UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1998
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)for the transition period from to .
-------- --------
Commission file number: 0-20033
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AmeriResource Technologies, Inc.
---------------------------------
(Name of Small Business Issuer in Its Charter)
Delaware 84-1084784
- ------------------------------- ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
8815 Long Avenue Lenexa, Kansas 66215
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(Address of Principal Executive Offices) (Zip Code)
(913) 859-9292
----------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of each Exchange on Which Registered
- -------------------------------- -----------------------------------------
Common Stock ($0.0001 Par Value) None
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 for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ].
The issuer's total consolidated revenues for the year ended December 31, 1998,
were $47,560.
The aggregate market value of the registrant's Common Stock, $0.0001 par value
held by non-affiliates was approximately $3,893,613 based on the average closing
bid and asked prices for the Common Stock on March 31, 1999. On March 31, 1999,
the number of shares outstanding of the registrant's Common Stock, $0.001 par
value (the only class of voting stock), was 472,061,312.
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business..........................................1
Item 2. Description of Property..........................................2
Item 3. Legal Proceedings............................................... 2
Item 4. Submission of Matters to a Vote of Security-Holders..............3
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.........3
Item 6. Management's Discussion and Analysis or Plan of Operation........5
Item 7. Financial Statements.............................................7
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.............................................7
PART III
Item 9. Directors and Executive Officers.................................8
Item 10. Executive Compensation...........................................8
Item 11. Security Ownership of Certain Beneficial Owners and Management...9
Item 12. Certain Relationships and Related Transactions..................10
Item 13. Exhibits, List and Reports on Form 8-K..........................11
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
- --------------------
As used herein, the term "Company" refers to AmeriResource Technologies,
Inc. and its subsidiaries and predecessors, unless the context indicates
otherwise. Originally incorporated in Delaware under the name M-1 Financial
Corporation in 1988, the Company adopted the name KLH Engineering Group, Inc in
connection with its May 29, 1991 stock acquisition of KLH Engineering Group,
Inc., a Colorado corporation. In 1994, the Company acquired Tomahawk
Construction, Inc., a Missouri Corporation, which became the Company's
construction subsidiary ("Tomahawk"). During 1996 the Company changed its name
to AmeriResource Technologies, Inc.
The Company's operations have historically consisted of providing
engineering and construction services through its wholly-owned subsidiaries.
However, in 1996 the Company closed all of its engineering subsidiaries due to
continued losses and has obtained no construction contracts during 1998. The
Company has been unable to obtain any construction contracts as a result of
placing Tomahawk into Chapter 11 Bankruptcy on September 15, 1994. Despite
Tomahawk's emergence from bankruptcy on August 28, 1995, the Company has been
unable to obtain the necessary bonding capacity to obtain construction
contracts.
On June 29, 1998, the Company entered into an Agreement for the Exchange of
Stock with First Americans Mortgage Corporation, a Missouri Corporation ("FAMC")
and its shareholders. Pursuant to this Agreement the Company issued Seventy
Million (70,000,000) shares of its $.0001 par value common stock in exchange for
a 100% interest in FAMC. FAMC is a mortgage company specializing in providing
Native Americans financing for new, existing and rehabilitation housing
projects. For more information, see "Item 12. Certain Relationships and Related
Transactions." See also "Item 2" in the Company's Form 8-K filed on August 26,
1998.
On December 14, 1998, the Company effectively entered into a Stock Purchase
Agreement with Gold Coast Recources, Inc. ("Gold") for the purchase of a 100%
interest in The Travel Agent"s Hotel Guide, Inc. ("TAHG"). Pursuant to the Stock
Purchase Agreement, the Company issued a convertible debenture in the amount of
#3,350,000 which bears interest at a rate of 7% per annum. The deventure may be
converted in shares of common stock of the Company based upon the average bid
price for the five days preceding the date the demand for conversion is made
which may occur any time agter December 14, 2001. The Company also paid
20,000,000 shares of its common stock to an unrelated third party to guarantee
payment under the terms of the debenture. In order for the Company to meet its
obligations under the debenture the Company will need to either generate
dufficient revenues to pay the 3,350,000 plus accrued interest or increase the
number of authorized shares. For more information, see "Item 6. Management's
Discussion and Analysis or Plan of Operation"
Business of Issuer
- ------------------
The Company's primary operations are conducted through its wholly-owned
subsidiaries, FAMC and Tomahawk, whose respective operations consist of
providing mortgage and construction services.
Mortgage Subsidiary (FAMC)
The Company acquired FAMC in an effort to supplement its construction
services. FAMC is a mortgage company specializing in providing Native Americans
financing for new, existing and rehabilitation housing projects. The Company's
plans include building homes for Native Americans through its construction
subsidiary and providing financing through FAMC. The Company intends to provide
all necessary services, including both construction and financing, to enable
Native Americans to obtain affordable housing,. The Company anticipates the
acquisition of FAMC will enable it to increase revenues, generate earnings and
increase shareholder value.
FAMC currently provides the following loan products: (1) Federal Housing
Administration loans; (2) Housing and Urban Development section 184 Indian
housing loan guarantee program; (3) Veterans Administration loans; (4) Rural
Housing Guarantee Loan; and (5) Fannie Mae loans.
Construction Subsidiary (Tomahawk)
During 1998, Tomahawk continued to bid for work in the construction
management field, but was not awarded any new contracts. As a result of
Tomahawk's lack of new construction jobs in 1998, management is currently
1
<PAGE>
planning to explore opportunities to combine Tomahawk with a more profitable
company through merger or acquisition. The Company is now searching for a
construction company that is interested in being acquired. Such an acquisition
would help fulfill the Company's long-term plan of becoming a full-service
housing resource for providing construction and mortgage services to Native
American communities across the United States.
The Company had a total of 8 employees, all of whom were employed
full-time, as of April 15, 1999.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns no real property. The Company's operations are conducted
through one office in Kansas, which is leased.
ITEM 3. LEGAL PROCEEDINGS
The following are pending material cases involving the Company. The Company
is subject to a variety of claims and suits that arise from time to time out of
the ordinary course of business, most commonly actions for professional
liability or contract disputes. The company currently believes that the pending
claims for professional liability are adequately covered by insurance. The
Company has historically been able to procure insurance. However, due to the
nature of the Company's business, there can be no guarantee that such insurance
will be adequate, will be renewable, or will remain available in the future.
American Factors Group, L.L.C. vs. AmeriResource Technologies, Inc., et al.
In February of 1997, American Factors Group, L.L.C. (AFG) filed an action
against the Company in the Federal Court of New Jersey, case no. 13 1810119097.
AFG claimed that the Company and/or certain officers or directors either
breached a contract or committed fraud involving the factoring of receivables.
The action was stayed to allow for arbitration. In August 1998, a panel of the
American Arbitration Association in New York City awarded $430,924 in favor of
AFG. The court confirmed the arbitration award and revived the action. AFG is
now proceeding against the Company and the other defendants. At this time, no
clear assessments can be made with respect to the litigation. AFG and the
Company are in settlement discussions, but there can be no assurance of a
settlement.
Adams v. AmeriResource Technologies, Inc. In February of 1997, Larry Adams
filed an action against the Company in the District Court of Johnson County,
Kansas, case no. 97C 2647. Adams claimed the Company owed him $80,652, arising
from a promissory note. The Company confessed judgment in that amount. In
January 1998, Delmar Janovec settled this matter by delivering to Adams
2,000,000 shares of his personal stock in the Company.
BillieYoungblood vs. KLH Engineering Group, Inc. et al. In July of 1996,
Youngblood Enterprises, Inc. filed an action against KLH Engineering Group, Inc.
& KLH Engineering of Grand Junction in the Eighteenth Judicial District Court of
Colorado, case no. 98C 4655. It claimed the Company did not pay for aerial
photography. It obtained a judgment for $25,051.43 plus interest. Thereafter,
Youngblood Enterprises assigned the judgment to Billie Youngblood. In April of
1998, Mr. Youngblood registered the judgment in the District Court in Johnson
County, Kansas. The judgment was satisfied as of March 30, 1999 and will be
dismissed soon.
Industrial State Bank vs. AmeriResource Technologies, Inc. In November of
1998, Industrial State Bank (the Bank) filed an action against the Company in
the District Court of Johnson County, Kansas, case no. 98C 14923. The Bank
claimed non-payment of a line of credit for $1,071,000. The Company filed a
counter-claim against the Bank for misapplication of funds, alleging that the
Bank erroneously applied approximately $900,000 to pay down obligations of one
of the Company's affiliates, rather than applying the $900,000 to pay down the
Company's line of credit. The parties have held ongoing settlement discussions
but have not reached a final agreement.
2
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Lexington Insurance Company vs. AmeriResource Technologies, Inc. In July of
1996, Lexington filed an action against the Company in the District Court of
Johnson County, Kansas, case no. 97C 13959. Lexington claimed the Company did
not pay its full insurance deductible on an Errors and Omissions claim the
insurer had covered. It obtained a judgment for $39,774.04 plus 8% interest per
annum. In December of 1997, the Court ordered the Company to appear for a
hearing in aid of execution. The Company explained that its accounting
information was in the hands of its accountants in Salt Lake City, Utah, due to
an audit, and the hearing was continued.
Since the continuance, Lexington has not sought any further hearing in aid of
execution.
Naylor vs. Tomahawk Construction Co. In July of 1997, Naylor filed an
action against Tomahawk Construction Co. in the District Court for Jackson
County, Missouri, case no. CV-9716964. Naylor claimed damages of approximately
$43,500.00 for injuries sustained while working as an employee of a
subcontractor for Tomahawk. Tomahawk is being defended by its insurance carrier
and believes that there will be no ultimate liability on its part. Any claim
should be covered under the subcontractor's insurance and/or under Tomahawk's
insurance.
Construction Industry Laborers Pension Fund, et al. vs. Tomahawk
Construction Co. In January of 1997, the Fund filed an action against Tomahawk
in the United States District Court for the Western District of Missouri, case
no. 97-0068-CV-V-4. The Fund claimed non-payment of pension, welfare, vacation
and training benefits in the amount of $41,000. The Fund is also filing a
complaint against U.S.F. & G. for nonpayment of the benefits based on a bond
U.S.F. & G. issued to the Fund. It appears that U.S.F. & G. and the Fund may
settle the claim in the near future, which would result in no liability to
Tomahawk.
The Preserve at Greenwood Village vs. The City of Greenwood Village,
Colorado, et al., vs. KLH Engineering of Lakewood Inc./ f/k/a KLH
- -Triconsultants, Inc. In October of 1998, the City of Greenwood Village served a
third-party complaint against KLH Engineering of Lakewood Inc. in District Court
of Arapaho County, Colorado, case no. 97 CV 2128. The relief sought is an
unspecified amount of damages. The City had earlier been sued by the Preserve
over defects in a drainage system at it built. The City then claimed KLH
negligently inspected the drainage system and negligently misrepresented that
the system passed inspection. Presently, the parties are in settlement
discussions with respect to an arrangement that would ensure no claim continues
against KLH.
Lincoln Property Company, N.C. vs. Carter B. Jones Cement Contractor, Inc.,
et al. In June of 1997, Lincoln filed an action against Jones and other building
contractors (eventually including KLH Engineering of San Mateo, Inc.) in Alameda
County Superior Court, State of California, case no. H-183573-7. Lincoln
Properties claimed that KLH Engineering of San Mateo was involved with other
contractors in negligently providing construction services to a housing develop-
ment. In March of 1999 this action was dismissed against KLH.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During 1998, the Company did not submit any matters to a vote of security
holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on OTC Bulletin Board under the symbol
"ARET."
3
<PAGE>
The table below sets forth the high and low sales prices for the Company's
Common Stock for each quarter of 1997, 1998 and the first quarter of 1999.
Prices rounded to the nearest 1 cent. The quotations below reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions:
Quarter High Low
------- ---- ---
1997 First $0.02 $0.01
----
Second $0.02 $0.01
Third $0.03 $0.01
Fourth $0.05 $0.01
Quarter High Low
------- ---- ---
1998 First $0.03 $0.02
----
Second $0.04 $0.01
Third $0.02 $0.01
Fourth $0.01 $0.00*
Quarter High Low
------- ---- ---
1999 First $0.02 $0.01
----
- -------------------------------------
Shareholders
- ------------
As of March 31, 1999, there were approximately 682 shareholders of record
holding a total of 472,061,312 shares of Common Stock.
Dividends on the Common Stock
- -----------------------------
The Company has not declared a cash dividend on its Common Stock in the
last two fiscal years and the Company does not anticipate the payment of future
dividends. The Company may not pay dividends on its Common Stock without first
paying dividends on its Preferred Stock. There are no other restrictions that
currently limit the Company's ability to pay dividends on its Common Stock other
than those generally imposed by applicable state law.
Preferred Stock
- ---------------
No market currently exists for the Company's preferred stock. The Company
has two classes of preferred stock, a Series A class and a Series B class
("Preferred Stock"). Each share of the Preferred Stock may be converted by the
holder into one share of common stock. The Preferred Stock has a liquidation
- -------------------------------------
* Share price fell below $.01, but still grater than $.00; stock
reporting program rounded down.
4
<PAGE>
value of $1.25 per share and has voting rights equivalent to one share of Common
Stock. Dividends on the Preferred Stock accrue quarterly at an annual rate of
$0.125 per share. The Company has never declared or paid dividends on its
Preferred Stock.
As of March 31, 1999, there were 16 shareholders of record holding a total
of 2,291,275 shares of the Company's Series A Preferred Stock. On the same date,
there were 2 shareholders of record holding a total of 777,012 shares of the
Company's Series B Preferred Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The only viable operations the Company had during 1998 were conducted
through First Americans Mortgage Corporation ("FAMC"), which was acquired as a
wholly-owned subsidiary on August 6, 1998. Despite the Company's efforts, it was
unable to obtain any construction projects through its construction subsidiary,
Tomahawk, in 1998. As a result of Tomahawk's inability to obtain any substantial
construction projects over the last two years, the Company is planning either to
combine Tomahawk with a more profitable company through merger or acquisition,
or perhaps discontinue any effort to obtain construction projects through
Tomahawk.
The Company's plan for 1999 is to increase its revenues by servicing loans
through FAMC. The Company's long-term plan is to create a fully integrated
company possessing all the necessary resources to provide housing for Native
Americans throughout the United States.
In an effort to accomplish this goal, the Company is currently searching
for an operating construction company that may be interested in being acquired
by the Company. The Company's plan then would be to build homes for Native
Americans through a construction subsidiary while also providing financing
through FAMC.
The Company is also in the process of implementing a specialized mortgage
program it designed, which targets Native American nations. Under this program,
Native Americans can purchase a home with less than 1% down at closing. FAMC has
already increased its staff from 2 to 6 people since the Company acquired FAMC.
FAMC intends to further increase its staff to approximately 15 by the end of
1999 to process the additional loans.
The specialized program FAMC designed is now being unitized with five of
the largest Native American nations in the State of Oklahoma, which should
provide mortgages for over 500 families in 1999. FAMC is currently reviewing and
developing relationships with other Native American nations to implement these
programs on a national level.
FAMC is also searching for other mortgage companies to acquire.
Specifically, FAMC is searching for small mortgage companies that provide
services via the Internet. FAMC believes that this will allow it to enter new
markets, because this segment of the market is still very new and is likely to
be largely untapped with regard to Native Americans.
Furthermore, FAMC is now reviewing and discussing the importance of
building relationships with other mortgage companies that could offer FAMC a
direct advantage over its limited competition. FAMC has entered into an
agreement with EBM Mortgage, a California-based company, to implement a Web site
that will allow FAMC to originate mortgages over the Internet. The mortgage Web
site will allow an applicant to complete a mortgage application over the
Internet. The system will have video conferencing, allowing the loan processor
to view the applicant at the same time the applicant views the loan processor.
Using the Web site will allow FAMC to enter another market--urban Indians--that
is presently not well-served. The market potential for this unique concept is
virtually untapped. FAMC plans to open this market by using Native American
Indian Centers, which will work as a host for FAMC. There is a great market
potential for this unique concept; statistics reflect that there are potentially
100,000 household wage earners that could qualify under FAMC's program.
5
<PAGE>
The Company hopes that FAMC's plans will yield substantial additional
business in 1999. FAMC's goal is to sign at least three additional Native
American nations that will use FAMC's loan programs by the end of 1999.
The Travel Agent's Hotel Guide, Inc.
- ------------------------------------
The company acquired a 100% interest in the Travel Agent's Hotel Guide,
Inc. ("TAHG") for the purpose of reselling TAHG's sole asset The Travel Hotel
Guide. The Travel Hotel Guide (the "Guide") is a publication that lists over
10,000 hotels in North America. TAHG charges for advertising space in the Guide
which historically has been published and distributed twice a year. The
Company's plan is to sell the Guide at a profit. Unfortunately, the Guide has
been out of publication for several years. However, management believes that the
potential purchaser of the Guide has adequate resources to resume publication of
the Guide. In the event the Company is unable to sell the Guide in 1999, the
Company is considering the possibility of a joint venture with an Internet
company that could post the Guide on the Internet and thereby, reduce the
substantial cost needed to publish and distribute the Guide in a conventional
manner. For more information, see "Item 1. Description of Business."
Results of Operations
- ---------------------
1998 revenues were $47,560, an increase of 8.9% over 1997's revenues of
$43,663. The increase in revenues was a direct result of FAMC's operations,
which were acquired in August of 1998. Thus, 1998 revenues (derived from
servicing loans) are not comparable to 1997 revenues generated by collecting
miscellaneous outstanding receivables from construction work.
The Company recorded a net operating loss of $3,469,770 for 1998 (compared
to an operating loss of $1,639,539 for 1997). The lower net operating losses
derive from a substantial decrease in operating expenses due to the Company's
inability to obtain construction contracts and the Company's acquisition of
FAMC, whose operating expenses were only $1,233. The Company recorded a net loss
of $3,504,010 for 1998 (compared to a net loss of $ 1,685,912 for 1997). The
larger net loss derived primarily from an extraordinary loss from a lawsuit the
Company was forced to record, the write-down of the acquisition for the Hotel
Guide,the write down on several doubtful accounts, and the issuance of S-8
Options for services. The one time write down of these accounts amounted to
3,742,702 or approximately 91% of the total loss.
Capital Resources and Liquidity
- -------------------------------
On December, 31, 1998, the Company had a working capital deficit of
$2,276,271. The Company plans to decrease its working capital deficit by
combining its inoperable subsidiaries with new, more profitable companies
through merger or acquisition.
Total stockholder's equity was a negative $5,827,417 in 1998 (compared to a
negative $3,239,022 in 1997). The Company intends to improve stockholder equity
by combining its inoperable subsidiaries with new, more profitable companies
through merger or acquisition.
During 1998, the Company issued a total of 32,000,000 shares of Common
Stock to various employees and consultants pursuant to a Form S-8 Registration
Statement ("S-8") under the Securities Act of 1933, as amended (the "Act"). The
Company will continue to use its equity securities to compensate employees and
consultants until its cash flows improve.
Year 2000 Compliance
- --------------------
The Year 2000 presents potential concerns for businesses throughout the
world. The consequences of this issue may include systems failures and business
process interruptions. It may also include additional business and competitive
differentiation. Aside from the well-known calculation problems with the use of
2-digit date formats as the year changes from 99 to 00, the year 2000 is a
special case leap year, and in many organizations using older technology,
2-digit dates may have been used for special programmatic functions.
To respond to the Year 2000 issue, the Company hired an outside computer
consultant in October of 1998 who completed a review of the Company's existing
systems and upgraded approximately 90% of its existing system with hardware and
software that purports to be Year 2000 compliant. Based on the advice of the
consultant, the Company expects to be fully compliant by June 30, 1999.
The cost associated with updating the Company's computer systems is not
expected to have a material impact on the financial condition of the Company.
Nonetheless, there can be no assurance that this will be the case.
6
<PAGE>
All organizations dealing with the Year 2000 issue must address the effect
this issue will have on their clients, associates, and third-party supply chain.
Although the Company currently has limited information concerning the Year 2000
compliance status of its clients, associates, and suppliers, the Company is
undertaking steps to identify key third parties and formulate a system for
working with them to understand their ability to continue providing services (or
buying the Company's) through the Year 2000 change. The impact of the Year 2000
issue on future Company revenue is hard to discern but is a risk to be
considered in evaluating the further growth of the Company.
Forward Looking Statements
- --------------------------
The forward-looking statements contained in this Item 6 and elsewhere in
this Form 10-KSB are subject to various risks, uncertainties and other factors
that could cause actual results to differ materially from the results
anticipated in such forward-looking statements.
Events Subsequent to End of Fiscal Year
- ---------------------------------------
During the first quarter of 1999, the Company entered into several
consulting agreements pursuant to which the Company issued 45,000,000 shares of
its Common Stock under an S-8 for services rendered. In addition, the Company
issued a total of 40,000,000 shares of its Common Stock to its outside counsel
for services rendered. The Company also issued 5,000,000 shares under an S-8 to
Rod Clawson, a director of the Company.
In February of 1999, the Internal Revenue Service (through its Denver
office) reached an agreement with the Company for unpaid 941 Taxes owed by the
Company in the amount of $63,318.05. The balance is to be paid starting in March
of 1999 and ending in December of 1999.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal year ended December 31,
1998 are attached hereto as pages F-1 through F-24.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During 1998, the Company had no changes or disagreements with its
accountants on accounting or financial disclosures.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7
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AMERIRESOURCE TECHNOLOGIES, INC.
AND SUBSIDIARIES
-----------------------------
CONSOLIDATED FINANCIAL STATEMENTS
-----------------
DECEMBER 31, 1998
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONTENTS
--------
Page
- ----
Independent Auditor's Report.................................................F-1
Financial Statements:
Consolidated Balance Sheet ........................................F-2 - F-3
Consolidated Statements of Operations....................................F-4
Consolidated Statement of in Stockholders' Equity........................F-5
Consolidated Statements of Cash Flows..............................F-6 - F-8
Notes to Consolidated Financial Statements........................F-9 - F-24
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Stockholders
and Board of Directors
of AmeriResource Technologies, Inc.
