein, sales of the Common Stock may be made in reliance
upon SEC Rules 144 and 145 pursuant to the terms and conditions of those rules.
Whitehall will supply the holders of such Common Stock with such information as
is necessary to enable them to make sales of the Common Stock under SEC Rules
144 and 145. Purchaser agrees to maintain, for two years from the closing date,
such current public information as is required by Rule 144(c).
4.11 RESTRICTIVE LEGEND. The certificates for shares issued by
Purchaser issued pursuant to
23
<PAGE>
this agreement each bear a legend substantially as follows:
The securities represented by this Certificate have not been registered
under the Securities Act of 1933 or the laws of any state and may not be
transferred in the absence of (a) an effective registration statement for the
securities under the Securities Act of 1933 and applicable state laws or (b) an
opinion of counsel to Whitehall that such registration is not required.
4.12 RESTRICTED SECURITIES. All shares of Whitehall Common Stock to be
issued to Shareholder will hereafter for the purposes of this Agreement be
referred to as the "Restricted Securities." The Restricted Securities will cease
to be restricted when they have been effectively registered under the Act and
disposed of in accordance with that registration or they have been distributed
to the public pursuant to Rules 144 and 145 under the Act or they have been
otherwise transferred and new certificates representing such securities have
been delivered which do not bear any legend restricting their transfer and such
securities are not subject to any stop transfer order or other restriction on
transfer. Whitehall will cause new stock certificates to be issued upon the
request of the Shareholder without restrictive legend after such securities are
no longer restricted.
4.13 LISTING OF SECURITIES. Upon the effectiveness of such registration
statement, the Registrable Securities included in the registration statement
shall be listed on the NASDAQ National Market or the NASDAQ SmallCap market if
the other shares of outstanding stock of Whitehall are so listed and on each
national securities exchange on which the other shares of outstanding Common
Stock of Whitehall are then listed.
SECTION 5. CONDITIONS PRECEDENT TO THE OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to enter into and complete the Closing is
subject, at the option of Purchaser to the fulfillment on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
by Purchaser in writing.
24
<PAGE>
5.1 REPRESENTATIONS AND COVENANTS. The representations and warranties
of ALG and Mertz contained in this Agreement shall be true in all material
respects. ALG and Mertz shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by ALG and Mertz on or prior to the Closing Date.
5.2 GOVERNMENTAL PERMITS AND APPROVALS, CORPORATE RESOLUTIONS. Any and
all permits and approvals from any governmental or regulatory body required for
the lawful consummation of the Closing shall have been obtained. ALG shall have
delivered to Purchaser resolutions by its Board of Directors certified by the
Secretary of ALG authorizing the transactions contemplated by this Agreement.
5.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any contracts, loan agreements or other agreements with ALG which may
be required in connection with the performance by ALG or Mertz of their
obligations under such contracts or other agreements, after the Closing Date
shall have been obtained. Additionally, the Purchaser shall have received all
required approvals from all governmental, agency or regulatory authorities
having jurisdiction over ALG or its business operations or the transactions
contemplated by this Agreement including, without limitation, any and all
necessary approvals from the Government National Mortgage Association, the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Veteran's administration, the Department of Housing and Urban
Development and such other appropriate state and federal agencies,
5.4 SATISFACTORY INVESTIGATION. Purchaser shall have in good faith
reasonably satisfied itself, after receipt and consideration of the Schedules
and after Purchaser and its representatives have completed the Investigation of
the business of ALG contemplated by this Agreement, that none of the
25
<PAGE>
information revealed thereby or in the Financial Statements has resulted in, or
in the reasonable opinion of Purchaser may result in, a material adverse change
in the assets, properties, business, operations or condition (financial or
otherwise) of ALG.
5.5 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or instituted or
threatened by any governmental or regulatory body to restrain, modify or prevent
the carrying out of the transactions contemplated hereby or to seek damages or a
discovery order in connection with such transactions, or which has or may have,
in the reasonable opinion of Purchaser, a materially adverse effect on the
assets, properties, business, operations or condition (financial or otherwise)
of ALG.
5.6 STOCK CERTIFICATES: At the Closing, the Shareholder shall have
delivered the certificates representing the ALG Shares, duly endorsed (or with
executed stock powers), so as to make Purchaser the sole owner thereof.
5.7 EMPLOYMENT AGREEMENT. Mertz shall enter into an employment
agreement with the Purchaser in the form of Exhibit "A" hereto.