We have audited the accompanying consolidated balance sheet of AmeriResource
Technologies, Inc. and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1997 and 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AmeriResource
Technologies, Inc. and subsidiaries as of December 31, 1998, and the results of
its operations and cash flows for the years ended December 31, 1997 and 1998, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 13 to
the financial statements, the Company has suffered recurring losses from
operations and has an accumulated deficit that raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
those matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Crouch, Bierwolf & Chisholm
- -------------------------------
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
April 15, 1999
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1998
ASSETS
--------
Current assets:
Cash and cash equivalents (Note 1) $ 36,152
Receivables:
Trade 759,404
Notes receivable - related party (Note 2 and 3) 283,190
Notes receivable - other (Note 3) 75,000
Allowance for doubtful accounts (711,937)
------------
Net receivables 405,657
------------
Total current assets 441,809
------------
Property, Plant and Equipment (Note 1):
Equipment 617,581
Furniture, fixtures and library 120,989
Vehicles 53,087
Less accumulated depreciation (749,299)
------------
Net property, plant and equipment 42,358
------------
Other assets:
Organization costs (Net) (Note 1) 450
Publication rights (Net) (Note 1) 1,139,010
Marketable securities (Note 12) 257,893
------------
Total other assets 1,397,353
------------
Total assets $1,881,520
============
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------
Current liabilities:
Accounts payable:
Trade $ 653,011
Related party (Note 2) 36,231
Current portion of long-term debt:
Related party (Note 2 and 4) 369,752
Other (Note 4) 606,693
Accrued payroll and related expenses 687,427
Accrued interest:
Related party (Note 2) 144,003
Other 180,779
Escrowed Fees 4,224
Income Tax Payable 35,960
Total current liabilities 2,718,080
Long-term debt:
Notes payable (Note 4) 1,535,857
Convertible debentures 3,350,000
Commitments and contingencies (Note 10) 105,000
------------
Total liabilities 7,708,937
------------
Stockholders' equity (Note 6)
Preferred stock, $.001 par value; authorized, 5,000,000
shares; issued and outstanding, 3,089,621 shares
(Note 6) 3,090
CommonStock, $.0001 par value; authorized, 500,000,000
shares; issued and outstanding, 382,060,312 shares 40,206
Additional paid-in capital 7,934,968
Commonstock held in treasury; 18,203,500 shares at cost (76,886)
Accumulated deficit (13,728,795)
------------
Total stockholders' equity (5,827,417)
Total liabilities and stockholders' equity $ 1,881,520
============
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Years Ended December 31, 1998
1998 1997
--------------------------
Net service income $47,560 43,663
Operating expenses (1,233) (737,256)
General and administrative expenses (3,516,097) (945,946)
-------------------------------
Operating loss (3,469,770) (1,639,539)
Other income (expense):
Gain on forgiveness of debt (Note 1) 19,575 -
Gain on marketable securities 1,538 -
Interest expense (55,353) (46,373)
-------------------------------
(34,240) (46,373)
Net loss before income tax (3,504,010) (1,685,912)
Income tax provision (Note 7) - -
--------------------------------
Net loss before extraordinary item $(3,504,010) (1,685,912)
================================
Extraordinary loss on judgement (623,924) -
--------------------------------
Net loss after extraordinary item $(4,127,934) (1,685,912)
================================
Earnings per share:
Income before extraordinary items $ (.01) $ (.01)
Extraordinary item (.00) -
--------------------------------
Net income $ (.01) $ (.01)
================================
Weighted average common shares
outstanding 273,137,558 162,963,803
================================
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Years Ended December 31, 1998 and 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$.0001 Par Value $.001 Par Value
Common Stock Preferred Stock Additional Stock
-------------------- -----------------
Number Number Paid-In Subscription Treasury Accumulated
of Shares Amount of Shares Amount Capital Receivable Stock Deficit Total
--------- ------ --------- ------ ------- ------------ -------- ----------- -----------
Balance at December 31, 1996 161,713,803 $ 16,170 3,089,621 $ 3,090 $ 6,348,204 $(5,625) $(7,914,949) $(1,553,110)
Issuance of Shares for:
S-8 options exercised 2,500,000 250 (250) -
Net loss for the year ended
December 31, 1997 (1,685,912) (1,685,912)
Balance at December 31, 1997 164,213,803 $ 16,420 3,089,621 $ 3,090 $ 6,347,954 $ - $ (5,625) $(9,600,861) $ 3,239,022)
=========== ======== ========= ======= =========== ========== ========== ============ ============
Issuance of Shares for:
S-8 options exercised 33,000,000 3,300 (3,300) -
Subscriptions Receivable 41,000,000 4,100 460,900 (465,000) -
Consulting services 62,535,978 6,254 676,151 682,406
Debt 1,958,281 196 137,304 137,500
Accrued Salaries 11,275,327 1,128 42,373 43,501
Stock 23,076,923 2,308 255,586 257,893
Acquisition of FAMC 45,000,000 4,500 4,500
Acquired from FAMC (71,261) (71,261)
Reduction in Subscription Receivable 465,000 465,000
Net loss for the year ended
December 31, 1998 (1,843,582) (1,843,582)
--------- ------ --------- ------ ------- ------------ -------- ----------- -----------
Balance at December 31, 1998 382,060,312 $ 38,206 3,089,621 $ 3,090 $ 7,916,968 $ - $ (76,886) $(11,444,443)$(3,563,065)
=========== ======== ========= ======= =========== ========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998 and 1997
1998 1997
----------------------------------
Reconciliation of net loss provided by
(used in) operating activities:
Net loss after extraordinary loss $ (4,127,934) $ (1,685,912)
Non-cash items:
Depreciation and amortization 2,297,156 125,626
Non-cash services through issuance of stock 702,406 -
Loss on judgement 430,924
Provision for bad debts 219,216 16,486
(Gain)/Loss on investment (1,538) -
(Gain)/Loss on forgiveness of (19,575) -
Changes in assets affecting operations -
(increase) decrease
Accounts receivables (14,648) 1,851,639
Other receivables 193,000 (2,825)
Notes receivables 49,714 -
Work-in-process - 83,401
Prepaid insurance and other expenses 50,249 104,986
Changes in liabilities affecting operations -
increase (decrease)
Accounts payable (38,434) 15,089
Accrued payroll and related 40,520 4,672
Escrowed fees 4,224 -
Accrued interest 219,549 46,257
Commitments and contingencies - (80,652)
Other current liabilities (91,508)
------------------------------
Net cash provided by
(used in) operating activities $ 4,829 $ 427,259
------------------------------
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,1 998 and 1997
1998 1997
----------------------------------
Cash flows from financing activities:
Proceeds from issuance of debt 35,130 62,593
Repayment of debt (8,745) (498,000)
------- ---------
Net cash provided by (used in) financing activities 26,385 (435,407)
Cash flows from investing activities:
Proceeds from sale of marketable securities 4,750 -
----- ---------
Net cash provided by (used in) investing activities 4,750 -
----- ---------
Increase (decrease) in cash 35,964 (8,148)
Cash - beginning of period 188 8,336
Cash - end of period $ 36,152 $ 188
========= ============
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, and 1997
SCHEDULE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS
1998 1997
-----------------------------
Purchase of fixed assets through issuance of debt $ - $ -
============ ==============
Debt paid through issuance of stock $ 181,001 $ -
============ ==============
Stock issued for services $ 685,406 $ -
============ ==============
Additional cash flow information Cash paid for:
Interest $ - $ -
============ ==============
Income taxes $ - $ -
============ ==============
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
1. Summary of significant accounting policies
------------------------------------------
Nature of business and business combinations
AmeriResource Technologies, Inc., formerly known as KLH Engineering Group,
Inc. (the Management Company), a Colorado corporation, was incorporated
March 3, 1989 for the purpose of providing diversified civil engineering
services throughout the United States, to be accomplished through
acquisitions of small to mid-size engineering firms. On July 16, 1996,
the Company changed its name to AmeriResource Technologies, Inc.
At December 31, 1998, the Management Company directly or indirectly owns
100% of the stock of KLH Engineering of Colorado Springs, KLH Engineering
of San Mateo, KLH Engineering of Grand Junction, KLH Engineering of
Lakewood, KLH Engineering of Greeley, and KLH Engineers and Constructors.
All of the Subsidiaries closed their operations during 1996, with the
exception of KLH Pueblo, which was sold to a third party during 1996.
Liabilities relating to these closed subsidiaries are included in the
consolidated balance sheet.
On December 14, 1998, the Company effectively acquired The Travel Agent's
Hotel Guide, Inc. (TAHG) pursuant to a Stock Purchace Agreement. The
Company acquired a 100% interest TAHG from Gold Coast Resources, Inc.
(GOLD) in exchange for a convertible debenture in the amount of $3,350,000.
The debenture is guaranteed by an independent third party, who will be
compensated with 20,000,000 shares of the Company's restricted common stock
as consideration for the guarantee.
Effective July 1, 1998, the Company acquired First Americans Mortgage
Corporation (First Americans) in an agreement for the exchange of stock.
The two shareholders of First Americans transferred 100% of their shares
in exchange for 45,000,000 shares of the Company stock (see Note 2). First
Americans is a mortgage company specializing in providing Native Americans
financing for new, existing and rehabilitated housing projects. First
Americans was incorporated on July 31, 1995 in Missouri. These consolidated
statements include First Americans activity from July 1, 1998 through
December 31, 1998.
On May 13, 1994, the Company entered into an agreement to acquire Tomahawk
Construction Company, a Missouri corporation (Tomahawk). The acquisition,
which was completed on July 27, 1994, was accomplished by merging Tomahawk
into a wholly-owned subsidiary of the Company. Tomahawk then became
a subsidiary of the Company. This transaction has been treated as a reverse
acquisition.
Tomahawk is a Kansas City, Kansas-based general contractor and qualified
American Indian Minority Business Enterprise specializing in concrete and
asphalt paving, utilities, grading/site work, structural concrete and
commercial buildings. Tomahawk was organized on April 12, 1980, as a
Missouri corporation. Tomahawk had no construction operations during 1997
or 1998.
F-8
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
1. Summary of significant accounting policies (continued)
-----------------------------------------------------
Basis of presentation
The accompanying financial statements have been prepared in conformity
with principles of accounting applicable to a going concern, which
contemplates the realization of assets and the liquidation of liabilities
in the normal course of business. The Company has incurred continuing
losses and has not yet generated sufficient working capital to support its
operations. The Company's ability to continue as a going concern is depen-
dent, among other things, on its ability to reduce certain costs, and its
obtaining additional financing and eventually attaining a profitable level
of operations.
It is management's opinion that the going concern basis of reporting its
financial condition and results of operations is appropriate at this
time. The Company plans to increase cash flows and to take steps towards
achieving profitable operations through the sale or closure of unprofitable
operations, and through the merger with or acquisition of profitable
operations.
Principles of consolidation
The consolidated financial statements include the combined accounts of
AmeriResource Technologies, Inc., Tomahawk Construction Company, First
Americas Mortgage Corp., and the accounts of their Subsidiaries. All
material intercompany transactions and accounts have been eliminated in
consolidation.
Cash and cash equivalents
For the purpose of the statement of cash flows, the Company considers
currency on hand, demand deposits with banks or other financial institu-
tions, money market funds, and other investments with original maturities
of three months or less to be cash equivalents.
Property, Plant and Equipment
The Company's fixed assets are presented at cost. Certain Subsidiaries
use tax depreciation methods which approximate straight-line. All others
are being depreciated on a straight-line basis. The estimated useful lives
used are as follows:
Furniture, fixtures and library 5 to 17 years
Equipment, including capitalized leased equipment 3 to 7 years
Vehicles 5 to 7 years
Construction equipment 3 to 10 years
F-9
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
1. Summary of significant accounting policies (continued)
------------------------------------------------------
Related depreciation and amortization expenses for the years ended
December 31, 1998, and 1997, were $32,804 and $125,626 respectively.
Repairs and maintenance are charged to operations as incurred. Major
renewals and betterment that extend the useful lives of property and
equipment are capitalized.
There was no accumulated depreciation relating to leased assets for the
years ended December 31, 1998 and 1997.
Organization costs
Organization costs consist of legal and broker fees incurred in connection
with the acquisition of the Company's subsidiaries. These costs are
amortized over five years ending in 2000. All organization costs relating
to the closed subsidiaries have been written off.
Stock Subscription Receivable
The Company issued stock in exchange for a stock subscription receivable.
The receivable was in default when the Company traded it to an officer and
major shareholder in exchange for a reduction in his note payable (Note 2).
See Note 4 for information regarding this note payable.
Publication Rights
The publication rights are for The Travel Agents Hotel Guide. This is a
publication used by travel agents to sell hotel rooms primarily throughout
the United States. The rights consist of the publication rights, logo,
client list and business concept.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
In these financial statements assets and liabilities involve extensive
reliance on management's estimates. Actual results could differ from those
estimates.
Income tax
For the years ended December 31, 1998 and 1997, the Company elected to file
a consolidated tax return and the income tax provision is on a consolidated
basis. Prior to 1992, the Subsidiaries filed separate corporate returns.
F-10
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
1. Summary of significant accounting policies (continued)
------------------------------------------------------
Effective January 1, 1993, the Financial Accounting Standards Board (FASB)
issued FASB No. 109, "Accounting for Income Taxes". FASB No. 109 requires
that the current or deferred tax consequences of all events recognized in
the financial statements be measured by applying the provisions of enacted
tax laws to determine the amount of taxes payable or refundable currently
or in future years. There was no impact from the adoption of this standard.
Deferred income taxes are provided for temporary differences in reporting
income for financial statement and tax purposes arising from differences in
the methods of accounting for construction contracts and depreciation.
Construction contracts are reported for tax purposes and for financial
statement purposes on the percentage-of-completion method. Accelerated
depreciation is used for tax reporting, and straight-line depreciation is
used for financial statement reporting.
Loss per common share
Loss per common share is based on the weighted average number of common
shares outstanding during the period. Options, warrants and convertible
debt outstanding are not included in the computation because the effect
would be antidilutive.
2. Related party transactions
--------------------------
A subsidiary rented office space from minority stockholders and from
entities with common ownership. At December 31, 1998 and 1997, in addition
to the above, there were miscellaneous receivables owed from officers and
employees.
At December 31, 1998 and 1997, the Company and some of the Subsidiaries had
notes payable balances to officers, a former officer and other stockholders
(Note 4). In addition, there was related interest expense incurred and
accrued interest. At December 31, 1998 and 1997, the Company also had a
note receivable from a former officer and minority shareholder of the
Company (Note 3).
The following transactions occurred between the Company and it stockholders
and its affiliated companies:
A. The Company is subleasing its office space from a subsidiary (First
Americans) on a month to month basis. Prior to July 1, 1998, First
Americans was not a subsidiary, only an entity with common ownership. Rents
paid were $0 in 1998, and $2,450 in 1197.
F-11
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
2. Related party transactions (continued)
--------------------------------------
B. The Company has a note receivable from Dellar Investments in the amount
of $43,981. An officer of the Company is a major shareholder of Dellar
Investments. This note is due on demand and is non-interest bearing.
C. The Company has a note receivable from a shareholder in the amount of
$126,057. The note is due on demand and is non-interest bearing.
D. The Company has a note receivable from an officer in the amount of
$113,152. The note is due on demand and is non interest bearing.
E. The Company has a note payable to an officer in the amount of $166,752
(see Note 4). This note was reduced by the assumption of stock
subscriptions receivable in the amount of $465,000 (see Note 1).
F. On July 1, 1998, the Company issued 45,000,000 shares of its common
stock for 100% of the stock of First Americans Mortgage Company. Prior to
this transaction, First Americans was 51% owned by an officer of the
Company.
The following is a table summarizing the related party transactions
described above:
For the Years Ended
December 31,
-------------------
1998 1997
--------- ---------
Receivables $ -- $ 14,471
========= =========
Advances $ -- $ --
========= =========
Note receivable - current $ 283,190 $ 332,904
========= =========
Accrued interest on notes payable $ 144,003 $ 97,473
========= =========
Notes payable - current $ 369,752 $ 522,849
========= =========
Notes payable - non-current $ -- $ --
========= =========
Office rent incurred (included in general
and administrative expenses) $ -- $ 2,450
========= =========
Interest expense on notes payable $ 46,530 $ 41,077
========= =========
F-12
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
3. Notes receivable
----------------
Related parties:
Note receivable from an officer, due on demand,
non-interest bearing. 113,152
Note receivable from an officer, due on demand,
non-interest bearing. 126,057
Note receivable from Dellar Investments, due on demand,
non-interest bearing. 43,981
Total Notes Receivable - Related Party 283,190
Less current portion (283,190)
---------
Total $ -
=========
Others:
Note receivable from the sale of a subsidiary, secured,
non-interest bearing, six equal payments of $6,667 starting
in June 1996.Note is in dispute, see Note 11. 40,000
Notes receivable from several individuals, no stated
interest rate, due July 10, 1997, unsecured. These have
been extended until August 1999. 35,000
---------
Total Notes Receivable - Other 75,000
Less current portion (75,000)
---------
Total Notes Receivable $ -
=========
F-13
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
4. Notes payable
-------------
Related Party:
Note dated August 11, 1995, payable to an officer in the
amount of $344,837, unsecured. Note bears interest at 8.75%
and is due in full on August 11, 1997, this was extended
until August 11, 1999. 166,752
Note payable to an officer, unsecured. Note bears interest
at 8% and is due on demand. 95,792
Note payable to a shareholder, dated December 31, 1998.
Bears interest at 8.5%, due December, 31, 1998, unsecured. 35,130
Notes payable to former directors, bears interest at 10%
unsecured, due on demand. 13,394
Notes payable to minority shareholder and former
shareholders with interest rates of 10% on notes due on
demand, unsecured. 17,500
Note payable to Johnston Trust, in dispute (see Note 10).
No stated interest rate, unsecured, due on demand. 41,184
---------
Total notes payable - related parties 369,752
Less current portion 369,752
---------
Long-term portion $ -
=========
F-14
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
4. Notes payable (continued)
-------------------------
Others:
Note dated October 15, 1997, payable to The Terrance
W. McClure Family Trust in the original amount of
$30,000, secured by 1,500,000 restricted shares of
AmeriResource common stock (owed personally by an
officer of the Company). The note bears interest at
10% and is due on June 30, 1998, was extended until
April 30, 2000. 30,000
Note dated October 15, 1997, payable to Mary and
Clayton Nolan in the original amount of $27,500,
secured by 1,500,000 restricted shares of
AmeriResource common stock (owned personally by an
officer of the Company). The note bears interest at
10% and is due on June 30, 1998, was extended until
April 30, 2000. 27,500
Note dated August 31, 1998, payable to American
Factors in the original amount of $430,924, unsecured.
The note bears interest at 9%. 430,924
Note dated August 11, 1996 to Industrial State Bank in
the original amount of $1,500,000, secured by Company
assets, secured and unsecured guarantees. The note had
a balloon payment of $1,216,296 due on August 11,
1998. This note is currently in dispute, see Note
10. 1,071,214
Notes payable to various subcontractors and suppliers
for goods and services provided in contracts. The
notes have no interest rate and are paid to the extent
a payment for providing services or goods on specified
contracts are collected. This debt is under class 7 of
the Plan of Reorganization and is to be paid from cash
flows of Tomahawk. 464,643
Various notes payable with interest rates ranging from
0% to 12.75%, monthly payments from $226 to $243,
uncollateralized. 118,269
F-15
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
4. Notes payable (continued)
-------------------------
Total notes payable 2,142,550
Less current portion (606,693)
---------
Long-term portion 1,535,857
---------
Maturities of notes payable at December 31, 1998, are
as follows:
Year Ended
December 31,
1998* 2,142,550
1999 -
2000 -
2001 -
-----------
Thereafter $ 2,142,550
===========
* These obligations are due when Tomahawk is profitable and has
cash flow.
5. Operating leases
----------------
First American Mortgage Company leases office space on a month-to-month
basis. Their lease expired in April 1998 at which time the lease was
converted to a month to month basis.
6. Stockholders' equity
--------------------
Regulation S-8 offering
During 1998 the Company issued 33,000,000 shares of common stock as a
result of the exercise of options issued during 1998.
F-16
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
6. Stockholders' equity (continued)
-------------------------------
Preferred stock
The Company has currently designated 2,500,000 shares of their
authorized preferred stock to Series A Convertible Preferred Stock and
an additional 2,500,000 shares to Series B Convertible Preferred Stock.
Both Series A and B preferred stock bear a cumulative $.125 per share
per annum dividend, payable quarterly. The shareholders have a
liquidation preference of $1.25 per share, and in addition, all unpaid
accumulated dividends are to be paid before any distributions are made
to common shareholders. These shares are subject to redemption by the
Company, at any time after the second anniversary of the issue dates
(ranging from August 1990 through December 1995) of such shares and at
a price of $1.25 plus all unpaid accumulated dividends. Each preferred
share is convertible, at any time prior to a notified redemption date,
to one common share. The preferred shares have equal voting rights with
common shares and no shares were converted in 1998. Dividends are not
payable until declared by the Company. At December 31, 1998, the amount
of dividends in arrears on the preferred stock was $1,327,204.
7. Income tax
----------
No current or deferred tax provision resulted as there was both an
accounting and a tax loss for each of the periods presented. The
primary permanent differences between tax and accounting losses are
non-tax deductible penalties, losses from closure of subsidiaries and
amortization of certain goodwill.
The Company has available for income tax purposes a net operating loss
carryforward of approximately $10,000,000 expiring from 2004 to 2007,
including $970,000 subject to certain recognition limitations. A
valuation allowance for the full amount of the related deferred tax
asset of approximately $1,380,000 has not been recorded, since there is
more than a 50 percent chance this will expire unused.
The significant temporary differences are associated with bad debts,
deferred compensation and accrued vacation.
All of the net operating losses carryforward of approximately
$10,000,000 is subject to significant recognition limitations due to
the merger with Tomahawk.
F-17
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
8. Closed and sold subsidiaries
----------------------------
As of December 31, 1996 the following subsidiaries have ceased
operations: KLH Engineering of Colorado Springs, KLH Engineering of
Grand Junction, KLH Engineering of Lakewood, KLH Engineering of
Greeley, KLH Engineering of San Mateo and KLH Engineers and
Constructors.
In April 1996, the Company sold KLH Engineering of Pueblo to an outside
party for a $40,000 note receivable, $33,433 in cash and $166,567 in
assumption of debt. During 1998, an allowance of $20,000 was recorded,
due to the note questionable collectability.
The consolidated financial statements contain liabilities related to
these closed subsidiaries.
9. Profit-sharing plan
-------------------
The Company has an employee savings and profit-sharing plan for all
eligible employees which includes an employees savings plan established
under the provisions of Internal Revenue Code Section 401(k). The
Company's contributions to the plan are at the Board of Director's
discretion, but may not exceed the maximum allowable deduction
permitted under the Internal Revenue Code at the time of the
contribution. No contributions were made under this plan in 1997 or
1998. This plan is administered by Security Bank of Kansas City and had
a balance of $216,476 at December 31, 1998.
10. Other commitments and contingencies
-----------------------------------
The Company's subsidiaries are typically subject to various claims
arising in the ordinary course of business which usually relate to
claims of professional negligence or contract breaches.
The Company believes that all pending professional liability
proceedings are adequately covered by insurance. The Company has
historically been able to procure insurance. There can be no assurance
such insurance will be adequate or that it will be renewable or remain
available in the future.
In October 1993, the U.S. Securities and Exchange Commission (the
"SEC") began a private "order of investigation" of the Company. In a
letter dated February 14, 1996, the SEC's Central Regional Office
("CRO") informed the Company that it planned to recommend to the SEC
that a civil injunctive action for violations of federal securities
laws, alleged to have occurred during 1993, be brought against two
former Presidents and Directors of the Company, Fred Boethling and
Richard Kendall (the "Former Management"), and against the Company
itself.
F-18
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
10. Other commitments and contingencies (continued)
-----------------------------------------------
During the time frame of the violations alleged by the SEC, no members
of the current management of either AmeriResource Group, AmeriResource
Technologies, Inc. or Tomahawk were involved in any transactions with
the Company or the Company's securities, or in the preparation of any
of the Company's disclosure or sales material. The Company was given
the opportunity to submit a written statement to the SEC setting forth
its positions and arguments concerning the recommendations (a "Wells
Submission"). The Company engaged counsel independent of Former
Management to prepare its Wells Submission, which was delivered to the
SEC on April 21, 1995. On April 30, 1996, the Company submitted
documents to the SEC with a request to finalize the settlement of this
matter. The SEC informed the Company in October 1997 that no action
will be taken against the Comp
In February 1996, Imperial Premium Finance filed an action in the
Superior Court of the State of California for the County of Los
Angeles. This action is for premiums financed for errors and omissions
coverage. This matter has been settled by allowing a stipulated
judgment in the amount of $60,000. This obligation is recorded in the
contingencies and commitments section of the financial statements.
On September 16, 1994, Tomahawk filed for protection pursuant to Title
11 of the U.S. Codes under Chapter 11, in the Western District of
Missouri, Western Division. A plan of reorganization was filed on or
about March 9, 1996 and an Amended Plan of Reorganization on April 29,
1996. The court confirmed the amended plan on August 28, 1996.
Tomahawk filed suit against M.K. Ferguson for work completed in Oak
Ridge, Tennessee. The claim was settled in May 1997 for the sum of
$1,851,444. Tomahawk has agreed with its subcontractors to sharing a
percentage of the delay claim only, in exchange for releases of money
owed by Tomahawk. Tomahawk has agreed to settle with it's bonding
company (USF&G) by paying $500,000 for a release of $2,300,000 of bond
claims. In addition, Tomahawk has agreed to pay Industrial State Bank
the sum of $336,000 for release of the Bank's claim on the settlement
money. Tomahawk will also pay the Internal Revenue Service $22,000 for
a release of all liens.
In July 1996, a judgment was entered in favor of Lexington Insurance
Company in the amount of $39,774 with interest (8%). In December 1997,
the court entered an order ordering the Company to appear for a hearing
in aid of execution. A hearing date is to be determined. This
obligation is recorded as a contingency and commitment.
F-19
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
10. Other commitments and contingencies (continued)
-----------------------------------------------
Tomahawk was named co-defendant in a lawsuit brought by private
plaintiffs for damages allegedly sustained as a result of construction
activity performed on a sewer project in Johnson County, Kansas. An
unspecified amount of damages was sought. The court dismissed the
action, and there is no ultimate liability to the Company since the
recovery is limited to insurance proceeds.
On April 26, 1996, Dyer Brothers Construction Company filed an action
against the Company's Lakewood subsidiary and the subsidiary's former
President, alleging negligence in the design of roadways. The roadways
were approved by the county engineer therefore the Company believes its
exposure is minimal. The Company is represented by outside counsel in
the lawsuit and an answer has been filed.
In October 1996, the Internal Revenue Service (IRS) placed liens on the
assets of all of the Company's Colorado and California subsidiaries for
failure to pay payroll taxes in 1996. The Company is several months
behind in payment and is attempting to resolve this matter. The total
of the liens is approximately $480,000.
In February 1996, American Factors Group, L.L.C. (American Factors)
filed suit against the Company and certain subsidiaries for breach of
contract and alleged fraud in the extension of credit in a factoring
agreement. An arbitrator was appointed and a hearing was held in July
1998. An award of $430,294 was issued in favor of American Factors. The
counsel for American Factors has indicated that they will proceed
against the Company and the other defendants based on alleged fraud.
Settlement discussions between the Company and American Factors are
currently taking place. This is recorded in the notes payable section
of the financial statements.
In September 1996, John Larry Adams, the Company's former Executive
Vice President, filed suit against the Company for non-payment of
expenses. In September 1996, the Company settled this matter by
allowing a stipulated judgment to be entered for $80,652 plus interest.
In January, 1998, this matter was settled by Delmar Janovec
contributing 2,000,000 shares of stock to Mr. Adams.
The Company has defaulted upon interest and principal with respect to a
promissory note in favor of the Olivia I. Dodge Charitable Remainder
Unitrust (the "Dodge Trust") which became due to December 31, 1995.
According to the Dodge Trust's attorney, the total due (including
interest) as of May 1, 1996 is $169,761. This note was settled during
1998 when the Company issued the Dodge Trust 1,959,281 shares of common
stock.
F-20
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
10. Other commitments and contingencies (continued)
-----------------------------------------------
Anderson & Associates, Inc. (AAI) obtained a judgment against Tomahawk
construction in Harris County, Texas in the amount of $3,337. AAI is
actively continuing their collection efforts for this note. This
obligation is reflected in the accounts payable section of the
financial statements.
On July 30,1996, Youngblood Enterprises, Inc. obtained a judgment
against KLH Engineering Group, Inc. in the State of Colorado.
Thereafter, Youngblood Enterprises, Inc. assigned the judgement to
Billie Youngblood. On April 8, 1998, Billie Youngblood registered this
judgment in the District Court in Johnson County, Kansas. As of the
date of this financial statement, the judgment has been satisfied and
will be dismissed in the near future.
The Company has defaulted upon interest and principal with respect to a
$40,819 note in favor of the Roy Lee Johnston Trust (the "Johnston
Trust"). The Johnston Trust has received a judgement in its favor but
has been unsuccessful in their attempts to collect. This obligation is
reflected in the notes payable section of the financial statements.
In January 1997, the Carpenters District Council of Kansas City Pension
Fund and certain other plaintiffs (collectively, the "Carpenters Fund")
filed a complaint in the United States District Court for the Western
District of Missouri against Tomahawk seeking payment of unpaid pension
fund and welfare fund benefits and an accounting of the benefits that
were to have been paid. Based upon the claims asserted by the
Carpenters Fund against United States Fidelity & Guaranty Company, the
amount of the unpaid benefits is approximately $4,200. It appears a
settlement may occur in the near future which will result in no
liability to the Company, therefore no liability has been recorded in
the financial statements.
In January 1997, the Construction Industry Laborers Pension Fund and
certain other plaintiffs (collectively, the "Construction Fund") filed
a complaint in the United States District Court for the Western
District of Missouri against Tomahawk seeking payment of unpaid pension
fund, welfare fund benefits, vacation fund and training fund benefits
and an accounting of the benefits that were to have been paid. Based
upon the claims asserted by the Construction Fund against United States
Fidelity & Guaranty Company, the amount of the unpaid benefits is
approximately $41,000. It appears a settlement may occur in the near
future which will result in no liability to the Company, therefore no
liability has been recorded in the financial statements.
F-21
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
10. Other commitments and contingencies (continued)
-----------------------------------------------
In January 1997, the Kansas City Cement Masons Pension Fund and certain
other plaintiffs (collectively, the "Cement Fund") filed a complaint in
the United States District Court for the Western District of Missouri
against Tomahawk seeking payment of unpaid pension fund, welfare fund
benefits, vacation fund and training fund benefits and an accounting of
the benefits that were to have been paid. Based upon the claims
asserted by the Cement Fund against United States Fidelity & Guaranty
Company, the amount of the unpaid benefits is approximately $7,700. It
appears a settlement may occur in the near future which will result in
no liability to the Company, therefore no liability has been recorded
in the financial statements.
In January 1997, the Mo-Kan Teamsters Pension Fund and certain other
plaintiffs (collectively, the "Teamsters Fund") filed a complaint in
the United States District Court for the Western District of Missouri
against Tomahawk seeking payment of unpaid pension fund, welfare fund
benefits, vacation fund and training fund benefits and an accounting of
the benefits that were to have been paid. Based upon the claims
asserted by the Teamsters Fund against United States Fidelity &
Guaranty Company, the amount of the unpaid benefits is approximately
$4,200. It appears a settlement may occur in the near future which will
result in no liability to the Company, therefore no liability has been
recorded in the financial statements.
In July 1997, Naylor commenced an action against Tomahawk based upon
injuries suffered while in the employment of a subcontractor employed
by Tomahawk. The damage alleged to be suffered by Naylor are greater
than $43,500. At this time, Tomahawk does not contemplate that there
will be any ultimate liability on its part as any claim should be
covered by its insurance coverage; therefore no liability has been
recorded in the financial statements.
In December 1997, Morthole & Zeppetello (Morthole) commenced action
against the Company based upon an alleged failure of the Company to pay
under the terms of a promissory note, dated May 3, 1996. The case was
dismissed pursuant to a settlement agreement reached by the parties.
The Company defaulted on the settlement agreement and a judgment was
then entered in the amount of $8,500 plus interest of 10% per annum
from May 3, 1996 forward and attorney's fees of $1,275. The judgment
remains pending; therefore no liability has been recorded in the
financial statements.
F-22
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
10. Other commitments and contingencies (continued)
-----------------------------------------------
In January 1998, OCI, Inc. commenced an action against the Company for
certain temporary services provided for the Company. The amount alleged
to be owed is $2,436 plus interest. On December 14, 1998, a settlement
was reached between the parties and the Company will pay the sum of
$100 per month until the principal amount has been paid. This is
recorded in the accounts payable section of the financial statements.
In August 1998, the City of Greenwood Village (the "City"), Colorado
filed a third party complaint against a subsidiary, KLH Engineering of
Lakewood. The City alleges that the Company negligently performed
inspection services with respect to a drainage system constructed in
the City by the developer, KTC. Presently, the parties are in
discussions with respect to reaching an arrangement that will ensure no
claim is made against the Company.
The Company's subsidiary, KLH Engineers & Constructors, Inc. has
defaulted on a promissory note to Thomas Little, a former officer of
the subsidiary. The note became due on November 14, 1996. The principal
amount owed is $17,500 with 10% interest accruing from the date of the
note, October 29, 1990. This obligation is reflected in the notes
payable section of the financial statements.
In November, 1998, an action was filed against the Company in the
District Court of Johnson County, Kansas. The plaintiff, Industrial
State Bank, claims it is owed for non-payment of a line of credit in
the amount of $1,071,000 which matured in August of 1998. The Company
filed a counter action against Industrial State Bank for
misappropriations of funds. The parties are currently discussing a
settlement. Th obligation is reflected in the notes payable section of
the financial statements.
An action was filed against a subsidiary, KLH Engineering of San Mateo,
by Lincoln Property Company, N.C. This action alleged that the Company
negligently provided construction services. In March of 1999, this
action was dismissed.
F-23
<PAGE>
AMERIRESOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1998
11. Marketable securities
---------------------
At December 31, 1998 marketable equity securities are stated at their
lower of aggregate cost or market value. No unrealized or realized
holding gains occurred during the fiscal year ended December 31, 1998.
The Company has marketable securities available for sale. No other
investments in trading or held-to-maturity marketable securities exist
as of December 31, 1998.
1998
----------
Marketable securities available for sale:
5,000,000 shares of restricted common stock, Kelly's Coffee
Group, Inc. $ 200,000
125,526 shares of restricted common stock, Oasis Hotels and
Casino International (formerly Flexweight Corporation) $ 57,893
---------
Total marketable securities $ 257,893
=========
12. Going concern uncertainty
-------------------------
The accompanying financial statements have been prepared in conformity
with principles of accounting applicable to a going concern, which
contemplates the realization of assets and the liquidation of
liabilities in the normal course of business. The Company has incurred
continuing losses and has not yet generated sufficient working capital
to support its operations. The Company's ability to continue as a going
concern is dependent, among other things, on its ability to reduce
certain costs, obtain new contracts and additional financing and
eventually, attaining a profitable level of operations.
It is management's opinion that the going concern basis of reporting
its financial condition and results of operations is appropriate at
this time. The Company plans to increase cash flows and take steps
towards achieving profitable operations through the sale or closure of
unprofitable operations, and through the merger with or acquisition of
profitable operations.
13. Bankruptcy proceedings of subsidiary
------------------------------------
On September 16, 1994, Tomahawk filed for protection pursuant to Title
11 of the U.S. Code under Chapter 11, in the Western District of
Missouri. On August 28, 1995 the court confirmed the Company's amended
plan of reorganization. The plan provides for payment of claims through
the continued operations of the Company, and contingent upon the
collection of receivables on completed projects. The Company has
reclassified various payables into long term debt relative to these
claims in the amount of $464,643.
F-24
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors, Executive Officers and Control Persons
Name Age Position(s) and Office(s)
---- --- ------------------------------------
Delmar Janovec 49 Chief Executive Officer and Director
Dustan Shepherd 37 President
Ron Clawson 42 Director
Delmar A. Janovec has served as a director of the Company since May 12,
1994. On June 27, 1994, he was appointed President and CEO of the Company.
Mr. Janovec, who is a descendant of the Mdewskanton Wahpakoota and
Sisseton-Wahpeton bands of the Sioux American Indian Tribe, has over twenty
years of experience in the construction industry as a general foreman,
superintendent, project manager, and estimator. For the past fifteen years,
he has been the owner and CEO of Tomahawk Construction Company, a
subsidiary of the Company. Mr. Janovec attended undergraduate studies at
Kansas State University.
Rod Clawson has been with the Company since October 1, 1993. Since May of
1995, he has served as Vice President of the Company and President of KLH
Engineers & Constructors, Inc., the Company's engineering subsidiary. On
August 10, 1995, Mr. Clawson was made a director of the Company. Before his
appointment as an officer of the Company, Mr. Clawson served as the
Company's Director of Marketing. Before joining KLH, Mr. Clawson worked as
a manager for other engineering and industrial companies. Mr. Clawson is a
graduate of Regis University.
Dustan Shepherd was appointed President of the Company on August 6, 1998.
Mr. Shepherd has 17 years of experience in the mortgage and finance
industry, including four years as president of First Americans Mortgage
Corporation (FAMC) and three years as president of Great Plains Lending
Services, both of which engaged in substantial amounts of residential real
estate lending. As president of FAMC, Mr. Shepherd closed and delivered 23%
of all Native American loans purchased by Fannie Mae in 1997. Mr. Shepherd
attended the University of Missouri.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company,
the Company is not aware of any person who at any time during the fiscal year
ended December 31, 1998 was a director, officer, or beneficial owner of more
than ten percent of the Common Stock of the Company, and who failed to file, on
a timely basis, reports required by Section 16(a) of the Securities Exchange Act
of 1934 during such fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation
- ----------------------
No compensation in excess of $100,000 was awarded to, earned by, or paid to
any executive officer of the Company during the years 1996 to 1998, with the
possible exception of Delmar Janovec, the Company's chief executive officer for
the past three years. The following table and the accompanying notes provide
summary information for each of the last three fiscal years concerning cash and
non-cash compensation paid or accrued by Mr. Janovec.
8
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities
Other Annual Stock Underlying LTIP
Name and Salary Bonus Compensation Award(s) Options payouts All Other
Principal Year ($) ($) ($) ($) SARs(#) ($) Compensation
Position ($)
Delmar Janovec, 1998 81,000* - - - - - -
Chief Executive 1997 81,000 - - - - - -
Officer; Director 1996 67,500** - - - - - -
</TABLE>
<PAGE>
Compensation of Directors
- -------------------------
The Company's directors are not compensated for any meeting the board of
directors which they attend.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership
of the Company's Common Stock as of March 31, 1999, with respect to: (i) each
person known to the Company to be the beneficial owner of more than five percent
of the Company's Common Stock; (ii) all directors; and (iii) directors and
executive officers of the Company as a group. The notes accompanying the
information in the table below are necessary for a complete understanding of the
figures provided below. As of March 31, 1999, there were 472,061,312 shares of
Common Stock issued and outstanding.
<TABLE>
<S> <C> <C> <C>
Name and Address of Beneficial Amount and Nature of
Title of Class Owner Beneficial Ownership Percent of class
Common Stock Delmar Janovec 44,000,000 9.3%
($0.0001 par value) CEO and Director
8021 Hallet
Lenexa, Kansas 66215
Class A Preferred Stock Delmar Janovec 2,160,000 94.3%
CEO and Director
8021 Hallet
Lenexa, Kansas 66215
Class B Preferred Stock Delmar Janovec 600,000 77.2%
CEO and Director
8021 Hallet
Lenexa, Kansas 66215
Common Stock Dustan Shepherd 25,000,000 5.3%
($0.0001) par value President
12804 West 121st Terrace
Overland Park, Kansas 66213
</TABLE>
- ---------------------------------------
* Accrued; $0..00 actually paid or received.
** $67,500 actually paid; another $13,500 was accrued but not yet paid or
received.
9
<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Stock Rod Clawson 13,700,000 2.9%
($0.0001) par value Director
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
Class B Preferred Stock Tibor L. Nemeth 177,012 22.8%
165 North Aspen Avenue
Azusa, California 91702
Common Stock Directors and Executive Officers 82,700,000 17.5%
($0.0001) par value as a Group (3 individuals)
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Delmar Janovec
On August 6, 1998, the Company acquired First Americans Mortgage Company
(FAMC). Delmar A. Janovec, a director and the Chief Executive Officer of the
Company, sold his 51% ownership interest in FAMC to the Company for 44,000,000
shares of the Company's stock (valued at the time at approximately $.007). For
more information, see "Item 2" in the Company's Form 8-K filed on August 26,
1998.
On March 31, 1998, the Company began a proposed transaction whereby Mr.
Janovec would acquire 51% ownership in Tomahawk Construction, Inc. in exchange
for a reduction in the obligations owed the Company. The transaction would help
the Company to become a minority-owned business. This status would allow
Tomahawk to compete for new work. The Company would continue to own 49% of
Tomahawk. This transaction has not been completed.
The Company and its subsidiary, Tomahawk, currently owe Mr. Janovec
approximately $262,544 pursuant to two promissory notes. One note is dated
August 11, 1995, in an original amount of $344,837, unsecured, bearing interest
of 8.75%. This note, of which $166,752 remains unpaid, was due in full on August
11, 1997, but it has been extended until August 11, 1999. The second note is
also unsecured and bears interest at 8%, due on demand, in a principal amount of
$95,792. Mr. Janovec has also extended the due date on this note until August
11, 1999. These two notes represent consolidations of previous smaller loans Mr.
Janovec had made to the Company. For more information, see "Item 12. Certain
Relationships and Related Transactions" in the Company's Form 10-KSB for the
year ended December 31, 1997.
Transactions involving Dustin Shepard
On August 6, 1998, the Company acquired FAMC. Dustan Shepherd, the current
President of the Company and a 5% shareholder of the Company sold his 48%
ownership interest in FAMC for 25,000,000 shares of the Company's stock. For
more information, see "Item 2 " in the Company's Form 8-K filed on August 26,
1998.
10
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits beginning on page14 of this
Form 10-KSB, which is incorporated herein by reference.
(b) Reports on Form 8-K. On August 19, 1998 the Company filed a Form 8-K
disclosing the execution of a Stock Exchange Agreement with First
American Mortgage Corporation in which the Company issued Seventy
Million shares of its common stock. On August 26, 1999, the Company
filed an amendment to the Form 8-K filed August 19, 1999. SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 19th day of April 1999.
AmeriResource Technologies, Inc.
/s/ Delmar Janovec
-------------------
Delmar Janovec, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/ Delmar Janovec Chief Executive Officer and Director May 12, 1999
- ------------------
Delmar Janovec
/s/ Rod Clawson Director May 12, 1999
- ------------------
Rod Clawson
11
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
2(i) * Amended Plan of Reorganization of Tomahawk
Construction Company, dated April 27, 1995.
Incorporated by reference to the Company's
Quarterly Report on Form 10-QSB for he
quarterly period ended June 30, 1995.
2(ii) * Second Addendum to Debtor's Amended Plan of
Reorganization of Tomahawk Construction
Company, filed August 28, 199.
3(i) * Articles of Incorporation and Bylaws.
Incorporated by reference to the Company's
Form S-4 registration statements, effective
February 11,1992. File No. 33-44104.
4(i) * Resolutions Establishing and Designating
Series A and Series B Convertible Preferred
Stock. Incorporated by reference to the
Company's Form S-4 registration statement,
effective February 11, 1992, File No.
33-44104.
MATERIAL CONTRACTS
10(i)(a) 14 Loan Originator Agreement, dated March 9,
1999, between the Company's wholly owned
subsidiary, First American Mortgage
Corporation and the Housing Authority of the
Cherokee Nation.
10(i)(b) 20 Loan Originator Agreement, dated November 1,
1998, between the Company's wholly owned
subsidiary, First American Mortgage
Corporation and First national Bank and
Trust Company.
10(i)(c) 26 PMI Mortgage Insurance Co. proposal, dated
October 8, 1998, presented to Citizen
Potawatomi Nation.
10(i)(d) 36 Memorandum of Understanding, dated September
15, 1998, between the Choctaw Nation, PMI
Mortgage Insurance Company, Freddie Mac, and
Washington Mutual.
10(i)(e) 39 Loan Originator Agreement, dated September
8, 1998, between the Company's wholly owned
subsidiary, First American Mortgage
Corporation and the Housing Authority of the
Choctaw Nation.
10(i)(f) 46 Residential Loan Brokerage Agreement, dated
August 4, 1998, between the Company's wholly
owned subsidiary, First American Mortgage
Corporation and Washington Mutual Bank.
10(i)(g) 48 Consulting Agreement, dated February 1,
1998, between the Company and Allen Wolfson.
10(i)(h) 60 Consulting Agreement, dated February 1,
1998, between the Company and Richard D.
Surber.
12
<PAGE>
10(i)(i) * Stock Exchange Agreement, dated August 7,
1998, between the Corporation and Flexweight
Corporation, a Kansas corporation.
Incorporated by reference to the Company's
Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1998.
10(i)(j) * Stock Exchange Agreement dated, August 7,
1998, between the Corporation and Kelly's
Coffee Group, Inc., a Colorado corporation.
Incorporated by reference to the Company's
Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1998.
10(i)(k) 73 Stock Purchase Agreement, Guarantee and the
Debenture dated December 14, 1998, between
the Company and Gold Coast Resources, Inc.
for the purchase of the Travel Agent's Hotel
Guide, Inc.
27(i) 103 Financial Data Schedule
* Previously filed as indicated and incorporated herein by reference from the
referenced filings previously made by the Company.
13
LOAN ORIGINATOR AGREEMENT
Between the
HOUSING AUTHORITY OF THE CHEROKEE NATION
and
FIRST AMERICANS MORTGAGE CORPORATION
This Loan Originator Agreement (hereinafter referred to as
"Agreement'), is made and entered into this 9th day of March, 1999, by and
between the Housing Authority of the Cherokee Nation, 1500 Hensley Drive,
Tahlequah, Oklahoma, 74465 (hereinafter referred to as the "IHA"), and First
Americans Mortgage Corporation, 8815 Long, Lenexa, Kansas 66215, (hereinafter
referred to as "FAMC").
WHEREAS, FAMC, in the conduct of its business, is desirous of
originating residential loans in the name of FAMC, and
WHEREAS, FAMC functions as a mortgage loan broker, selling loans
originated by loan originators, such as contemplated herein, to financial
institutions with which FAMC has executed loan purchase agreements (hereinafter
referred to as "Investors"), and
WHEREAS, the IHA wishes to enter into an agreement with FAMC to
originate residential loan applications for FAMC, and
WHEREAS, FAMC hereby affirms it is an independent corporation in
accordance with the laws of the State of Missouri and the Internal Revenue
Service, and further maintains it is qualified, willing, and able to perform the
services herein described, and
NOW THEREFORE, and in consideration of the mutual covenants, promises,
agreements, understandings, and conditions herein contained, the parties hereto
mutually promise to the other, agree, and understand as follows, to wit:
TERM: The term of this Agreement shall be for a period of two (2) year, from
the 9th day of March, 1999 to the 8th day of March, 2001.
NOTICES: All notices required hereunder shall be sent via U.S. Mail, postage
paid as follows:
To the IHA: Housing Authority of the Cherokee Nation
David Sutherland, Executive Director
1500 Hensley Drive
Tahlequah, Oklahoma, 74465
To the FAMC: First Americans Mortgage Corporation
Attention: Dustan R. Shepherd, President
P.O. Box 19236
Shawnee Mission, KS 66285-9236
PERFORMANCE REQUIREMENTS OF THE IHA AND FAMC:
The IHA agrees to originate residential mortgages in the name of FAMC
in the State of Oklahoma. All loans originated shall be subject to and
shall meet all underwriting standards set forth in FAMC's
Policy and Procedure Manual (attached hereto as Attachment ("1") and that of the
Investors which have committed to purchase the loans after closing. All Loans
are subject to FAMC approval prior to loan commitment. Any loan not meeting
these underwriting standards or approval conditions shall not be closed.
14
<PAGE>
The IHA agrees to use its best efforts to assist FAMC and their Investors in
obtaining documentation, authorizations, certifications, verifications, and any
other conditions required to close and subsequently sell residential loans. FAMC
agrees to use its best efforts to assist the IHA in processing and closing
residential loans.
FAMC shall provide to the IHA in conjunction with this Agreement, all necessary
training and software in order for the IHA to fulfill its performance
requirements under this Agreement.
The IHA agrees to adhere to the price schedule, charges, and terms (see Policy
and Procedure Manual; Exhibit section for a copy of the pricing schedule) as
provided by FAMC for those loans originated for FAMC. A rate quote may be
obtained from FAMC at any time during normal business hours via the telephone.
The following performance requirements shall be utilized during the first ninety
(90) days or until such time as FAMC and the IHA mutually decide to expand the
responsibilities of the IHA:
7. LOAN APPLICATION: The IHA shall assist the applicant with completion of
the Fannie Mae Form 1003 - Uniform Residential Loan Application.
8. APPLICATION ACTION: Once an application is accepted by the IHA a credit
report will be immediately ordered by the IHA. FAMC shall supply
software that will allow the IHA to contact, via a modem, FAMC's credit
reporting agency. The report can be quickly downloaded and then printed
with a laser printer. The IHA shall fax a photocopy of the credit
report along with the 1003 form and a Good Faith Estimate to FAMC for
review. Within 24 hours, FAMC shall notify the IHA of action to be
taken on the application. If the applicant is not prepared to proceed
with the loan process at this time the IHA, either through telephone or
face-to-face contact, will notify the applicant of FAMC's decision and
discuss possible alternatives. The Notice of Action Taken will then be
mailed to the applicant. All of the applicants information received by
the IHA on hard copy as well as the applicant's mortgage software file
should be forwarded to FAMC on the Friday following any action taken.
FAMC will be responsible for all long-term storage of loan file
information. If the applicant is prepared to proceed with the loan
process, the IHA shall be notified and the process to compile a
complete credit file will begin. FAMC will also notify the IHA of the
most appropriate loan program for the applicant.
9. BORROWER DOCUMENTS: The applicant shall bring all necessary
documentation to the mortgage application meeting. Income can be
calculated by obtaining the past two (2) years' 1040 forms, W-2 forms,
and a current year-to-date pay stub for each applicant. Assets can be
calculated by providing the past three (3) months statements on each
depository account of the applicants. A complete list of monthly
liabilities with account numbers, addresses, balances, and monthly
payments must be provided by each applicant as well as landlord and/or
mortgage information for the past two years.
10. Real Estate Settlement Procedures Act (RESPA): The IHA must provide the
following documents to each applicant within three (3) days of the loan
application date: a) Truth-in-Lending Disclosure; b) Good Faith
Estimate; c) Mortgage Servicing Disclosure; d) Special Information
Booklet "Settlement Costs" (to be supplied by the IHA); e) any
additional documents necessary. All documentation, except for the
Special Information Booklet, will be located within FAMC's mortgage
software.
11. CREDIT REPORT: A Credit Report for each applicant shall be ordered
immediately after a loan application is accepted by the IHA. The Credit
Report may take the form of a Three Repository Merged Credit Report or
a full Residential Mortgage Credit Report depending upon the loan
product needed and on the credit quality of the applicant. The cost of
the reports will be billed directly from the credit reporting company
to FAMC.