SECTION 6. CONDITIONS PRECEDENT TO THE OBLIGATION OF ALG AND SHAREHOLDERS TO
CLOSE
The obligation of ALG to enter into and complete the Closing is
subject, at the option of ALG, to the fulfillment on or prior to the Closing
Date of the following conditions, any one or more of which may be waived in
writing by ALG.
6.1 REPRESENTATIONS AND COVENANTS. The representations and warranties
of Purchaser contained in this Agreement shall be true in all material respects.
Purchaser shall have performed
26
<PAGE>
and complied with all covenants and agreements (including the covenants
contained in Section 4.4 hereof) required by the Agreement to be performed or
complied with by Purchaser on or prior to the Closing Date.
6.2 GOVERNMENTAL PERMITS AND APPROVALS: CORPORATE RESOLUTIONS. Any and
all permits and approvals from any governmental or regulatory body required for
the lawful consummation of the Closing shall have been obtained. Purchaser shall
have delivered to ALG resolutions by its Board of Directors certified by the
Secretary of Purchaser authorizing the transactions contemplated by this
Agreement.
6.3 THIRD PARTY CONSENTS. All consents, permits and approvals from
parties to any contracts, loan agreements or other agreements with Purchaser
which may be required in connection with the performance by Purchaser of its
obligations under such contracts or other agreements after the Closing shall
have been obtained.
6.4 SATISFACTORY BUSINESS REVIEW. ALG shall have in good faith
reasonably satisfied itself after review of the information provided hereby or
in connection herewith, or following any discussions with management or
representatives of Purchaser, that none of the information revealed thereby has
resulted in or in the reasonable opinion of ALG may result in a material adverse
change in the assets, properties, business, operations or condition (financial
or otherwise) of Purchaser.
6.5 LITIGATION. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or instituted or
threatened by any governmental or regulatory body to restrain, modify or prevent
the carrying out of the transactions contemplated hereby or to seek damages or a
discovery order in connection with such transactions, or which has or may in the
reasonable opinion of ALG, have a materially adverse effect on the assets,
properties, business,
27
<PAGE>
operations or condition (financial or otherwise) of Purchaser.
6.6 STOCK CERTIFICATES. Purchaser shall have issued to Mertz a
certificate or certificates representing Purchaser shares required to be issued
to Mertz under this Agreement and have delivered the certificate or certificates
to Mertz at closing.
SECTION 7. FULL OPPORTUNITY TO NEGOTIATE.
The parties have negotiated, prepared and entered into this Agreement upon
terms mutually acceptable to all parties and their legal counsel, as evidenced
by the Parties' signatures hereto.
SECTION 8. CONDITIONS SUBSEQUENT TO CLOSING
8.1 SALE OF ASSETS OR STOCK OF ALG. In the event that on or prior to
January 15, 2005, the Purchaser shall have disposed of substantially all of the
assets or a majority in interest of the capital stock of ALG to a third party
non-affiliate of the Purchaser, Mertz shall be entitled to receive 25% of the
net proceeds received by the Purchaser as its purchase price for such capital
stock or assets.
8.2 DISTRIBUTION OF ALG NET INCOME. There shall be no distribution of
ALG net income to Purchaser until such time as the ALG shares are distributed to
Purchaser pursuant to the Escrow Agreement provided for in Section 1.3.
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF ALG AND MERTZ
Notwithstanding any right of Purchaser fully to investigate the affairs
of ALG, Purchaser shall have the right to rely fully upon the representations,
warranties, covenants and agreements of ALG and Mertz contained in this
Agreement or in any document delivered to Purchaser by ALG or Mertz or any of
their representatives, in connection with the transactions contemplated by this
Agreement. All such representations, warranties, covenants and agreements shall
survive the execution and delivery hereof and the Closing hereunder for twelve
(12) months following the Closing Date.
28
<PAGE>
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF PURCHASER
Notwithstanding any right of ALG and Mertz fully to investigate the
affairs of Purchaser, ALG, and Mertz have the right to rely fully upon the
representations, warranties, covenants and agreements of Purchaser and PURCHASER
contained in this Agreement or in any document delivered to ALG and Mertz by
Purchaser or any of their representatives, in connection with the transactions
contemplated by this Agreement. All such representations, warranties, covenants
and agreements shall survive the execution and delivery hereof and the Closing
hereunder for twelve (12) months following the Closing Date.