15
<PAGE>
FAMC will notify the IHA 15 days in advance of any change in the cost
of a credit report. It is the responsibility of the IHA to pay for any
reports pulled by the IHA. It will be the IHA'S responsibility to
collect the appropriate fee. FAMC will invoice the IHA on a monthly
basis for all loans pulled during the prior month. The will be
responsible to pay the invoice within 15 days of receipt in order to
allow FAMC sufficient time to pay the credit reporting agency under
their billing terms. When appropriate the IHA will be responsible for
faxing the credit reporting worksheet (see Policy and Procedure Manual)
to FAMC's credit reporting agency (i.e. the borrower pays the
designated cost to receive a copy of the report).
12. VERIFICATIONS: All loans are required to contain documentation
verifying. the information given by the applicant. If the IHA does not
collect the documentation mentioned in step 3 it will be necessary to
send independent verification requests to employer(s) and depositories.
The IHA shall verify the last 24 months of rental or mortgage history
if it is not included in the applicant's credit report. The source of
funds may include a gift from a family member or the sale of an asset.
If the applicant has obtained a divorce, the complete divorce decree
and settlement statement must be provided. Child support, alimony or
separate maintenance is available for consideration as income, if
received regularly. This form of income may be verified through a court
printout or canceled checks covering the past twelve (12) months.
Bankruptcy paperwork and explanations are required if applicable.
Derogatory credit, undisclosed credit and inquiries must be
satisfactorily explained by the applicant. Applicants must provide a
Certificate Degree of Indian Blood (CDIB) card (for Native American
loan programs), picture ID, and evidence of a Social Security Number.
All forms will be mailed to the verifying institutions with a stamped
return envelop to the FAMC. From time to time borrowers may drop off
miscellaneous documents to the IHA for delivery to FAMC (i.e. bank
statements, canceled rental checks, divorce decrees). These documents
should be forwarded to FAMC in the regular Friday overnight package.
13. PACKAGING: The IHA shall collect, review for discrepancies, and bind in
the proper stacking order in legal manila file folders, all necessary
loan documentation prior to submission to FAMC. A loan packaging
checklist for each loan is included in FAMC's mortgage software. All
manila file folders, along with a diskette containing all loan files
originated during the week should be forwarded to FAMC through
overnight delivery every Friday nights.
14. CREDIT SUBMISSION: FAMC will review the IHA's package and submit ft to
the appropriate decision maker. The decision will be based upon the
information received in R the loan package. Additional verifications
and/or credit documents may be necessary. The IHA will be advised of
loan approval and any conditions.
At this time the day-to-day handling of the loan package will be transferred to
FAMC. The IHA'S role will be to support FAMC:
16
<PAGE>
15. APPRAISAL: After the funds for payment of the appraisal are received
from the applicant, FAMC will order the appraisal report from a
qualified appraiser. FAMC may request assistance from the IHA in
receiving the funds for the cost of the appraisal and provide the
appraiser with a copy of the sales contract, new construction or
rehabilitation plans and specifications and other pertinent documents
needed to conduct the appraisal.
16. TITLE REPORT/ABSTRACT and TITLE STATUS REPORT (TSR): FAMC may request
assistance from the IHA in the ordering of the appropriate Title
Report/Abstract or TSR.
17. LAND STATUS FORM: FAMC may request assistance from the IHA in obtaining
a completed Land Status Form or other documents pertaining to the
proposed properties land status.
18. SUBMISSION FOR FINAL APPROVAL: FAMC will be responsible for all
submission procedure and gaining final approval from the appropriate
decision maker. It should be noted that depending upon the loan
program, a file may not go through a Credit Submission process but
could move directly to a one-time Submission. The appropriate loan
program will be identified in Step 1 so that the IHA and FAMC can plan,
up front, the proper submission procedure.
19. FINAL APPROVAL: Upon issuance of the final approval by the decision
maker, FAMC shall order all closing documents (i.e. survey,
inspections) for immediate loan cjosure. FAMC may ask the [HA to assist
in scheduling the closing with the local closing agent (approved by the
IHA and FAMC) and obtaining various other closing documents.
20. INVESTOR FUNDING: FAMC shall provide the Investor with a copy of the
complete loan package and shall be consulted as to the timing of the
closing.
21. GUARANTEE PACKAGE: FAMC shall be responsible for all insurance
packaging if applicable.
22. DRAW INSPECTIONS: FAMC may request from time-to-time that the IHA
assistance in the accumulation of documentation needed to conduct draw
payments on loans for new construction or rehabilitation. At no time
will the IHA be responsible for construction or rehabilitation fund
disbursement.
COMPENSATION:
The IHA shall be compensated by FAMC for each loan closed and funded.
Compensation will be in the form of a flat fee. The fee will be paid as
follows:
A fee of $120.00 will be due to the IHA on each loan originated by the IHA
and subsequently closed and funded by FAMC. The fee shall be paid by FAMC
to the IHA on the fifteenth day of each month following the loan funding.
The cutoff date will be the last day of each month (example: for all loans
funded between March 1 and March 31, total fees would be mailed to the IHA
on April 15).
STATUS OF THE PARTIES:
This Agreement shall not be construed to constitute a joint venture,
partnership, nor other form of agreement creating a joint liability between
the parties. The IHA and FAMC hereto stipulate and agree that the parties
are independent contractors and shall be responsible and liable for the
acts and omissions of their own respective employees, agents, and
representatives.
17
<PAGE>
Notwithstanding any other provisions in this Agreement, R is the intention
of the IHA and FAMC that the employees, agents, and representatives
furnished hereunder by each party shall be the employees, agents, and
representatives of that respective party. Accordingly, at no additional
expense to either party, the IHA and FAMC shall be fully responsible for
the withholding of all state and federal employment, social security,
Medicare, and similar taxes for their own respective employees. The IHA and
FAMC, and their respective employees, agents, and representatives, hereby
agree to indemnify and hold each other harmless from any and all liability
for such taxes, as well as for any penalties, interest, or other charges or
fees which may be assessed or imposed as a result, required to be filed by
state or federal taxing authorities in connection therewith. The
obligations under this paragraph shall survive the expiration or
cancellation of this Agreement.
ASSIGNMENT OR NON-ASSIGNMENT PROVISION:
The IHA and FAMC hereby agree the services specified in this Agreement may
not be delegated or assigned without the prior written approval of both
parties hereto.
TERMINATION OR CANCELLATION CLAUSE:
This Agreement may be terminated by either party upon thirty (30) days
written notice by certified letter. In the event this Agreement is
terminated or canceled by either party, the IHA shall remain obligated to
FAMC for any outstanding fees or payments due and shall not transfer any
loans currently in process. FAMC shall remain responsible for all unpaid
fees due to the IHA prior to said termination or cancellation.
If cancellation occurs FAMC will continue as the sole loan originator for
any loan programs defined in the "Special Loan Programs" paragraph of this
agreement. FAMC will continue to originate said loans until such time as
the loan commitment is completed, IHA withdraws their participation in the
program or FAMC waives their exclusive right.
PROPRIETARY INFORMATION:
1. FAMC agrees and warrants that R will protect any confidential
information ft receives from the IHA as confidential, proprietary and
not use the confidential information for its own purpose or disclose to
any third party, either directly or indirectly, any and all business
related clients, contracts, documentation, projections, business plans,
information, funding arrangements, maps or other materials.
2. The IHA agrees and warrants that R will protect any confidential
information it receives from FAMC as confidential, proprietary and not
use the confidential information for its own purpose or disclose to any
third party, either directly or indirectly, any and all business
related clients, contracts, documentation, projections, business plans,
information, funding arrangements, maps or other materials.
3. This agreement does not apply to any information which is a matter of
public record.
MODIFICATIONS:
Modifications or changes to the terms of this Agreement shall be in writing
and signed by each of the parties hereto.
18
<PAGE>
LAWS AND REGULATIONS:
The parties' performances hereunder shall comply with all applicable laws,
ordinances, rules and regulations of any governmental agency having
jurisdiction and shall pay any fine, penalty, loss, damage, or expense
resulting from the party's failure to comply therewith. FAMC shall provide
all licenses and permits required to perform its obligations under this
Agreement.
OFFICE EXPENSES:
The IHA shall be responsible for its own office expenses (i.e., office
rent, mailing, business related telephone costs, and other reasonable
charges). The IHA shall also be responsible for all other expenses that may
be incurred in conducting a mortgage origination business (i.e, auto
expenses, meals, lodging, and transportation). FAMC shall provide photocopy
ready promotional materials, rate sheets, training and assistance in
presentations at no additional cost to the IHA.
POLICY COMPLIANCE:
The IHA agrees to comply with the rules and regulations set forth in each
of the loan programs that FAMC is currently or will be participating in the
future (see Policy and Procedure Manual). FAMC reserves the right to amend
any policies set forth in its company Policy and Procedures Manual from
time-to-time and shall notify the IHA of any such changes.
GENERAL PROVISIONS:
This Agreement contains the complete expression of the parties' agreement
with respect to the subject matter hereof, and shall bind the parties,
their successors, and assigns. This Agreement shall supersede any and all
written or oral statements, agreements, and/or representations of the
parties made prior to or contemporaneously with the execution hereof.
This Agreement shall be governed by the laws of the United States and,
where applicable, the laws of the State of Oklahoma. The parties agree
their respective performances hereunder shall be governed by an obligation
of good faith.
FIRST AMERICANS MORTGAGE CORPORATION:
/s/ Dustan Shepherd 3/9/99
- ------------------- ------
Dustan R. Shepherd, President Date
Federal Tax Identification #481170870
HOUSING AUTHORITY OF THE CHEROKEE NATION:
/s/ David Southerland 3/9/99
- --------------------- ------
David Southerland, Executive Director Date
19
LOAN ORIGINATOR AGREEMENT
Between the
FIRST NATIONAL BANK AND TRUST COMPANY
and
FIRST AMERICANS MORTGAGE CORPORATION
This Loan Originator Agreement (hereinafter referred to as
"Agreement"), is made and entered into this lst day of November, 1998, by and
between First National Bank and Trust Company, 130 E. MacArthur, Shawnee,
Oklahoma, 74801 (hereinafter referred to as the "Bank"), and First Americans
Mortgage Corporation, 8815 Long, Lenexa, Kansas 66215, (hereinafter referred to
as "FAMC").
WHEREAS, FAMC, in the conduct of its business, is desirous of
originating residential loans in the name of FAMC, and
WHEREAS, FAMC functions as a mortgage loan broker, selling loans
originated by loan originators, such as contemplated herein, to financial
institutions with which FAMC has executed loan purchase agreements (hereinafter
referred to as "Investors"), and
WHEREAS, the BANK wishes to enter into an agreement with FAMC to
originate residential loan applications for FAMC, and
WHEREAS, FAMC hereby affirms it is an independent corporation in
accordance with the laws of the State of Missouri and the Internal Revenue
Service, and further maintains it is qualified, willing, and able to perform the
services herein described, and
NOW THEREFORE, and in consideration of the mutual covenants, promises,
agreements, understandings, and conditions herein contained, the parties hereto
mutually promise to the other, agree, and understand as follows, to wit:
TERM: The term of this Agreement shall be for a period of one (1) year, from
the lst day of November, 1998 to the lst day of November, 1999. This
Agreement may be renewed on an annual basis by written mutual consent
of both parties.
NOTICES: All notices required hereunder shall be sent via U.S. Mail, postage
paid as follows:
To the BANK: First National Bank and Trust Company
130 MacArthur
Shawnee, OK 74801
To the FAMC: First Americans Mortgage Corporation
Attention: Dustan R. Shepherd, President
P.O. Box 19236
Shawnee Mission, KS 66285-9236
PERFORMANCE REQUIREMENTS OF THE BANK AND FAMC:
The BANK agrees to originate residential mortgages in the name of FAMC in
the State of Oklahoma. All loans originated shall be subject to and shall
meet all underwriting standards set forth in FAMC's Policy and Procedure
Manual (attached hereto as Attachment "1") and that of the Investors which
have committed to purchase the loans after closing. All Loans are subject
to FAMC approval prior to loan commitment. Any loan not meeting these
underwriting standards or approval conditions shall not be closed.
20
<PAGE>
The BANK agrees to use its best efforts to assist FAMC and their Investors
in obtaining documentation, authorizations, certifications, verifications,
and any other conditions required to close and subsequently sell
residential loans. FAMC agrees to use its best efforts to assist the BANK
in processing and closing residential loans.
FAMC shall provide to the BANK in conjunction with this Agreement, all
necessary training and software in order for the BANK to fulfill its
performance requirements under this Agreement.
The BANK agrees to adhere to the price schedule, charges, and terms (see
Policy and Procedure Manual; Exhibit section for a copy of the pricing
schedule) as provided by FAMC for those loans originated for FAMC. A rate
quote may be obtained from FAMC at any time during normal business hours
via the telephone.
The following performance requirements shall be utilized during the first
ninety (90) days or until such time as FAMC and the BANK mutually decide to
expand the responsibilities of the BANK:
1. LOAN APPLICATION: The BANK shall assist the applicant with completion of
the Fannie Mae Form 1003 - Uniform Residential Loan Application.
2. APPLICATION ACTION: Once an application is accepted by the BANK a credit
report will be immediately ordered by the BANK. FAMC will supply software
that will allow the BANK to contact, via a modem, FAMC's credit reporting
agency. The report can be quickly downloaded and then printed with a laser
printer. The BANK shall fax a photocopy of the credit report along with the
1003 form and a Good Faith Estimate to FAMC for review. Within 24 hours,
FAMC shall notify the BANK of action to be taken on the application. If the
applicant is not prepared to proceed with the loan process at this time the
BANK, either through telephone or face-to-face contact, will notify the
applicant of FAMC's decision and discuss possible alternatives. The Notice
of Action Taken will then be mailed to the applicant. All of the applicants
information received by the BANK on hard copy as well as the applicant's
mortgage software file should be forwarded to FAMC on the Friday following
any action taken. FAMC will be responsible for all long-term storage of
loan file information. If the applicant is prepared to proceed with the
loan process, the BANK shall be notified and the process to compile a
complete credit file will begin. FAMC will also notify the BANK of the most
appropriate loan program for the applicant.
3. BORROWER DOCUMENTS: The applicant shall bring all necessary documentation
to the mortgage application meeting. Income can be calculated by obtaining
the past two (2) years' 1040 forms, W-2 forms, and a current year-to-date
pay stub for each applicant. Assets can be calculated by providing the past
three (3) months statements on each depository account of the applicants. A
complete list of monthly liabilities with account numbers, addresses,
balances, and monthly payments must be provided by each applicant as well
as landlord and/or mortgage information for the past two years.
4. Real Estate Settlement Procedures Act (RESPA): The BANK must provide the
following documents to each applicant within three (3) days of the loan
application date: a) Truth-in- Lending Disclosure; b) Good Faith Estimate;
c) Mortgage Servicing Disclosure; d) Special Information Booklet
"Settlement Costs" (to be supplied by the BANK); e) any additional
documents necessary. All documentation, except for the Special Information
Booklet, will be located within FAMC's mortgage software.
5. CREDIT REPORT: A Credit Report for each applicant shall be ordered
immediately after a loan application is accepted by the BANK. The Credit
Report may take the form of a Three Repository Merged Credit Report or a
full Residential Mortgage Credit Report depending upon the loan product
needed and on the credit quality of the applicant. The cost of the reports
will be billed directly from the credit reporting company to FAMC. FAMC
will notify the BANK 15 days in advance of any change in the cost of a
credit report. It is the responsibility of the BANK to pay for any reports
pulled by the BANK It will be the BANK'S responsibility to collect the
appropriate fee and then forward it to FAMC on a weekly basis. When
appropriate the BANK will be responsible for faxing the credit reporting
worksheet (see Originators Lending Manual) to FAMC's credit reporting
agency (i.e. the borrower pays the designated cost to receive a copy of the
report).
21
<PAGE>
6. VERIFICATIONS: All loans are required to contain documentation verifying
the information given by the applicant. If the BANK does not collect the
documentation mentioned in step 3 it will be necessary to send independent
verification requests to employer(s) and depositories. The BANK shall
verify the last 24 months of rental or mortgage history if it is not
included in the applicant's credit report. The source of funds may include
a gift from a family member or the sale of an asset. If the applicant has
obtained a divorce, the complete divorce decree and settlement statement
must be provided. Child support, alimony or separate maintenance is
available for consideration as income, if received regularly. This form of
income may be verified through a court printout or canceled checks covering
the past twelve (12) months. Bankruptcy paperwork and explanations are
required if applicable. Derogatory credit, undisclosed credit and inquiries
must be satisfactorily explained by the applicant. Applicants must provide
a Certificate Degree of Indian Blood (CDIB) card (for Native American loan
programs), picture ID, and evidence of a Social Security Number. All forms
will be mailed to the verifying institutions with a stamped return envelop
to the BANK. All miscellaneous documents and a diskette containing the loan
files shall be forwarded to FAMC through overnight delivery on Friday
nights.
7. PACKAGING: The BANK shall collect, review for discrepancies, and bind in
the proper stacking order in legal manila file folders, all necessary loan
documentation prior to submission to FAMC. A loan packaging checklist for
each loan is included in FAMC's mortgage software. The loan package should
be included in the Friday overnight delivery package unless the submission
file needs immediate attention.
8. CREDIT SUBMISSION: FAMC will review the BANK's package and submit it to the
appropriate decision maker. The decision will be based upon the information
received in it the loan package. Additional verifications and/or credit
documents may be necessary. The BANK will be advised of loan approval and
any conditions.
At this time the day-to-day handling of the loan package will be transferred to
FAMC. The BANK'S role will be to support FAMC:
9. APPRAISAL: After the funds for payment of the appraisal are received from
the applicant, FAMC will order the appraisal report from a qualified
appraiser. FAMC may request assistance from the BANK in obtaining the funds
for the cost of the appraisal and provide the appraiser with a copy of the
sales contract, new construction or rehabilitation plans and specifications
and other pertinent documents needed to conduct the appraisal.
10. TITLE REPORT/ABSTRACT and TITLE STATUS REPORT (TSR): FAMC may request
assistance from the BANK in the ordering of the appropriate Title
Report/Abstract or TSR.
11. LAND STATUS FORM: FAMC may request assistance from the BANK in obtaining a
completed Land Status Form or other documents pertaining to the proposed
properties land status.
12. SUBMISSION FOR FINAL APPROVAL: FAMC will be responsible for all submission
procedure and gaining final approval from the appropriate decision maker.
It should be noted that depending upon the loan program, a file may not go
through a Credit Submission process but could move directly to a one-time
Submission. The appropriate loan program will be identified in Step 1 so
that the BANK and FAMC can plan, up front, the proper submission procedure.
22
<PAGE>
13. FINAL APPROVAL: Upon issuance of the final approval by the decision maker,
FAMC shall order all closing documents (i.e. survey, inspections) for
immediate loan closure. FAMC may ask the BANK to assist in scheduling the
closing with the local closing agent (designated by the borrower and
approved by FAMC) and obtaining various other closing documents.
14. INVESTOR FUNDING: FAMC shall provide the Investor with a copy of the
complete loan package and shall be consulted as to the timing of the
closing.
15. GUARANTEE PACKAGE: FAMC shall be responsible for all insurance packaging if
applicable.
16. DRAW INSPECTIONS: FAMC may request from time-to-time that the BANK
assistance in the accumulation of documentation needed to conduct draw
payments on loans for new construction or rehabilitation. At no time will
the BANK be responsible for construction or rehabilitation fund
disbursement.
COMPENSATION:
The BANK shall be compensated by FAMC for each loan closed and funded.
Compensation will be in the form of a flat fee. The fee will be paid as
follows:
A fee of $120.00 will be due to the BANK on each loan originated by the
BANK and subsequently closed and funded by FAMC. The fee shall be paid by
FAMC to the BANK on the first or fifteenth day of each month following the
loan funding.
SPECIAL LOAN PROGRAMS:
Both parties agree that from time-to-time FAMC will assist the BANK in
developing special loan programs for use by the BANK in assisting Choctaw
and/or other Native American home buyers. As programs are developed each
program's parameters will become an addendum to this contract.
STATUS OF THE PARTIES:
This Agreement shall not be construed to constitute a joint venture,
partnership, nor other form of agreement creating a joint liability between
the parties. The BANK and FAMC hereto stipulate and agree that the parties
are independent contractors and shall be responsible and liable for the
acts and omissions of their own respective employees, agents, and
representatives.
Notwithstanding any other provisions in this Agreement, it is the intention
of the BANK and FAMC that the employees, agents, and representatives
furnished hereunder by each party shall be the employees, agents, and
representatives of that respective party. Accordingly, at no additional
expense to either party, the BANK and FAMC shall be fully responsible for
the withholding of all state and federal employment, social security,
Medicare, and similar taxes for their own respective employees. The BANK
and FAMC, and their respective employees, agents, and representatives,
hereby agree to indemnify and hold each other harmless from any and all
liability for such taxes, as well as for any penalties, interest, or other
charges or fees which may be assessed or imposed as a result, required to
be filed by state or federal taxing authorities in connection therewith.
The obligations under this paragraph shall survive the expiration or
cancellation of this Agreement.
ASSIGNMENT OR NON-ASSIGNMENT PROMSION:
The BANK and FAMC hereby agree the services specified in this Agreement may
not be delegated or assigned without the prior written approval of both
parties hereto.
23
<PAGE>
TERMINATION OR CANCELLATION CLAUSE:
This Agreement may be terminated by either party upon thirty (30) days
written notice by certified letter. In the event this Agreement is
terminated or canceled by either party, the BANK shall remain obligated to
FAMC for any outstanding fees or payments due and shall not transfer any
loans currently in process. FAMC shall remain responsible for all unpaid
fees due to the BANK prior to said termination or cancellation.
If cancellation occurs FAMC will continue as the sole loan originator for
any loan programs defined in the "Special Loan Programs" paragraph of this
agreement. FAMC will continue to originate said loans until such time as
the loan commitment is completed, BANK withdraws their participation in the
program or FAMC waives their exclusive right.
PROPRIETARY INFORMATION:
1. FAMC agrees and warrants that it will protect any confidential information
it receives from the BANK as confidential, proprietary and not use the
confidential information for its own purpose or disclose to any third
party, either directly or indirectly, any and all business related clients,
contracts, documentation, projections, business plans, information, funding
arrangements, maps or other materials.
2. The BANK agrees and warrants that it will protect any confidential
information it receives from FAMC as confidential, proprietary and not use
the confidential information for its own purpose or disclose to any third
party, either directly or indirectly, any and all business related clients,
contracts, documentation, projections, business plans, information, funding
arrangements, maps or other materials.
3. FAMC agrees and warrants that it will not circumvent the BANK with respect
to any contracts, understandings, discussions, solicitations, negotiations
or undertakings with the landowners, consultants, funding sources or other
individuals or entities to whom it is introduced by BANK.
4. The BANK agrees and warrants that it will not circumvent FAMC with respect
to any contracts, understandings, discussions, solicitations, negotiations
or undertakings with the landowners, consultants, funding sources or other
individuals or entities to whom it is introduced by FAMC.
5. This paragraph shall become effective immediately upon signing and remain
in effective for three (3) years after cancellation of the entire contract
unless agreed to by FAMC and the BANK.
6. This agreement does not apply to any information which is a matter of
public record.
MODIFICATIONS:
Modifications or changes to the terms of this Agreement shall be in writing
and signed by each of theparties hereto.
LAWS AND REGULATIONS:
The parties' performances hereunder shall comply with all applicable laws,
ordinances, rules and regulations of any governmental agency having
jurisdiction and shall pay any fine, penalty, loss, damage, or expense
resulting from the party's failure to comply therewith. FAMC shall provide
all licenses and permits required to perform its obligations under this
Agreement.
24
<PAGE>
OFFICE EXPENSES:
The BANK shall be responsible for its own office expenses (i.e., office
rent, mailing, business related telephone costs, and other reasonable
charges). The BANK shall also be responsible for all other expenses that
may be incurred in conducting a mortgage origination business (i.e, auto
expenses, meals, lodging, and transportation). FAMC shall provide photocopy
ready promotional materials, rate sheets, training and assistance in
presentations at no additional cost to the BANK.
POLICY COMPLIANCE:
The BANK agrees to comply with the rules and regulations set forth in each
of the loan programs that FAMC is currently or will be participating in the
future (see Policy and Procedure Manual). FAMC reserves the right to amend
any policies set forth in its company Policy and Procedures Manual from
time-to-time and shall notify the BANK of any such changes.
GENERAL PROVISIONS:
This Agreement contains the complete expression of the parties' agreement
with respect to the subject matter hereof, and shall bind the parties,
their successors, and assigns. This Agreement shall supersede any and all
written or oral statements, agreements, and/or representations of the
parties made prior to or contemporaneously with the execution hereof.
This Agreement shall be governed by the laws of the United States and,
where applicable, the laws of the State of Missouri. The parties agree
their respective performances hereunder shall be governed by an obligation
of good faith.
FIRST AMERICANS MORTGAGE CORPORATION:
/s/ Dustan Shepherd
12/28/98
----------
Dustan R. Shepherd, President Date
Federal Tax Identification #48-1170870
FIRST NATIONAL BANK AND TRUST COMPANY:
/s/ Linda Hoisenfon, ADP 12/28/98
----------
Date
25
October 8, 1998
Mr. Robert B. Carlile III
Executive Housing Director
Citizen Potawatomi Nation
1601 South Garden Cooper Dr.
Shawnee OK 74801
Dear Mr. Carlile:
PMI Mortgage Insurance Co. (PMI) is pleased to present to the Citizen
Potawatomi Nation our proposal for providing primary mortgage insurance for your
affordable housing program. We understand that this program would entail making
low-to-moderate income residential mortgage loans (Loans) totaling $5 million
over a twelve month period and, if accepted, PMI will be the sole mortgage
guaranty insurer for this specific PMI risk--share program.
The most important part of our proposal is the risk-sharing agreement, described
in Exhibit A, which would allow for more flexible underwriting of the Loans than
allowed by PMI's standard underwriting guidelines. Under this proposal, PMI pays
all claims up to the first layer stop loss. PMI would pay all claims in the
second layer, but would then seek reimbursement from the Citizen Potawatomi
Nation for all claims in the second layer. PMI then pays all claims in excess of
the second layer stop loss up to the total amount of coverage.
PMI would agree to underwrite to the Citizen Potawatomi Nation underwriting
guidelines as listed in Exhibit B. In addition, PMI would provide coverage for
the Loans using the rates and coverages in Exhibit C.
PMI has made certain assumptions in structuring this proposal. If the actual
Loan composition and characteristics insured under this program differ
materially from these assumptions set forth in Exhibit A, PMI reserves the right
to renegotiate the risk-sharing agreement as any differences would require.
These assumptions include, but are not limited to, the following: The
ninety-seven percent (97%) loan-to-value (LTV) Loans can represent up to one
hundred percent (100%) of the Loans injured under this program. One hundred
percent (1 00%) of the 97% LTV Loans will have 1/2 down payment option.
26
<PAGE>
Mr. Robert B. Carlile III
October 8, 1998 -
Page 2 of 2
This proposal is made subject to a risk-sharing agreement acceptable to both
parties being signed by both parties.
As the Vice President of Marketing, I look forward to working with you to
finalize this offering. We will begin drafting the legal agreements upon your
acceptance of this proposal.
Should you have any questions regarding this proposal, please do not hesitate to
contact either Jean Garhson, Affordable Housing Consultant, at (800) 759-4764 or
Debra Hassing in Marketing at (800) 288-1970 Ext. 295.
This offer remains open for thirty days from its receipt. Kindly indicate your
acceptance by signing below on both originals and returning one original of this
letter to PMI.
Sincerely,
/s/ David H. Katkov
- -------------------------
David H. Katkov
Vice President
Accepted by Citizen Potawatomi Nation
By: __________________________________________
Title:__________________________________________
Date: __________________________________________
enclosures
cc: Jean Garrison
27
<PAGE>
STRUCTURE FOR RISK-SHARING AGREEMENT
EXAMPLE OF CALCULATION OF FIRST AND SECOND LAYERS OF CLAIMS PAYABLE BY PMI AND
CITIZEN POTAWATOMI NATION
Assume the following percentage of Aggregate Insured Loan Amount (the aggregate
of the initial principal balance of all the insured loans) for the following LTV
categories:
- --------------------------------------------------------------------------------
FIRST LAYER
LTV Coverage 1st Layer Factor % Aggregate Insured Weighted lst Layer
Loan Amount Factor
========== ======== ================ =================== ==================
97% 40% 2.554% x 100% = 2.544%
- --------------------------------------------------------------------------------
FIRST LAYER STOP LOSS PERCENTAGE = 2.544%
- --------------------------------------------------------------------------------
Given the above LTV distribution, the First Layer Stop Loss Percentage
represents claim amounts up to 2.554% of the aggregate insured loan amount.
- --------------------------------------------------------------------------------
SECOND LAYER
LTV Coverage 2nd Layer Factor % of Aggregate Weighted 2nd Layer
Insured Loan Amount Factor
============ ======== ================ =================== ==================
97% 40% 2.184% x 100% = 2.184%
- --------------------------------------------------------------------------------
SECOND LAYER STOP LOSS PERCENTAGE = 2.184%
- --------------------------------------------------------------------------------
Given the above LTV distribution, the Second Layer Stop Loss Percentage
represents claim amounts up to 2.184% of the aggregate insured loan amount.
Exhibit A
Page 1 of 3
28
<PAGE>
For purposes of demonstration, the dollar amounts of the layers would be as
follows, assuming the aggregate insured loan amount below and the LTV mix stated
on the previous page.
Layer Stop Loss Layer Stop Loss
$5,000,000 Aggregate Insured Loan Amount Percentage In Dollars
- --------------------------------------------------------------------------------
1st Layer PMI 2.554% $0 to $127,700
2nd Layer CITIZEN POTAWATOMI NATION 2.184% $127,700 to $236,900
3rd Layer PMI above 4.738% $236,900 +
- --------------------------------------------------------------------------------
Note: The actual First Layer Stop Loss and Second Layer Stop Loss will be
determined based upon the actual percentage of insured loans in the various LTV
categories and property distribution on the earlier to occur of $5,000,000 of
loans being insured under this program or the program being terminated.
First Layer: PMI will pay, without reimbursement from CITIZEN POTAWATOMI NATION,
- ------------
all allowed claim amounts with respect to the loans insured under
this program up to the First Layer Stop Loss.
Second Layer: PMI will review the claim documentation and report, for tracking
- -------------
purposes, to CITIZEN POTAWATOMI NATION, all claim amounts in the
Second Layer (i.e., claim losses in excess of the First Layer
Stop Loss up to the Second Layer Stop Loss). At no time shall PMI
be responsible to pay any claim losses which occur in the Second
Layer.
Third Layer: PMI will pay, without reimbursement from CITIZEN POTAWATOMI NATION,
- ------------
all allowed claim amounts with respect to the loans insured under
this program in excess of the Second Layer Stop Loss.
Exhibit A
Page 2 of 3
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<PAGE>
ASSUMPTIONS UNDERLYING FIRST AND SECOND LAYER STOP LOSS CALCULATIONS
LTV Downpayment Distribution % of Aggregate Insured Loan Amount
- ---------------------------- ----------------------------------
97% LTV with 40% Coverage 100%
Downpayment Distribution (for 97% LTV's) % of 97% LTV's
- ---------------------------------------- --------------
1/2Downpayment Option 100%
Property Type Distribution % of Aggregate Insured Loan Amount
- -------------------------- ----------------------------------
SFD 100%
Loan Type % of Aggregate Insured Loan Amount
- --------- ----------------------------------
Fixed Rate Loans 100%
Loan Term % of Aggregate Insured Loan Amount
- --------- ----------------------------------
30-Year 90%
15-Year 10%
Occupancy Type % of Aggregate Insured Loan Amount
- -------------- ----------------------------------
Owner Occupied 100%
Geographic Distribution % of Aggregate Insured Loan Amount
- ----------------------- ----------------------------------
Oklahoma 100%
Coverage
- --------
40% on 97% LTV's
Exhibit A
Page 3 of 3
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<PAGE>
EXHIBIT B
CITIZEN POTAWATOMI NATION
NATIVE AMERICAN INITIATIVE
GUIDELINES
LTV
Maximum loan to value is 97%. Borrowers must contribute a minimum of I% toward
the downpayment. Downpayment assistance to cover the additional 2% downpayment
as well as closing costs and prepaids may come from a grant or a secured loan
from the Potawatomi Nation. The payment for the secured loan must be included in
the borrower's debt ratio. Gifts from family members are also acceptable.
RESERVES
A minimum of 2 month's PITI in reserves after closing is required.
RATIOS
In general, ratios should not exceed 33/38. However, it is acceptable for ratios
to exceed 33/38, when the following conditions exist:
-Borrower has a history of maintaining a high debt load.
-Borrower has demonstrated an ability to repay debt in a timely fashion.
-Borrower has a history of income stability.
INCOME LIMITS
For purposes of this program, specified income limits will not apply.
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<PAGE>
LOAN TYPE
-Fixed rate/fixed term
-Maximum 30 year amortization
-Temporary buydowns not available, permanent buydowns are acceptable
TRANSACTION TYPE
-New Purchases
-Refinance of existing mortgage loan at a maximum 90% LTV
CREDIT
A conventional residential credit report is required on all loans. Alternative
sources of credit history (utility receipts, current and previous landlord
statements and other services which require regular payments) are acceptable
from a borrower who has limited or no traditional credit established. If
non-traditional credit is used, 4 sources should be developed.
Borrower's credit report should reflect a willingness to repay debt in a timely
fashion. Mandatory payment of collections will not be necessary when the
following conditions exist:
-The borrower has made timely payments on the collection for the past 6
months.
-An agreement was made with the vendor which outlines the terms of the
repayment.
-The borrower has a minimum of 4 other trades which have been paid on
time. Trades could include non-traditional lines of credit.
-There are no lates on the rental history in the past 12 months.
Chapter 7 bankruptcies generally should be discharged for 2 years, with
re-established credit.
Chapter 13 bankruptcies must have a minimum of I year satisfactory repayment and
permissionof the Trustee. When Chapter 13 bankruptcies exist, the borrower's
ratios should not exceed 33/40.
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<PAGE>
INCOME STABILITY
Stable 2 year income history must be verified. Borrowers will not be penalized
for frequent changes in jobs if they have maintained income continuity despite
the changes.
Gaps in employment over the past 24 months is allowable, provided no gap exceeds
30 days. When gaps exist, the following guidelines are recommended:
-Minimum one borrower must have uninterrupted 24 months employment/income
history.
-The borrower experiencing job gaps must have a minimum of 9 months
employment/ income history and only 50% of that income will be used to
qualify.
PROPERTY TYPE
Single family detached properties only. Program may be used for rehabilitation
of single family dwellings. The rehab should not exceed 50% of the "as
completed" value. Funds for rehab should be held in escrow and only qualified
contractors are eligible to complete the work. Lender must supervise the quality
of rehab construction as well as the payouts during construction.
Program applies to new construction of single family dwellings to a maximum of
97% LTV. Lender must supervise the quality of construction as well as payouts
during construction.
Land must be held in fee simple.
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<PAGE>
SELLER CONTRIBUTIONS
Contributions toward closing costs normally paid by the seller are limited to
3%.
ELIGIBLE INCOME
Fully taxable reported income. Fixed income such as retirement, social security,
alimony, child support and VA benefits will be considered if documented with
copies of award letters, canceled checks, bank statements, divorce decrees
and/or separation agreements. Income needs to continue for next 2 years. It is
acceptable to include income provided to Native Americans by the Federal
Government (as written in the IRS tax codes). While this income is not taxable,
its receipt must be documented. Foster care income will be considered if
verified as continuous for at least 1 year and is likely to continue for the
foreseeable future.
Seasonable income such as agricultural, is also acceptable to be considered as
qualifying income. Borrower must have a 12 month history of receipt and it must
continue for the foreseeable future.
CASH ON HAND
Cash on hand is acceptable if it can be documented that the borrower has not
established savings/checking accounts and if the borrower has not established
traditional forms of credit. Loans utilizing cash on hand cannot be less than a
90% LTV. An in-house credit report merging 3 repositories will be ordered prior
to underwriting.
BORROWER EDUCATION
-Borrower must satisfactorily complete pre-purchase counseling from CCCS or
another Agency approved source. It is also acceptable for the Potawatomi
Nation to provide pre-purchase counseling as well as post-purchase
counseling. However, this counseling must first be approved by PMI.
-Aggressive loss mitigation counseling through CCCS will commence after 26
days past the borrower's payment date. CCCS will work in conjunction with
the Potawatomi Nation to provide post-purchase counseling.
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<PAGE>
MORTGAGE INSURANCE
-90.01 to 97.00% LTV - 40% coverage
-85.01 to 90.00% LTV - 25% coverage
PROGRAM AMOUNT
Initial program amount is $5M, with best efforts delivery over the next 12
months.
35
MEMORANDUM OF UNDERSTANDING
among
THE CHOCTAW NATION,
PMI MORTGAGE INSURANCE COMPANY,
FREDDIE MAC, AND WASHINGTON MUTUAL
This Memorandum of Understanding (hereinafter "MOU") is entered into on the
fifteenth day of September, 1998, by and among THE CHOCTAW NATION, PMI MORTGAGE
INSURANCE CO., FREDDIE MAC, AND WASHINGTON MUTUAL. This MOU expresses the
parties' understanding and agreement on the responsibility of the parties.
WHEREAS, The Choctaw Nation has identified the housing needs of its citizens and
desires to address those needs; and
WHEREAS, PMI Mortgage Insurance Co. ("PMI") endeavors to assist minority and low
income populations by insuring mortgage products that address special needs; and
WHEREAS, Freddie Mac endeavors to expand home ownership opportunities for
minority and low- and moderate-income populations through the purchase of
mortgages on Native American homes; and
WHEREAS, Washington Mutual is a mortgage lender that has a significant interest
in making loans to previously unserved and unserved populations; and
WHEREAS, the parties desire to coordinate their best efforts to provide a
mortgage product that is sensitive to the culture and traditions of Choctaw
citizens.
NOW THEREFORE, in consideration of the parties' mutual goals, the parties enter
into this MOU and agree as follows:
1. Relationship. There is hereby created a working relationship among the
parties that will utilize the experience, expertise and abilities of each
party to the maximum benefit of the parties and the citizens of the Choctaw
Nation. The relationship shall be defined by the terms and conditions
herein by formal transaction documents which will be entered into from time
to time, subject to the approval of the applicable parties.
2. Term. Beginning on September 15, 1998, this MOU shall be in full force and
effect until canceled by subsequent written agreement of the parties
pursuant to Section 4 below.
36
<PAGE>
3. Provisions. The parties shall coordinate their best efforts to provide a
culturally sensitive mortgage product for Choctaw citizens. The product
shall be know as the "Choctaw Homebuyer Advantage Program" (CHAP). To that
end, the parties hereby accept duties and responsibilities as follows:
The Choctaw Nation shall:
A. Market the CHAP mortgage product to all eligible Choctaw citizens who will
reside within the state of Oklahoma;
B. Provide assistance to First Americans Mortgage Corporation, such as office
space, staff support, and equipment used for purposes of loan origination;
and
C. Collaborate with PMI and Freddie Mac to deliver pre-purchase,
post-purchase, and early intervention counseling services to borrowers.
PMI shall:
A. Insure up to $ 10,000,000.00 of CHAP mortgages against potential losses;
B. Underwrite all loans to investment quality standards; and
C. Provide post-purchase counseling and early intervention counseling in
collaboration with the Choctaw Nation.
Freddie Mac shall:
A. Invest in eligible CHAP mortgages up to a total aggregate value of
$10,000,000.00;,
B. Utilize its experience and expertise to enhance all parties' understanding
of the responsible use of mortgage financing; and
C. Review the performance of CHAP mortgages to determine the feasibility of
investing in additional culturally sensitive products.
Washington Mutual shall:
A. Purchase approved CHAP loans through its brokered loan agreement with First
Americans Mortgage Corporation;
B. Sell CHAP mortgages to Freddie Mac; and
C. Utilize its experience and expertise to enhance the performance of CHAP
mortgages.
37
<PAGE>
4. Cancellation. This MOU may be canceled by any party upon thirty (30) days'
written notice to the other parties.
5. Sovereign Immunity. Nothing contained in this MOU can be construed to waive
the sovereign immunity of the Choctaw Nation, its officers, employees or
agents.
IN WITNESS of the foregoing, the following agree to abide by the terms of this
MOU.
/s/ Gregory E. Pyle
Chief Gregory E. Pyle
The Choctaw Nation
/s/ Juliette B. Madison
Juliette B. Madison, Vice P resident, Industry Relations
PMI Mortgage Insurance Co.
/s/ Craig S. Nickerson
Craig S. Nickerson, Vice President, Community Development Lending
Freddie Mac
Washington Mutual
/s/ Dustan R. Shepherd
38
LOAN ORIGINATOR AGREEMENT
Between the
HOUSING AUTHORITY OF THE CHOCTAW NATION
and
FIRST AMERICANS MORTGAGE CORPORATION
This Loan originator Agreement (hereinafter referred to as "Agreement"), is
made and entered into this 8th day of September, 1998, by and between the
Housing Authority of the Choctaw Nation, P.C. Box G. Hugo, Oklahoma. 74743
(hereinafter referred to as the"IHA"), and First Americans Mortgage Corporation,
8815 Long, Lenexa, Kansas 66215, (hereinafter referred to as "FAMC").
WHEREAS, FAMC, in the conduct of its business is desirous of originating
residential loans in the name of FAMC, and
WHEREAS, FAMC function as a mortgage loan broker, selling loans originated
by loan originators, such as contemplated herein, to financial institutions with
which FAMC as executed loan purchase agreements (hereinafter referred to as
"Investors"), and
WHEREAS, the IHA wishes to enter into an agreement with. FAMC to originate
residential loan applications for FAMC, and
WHEREAS, FAMC hereby affirms it is an independent corporation in accordance
with the laws of the State of Missouri and the Internal Revenue Service, and
further maintains it is qualified, willing, and able to perform the services
herein described, and
NOW THEREFORE, and in consideration of the mutual covenants, promises,
agreements, understandings, and conditions herein contained, the parties hereto
mutually promise to the other, agree, and understand as follows, to wit:
TERM: The term of this Agreement shall be for a period of one (1) year, from
the 8th day of September, 1998 to the 8th day of September, 1999. This
Agreement may be renewed on an Annual basis by written mutual consent
of both parties.
NOTICES: All notices required hereunder shall be sent via U.S. Mail, postage
paid as follows:
To the IHA: Housing Authority of the Choctaw Nation Executive
Director P.O. Box G Hugo, Oklahoma, 74743
To the FAMC: First Americans Mortgage Corporation Attention:
Dustan R. Shepherd, President P.O. Box 19236 Shawnee
Mission, KS 668285-9236
PERFORMANCE REQUIREMENTS OF THE IHA AND FAMC:
The IHA agrees to originate residential mortgages in the name of FAMC in
the State of Oklahoma. All loans originated shall be subject to and shall
meet all underwriting standards set forth in FAMC's Policy and Procedure
Manual (attached hereto as Attachment "1")and that of the investors which
have committed to purchase the loans after closing. All Loans are subject
to FAMC approval prior to loan commitment. Any loan not meeting these
underwriting standards or approval conditions shall not be closed.
39
<PAGE>
The IHA agrees to use its best efforts to assist FAMC and their Investors
in obtaining documentation, authorizations, certifications, verifications,
and any other conditions required to close and subsequently sell
residential loans. FAMC agrees to use its best efforts to assist the IHA in
processing and closing residential loans.
FAMC shall provide to the IHA in conjunction with this Agreement all
necessary training and software in order for the IHA to fulfill its
performance requirements under this Agreement.
The IHA agrees to adhere to the price shedule, charges, and terms (see
Policy and Procedure manual; Exhibit section for a copy of the pricing
schedule) as provided by FAMC for those loans originated for FAMC, A rate
quote may be obtained from FAMC at any time during normal business hours
via the telephone.
The following performance requirements shall be utilized during the first
ninety (90) days or until such time as FAMC and the IHA mutually decide to
expand the responsibilities of the IHA:
1. LOAN APPLICATION: The IHA shall assist the applicant with completion
of the Fannie Mae Form 1003 - Uniform Residential Loan Application.
2. APPLICATION ACTION: Once an application is accepted by the IHA a
credit report will be immediately ordered by the IHA. FAMC will supply
software that will allow the IHA to contact, via a modem, FAMC's
credit reporting agency. The report can be quickly downloaded and then
printed with a laser printer. The IHA shall fax a photocopy of the
credit report along with the 1003 form and a Good Faith Eestimate to
FAMC for review. Within 24 hours, FAMC shall notify the IHA of action
to be taken on the application. If the applicant is not prepared to
proceed the loan process at this time the IHA, either through
telephone or face-to-face contact, will notify the applicant of FAMCs
decision and discuss possible alternatives. The Notice of Acton Taken
will then be mailed to the applicant. All of the applicants
information received by the IHA on hardcopy as well as the applicants
mortgage software file should be forwarded to FAMC on the Friday
following any action taken. FAMC will be responsible for all long-term
storage of loan file information. If the applicant is prepared to
proceed with the loan process, the IHA shall be notified and the
process to compile a complete credit file will begin. FAMC will also
notify, the IHA of the most appropriate loan program for the
applicant.
3. BORROWER DOCUMENTS: The applicant shall bring all necessary
documentation to the mortgage application meeting. Income can be
calculated by obtaining the past two (2) years' 1040 forms, W-2 forms,
and a current year-to-date pay stub for each applicant. Assets can be
calculated by providing the past three (3) months statements on each
depository account of the applicants. A complete list of monthly
liabilities with account numbers, addresses, balances, and monthly
payments must be provided by each applicant as well as landlord and/or
mortgage information for the past two years.
4. Real Estate Settlement Procedures Act (RESPA): The IHA must provide
the following documents to each applicant within three (3) days of the
loan application date: a) Truth-in- Lending Disclosure, b) Good Faith
Estimate; c) Mortgage Servicing Disclosure; d) Special information
Booklet "Settlement Costs" (to be supplied by the IHA); e) any
additional documents necessary. All documentation, except for the
Special Information Booklet, will be located within FAMC's mortgage
software.
5. CREDIT REPORT: A Credit Report for each applicant shall be ordered
immediately after a loan application is accepted by the IHA. The
Credit Report may take the form of a Three Repostiory Merged Credit
Report or a full Residential Mortgage Credit Report depending on the
loan product needed and on the credit quality of the applicant. The
cost of the reports will be billed directly from the credit reporting
company to FAMC. FAMC will notify the IHA 15 days in advance of any
change in the cost of a credit report. It is the responsibility of the
IHA to pay for any reports pulled by the IHA. It will be the IHA's
responsibility to collect the appropriate fee and then forward it to
FAMC on a weekly basis. When appropriate the IHA will be responsible
for faxing the credit reporting worksheet (see Originators Lending
Manual) to FAMC's credit reporting agency (i.e. the borrower pays the
designated cost to receive a copy of the report).
40
<PAGE>
6. VERIFICATIONS: All loans are required to contain documentation
verifying information given by the applicant. If the IHA does not
collect the documentation mentioned in step 3 it willbe necessary to
send independent verification requests to employer(s) and
depositories. The IHA shall verify the last 24 months of rental or
mortgage history If it is not included in the applicant's credit
report, The source of funds may include a gift from a family member or
the sale of an asset. If the applicant has obtained a divorce, the
complete divorce decree and settlement statement must be provided.
Child support, alimony, or maintenance is available for consideration
as income, if received regularly. This form of income may be verified
through a court printout or canceled checks covering the past twelve
(12) months. Bankruptcy paperwork and explanations are required if
applicable. Derogatory credit, undisclosed credit and inquiries must
be satisfactorily explained by the applicant. Applicants must provide
a Certificate Degree of Indian Blood (CDIB) card (for Native American
loan programs), picture ID, and evidence of a Social Security Number,
All forms will be mailed to the verifying institutions with a stamped
return envelop to the IHA. All miscellaneous documents and a diskette
containing the loan files shall be forwarded to FAMC through overnight
delivery on Friday nights.
7. PACKAGING: The IHA shall collect, review for discrepancies, and bind
in the proper stacking order in legal manila file folders, all
necessary loan documentation prior to submission to FAMC. A loan
packaging checklist for each loan is included in FAMC's mortgage
software. The loan package should be included in the Friday overnight
delivery package unless the submission file needs immediate attention.
8. CREDIT SUBMISSION: FAMC will review the IHA's package and submit it to
the appropriate decision maker. The decision will be based upon the
information received in it the loan package. Additional verifications
and/or credit documents may be necessary. The IHA will be advised of
loan approval and any conditions.