29
<PAGE>
SECTION 11. INDEMNIFICATION
11.1 OBLIGATION OF ALG AND MERTZ TO INDEMNIFY. Subject to the
limitations on the survival of representations and warranties contained in
Section 2, ALG and Mertz jointly and severally hereby agree to indemnify, defend
and hold harmless Purchaser from and against any losses, liabilities, damages,
deficiencies, costs or expenses (including interest, penalties and reasonable
attorneys' fees and disbursements) (a "Loss") based upon, arising out of or
otherwise due to any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of ALG or Mertz contained in this Agreement, in
any document or other writing delivered pursuant to this Agreement, for any
expenses incurred as a result of a claim that such other party or its affiliates
has employed a broker in connection with the transactions contemplated by this
Agreement.
11.2 OBLIGATION OF PURCHASER TO INDEMNIFY. Subject to the limitations
on the survival of representations and warranties contained in Section 3,
Purchaser agrees to indemnify, defend and hold harmless Mertz and ALG from and
against any Loss, based upon, arising out of or otherwise due to any inaccuracy
in or any breach of any representation, warranty, covenant or agreement made by
Purchaser and contained in this Agreement, in any document or other writing
delivered pursuant to this Agreement, or for any expenses incurred as a result
of a claim that such other party or its affiliates has employed a broker in
connection with the transactions contemplated by this Agreement.
11.3 CLAIMS BY THIRD PARTIES. Promptly after receipt by either party
hereto (the "Indemnitee") of notice of any demand, claim or circumstances which,
with the lapse of time, would give rise to a claim or the commencement (or
threatened commencement) of any action, proceeding or investigation (an
"Asserted Liability") that may result in a Loss, the Indemnitee shall give
notice
30
<PAGE>
thereof (the "Claims Notice") to the other party or parties (the "Indemnitor").
The Claims Notice shall describe the Asserted Liability in reasonable detail,
and shall indicate the amount (estimated, if necessary) of the Loss that has
been or may be suffered by the Indemnitee.
11.4 OPPORTUNITY TO DEFEND. Indemnitor may elect to compromise or
defend, at its own expense and by its own counsel, any Asserted Liability. If
the Indemnitor elects to compromise or defend such Asserted Liability, it shall
within fifteen (15) days (or sooner, if the nature of the Asserted Liability so
requires) notify the Indemnitee of its intent to do so, and the Indemnitee shall
cooperate, at the expense of the Indemnitor in the compromise of, or defense
against, such Asserted Liability. The Indemnitee may participate at its own
expense, in the defense of such Asserted Liability. If Indemnitor elects not to
compromise or defend the Asserted Liability, fails to notify the Indemnitee of
its election as herein provided, contests its obligations to indemnify under
this Agreement, or at any time fails to pursue in good faith the resolution of
any Asserted Liability, in the opinion of Indemnitee, then Indemnitee may, upon
ten days' notice to Indemnitor pay, compromise or defend any such Asserted
Liability. If the Indemnitor chooses to defend any claim, the Indemnitee shall
make available to the Indemnitor any books, records or other documents within
its control that are necessary or appropriate for such defense.
SECTION 12. TERMINATION OF AGREEMENT
This Agreement may be terminated prior to or on the Closing Date as
follows:
(i) at the election of Purchaser, if any one or more of the
conditions to the obligation of ALG, Mertz, or the Shareholder to close have not
been fulfilled as of the Closing Date;
(ii) at the election of ALG or Mertz, if any one or more of
the conditions to the obligation of Purchaser to close have not been fulfilled
as of the Closing Date;
31
<PAGE>
(iii) at the election of Purchaser, if ALG or Mertz has
breached any material representations, warranty, covenant or agreement contained
in this Agreement;
(iv) at the election of ALG, if Purchaser has breached any
material representation, warranty, covenant or agreement contained in this
Agreement;
(v) at the election of Purchaser or ALG and Mertz, if any
legal proceeding is commenced or threatened by any governmental or regulatory
agency or other person directed against the consummation of the Closing or any
other transaction contemplated under this Agreement and either Purchaser or ALG
and Mertz, as the case may be, reasonably and in good faith deem it impractical
or inadvisable to proceed in view of such legal proceeding or threat thereof; or
(vi) at any time on or prior to the Closing Date, by mutual
written consent of Purchaser and ALG.
If this Agreement is terminated and the transactions contemplated
hereby are not consummated as described herein, this Agreement shall become null
and void and of no further force and effect, except for the provisions of
Section 4.4 hereof relating to the obligation of the parties to keep information
confidential and of Section 4.2 as to the expenses of each party. None of the
parties has any liability in respect of a termination of this Agreement except
to the extent that failure to satisfy the conditions of Section 5 and 6 results
from the intentional or willful violation of the representations, warranties,
covenants or agreements of such party under this Agreement. SECTION 13. CLOSING
The Closing shall take place at the Law Offices of Jerome L. Froimson,
340 E. Palm Lane, Suite 150, Phoenix, Arizona 85004 on or before December 22,
1999.