At this time the day-to-day handling of the loan package will be transferred to
FAMC. The IHA's role will be to support the FAMC:
9. APPRAISAL: After the funds for payment of the appraisal are recieved
from the applicant, FAMC will order the appraisal report from a
qualified appraiser. FAMC may request assistance from the IHA in
obtaining the funds for the cost of the appraisal and provide the
appraiser with a copy of the sales contract, new construction or
rehabilitation plans and specifications and other pertinent documents
needed to conduct the appraisal.
10. TITLEREPORT/ABSTRACT and TITLE STATUS REPORT (TSR): FAMC may request
assistance from the IHA in the ordering of the appropriate Title
Report/Abstract or TSR.
11. LAND STATUS FORM:FAMC may request assistance from the IHA in obtaining
a completed Land Status Form or other documents pertaining to the
proposed properties land status.
12. SUBMISSION FOR FINAL APPROVAL: FAMC will be responsible for all
submission procedure and gaining final approval from the appropriate
decision maker. It should be noted that depending upon the loan
program, a file may not go through a Credit Submission process but
could move directly to a one-time Submission. The appropriate loan
program will be identified in Step 1 so that the IHA and FAMC cam
plan, up front, the proper submission procedure.
13. FINALAPPROVAL: Upon issuance of the final approval by the decision
maker, FAMC shall order all closing documents (i.e. survey,
inspections) for immediate closure. FAMC may ask the IHA to assist in
scheduling the closing with the local closing agent (designated by the
borrower and approved by FAMC) and obtaining various other closing
documents.
14. INVESTOR FUNDING: FAMC shall provide the Investor with a copy of the
complete loan package and shall be consulted as to the timing of the
closing.
15. GUARANTEE PACKAGE: FAMC shall be responsible for all insurance
packaging if applicable.
41
<PAGE>
16. DRAW INSPECTIONS: FAMC may request from time-to-time that the IHA
assist in the accumulation of documentation needed to conduct draw
payments on loans for new construction or rehabilitation. At no time
will the IHA be responsible for construction or rehabilitation fund
disbursement.
COMPENSATION:
The IHA shall be compensated by FAMC for each loan closed and funded.
Compensation will be in the form of a flat fee. The fee will be paid as
follows:
A fee of $120.00 will be due to the IHA on each loan originated by the IHA
and subsequently closed and funded by FAMC. The fee shall be paid by FAMC
to the IHA on the first or fifteenth day of each month following the loan
funding.
SPECIAL LOAN PROGRAMS:
Any special loan programs shall be attached to this contract as an
addendum.
STATUS OF THE PARTIES:
This Agreement shall not be construed to constitute a joint venture,
partnership, nor other form of agreement creating a joint liability between
the parties. The IHA and FAMC hereto stipulate and agree that the parties
are independent contractors and shall be responsible and liable for the
acts and omissions of their own respective employees, agents and
representatives.
Notwithstanding any other provisions in this Agreement, it is the intention
of the IHA and FAMC that the employees, agents, and representatives
furnished hereunder by each party shall be the employees, agents, and
representatives of that respective party. Accordingly, at no additional
expense to either party, the IHA and FAMC shall be fully responsible for
the withholding of all state and federal employment, social security,
Medicare, and similar taxes for their own respective employees. The IHA and
FAMC, and their respective employees, agents, and representatives, hereby
agree to indemnify and hold each other harmless from any and all liability
for such taxes, as well as for any penalties, interest, or other charges or
fees which may be assessed or imposed as a result, required to be filed by
state or federal taxing authorities in connection therewith. The
obligations under this paragraph shall survive the expiration or
cancellation of this Agreement.
ASSIGNMENT OR NON-ASSIGNMENT PROVISION:
The IHA and FAMC hereby agree the services specified in this Agreement may
not be delegated or assigned without the prior written approval of both
parties hereto.
TERMINATION OR CANCELLATION CLAUSE:
This Agreement may be terminated by either party upon thirty (30) days
written notice by certified letter. In the event this Agreement is
terminated or canceled by either party, the IHA shall remain obligated to
FAMC for any outstanding fees or payments due and shall not transfer any
loans currently in process. FAMC shall remain responsible for all unpaid
fees due to the IHA prior to said termination or cancellation.
If cancellation occurs, FAMC will continue as the sole loan originator for
any loan programs defined in the "Special Loan Programs" paragraph of this
agreement. FAMC will continue to originate said loans until such time as
the loan commitment is completed, IHA withdraws their participation in the
program or FAMC waives their exclusive right.
42
<PAGE>
PROPRIETY INFORMATION:
17. FAMC agrees and warrants that it will protect any confidential
information it receives from IHA as confidential, proprietary and not
use the confidential information for its own purpose or disclose to any
third party, either directly or indirectly, any and all business
related clients contracts, documentation, projections, business plans,
information, funding arrangements, maps or other materials.
18. The IHA agrees and warrants that it will protect any confidential
information it receives from FAMC as confidential, proprietary and not
use the confidential information for its own purpose or disclose to any
third party, either directly or indirectly, any and all business
related clients contracts, documentation, projections, business plans,
information, funding arrangements, maps or other materials.
19. FAMC agrees and warrants that it will circumvent the IHA with respect
to any contracts understandings, discussions, solicitations,
negotiations, or undertakings, with the landowners, consultants,
funding sources or other individuals or entities to whom it is
introduced by IHA.
20. IHA agrees and warrants that it will circumvent the FAMC with respect
to any contracts understandings, discussions, solicitations,
negotiations, or undertakings, with the landowners, consultants,
funding sources or other individuals or entities to whom it is
introduced by FAMC.
21. This paragraph shall become effective immediately upon signing and
remain in effect for three (3) years after cancellation of the entire
contract unless agreed to by FAMC and the IHA.
22. This agreement does not apply to any information which is a matter of
public record.
MODIFICATIONS:
Modifications or changes to the terms of this Agreement shall be in writing
and signed by each of the parties hereto.
LAWS AND REGULATIONS:
The parties' performances hereunder shall comply with all applicable laws,
ordinances, rules and regulations of any governmental agency having
jurisdiction and shall pay any fine, penalty, loss, damage, or expense
resulting from the party's failure to comply therewith. FAMC shall provide
all licenses and permits required to perform its obligations under this
Agreement.
OFFICE EXPENSES:
The IHA shall be responsible for its own office expenses (i.e., office
rent, mailing, business related telephone costs , and other reasonable
charges). The IHA shall also be responsible for all other expenses that may
be incurred in conducting a mortgage origination business (i.e., auto
expenses, meals, lodging, and transportation). FAMC shall provide a
photocopy ready promotional materials, rate sheets, training and assistance
in presentations at no additional cost to the IHA.
POLICY COMPLIANCE:
The IHA agrees to comply with the rules and regulations set forth in each
of the loan programs that FAMC is currently or will be participating in the
future (see Policy and Procedure Manual). FAMC reserves the right to amend
any policies set forth in its company Policy and Procedures Manual from
time-to-time and shall notify the IHA of any such changes.
43
<PAGE>
GENERAL PROVISIONS:
This Agreement contains the complete expression of the parties' agreement
with respect to the subject matter hereof, and shall bind the parties,
their successors and assigns. This Agreement shall supersede any and all
written or oral statements, agreements, and/or representations of the
parties made prior to or contemporaneously with the execution hereof.
This Agreement shall be governed by the laws of the United States and,
where applicable, the laws of the State of Oklahoma. The parties agree
their respective performances hereunder shall be governed by an obligation
of good faith.
FIRST AMERICANS MORTGAGE CORPORATION:
/s/ Dustan Shepherd 9/8/98
------------
Dustan R. Shepherd, President Date
Federal Tax Identification #48-1170870
HOUSING AUTHORITY OF THE CHOCTAW NATION:
/s/ Russell Somerson 9/8/98
------------
Executive Director Date
44
<PAGE>
SPECIAL LOAN PROGRAMS
Addendum: Housing Authority of the Choctaw Nation and
First Americans Mortgage Corporation, Loan Origination Agreement
dated September 8, 1998
It is accknowledged by both parties that First Americans assited in the loan
product development, guideline and procedures implementation and the
introduction of additional parties needed to facilitate the program (Freddie
Mac, Washington Mutual Bank, PMI Mortgage INsurance Corp.). The loan product
will be called: Choctaw Nation Housing "ADVANTAGE" program. Because of their
assistance in bringing this product to the Housing Authority, FAMC will be the
exclusive originator for the products $10,000,000.00 commitment.
FIRST AMERICANS MORTGAGE CORPORATION:
/s/ Dustan R. Shepherd 9/8/98
- ---------------------- ------------
Dustan R. Shepherd, President Date
Federal Tax Indentification # 48-1170870
HOUSING AUTHORIT OF THE CHOCTAW NATION:
/s/ Russell Somerson 9/8/98
- -------------------- -----------
Executive Director Date
45
Date: 8/4/98
First Americans Mortgage Corp.
8815 Long
Lenexa, KS 66215
Attention: Dustan Shepherd
Ladies and Gentlemen:
RESIDENTIAL LOAN BROKERAGE AGREEMENT
The terms of this letter agreement ("Agreement") shall govern the brokerage of
one-to-four family residential mortgage loans (individually, a "Brokered Loan"
and collectively, the "Brokered' Loans") to the undersigned investor (either
Washington Mutual Bank or Washington Mutual Bank fsb; referred to herein as
"Investor"), by FIRST AMERICANS MORTGAGE CORP. ("Broker"). This Agreement sets
forth our complete understanding regarding the above, and supersedes any prior
agreements or correspondence on this topic.
The specific terms of our arrangement are as follows:
1. Nonexclusivity. This arrangement is nonexclusive. That is, Investor is free
to make residential mortgage loans for its own account and to broker such
loans to other lenders, and Broker is likewise free to make residential
mortgage loans for its own account and to enter into brokerage arrangements
with other lenders.
2. Independent Contractor. At all times during the term of this Agreement,
Broker shall not be an employee of Investor, but shall be an independent
contractor with respect to Investor for all purposes. Broker shall not be
subject to the Bank's control or direction over the performance of Broker's
services. To ensure Broker's exclusion from Washington State Industrial
Insurance and Unemployment Compensation, Broker makes the following
representations and warranties:
a) Services under this Agreement shall be performed outside all of the
places of business of the Bank, and Broker is responsible for the costs
of Broker's principal place of business where Broker's services are
performed; and
b) Broker is customarily engaged in the brokerage business, and Broker has
a principal place of business for Broker's services that is eligible
for a business deduction for federal income tax purposes; and
c) On the date of this Agreement, Broker is responsible for filing at the
next applicable filing period a schedule of expenses with the Internal
Revenue Service for Broker's business; and
d) On the date of this Agreement, or within a reasonable period
thereafter, Broker has established an account with the Department of
Revenue, and other state agencies as required by the particular case,
for Broker's business for the payment of all state taxes normally paid
by employers and businesses and has registered for and received a
unified business identifier number from the State of Washington; and
e) On the date of this Agreement, Broker is maintaining a separate set of
books or records that reflect all items of income and expenses of
Broker's business.
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LIMITED AGENCY ADDENDUM TO
RESIDENTIAL LOAN BROKERAGE AGREEMENT
ThisAddendum amends and supplements that Residential Loan Brokerage Agreement
("Agreement') between FIRST AMERICANS MORTGAGE CORP. ("Broker') and Washington
Mutual Bank or Washington Mutual Bank fsb ("Washington Mutual") as applicable.
The terms of this Addendum are as follows:
1. Washington Mutual designates Broker as Washington Mutual's agent for the
sole, limited and exclusive purpose of ordering and obtaining appraisal
services for the properties that are the subject of loans funded by
Washington Mutual Bank or Washington Mutual Bank fsb. Broker shall in all
other respects be subject to all other terms and conditions of the
Agreement.
2. Broker may order appraisal services under this Addendum in its own name.
3. The person ordering the appraisal services for Broker and selecting the
appraiser to be used shall be competent to accept and assign orders and
independent of any person involved in origination or production of the
loan. The person ordering the appraisal service shall not receive any
payment based on whether or not the loan is approved.
4. Appraisal services shall be ordered from appraisers who are on Washington
Mutual's Approved Appraiser List at the time the appraisal service is
ordered and when the appraisal service is performed.
5. Broker, its employees and agents (including the person ordering the
appraisal service), and the Approved Appraiser performing the appraisal
service for Broker shall have no direct or indirect interest, future or
contemplated, financial or otherwise, in the property or transaction that
is the subject of the appraisal service, other than the standard fees
generated by the loan transaction.
6. Broker agrees not to submit to Washington Mutual, and not to retype for
such submission, any appraisal reports by the borrower, seller, builder or
any other person with a direct or indirect interest, future or
contemplated, financial or otherwise, in the property or transaction that
is the subject of the appraisal service.
7. Appraisal services shall comply with applicable federal and state law and
regulations (including the FDIC's 12 C.F.R. Part 323 or the OTS's 12 C.F.R.
Part 564, as applicable), the Uniform Standards of Professional Appraisal
Practice ("USPAP") and Washington Mutual's Appraisal Report Standards or
standards that are no less stringent than Washington Mutual's Appraisal
Report Standards (as determined by Washington Mutual's Residential
Appraisal Department).
8. Washington Mutual's minimum Appraisal Report Standards accompany this
Addendum. By signing below, Broker acknowledges that Appraiser has received
and will follow Washington Mutual's Appraisal Report Standards or standards
no less stringent than Washington Mutual's Appraisal Report Standards (as
determined by Washington Mutual's Residential Appraisal Department).
In order to become Washington Mutual's limited agent for the purpose of
ordering appraisal services under this Addendum, please sign this letter
where indicated below.
Very truly yours,
Susan M. Potteiger
Vice President/Manager of Appraisal Department
ACCEPTED AND AGREED TO this 4 day of August, 1998 .
-------- --------------------------------
BROKER: By First Americans Mortgage Corp.
Dustan R. Shepherd
/s/ Dustan R. Shepherd
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10. Assignment. Neither party may assign its rights or obligations under this
Agreement without the consent of the other party. This paragraph does not
prohibit Investor from selling Brokered Loans on the secondary market once
they have been funded.
If the above correctly confirms our understanding, please sign this letter where
indicated below.
Very truly yours,
[x] WASHINGTON MUTUAL BANK
[ ] WASHINGTON MUTUAL BANK fsb
By /s/ Michael S. Holt
Its First Vice President
ACCEPTED AND AGREED TO this 7th day of August, 1998 .
---- ---------------------------------------
BROKER: First American Mortgage Corp.
By /s/ Dustan R. Shepherd
Its President
48
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is made effective this 1st day of
February, 1999 by Allen Wolfson, an individual ("Consultant") and AmeriResource
Technologies, Inc. ("Client") with principal offices located at 8815 E Long
Street, Lenexa, Kansas 66215.
PREMISES
WHEREAS, Client wishes to obtain financial consulting services.
WHEREAS, Consultant is experienced in providing consulting and other
services to firms who desire to make complex financial and structural changes to
their firms.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Client and Consultant
agree as follows:
Section 1 - Engagement of Consultant and Term of Agreement
A. Client retains Consultant to assist Client in general business
consulting, including introducing Client to potential business partners,
introduce Client to potential acquisition or merger candidates in the form of
business opportunities, assisting in a restructuring of Client's common stock,
if necessary, the issuance of new shares and assisting Client in the preparation
of agreements, documents, filings and other material necessary to effectuate the
above services ("Consulting Services").
B. The term of this Agreement ("Term") shall, subject to earlier
termination as described herein, be one (1) year from the execution of this
Agreement, unless a party to this Agreement, in writing, serves notice of its
decision to terminate this Agreement no later than thirty (30) days before the
expiration of the Term of this Agreement or expiration of any extension hereof.
Section 2 - Compensation
Client shall compensate Consultant in the following manner:
A. Before each issuance of stock, or exchange of stock owed pursuant to
this Agreement, Consultant shall provide Client with a list of
services to be provided or services that have been provided under this
Agreement.
B. Consultant shall be issued, upon the execution of this Agreement, a
non-refundable engagement fee and as payment for services provided
prior to the execution hereof twenty million (20,000,000) shares of
Client's capital stock ("Capital Stock"). For purposes of this
Agreement Capital Stock shall be defined as any instrument which
provides an interest in the equity of Client or other applicable
corporation.
C. Client and Consultant agree that any additional consulting fee shall
be negotiated and agreed upon by the parties prior to any additional
consulting services being performed. Once the fee has been determined,
Consultant shall bill Client on a monthly basis, and payment shall be
due upon receipt of the bill, payable in either cash or in Client's
Common Stock ("Common Stock").
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D. If Consultant assists Client in merging with or acquiring a Company,
either by introducing the Company to Client or by providing any other
services in connection with the merger and acquisition, Consultant
shall be compensated, in addition to the rights and shares specified
above, an amount of shares of Capital Stock sufficient so that upon
such issuance, Consultant owns four and one-half percent (4.5%) of the
total issued and outstanding shares of the corporate entity created
from the merger with or acquisition of the Company by Client ("New
Entity"). New Entity shares shall be issued within five (5) days of
Client's receipt of services. If New Entity is not a public company
("Public Company") (defined as a company registered under Section 12
of the Exchange Act or a reporting company subject to the reporting
requirements of Section 15(d) of the Exchange Act) then, at
Consultant's option, in lieu of receiving New Entity shares, an amount
equal to four and one-half percent (4.5%) of the total issued and
outstanding shares of Client's Capital Stock shall be issued to
Consultant. Shares shall be issued within five (5) days of Client's
receipt of services. Consultant may introduce a company to Client in
writing, verbally, by facsimile or by telephone conversation or
conference.
E. Upon Client entering into a transaction involving a business
opportunity which Consultant introduces to Client, including but not
limited to a joint venture, licensing agreement, or other contract or
asset, Consultant shall receive a finder's fee in the amount of nine
and nine-tenth percent (9.9%) of the market value of the assets
received by Client in connection with such transaction. Unless
otherwise mutually agreed upon by Client and Consultant, compensation
shall be payable in either cash, or in "like kind", but only "like
kind" if Consultant determines that the "like kind" asset is easily
divisible and liquidable. Consultant may introduce a business
opportunity to Client in writing, verbally, by facsimile or by
telephone conversation or conference.
F. Client shall reimburse Consultant for expenses incurred during and in
relation to Consultant's performance under this Agreement. Such
expenses include, but are not limited to, travel, lodging, filing
fees, printing, postage, delivery, shipping, copying, telephone calls,
overnight packages, facsimiles, and all other out-of-pocket expenses.
G. All shares of stock that are issued to Consultant under this Agreement
shall, when issued, be validly issued, fully paid and non assessable.
Section 3 - Registration Rights
Client agrees to register all shares issued, exchanged or otherwise
transferred to Consultant pursuant to this Agreement ("Payment Shares") as
follows:
A. If, at any time commencing after the termination of this Agreement and
for a period of three (3) years thereafter, Client, New Entity, or any
of their successors, proposes to file a registration statement for the
public sale of shares of its common stock, written notice of such
proposal, will be given to Consultant at least 60 days prior to the
filing of such registration statement. The term "Registration
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Statement" as used in this Section shall be deemed to include any form
which may be used to register a distribution of securities to the
public, a post-effective amendment to a registration statement, or a
Notification and Offering Circular pursuant to a Regulation A Offering
when necessary to perfect an exemption thereunder. Client, New Entity,
or any of their successors, agree that on written notice received from
Consultant, within 20 days after Consultant's receipt of the notice to
file a registration statement, Client shall afford the holders of
Payment Shares the opportunity to have the Payment Shares included in
such Registration Statement. Notwithstanding the provision of this
section, Client shall have the right, at any time after it shall give
written notice pursuant to this subsection to elect not to file any
proposed Registration Statement, or to withdraw the same after the
filing but prior to the effective date thereof. Notwithstanding any
provision to the contrary contained herein, Client shall not be
required to include any of the Payment Shares transferred hereunder in
any Registration Statement with respect to shares offered in any
underwriting:
(i) unless Consultant agrees to offer such shares, on the same
terms and conditions as Client shares are being offered, and
to sign an underwriting agreement in the form to be signed
by the other offerors; or
(ii) if, in the good faith and reasonable opinion of the managing
underwriter of the offering, the sale of the Payment Shares
to be included would be materially detrimental to the
remainder of the offerors.
In such an event the amount of Payment Shares and the amount of shares
to be registered, if any, by the remainder of the offerors (other than
Client), shall be proportionally reduced to a level acceptable to the
managing underwriter of the Offering, who may reasonably refuse to
have any shares registered.
B. The shareholders desiring to sell shares of common stock pursuant to
the registration rights granted herein shall provide Client with all
reasonable information relating to such sale and on which Client shall
be entitled to rely and to include such information in any such
Registration Statement.
All sales pursuant to any such Registration Statement shall be made in
accordance with the provision of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and Client shall not be
required to include any such Payment Shares in any registration until
it has received written assurances reasonably satisfactory in form and
substance to Client from the shareholders offering such Payment Shares
that such sales shall be so conducted. All expenses incurred by Client
in complying with the registration requirements hereof (except fees
and disbursements of counsel for any shareholder and underwriting
discounts, commissions, or similar expenses to be incurred in
connection with the sale of Payment Shares) shall be borne by Client.
On notice to any shareholder offering Payment Shares covered by a
Registration Statement that such Registration Statement or prospectus
relating thereto requires revision, such holder will immediately cease
to make offers or sales pursuant to such Registration Statement and
return all such Registration Statements and prospectuses to Client.
All registration rights granted herein may apply only to shares of
common stock issued by Client. Client is under no obligation to
maintain the effectiveness of any Registration Statement for more than
an aggregate of 90 days.
C. In connection with the filing of any Registration Statement or
offering statement under this section, Client covenants and agrees
that it will take all necessary action which may be required in
qualifying or registering the Payment Shares included in a
Registration Statement or offering statement for the offer and sale
under the securities or blue sky laws of such states as may be
reasonably requested by the holders of the Payment Shares; provided,
that Client shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation
to do business under the laws of any such jurisdiction.
D. In the event that the payment Shares are the subject of or are
included in any Registration Statement or offering statement which is
filed and becomes effective, Client agrees to utilize its best efforts
to keep the same, including blue sky filings, for an effective period
of not less than 90 days. The holders of the Payment Shares shall
cooperate with Client and shall furnish such information as Client may
reasonably request in connection with any such registration or
offering statement hereunder, on which Client shall be entitled to
rely.
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E. Client further agrees that in the event that counsel to Consultant is
of the reasonable opinion that the Payment Shares may be transferred
and/or sold in full compliance with the provisions of the Act, without
the need for filing a Registration Statement, Client will fully
cooperate in connection with such transfer and/or sale at Client's
sole expense.
F. Client further agrees and represents that while any of the Payment
Shares are outstanding and held by Consultant or Consultant's
affiliates, Client will timely file all reports and documents required
under the Exchange Act and the Securities Act as well as such
additional information as is necessary in order to allow the holder of
the Payment Shares to rely upon the provisions of Rule 144 promulgated
under the Securities Act with respect to the current public
information requirements contained in Rule 144(c).
In the event of any registration of any Client common stock under the
Securities Act pursuant to this Section 5, Client shall indemnify and
hold harmless Consultant or any subsequent transferee of the Payment
Shares against any losses, claims, damages or liabilities, joint or
several, to which such holder may become subject under the Securities
Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any alleged untrue statement of any
material fact contained, on the effective date thereof, in any
Registration Statement under which such securities were registered
under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment required to be stated
therein or necessary to make the statements therein not misleading,
and shall reimburse such holder for any legal or any other expenses
reasonably incurred by such holder in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that Client shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon any alleged untrue statement or alleged omission made in
such Registration Statement, preliminary prospectus, prospectus or
amendment or supplement in reliance upon and in conformity with
written information furnished to Client by such holder specifically
for use therein. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder
and shall survive the transfer of such securities by such holder and
consummation of the transactions contemplated by this Agreement.
Section 4 - Client's Representations
Client represents, warrants and covenants to Consultant that each of the
following are true and complete as of the date of this Agreement:
A. Corporate Existence. Client is a corporation duly organized, validly
--------------------
existing, and in good standing under the laws of the state of its
incorporation, with full corporate power and authority and all
necessary governmental authorizations to own, lease and operate
property and carry on its business as it is now being conducted.
Client is duly qualified to do business in and is in good standing in
every jurisdiction in which the nature of its business or the property
owned or leased by it makes such qualifications necessary.
B. Disclosure Documents. Client has or will cause to be delivered,
----------------------
concurrent with the execution of this Agreement, copies of its
articles of incorporation and bylaws, each as amended and as in effect
on the date hereof, and any documents that may be required to
effectuate any transaction contemplated herein.
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C. Client's Capitalization. All of the shares to be issued hereunder have
------------------------
been, or will be at the time of issuance, duly authorized and validly
issued, are fully paid and non assessable and will be issued to the
Consultant free and clear of any liens, charges, encumbrances,
security interests, options, rights or claims of others with respect
thereto. There are no preemptive or similar rights on the part of any
holder of any class of securities of Client. No options, warrants,
calls, conversion, subscription or other rights, agreements or
commitments of any kind obligating Client contingently, or otherwise,
to issue or sell any shares of its capital stock of any class, or any
securities convertible into or exchangeable for any such shares, are
outstanding and no authorization therefor has been given. The shares
are not subject to any contractual restrictions relating to their
disposition. All voting rights are vested exclusively in the common
stock of Client.
D. Client's Authority for Agreement. The execution and delivery of this
----------------------------------
Agreement and the consummation of the transactions contemplated herein
have been duly authorized by the Client. This Agreement has been duly
executed and delivered by Client and constitutes the valid and legally
binding obligation of Client enforceable in accordance with its terms,
except to the extent that enforceability may be subject to or limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditor's rights generally. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated herein will not conflict with or result in any violation
of any provision of the Articles of Incorporation or Bylaws of Client.
To the best of Client's knowledge, after due inquiry, the execution
and delivery of this agreement and the consummation of the transaction
contemplated herein will not conflict with any mortgage, indenture,
lease, contract, commitment, agreement, or other instrument, permit,
concession, grant, franchise, license, judgement, order, decree,
statute, law, ordinance, rule or regulation applicable to Client or
any of its properties or assets.
E. Consents and Authorizations. No consent, approval, order or
-------------------------------
authorization of, or registration, declaration, compliance with or
filing with, any governmental or regulatory authority is required in
connection with the execution and delivery of this Agreement to permit
the consummation by Client of the transactions contemplated herein or
to prevent the termination of any material right, privilege, license
or agreement of Client or to prevent any material loss to Client or
the Client's business, by reason of the transactions contemplated
herein.
F. Compliance with Law. To the best of Client's knowledge, after due
----------------------
inquiry, Client is not in violation of or default under any statute,
law, ordinance, rule, regulation, judgment, order, decree, permit,
concession, grant, franchise, license or other governmental
authorization or approval applicable to it or any of its properties or
business. There are no proceedings pending or threatened which may
result in the revocation, cancellation, suspension, or any adverse
modification of any permit, concession, grant, franchise, license or
other governmental authorization or approval necessary for the conduct
of Client's business or which question the validity of this Agreement
or of any action taken or to be taken in connection herewith or the
consummation of the transactions contemplated hereby. Client has all
franchise, licenses, permits and other governmental approvals necessary
to enable it to carry on its business as presently conducted, except
where the failure to have such franchises, licenses or permits or other
governmental approvals would not have, individually or in the
aggregate, a material and adverse affect on Client's business.
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G. Minute Books and Stock Options. The minute books of Client contain
--------------------------------
full and complete minutes of all annual, special and other meetings
(or written consents in lieu thereof) of the directors and committees
of directors and shareholders of Client; the signatures on such
minutes and written consents are the true signatures of the persons
purporting to have signed them; and the stock ledger of Client with
respect to shares of Client's common stock issued or transferred is
complete and no documentary stamp taxes are required to be affixed and
canceled in connection with the transfer or issuance of the shares.
H. Nature of Representations. No representation or warranty made by
---------------------------
Client in this Agreement, nor any document or information furnished or
to be furnished by Client to the Consultant in connection with this
Agreement, contains or will contain any untrue statement of material
fact, or omits or will omit to state any material fact necessary to
make the statements contained therein not misleading, or omits to
state any material fact relevant to the transactions contemplated by
this Agreement.
I. Independent Legal and Financial Advice. Consultant is not a law firm,
---------------------------------------
neither is it an accounting firm. Consultant does however work with
professionals to better provide consulting services. Client represents
that it has not nor will it rely upon any legal or financial
representation made by Consultant, and that Client has and will
continue to seek the independent advice of legal and financial counsel
regarding all material aspects of the transactions contemplated by
this Agreement, including the review of all documents provided by
Consultant to Client and all opportunities Consultant introduces to
Client. Client acknowledges that the attorneys, accountants and other
advisors Consultant works with represent the interests of Consultant
solely, and that no representation or warranty has been given to
Client by Consultant as to any legal, tax, accounting, financial or
other aspect of the transactions contemplated by this Agreement.
Section 5 - Non-Circumvention
Client agrees that Client will not enter into any merger with or
acquisition of a Company, raise any funds for which Consultant provided
services, or enter into any transaction involving a business opportunity or
asset introduced to Client by Consultant, without compensating Consultant
pursuant to this Agreement. Neither will Client terminate this Agreement solely
as a means to avoid paying Consultant compensation earned or to be earned, or in
any other way attempt to circumvent Consultant.
Section 6 - Termination of Agreement by Consultant and by Client
I. Consultant may terminate this Agreement if the following occurs:
A. Payments due under this Agreement are not timely made.
B. In the judgment of the Board of Directors of Consultant, Client's
actions or conduct make it unreasonable for Consultant to perform under
this Agreement. Such acts include, and are or may be perceived as being
in the nature of, dishonesty, illegal activities, activities harmful to
the reputation of the Consultant, and activities which may create civil
or criminal liability for the Consultant.
C. Consultant makes a bona fide decision to terminate its business and
liquidate its assets.
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D. Client misrepresents its corporate standing, power to enter and bind
itself to this Agreement, misrepresentation of its Section 3
guarantees, or any other concealed or misrepresented material fact
which would decrease the binding effect of this Agreement on Client.
E. If after conduct of a due diligence investigation, Consultant concludes
that an intended merger with or acquisition of a Company, public
offering, or other action contemplated under this Agreement (the
"Transaction"), is not viable, Consultant may give ten (10) days
written notice to Client, stating in particular why the Transaction is
not viable, and if after ten (10) days of receipt of the written
notice, Client insists that Consultant continue performance on the
Transaction, Consultant may then terminate the Agreement.
F. An unanticipated material change in either the market, Client or
Consultant makes continued performance under this Agreement
unreasonable.
G. Breach of any provision of this Agreement.
H. Notwithstanding the termination of this Agreement, Consultant shall be
entitled to receipt of all compensation owed pursuant to Section 2 up
to the time of termination of this Agreement. Consultant shall also be
entitled to any fees owed pursuant to Section 2, should Client,
subsequent to the termination of this Agreement, enter into any
transaction contemplated pursuant to Section 2. Pursuant to Section 2,
Consultant shall also be entitled to reimbursement of any expenses
incurred, up to the time of termination of this Agreement along with
any expenses incurred as a result of the termination.
II. Client may terminate this Agreement under the following conditions:
A. Consultant fails to follow Client's reasonable instructions. Client
must advise Consultant that his actions or inactions are unacceptable
and give Consultant thirty (30) days in which to comply. If Consultant
fails to comply within thirty (30) days, Consultant may be terminated
hereunder by Client's service of notice of termination to Consultant.
B. If, in the judgment of the Board of Directors of Client, Consultant's
actions or conduct would make it unreasonable to require Client to
retain Consultant. Such acts include, and are in the nature of,
dishonesty, illegal activities, activities harmful to the reputation of
the Client, and activities which create civil or criminal liability for
the Client.
C. Notwithstanding the termination of this Agreement, Consultant shall be
entitled to receipt of all compensation owed pursuant to Section 2 up
to the time of termination of this Agreement. Consultant shall also be
entitled to reimbursement of any expenses incurred, up to the time of
termination of this Agreement, along with any expenses incurred as a
result of the termination.
Section 7 - Utilization of Attorneys
Consultant utilizes attorneys to assist in preparing the documentation
required to effectuate the transactions contemplated by this Agreement. The
attorneys utilized by Consultant represent only Consultant, and Consultant's
interest in providing consulting services and do not in anyway represent the
interests of any party to this Agreement other than Consultant's. Client is
advised, and has represented, that he will seek independent legal counsel to
review all documentation provided to Client by Consultant.
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Section 8 - Nondisclosure of Confidential Information
In consideration for the Client entering into this Agreement, Consultant
agrees that the following items used in the Client's business are secret,
confidential, unique, and valuable, were developed by Client at great cost and
over a long period of time, and disclosure of any of the items to anyone other
than clients' officers, agents, or authorized employees will cause Client
irreparable injury.
A. Non-public financial information, accounting information, plans of
operations, possible mergers or acquisitions prior to the public
announcement.
B. Customer lists, call lists, and other confidential customer data;
C. Memoranda, notes, records concerning the technical and creative
processes conducted by Client;
D. Sketches, plans, drawings and other confidential research and
development data; or
E. Manufacturing processes, chemical formulae, and the composition of
Client's products.
Consultant shall have no liability to the Client with respect to the use or
disclosure to others not party to this Agreement, of such information as
Consultant can establish to:
A. have been publicly known;
B. have become known, without fault on the part of Consultant, subsequent
to disclosure by Client of such information to Consultant;
C. have been otherwise known by Consultant prior to communication by the
Client to Consultant of such information; or
D. have been received by Consultant at any time from a source other than
Client lawfully having possession of such information.
Section 9 - Best Efforts
Consultant agrees that it will at all times faithfully and to the best of
its experience, ability and talents, perform all the duties that may be required
of and from Consultant pursuant to the terms of this Agreement. Consultant does
not guarantee that its efforts will have any impact on Client's business or that
any subsequent financial improvement will result from Consultant's efforts.
Section 10 - Client's Right to Approve Transaction
Client expressly retains the right to approve, in its sole discretion, each
and every transaction introduced by Consultant that involves Client as a party
to any agreement. Consultant and Client mutually agree that Consultant is not
authorized to enter into agreements on behalf of Client.
Section 11 - Client Under No Duty or Obligation to Accept or Close on any
Transactions
It is mutually understood and agreed that Client is not obligated to accept
or close any transaction submitted by Consultant.
Section 12 - Place of Services
The Consulting Services contemplated to be performed by Consultant will be
performed through Consultant's offices; however, it is understood and expected
that Consultant may make contacts with persons and entities in any other place
deemed appropriate by Consultant.
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Section 13 - Nonexclusive Services
Client acknowledges that Consultant is currently providing services of the
same or similar nature to other parties and Client agrees that Consultant is not
prevented or barred from rendering services of the same nature or a similar
nature to any other individual or entity.
Section 14 - All Prior Agreements Terminated
This Agreement comprises the entire agreement and understanding between the
parties hereto at the date of this Agreement as to the subject matter hereof and
supersedes and replaces all proposals, prior negotiations and agreements,
whether oral or written, between the parties hereto in connection with the
subject matter hereof. None of the parties hereto shall be bound by any
conditions, definitions, warranties or representations with respect to the
subject matter of this Agreement other than as expressly provided in this
Agreement unless the parties hereto subsequently agree to vary this Agreement in
writing, duly signed by authorized representatives of the parties hereto.
Section 15 - Consultant is not an Agent or Employee of Client
Consultant's obligations under this agreement consist solely of the
Consulting Services described herein. In no event shall Consultant be considered
to act as the employee or agent of Client or otherwise represent or bind Client.
For the purposes of this Agreement, Consultant is an independent contractor. All
final decisions with respect to acts of Client or its affiliates, whether or not
made pursuant to or in reliance on information or advice furnished by Consultant
hereunder, shall be those of Client or such affiliates and Consultant, its
employees or agents shall under no circumstances be liable for any expense
incurred or loss suffered by Client as a consequence of such action or
decisions.
Section 16 - Disclosure of Documents
Upon the execution of this Agreement, and prior to the consummation of the
transactions contemplated herein, Client will provide Consultant, at Client's
sole expense, audited financial statements in accordance with generally accepted
accounting principles and financial documentation with respect to Client since
the later of either the date of incorporation of Client or three (3) years prior
to the execution of this Agreement, other financial and corporate information,
pro-forma, due-diligence, articles of incorporation, by-laws, business plans,
proof of ownership of assets, accounts receivable, bank statements and copies of
deeds, liens, mortgages, a certificate of good standing issued by Client's state
of incorporation, and any other documents that may be reasonably required by
Consultant to provide services to Client for the transactions contemplated
herein. After review of the documents and information provided in this
paragraph, or after review of the due diligence information requested by Client,
Consultant or Client may make a determination that the transactions contemplated
are not in their best interests and may terminate this Agreement with no further
obligation.
Section 17 - Continue Operations in Substantially Same Manner
Client will not transfer, sell or hypothecate, assign or distribute any of
the assets currently in its possession except upon the written notification to
the parties to this Agreement, and will continue operations in substantially the
same manner as it is presently functioning, until the closing of the
transactions mutually acceptable to the parties are entered into and this
agreement has been consummated.
Section 18 - Miscellaneous
A. Authority. The execution and performance of this Agreement have been
duly authorized by all requisite corporate action. This Agreement
constitutes a valid and binding obligation of the parties hereto.
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B. Amendment. This Agreement may be amended or modified at any time and in
any manner only by an instrument in writing executed by the parties
hereto.
C. Waiver. No term of this Agreement shall be considered waived and no
breach excused by either party unless made in writing. No consent,
waiver or excuse by either party, express or implied, shall constitute
a subsequent consent, waiver or excuse.
D. Assignment:
(i) The rights and obligations of the Consultant under this Agreement
shall inure to the benefit of and shall be binding upon its
successors and assigns. There shall be no rights of transfer or
assignment of this Agreement by Client except with the prior
written consent of the Consultant.
(ii) Nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties and their
successors, any rights or remedies under this Agreement.
E. Notices. Any notice or other communication required or permitted by
this Agreement must be in writing and shall be deemed to be properly
given when delivered in person to an officer of the other party, when
deposited in the Unites States mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public
telegraph company for transmittal or when sent by facsimile
transmission, charges prepaid provided that the communication is
addressed:
(i) In the case of Consultant to:
Allen Wolfson
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
(801) 575-8073
(801) 575-8092 (fax)
(ii) In the Case of Client to:
AmeriResource Technologies, Inc.
P.O. Box 14748
Shawnee Mission, Kansas 66285-4748
(913) 859-9292
(913) 859-9520
or to such other person or address designated by Client in writing to
receive notice.
F. Headings and Captions. The headings of paragraphs are included solely
for convenience. If a conflict exists between any heading and the text
of this Agreement, the text shall control.
G. Entire Agreement. This instrument and the exhibits to this instrument
contain the entire Agreement between the parties with respect to the
transaction contemplated by the Agreement. It may be executed in any
number of counterparts but the aggregate of the counterparts together
constitute only one and the same instrument.
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H. Effect of Partial Invalidity. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of
this Agreement, but this Agreement shall be constructed as if it never
contained any such invalid, illegal or unenforceable provisions.
I. Controlling Law. The validity, interpretation, and performance of this
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Agreement shall be governed by the laws of the State of Utah, without
regard to its law on the conflict of laws. Any dispute arising out of
this Agreement shall be brought in a court of competent jurisdiction in
Salt Lake County, Utah. The parties exclude any and all statutes, laws
and treaties which would allow or require any dispute to be decided in
another forum or by other rules of decision than provided in this
Agreement.
J. Attorney's Fees. If any action at law or in equity, including an action
----------------
for declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be entitled to
recover actual attorney's fees, court costs, and other costs incurred
in proceeding with the action from the other party. The attorney's
fees, court costs or other costs, may be ordered by the court in its
decision of any action described in this paragraph or may be enforced
in a separate action brought for determining attorney's fees, court
costs, or other costs. Should either party be represented by in-house
counsel, all parties agree that party may recover attorney's fees
incurred by that in-house counsel in an amount equal to that attorney's
normal fees for similar matters, or, should that attorney not normally
charge a fee, by the prevailing rate charged by attorneys with similar
background in that legal community.
K. Time is of the Essence. Time is of the essence of this Agreement and of
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each and every provision hereof.
L. Mutual Cooperation. The parties hereto shall cooperate with each other
-------------------
to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transactions described herein.
M. Indemnification. Client and Consultant agree to indemnify, hold
----------------
harmless and, at the party seeking indemnification's sole option,
defend the other from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties, court fees, and attorneys' fees and expenses
asserted against or imposed or incurred by either party by reason of or
resulting from a breach of any representation, warranty, covenant
condition or agreement of the other party to this Agreement. Neither
party shall be responsible to the other party for any consequential or
punitive damages.
N. No Third Party Beneficiary. Nothing in this Agreement, expressed or
----------------------------
implied, is intended to confer upon any person, other than the parties
hereto and their successors, any rights or remedies under or by reason
of this Agreement, unless this Agreement specifically states such
intent.
P. Facsimile Counterparts. If a party signs this Agreement and transmits
------------------------
an electronic facsimile of the signature page to the other party, the
party who receives the transmission may rely upon the electronic
facsimile as a signed original of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
herein above written.
By: /s/ Allen Wolfson
Allen Wolfson
By: /s/ Delmar Janovec
Delmar Janovec, CEO
AmeriResource Technologies, Inc.
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CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is made effective this 1st day of
February, 1999 by Richard D. Surber, an individual ("Consultant") and
AmeriResource Technologies, Inc. ("Client") with principal offices located at
8815 E Long Street, Lenexa, Kansas 66215.
PREMISES
WHEREAS, Client wishes to obtain financial consulting services.
WHEREAS, Consultant is experienced in providing consulting and other
services to firms who desire to make complex financial and structural changes to
their firms.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Client and Consultant
agree as follows:
Section 1 - Engagement of Consultant and Term of Agreement
A. Client retains Consultant to assist Client in general business
consulting, including introducing Client to potential business partners,
introduce Client to potential acquisition or merger candidates in the form of
business opportunities, assisting in a restructuring of Client's common stock,
if necessary, the issuance of new shares and assisting Client in the preparation
of agreements, documents, filings and other material necessary to effectuate the
above services ("Consulting Services").
B. The term of this Agreement ("Term") shall, subject to earlier
termination as described herein, be one (1) year from the execution of this
Agreement, unless a party to this Agreement, in writing, serves notice of its
decision to terminate this Agreement no later than thirty (30) days before the
expiration of the Term of this Agreement or expiration of any extension hereof.
Section 2 - Compensation
Client shall compensate Consultant in the following manner:
A. Before each issuance of stock, or exchange of stock owed pursuant to
this Agreement, Consultant shall provide Client with a list of services
to be provided or services that have been provided under this
Agreement.
B. Consultant shall be issued, upon the execution of this Agreement, a
non-refundable engagement fee and as payment for services provided
prior to the execution hereof twenty million (20,000,000) shares of
Client's capital stock ("Capital Stock"). For purposes of this
Agreement Capital Stock shall be defined as any instrument which
provides an interest in the equity of Client or other applicable
corporation.
C. Client and Consultant agree that any additional consulting fee shall be
negotiated and agreed upon by the parties prior to any additional
consulting services being performed. Once the fee has been determined,
Consultant shall bill Client on a monthly basis, and payment shall be
due upon receipt of the bill, payable in either cash or in Client's
Common Stock ("Common Stock").
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D. If Consultant assists Client in merging with or acquiring a Company,
either by introducing the Company to Client or by providing any other
services in connection with the merger and acquisition, Consultant
shall be compensated, in addition to the rights and shares specified
above, an amount of shares of Capital Stock sufficient so that upon
such issuance, Consultant owns four and one-half percent (4.5%) of the
total issued and outstanding shares of the corporate entity created
from the merger with or acquisition of the Company by Client ("New
Entity"). New Entity shares shall be issued within five (5) days of
Client's receipt of services. If New Entity is not a public company
("Public Company") (defined as a company registered under Section 12 of
the Exchange Act or a reporting company subject to the reporting
requirements of Section 15(d) of the Exchange Act) then, at
Consultant's option, in lieu of receiving New Entity shares, an amount
equal to four and one-half percent (4.5%) of the total issued and
outstanding shares of Client's Capital Stock shall be issued to
Consultant. Shares shall be issued within five (5) days of Client's
receipt of services. Consultant may introduce a company to Client in
writing, verbally, by facsimile or by telephone conversation or
conference.
E. Upon Client entering into a transaction involving a business
opportunity which Consultant introduces to Client, including but not
limited to a joint venture, licensing agreement, or other contract or
asset, Consultant shall receive a finder's fee in the amount of nine
and nine-tenth percent (9.9%) of the market value of the assets
received by Client in connection with such transaction. Unless
otherwise mutually agreed upon by Client and Consultant, compensation
shall be payable in either cash, or in "like kind", but only "like
kind" if Consultant determines that the "like kind" asset is easily
divisible and liquidable. Consultant may introduce a business
opportunity to Client in writing, verbally, by facsimile or by
telephone conversation or conference.
F. Client shall reimburse Consultant for expenses incurred during and in
relation to Consultant's performance under this Agreement. Such
expenses include, but are not limited to, travel, lodging, filing fees,
printing, postage, delivery, shipping, copying, telephone calls,
overnight packages, facsimiles, and all other out-of-pocket expenses.
G. All shares of stock that are issued to Consultant under this Agreement
shall, when issued, be validly issued, fully paid and non assessable.
Section 3 - Registration Rights
Client agrees to register all shares issued, exchanged or otherwise
transferred to Consultant pursuant to this Agreement ("Payment Shares") as
follows:
A. If, at any time commencing after the termination of this Agreement and
for a period of three (3) years thereafter, Client, New Entity, or any
of their successors, proposes to file a registration statement for the
public sale of shares of its common stock, written notice of such
proposal, will be given to Consultant at least 60 days prior to the
filing of such registration statement. The term "Registration
Statement" as used in this Section shall be deemed to include any form
which may be used to register a distribution of securities to the
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public, a post-effective amendment to a registration statement, or a
Notification and Offering Circular pursuant to a Regulation A Offering
when necessary to perfect an exemption thereunder. Client, New Entity,
or any of their successors, agree that on written notice received from
Consultant, within 20 days after Consultant's receipt of the notice to
file a registration statement, Client shall afford the holders of
Payment Shares the opportunity to have the Payment Shares included in
such Registration Statement. Notwithstanding the provision of this
section, Client shall have the right, at any time after it shall give
written notice pursuant to this subsection to elect not to file any
proposed Registration Statement, or to withdraw the same after the
filing but prior to the effective date thereof. Notwithstanding any
provision to the contrary contained herein, Client shall not be
required to include any of the Payment Shares transferred hereunder in
any Registration Statement with respect to shares offered in any
underwriting:
(i) unless Consultant agrees to offer such shares, on the same terms
and conditions as Client shares are being offered, and to sign an
underwriting agreement in the form to be signed by the other
offerors; or
(ii) if, in the good faith and reasonable opinion of the managing
underwriter of the offering, the sale of the Payment Shares to be
included would be materially detrimental to the remainder of the
offerors.
In such an event the amount of Payment Shares and the amount of shares
to be registered, if any, by the remainder of the offerors (other than
Client), shall be proportionally reduced to a level acceptable to the
managing underwriter of the Offering, who may reasonably refuse to have
any shares registered.
B. The shareholders desiring to sell shares of common stock pursuant to
the registration rights granted herein shall provide Client with all
reasonable information relating to such sale and on which Client shall
be entitled to rely and to include such information in any such
Registration Statement.
All sales pursuant to any such Registration Statement shall be made in
accordance with the provision of the Securities Act of 1933, as amended
(the "Securities Act") and the Securities Exchange Act of 1934, as
amended, (the "Exchange Act") and Client shall not be required to
include any such Payment Shares in any registration until it has
received written assurances reasonably satisfactory in form and
substance to Client from the shareholders offering such Payment Shares
that such sales shall be so conducted. All expenses incurred by Client
in complying with the registration requirements hereof (except fees and
disbursements of counsel for any shareholder and underwriting
discounts, commissions, or similar expenses to be incurred in
connection with the sale of Payment Shares) shall be borne by Client.
On notice to any shareholder offering Payment Shares covered by a
Registration Statement that such Registration Statement or prospectus
relating thereto requires revision, such holder will immediately cease
to make offers or sales pursuant to such Registration Statement and
return all such Registration Statements and prospectuses to Client. All
registration rights granted herein may apply only to shares of common
stock issued by Client. Client is under no obligation to maintain the
effectiveness of any Registration Statement for more than an aggregate
of 90 days.
C. In connection with the filing of any Registration Statement or offering
statement under this section, Client covenants and agrees that it will
take all necessary action which may be required in qualifying or
registering the Payment Shares included in a Registration Statement or
offering statement for the offer and sale under the securities or blue
sky laws of such states as may be reasonably requested by the holders
of the Payment Shares; provided, that Client shall not be obligated to
execute or file any general consent to service of process or to qualify
as a foreign corporation to do business under the laws of any such
jurisdiction.