32
<PAGE>
SECTION 14. MISCELLANEOUS
14.1 PUBLICITY. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be issued by either
party at any time from the signing hereof without advance approval in writing of
the form and substance thereof by the other party.
14.2 NOTICES. Any notice or other communication required or which may
be given hereunder shall be in writing by a party or by an attorney to a party
and shall be delivered personally, telegraphed, telexed, sent by facsimile
transmission or sent by certified, registered, or express mail, postage prepaid,
and shall be deemed given when so delivered personally, telegraphed, telexed or
sent by facsimile transmission or if mailed, four (4) days after the date of
mailing, as follows:
(i) If to Purchaser:
WHITEHALL ENTERPRISES, INC.
801 Brickell Avenue, 9th Floor
Miami, FL 33131
Attention: Luis Alvarez, President
(ii) If to ALG:
ALTERNATIVE LENDING GROUP, INC.
1420 East Missouri, Suite 125
Phoenix, AZ 85014
Attention: Jeffrey Mertz, President
(iii) If to Mertz:
R. JEFFREY MERTZ
1420 East Missouri, Suite 125
Phoenix, AZ 85014
33
<PAGE>
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notice
hereunder.
14.3 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto) and the collateral agreements executed in connection with the
consummation of the transactions contemplated herein contains the entire
agreement among the parties with respect to the delivery of the ALG Shares, the
issue of Purchaser shares to Mertz, payment of cash and related transactions,
and supersede all prior agreements, written or oral, with respect thereto.
14.4 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which any party may otherwise have at law or in equity. The rights and
remedies of any party based upon, arising out of or otherwise in respect of any
inaccuracy in or breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which the claim of any
inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which
34
<PAGE>
there is no inaccuracy or breach.
14.5 GOVERNING LAW. This Agreement shall be governed by, construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of Delaware, without reference to the principles of conflicts of
law.
14.6 NO ASSIGNMENT. This Agreement is not assignable except by
operation of law.
14.7 EXHIBITS. All Exhibits and documents referred to in, or attached
to, this Agreement are integral parts of this Agreement as if fully set forth
herein and all statements appearing therein shall be deemed to be
representations. All items disclosed hereunder shall be deemed disclosed only in
connection with the specific representation to which they are explicitly
referenced or to wherever else they otherwise may apply.
14.8 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
14.9 SEVERABILITY OF PROVISIONS. The invalidity or unenforceability of
any term, phrase, clause, paragraph, restriction, covenant, agreement or other
provision of this Agreement shall in no way affect the validity or enforcement
of any other provision or any part thereof.
14.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed, shall constitute an original copy
hereof, but all of which together shall consider but one and the same document.
14.11 ATTORNEY'S FEES AND COSTS. In connection with any litigation
arising out of this Agreement or the parties relationship as contemplated
herein, the prevailing party will be entitled to recover all expenses incurred,
including reasonable attorney's fees and courts costs and any and all fees in
connection with any appellate proceeding occasioned as a result thereof.
35
<PAGE>
14.12 GENDER. The use of the singular herein shall be deemed to
include the plural and the use of the plural shall be deemed to include the
singular.
14.13 CONSTRUCTION. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party or parties drafting such
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
ATTEST: WHITEHALL ENTERPRISES, INC.
By:
- ---------------------- ------------------------------
Name: /s/ LUIS ALVAREZ
--------------------------
Title: President
ATTEST: ALTERNATIVE LENDING GROUP, INC.
By:
- ---------------------- ------------------------------
Secretary Name: R. Jeffrey Mertz
Title: President
/s/ R. JEFFREY MERTZ
---------------------------------
- ---------------------- R. Jeffrey Mertz
Witness
36
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-2000
<PERIOD-END> DEC-31-1999
<CASH> 8,507
<SECURITIES> 0
<RECEIVABLES> 684,604
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<INVENTORY> 391,613
<CURRENT-ASSETS> 1,185,153
<PP&E> 829,263
<DEPRECIATION> 120,609
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0
4,000
<COMMON> 12,493
<OTHER-SE> 1,083,900
<TOTAL-LIABILITY-AND-EQUITY> 4,240,270
<SALES> 1,364,301
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<CGS> 1,083,906
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