D. In the event that the payment Shares are the subject of or are included
in any Registration Statement or offering statement which is filed and
becomes effective, Client agrees to utilize its best efforts to keep
the same, including blue sky filings, for an effective period of not
less than 90 days. The holders of the Payment Shares shall cooperate
with Client and shall furnish such information as Client may reasonably
request in connection with any such registration or offering statement
hereunder, on which Client shall be entitled to rely.
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E. Client further agrees that in the event that counsel to Consultant is
of the reasonable opinion that the Payment Shares may be transferred
and/or sold in full compliance with the provisions of the Act, without
the need for filing a Registration Statement, Client will fully
cooperate in connection with such transfer and/or sale at Client's sole
expense.
F. Client further agrees and represents that while any of the Payment
Shares are outstanding and held by Consultant or Consultant's
affiliates, Client will timely file all reports and documents required
under the Exchange Act and the Securities Act as well as such
additional information as is necessary in order to allow the holder of
the Payment Shares to rely upon the provisions of Rule 144 promulgated
under the Securities Act with respect to the current public information
requirements contained in Rule 144(c).
In the event of any registration of any Client common stock under the
Securities Act pursuant to this Section 5, Client shall indemnify and
hold harmless Consultant or any subsequent transferee of the Payment
Shares against any losses, claims, damages or liabilities, joint or
several, to which such holder may become subject under the Securities
Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any alleged untrue statement of any
material fact contained, on the effective date thereof, in any
Registration Statement under which such securities were registered
under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment required to be stated
therein or necessary to make the statements therein not misleading, and
shall reimburse such holder for any legal or any other expenses
reasonably incurred by such holder in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that Client shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon any alleged untrue statement or alleged omission made in
such Registration Statement, preliminary prospectus, prospectus or
amendment or supplement in reliance upon and in conformity with written
information furnished to Client by such holder specifically for use
therein. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder and
shall survive the transfer of such securities by such holder and
consummation of the transactions contemplated by this Agreement.
Section 4 - Client's Representations
Client represents, warrants and covenants to Consultant that each of the
following are true and complete as of the date of this Agreement:
A. Corporate Existence. Client is a corporation duly organized, validly
---------------------
existing, and in good standing under the laws of the state of its
incorporation, with full corporate power and authority and all
necessary governmental authorizations to own, lease and operate
property and carry on its business as it is now being conducted. Client
is duly qualified to do business in and is in good standing in every
jurisdiction in which the nature of its business or the property owned
or leased by it makes such qualifications necessary.
B. Disclosure Documents. Client has or will cause to be delivered,
----------------------
concurrent with the execution of this Agreement, copies of its articles
of incorporation and bylaws, each as amended and as in effect on the
date hereof, and any documents that may be required to effectuate any
transaction contemplated herein.
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C. Client's Capitalization. All of the shares to be issued hereunder have
------------------------
been, or will be at the time of issuance, duly authorized and validly
issued, are fully paid and non assessable and will be issued to the
Consultant free and clear of any liens, charges, encumbrances, security
interests, options, rights or claims of others with respect thereto.
There are no preemptive or similar rights on the part of any holder of
any class of securities of Client. No options, warrants, calls,
conversion, subscription or other rights, agreements or commitments of
any kind obligating Client contingently, or otherwise, to issue or sell
any shares of its capital stock of any class, or any securities
convertible into or exchangeable for any such shares, are outstanding
and no authorization therefor has been given. The shares are not
subject to any contractual restrictions relating to their disposition.
All voting rights are vested exclusively in the common stock of Client.
D. Client's Authority for Agreement. The execution and delivery of this
-----------------------------------
Agreement and the consummation of the transactions contemplated herein
have been duly authorized by the Client. This Agreement has been duly
executed and delivered by Client and constitutes the valid and legally
binding obligation of Client enforceable in accordance with its terms,
except to the extent that enforceability may be subject to or limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditor's rights generally. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
herein will not conflict with or result in any violation of any
provision of the Articles of Incorporation or Bylaws of Client. To the
best of Client's knowledge, after due inquiry, the execution and
delivery of this agreement and the consummation of the transaction
contemplated herein will not conflict with any mortgage, indenture,
lease, contract, commitment, agreement, or other instrument, permit,
concession, grant, franchise, license, judgement, order, decree,
statute, law, ordinance, rule or regulation applicable to Client or any
of its properties or assets.
E. Consents and Authorizations. No consent, approval, order or
-------------------------------
authorization of, or registration, declaration, compliance with or
filing with, any governmental or regulatory authority is required in
connection with the execution and delivery of this Agreement to permit
the consummation by Client of the transactions contemplated herein or
to prevent the termination of any material right, privilege, license or
agreement of Client or to prevent any material loss to Client or the
Client's business, by reason of the transactions contemplated herein.
F. Compliance with Law. To the best of Client's knowledge, after due
---------------------
inquiry, Client is not in violation of or default under any statute,
law, ordinance, rule, regulation, judgment, order, decree, permit,
concession, grant, franchise, license or other governmental
authorization or approval applicable to it or any of its properties or
business. There are no proceedings pending or threatened which may
result in the revocation, cancellation, suspension, or any adverse
modification of any permit, concession, grant, franchise, license or
other governmental authorization or approval necessary for the conduct
of Client's business or which question the validity of this Agreement
or of any action taken or to be taken in connection herewith or the
consummation of the transactions contemplated hereby. Client has all
franchise, licenses, permits and other governmental approvals necessary
to enable it to carry on its business as presently conducted, except
where the failure to have such franchises, licenses or permits or other
governmental approvals would not have, individually or in the
aggregate, a material and adverse affect on Client's business.
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G. Minute Books and Stock Options. The minute books of Client contain full
-------------------------------
and complete minutes of all annual, special and other meetings (or
written consents in lieu thereof) of the directors and committees of
directors and shareholders of Client; the signatures on such minutes
and written consents are the true signatures of the persons purporting
to have signed them; and the stock ledger of Client with respect to
shares of Client's common stock issued or transferred is complete and
no documentary stamp taxes are required to be affixed and canceled in
connection with the transfer or issuance of the shares.
H. Nature of Representations. No representation or warranty made by Client
--------------------------
in this Agreement, nor any document or information furnished or to be
furnished by Client to the Consultant in connection with this
Agreement, contains or will contain any untrue statement of material
fact, or omits or will omit to state any material fact necessary to
make the statements contained therein not misleading, or omits to state
any material fact relevant to the transactions contemplated by this
Agreement.
I. Independent Legal and Financial Advice. Consultant is not a law firm,
----------------------------------------
neither is it an accounting firm. Consultant does however work with
professionals to better provide consulting services. Client represents
that it has not nor will it rely upon any legal or financial
representation made by Consultant, and that Client has and will
continue to seek the independent advice of legal and financial counsel
regarding all material aspects of the transactions contemplated by this
Agreement, including the review of all documents provided by Consultant
to Client and all opportunities Consultant introduces to Client. Client
acknowledges that the attorneys, accountants and other advisors
Consultant works with represent the interests of Consultant solely, and
that no representation or warranty has been given to Client by
Consultant as to any legal, tax, accounting, financial or other aspect
of the transactions contemplated by this Agreement.
Section 5 - Non-Circumvention
Client agrees that Client will not enter into any merger with or
acquisition of a Company, raise any funds for which Consultant provided
services, or enter into any transaction involving a business opportunity or
asset introduced to Client by Consultant, without compensating Consultant
pursuant to this Agreement. Neither will Client terminate this Agreement solely
as a means to avoid paying Consultant compensation earned or to be earned, or in
any other way attempt to circumvent Consultant.
Section 6 - Termination of Agreement by Consultant and by Client
I. Consultant may terminate this Agreement if the following occurs:
A. Payments due under this Agreement are not timely made.
B. In the judgment of the Board of Directors of Consultant, Client's
actions or conduct make it unreasonable for Consultant to perform under
this Agreement. Such acts include, and are or may be perceived as being
in the nature of, dishonesty, illegal activities, activities harmful to
the reputation of the Consultant, and activities which may create civil
or criminal liability for the Consultant.
C. Consultant makes a bona fide decision to terminate its business and
liquidate its assets.
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D. Client misrepresents its corporate standing, power to enter and bind
itself to this Agreement, misrepresentation of its Section 3
guarantees, or any other concealed or misrepresented material fact
which would decrease the binding effect of this Agreement on Client.
E. If after conduct of a due diligence investigation, Consultant concludes
that an intended merger with or acquisition of a Company, public
offering, or other action contemplated under this Agreement (the
"Transaction"), is not viable, Consultant may give ten (10) days
written notice to Client, stating in particular why the Transaction is
not viable, and if after ten (10) days of receipt of the written
notice, Client insists that Consultant continue performance on the
Transaction, Consultant may then terminate the Agreement.
F. An unanticipated material change in either the market, Client or
Consultant makes continued performance under this Agreement
unreasonable.
G. Breach of any provision of this Agreement.
H. Notwithstanding the termination of this Agreement, Consultant shall be
entitled to receipt of all compensation owed pursuant to Section 2 up
to the time of termination of this Agreement. Consultant shall also be
entitled to any fees owed pursuant to Section 2, should Client,
subsequent to the termination of this Agreement, enter into any
transaction contemplated pursuant to Section 2. Pursuant to Section 2,
Consultant shall also be entitled to reimbursement of any expenses
incurred, up to the time of termination of this Agreement along with
any expenses incurred as a result of the termination.
II. Client may terminate this Agreement under the following conditions:
A. Consultant fails to follow Client's reasonable instructions. Client
must advise Consultant that his actions or inactions are unacceptable
and give Consultant thirty (30) days in which to comply. If Consultant
fails to comply within thirty (30) days, Consultant may be terminated
hereunder by Client's service of notice of termination to Consultant.
B. If, in the judgment of the Board of Directors of Client, Consultant's
actions or conduct would make it unreasonable to require Client to
retain Consultant. Such acts include, and are in the nature of,
dishonesty, illegal activities, activities harmful to the reputation of
the Client, and activities which create civil or criminal liability for
the Client.
C. Notwithstanding the termination of this Agreement, Consultant shall be
entitled to receipt of all compensation owed pursuant to Section 2 up
to the time of termination of this Agreement. Consultant shall also be
entitled to reimbursement of any expenses incurred, up to the time of
termination of this Agreement, along with any expenses incurred as a
result of the termination.
Section 7 - Utilization of Attorneys
Consultant utilizes attorneys to assist in preparing the documentation
required to effectuate the transactions contemplated by this Agreement. The
attorneys utilized by Consultant represent only Consultant, and Consultant's
interest in providing consulting services and do not in anyway represent the
interests of any party to this Agreement other than Consultant's. Client is
advised, and has represented, that he will seek independent legal counsel to
review all documentation provided to Client by Consultant.
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Section 8 - Nondisclosure of Confidential Information
In consideration for the Client entering into this Agreement, Consultant
agrees that the following items used in the Client's business are secret,
confidential, unique, and valuable, were developed by Client at great cost and
over a long period of time, and disclosure of any of the items to anyone other
than clients' officers, agents, or authorized employees will cause Client
irreparable injury.
A. Non-public financial information, accounting information, plans of
operations, possible mergers or acquisitions prior to the public
announcement.
B. Customer lists, call lists, and other confidential customer data;
C. Memoranda, notes, records concerning the technical and creative
processes conducted by Client;
D. Sketches, plans, drawings and other confidential research and
development data; or
E. Manufacturing processes, chemical formulae, and the composition of
Client's products.
Consultant shall have no liability to the Client with respect to the use or
disclosure to others not party to this Agreement, of such information as
Consultant can establish to:
A. have been publicly known;
B. have become known, without fault on the part of Consultant, subsequent
to disclosure by Client of such information to Consultant;
C. have been otherwise known by Consultant prior to communication by the
Client to Consultant of such information; or
D. have been received by Consultant at any time from a source other than
Client lawfully having possession of such information.
Section 9 - Best Efforts
Consultant agrees that it will at all times faithfully and to the best of
its experience, ability and talents, perform all the duties that may be required
of and from Consultant pursuant to the terms of this Agreement. Consultant does
not guarantee that its efforts will have any impact on Client's business or that
any subsequent financial improvement will result from Consultant's efforts.
Section 10 - Client's Right to Approve Transaction
Client expressly retains the right to approve, in its sole discretion, each
and every transaction introduced by Consultant that involves Client as a party
to any agreement. Consultant and Client mutually agree that Consultant is not
authorized to enter into agreements on behalf of Client.
Section 11 - Client Under No Duty or Obligation to Accept or Close on any
Transactions
It is mutually understood and agreed that Client is not obligated to accept
or close any transaction submitted by Consultant.
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Section 12 - Place of Services
The Consulting Services contemplated to be performed by Consultant will be
performed through Consultant's offices; however, it is understood and expected
that Consultant may make contacts with persons and entities in any other place
deemed appropriate by Consultant.
Section 13 - Nonexclusive Services
Client acknowledges that Consultant is currently providing services of the
same or similar nature to other parties and Client agrees that Consultant is not
prevented or barred from rendering services of the same nature or a similar
nature to any other individual or entity.
Section 14 - All Prior Agreements Terminated
This Agreement comprises the entire agreement and understanding between the
parties hereto at the date of this Agreement as to the subject matter hereof and
supersedes and replaces all proposals, prior negotiations and agreements,
whether oral or written, between the parties hereto in connection with the
subject matter hereof. None of the parties hereto shall be bound by any
conditions, definitions, warranties or representations with respect to the
subject matter of this Agreement other than as expressly provided in this
Agreement unless the parties hereto subsequently agree to vary this Agreement in
writing, duly signed by authorized representatives of the parties hereto.
Section 15 - Consultant is not an Agent or Employee of Client
Consultant's obligations under this agreement consist solely of the
Consulting Services described herein. In no event shall Consultant be considered
to act as the employee or agent of Client or otherwise represent or bind Client.
For the purposes of this Agreement, Consultant is an independent contractor. All
final decisions with respect to acts of Client or its affiliates, whether or not
made pursuant to or in reliance on information or advice furnished by Consultant
hereunder, shall be those of Client or such affiliates and Consultant, its
employees or agents shall under no circumstances be liable for any expense
incurred or loss suffered by Client as a consequence of such action or
decisions.
Section 16 - Disclosure of Documents
Upon the execution of this Agreement, and prior to the consummation of the
transactions contemplated herein, Client will provide Consultant, at Client's
sole expense, audited financial statements in accordance with generally accepted
accounting principles and financial documentation with respect to Client since
the later of either the date of incorporation of Client or three (3) years prior
to the execution of this Agreement, other financial and corporate information,
pro-forma, due-diligence, articles of incorporation, by-laws, business plans,
proof of ownership of assets, accounts receivable, bank statements and copies of
deeds, liens, mortgages, a certificate of good standing issued by Client's state
of incorporation, and any other documents that may be reasonably required by
Consultant to provide services to Client for the transactions contemplated
herein. After review of the documents and information provided in this
paragraph, or after review of the due diligence information requested by Client,
Consultant or Client may make a determination that the transactions contemplated
are not in their best interests and may terminate this Agreement with no further
obligation.
Section 17 - Continue Operations in Substantially Same Manner
Client will not transfer, sell or hypothecate, assign or distribute any of
the assets currently in its possession except upon the written notification to
the parties to this Agreement, and will continue operations in substantially the
same manner as it is presently functioning, until the closing of the
transactions mutually acceptable to the parties are entered into and this
agreement has been consummated.
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Section 18 - Miscellaneous
A. Authority. The execution and performance of this Agreement have been
duly authorized by all requisite corporate action. This Agreement
constitutes a valid and binding obligation of the parties hereto.
B. Amendment. This Agreement may be amended or modified at any time and in
any manner only by an instrument in writing executed by the parties
hereto.
C. Waiver. No term of this Agreement shall be considered waived and no
breach excused by either party unless made in writing. No consent,
waiver or excuse by either party, express or implied, shall constitute
a subsequent consent, waiver or excuse.
D. Assignment:
(i) The rights and obligations of the Consultant under this Agreement
shall inure to the benefit of and shall be binding upon its
successors and assigns. There shall be no rights of transfer or
assignment of this Agreement by Client except with the prior
written consent of the Consultant.
(ii) Nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties and their
successors, any rights or remedies under this Agreement.
E. Notices. Any notice or other communication required or permitted by
this Agreement must be in writing and shall be deemed to be properly
given when delivered in person to an officer of the other party, when
deposited in the Unites States mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public
telegraph company for transmittal or when sent by facsimile
transmission, charges prepaid provided that the communication is
addressed:
(i) In the case of Consultant to:
Richard D. Surber
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
(801) 575-8073
(801) 575-8092 (fax)
(ii) In the Case of Client to:
AmeriResource Technologies, Inc.
P.O. Box 14748
Shawnee Mission, Kansas 66285-4748
(913) 859-9292
(913) 859-9520
or to such other person or address designated by Client in writing to
receive notice.
F. Headings and Captions. The headings of paragraphs are included solely
for convenience. If a conflict exists between any heading and the text
of this Agreement, the text shall control.
G. Entire Agreement. This instrument and the exhibits to this instrument
contain the entire Agreement between the parties with respect to the
transaction contemplated by the Agreement. It may be executed in any
number of counterparts but the aggregate of the counterparts together
constitute only one and the same instrument.
H. Effect of Partial Invalidity. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of
this Agreement, but this Agreement shall be constructed as if it never
contained any such invalid, illegal or unenforceable provisions.
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I. Controlling Law. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of Utah, without
regard to its law on the conflict of laws. Any dispute arising out of
this Agreement shall be brought in a court of competent jurisdiction in
Salt Lake County, Utah. The parties exclude any and all statutes, laws
and treaties which would allow or require any dispute to be decided in
another forum or by other rules of decision than provided in this
Agreement.
J. Attorney's Fees. If any action at law or in equity, including an action
for declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be entitled to
recover actual attorney's fees, court costs, and other costs incurred
in proceeding with the action from the other party. The attorney's
fees, court costs or other costs, may be ordered by the court in its
decision of any action described in this paragraph or may be enforced
in a separate action brought for determining attorney's fees, court
costs, or other costs. Should either party be represented by in-house
counsel, all parties agree that party may recover attorney's fees
incurred by that in-house counsel in an amount equal to that attorney's
normal fees for similar matters, or, should that attorney not normally
charge a fee, by the prevailing rate charged by attorneys with similar
background in that legal community.
K. Time is of the Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
L. Mutual Cooperation. The parties hereto shall cooperate with each other
to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transactions described herein.
M. Indemnification. Client and Consultant agree to indemnify, hold
harmless and, at the party seeking indemnification's sole option,
defend the other from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties, court fees, and attorneys' fees and expenses
asserted against or imposed or incurred by either party by reason of or
resulting from a breach of any representation, warranty, covenant
condition or agreement of the other party to this Agreement. Neither
party shall be responsible to the other party for any consequential or
punitive damages.
N. No Third Party Beneficiary. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person, other than the parties
hereto and their successors, any rights or remedies under or by reason
of this Agreement, unless this Agreement specifically states such
intent.
O. Facsimile Counterparts. If a party signs this Agreement and transmits
an electronic facsimile of the signature page to the other party, the
party who receives the transmission may rely upon the electronic
facsimile as a signed original of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
herein above written.
By: /s/ Richard Surber
Richard D. Surber
By: /s/ Delmar Janovec
Delmar Janovec, CEO
AmeriResource Technologies, Inc.
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is dated as of December 14,
1998, between
Gold Coast Resources, Inc., a Nevada corporation ("Gold"), with an address
of 3333 South Congress Ave., Suite 404, Delray Beach, Florida 33445; and
AmeriResource Technologies, Inc., a Delaware corporation
("AmeriResources"), with an address of 8815 Long Street, Lenexas, Kansas 66215.
WHEREAS, Gold is the owner of all of the issued and outstanding shares of
common stock of The Travel Agents Hotel Guide, Inc., a Nevada corporation (the
"Corporation");
WHEREAS, Gold represents that the Corporation has no more than $150,000 in
liabilities and that the Corporation owns the rights to a publication known as
the Travel Agents Hotel Guide with market value of no less than $3,500,000; and
WHEREAS, AmeriResources wishes to acquire all of the issued and outstanding
shares of common stock of the Corporation (the "Shares").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto, severally and jointly, have
agreed, and do hereby agree, subject to the terms and conditions hereinafter set
forth as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
---------------------------
1.01 Purchase and Sale. Subject to the terms and conditions of this
Agreement, and in reliance on the representations and warranties contained
herein, at Closing, Gold shall sell, transfer and deliver to AmeriResources,
free and clear of all liens, pledges, charges or other encumbrances all shares
of the Corporation ("the Shares"). Certificates evidencing the Shares shall be
either duly endorsed or accompanied by stock powers.
1.02 Purchase Price. In consideration of the purchase of the Shares,
AmeriResources shall issue to Gold, at Closing, a Convertible Debenture in the
face amount of $3,350,000, bearing interest at the rate of 7% per annum,
convertible into shares of AmeriResources's Common Stock in three years from the
date of closing, valued at the average bid price for the shares for the five
business days prior to demand for payment of the Debenture, any such shares
shall have their voting rights retained by the management of AmeriResources for
a period of one year after the date of issuance; shall have voting rights,
AmeriResources shall retain the right to redeem the Debenture for its face value
in cash at any time prior to its conversion into the Common Stock of
AmeriResources. Lexington Sales Corp. shall guaranty the payment of the
Debenture at the time of maturity.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF GOLD
--------------------------------------
Gold represents and warrants to AmeriResources, to the best of its
knowledge, knowing and intending that AmeriResources will rely on these
representations and warranties in entering into this Agreement, as follows:
2.01 Corporate Authority.
(a) Gold has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the Board of Directors of Gold, and no other
corporate proceedings on the part of Gold are necessary to authorize this
Agreement and the transactions contemplated hereby.
(b) The Corporation is a wholly owned subsidiary of Gold.
2.02 No Conflict or Default. Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, including
without limitation the consummation of the transactions contemplated hereby,
will violate any statute, regulation or ordinance of any governmental authority,
or conflict with or result in the breach of any term condition or provisions of
the Articles of Incorporation or By-laws of Gold, or of any agreement, deed,
contract, mortgage, indenture, writ, order decree, legal obligation or
instrument to which Gold is a party or by which it or any of its respective
assets or properties are or may be bound: or constitute a default (or an event
which, with the lapse of time or the giving of notice, or both, would constitute
a default) thereunder, or result in the creation or imposition of any lien,
charge or encumbrance, or restriction of any nature whatsoever with respect to
any properties or assets of Gold, or give to others any interest or rights,
including rights of termination, acceleration or cancellation in or with respect
to any of the properties, assets, contracts, or business of Gold.
2.03 Due Organization; Power; Qualification; Etc. of Corporation
(a) The Corporation is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Nevada and has the corporate
power to own its property and to carry on its business as now and where now
conducted; is duly qualified or licensed as a foreign corporation and is in good
standing in all jurisdictions in which the nature of its business or the
property owned, leased or operated by it makes such qualification or licensing
necessary.
(b) The Corporation has no subsidiaries.
(c) The copies of the Articles (or Certificates) of Incorporation of
the Corporation certified by the Secretary of State of domicile and of the
By-Laws (or Codes of Regulations) of Gold, certified by its corporate Secretary,
and the minute and stock record book or books of the Corporation are true and
complete and reflect all resolutions adopted and all actions authorized or
ratified by the shareholders and the directors of the Corporation.
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2.04 Capitalization. The authorized capital stock of the Corporation
consists of ______________ shares of common stock, $.001 par value per share, of
which _______________ shares are issued and outstanding as of the date hereof.
There are no options, warrants, convertible securities or rights which may
require any Company to issue additional shares of its capital stock. All the
outstanding shares of common stock of the Corporation have been duly authorized,
and are validly issued, fully paid and nonassessable. The Corporation has no
obligation of any kind to issue any additional securities, except as disclosed
in Schedule 2.03, or as provided for herein.
2.05 Financial Information; No Material Adverse Change.
(a) Gold has heretofore delivered to AmeriResources the following
financial information for the Corporation (collectively,"Financial Statements"):
All of the Financial Statements (i) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods, (ii) fairly present the financial condition, results of its
operations and changes in its financial position at and for the periods therein
specified for the entities covered thereby, (iii) are true and complete, (iv)
are consistent with the books and records of the entities covered thereby, and
(v) with respect to any unaudited financial statements, include all adjustments,
consisting only of normal recurring adjustments, required for a fair
presentation. As of the respective dates, such Financial Statements did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Since June 9, 1998 there has not been any material adverse change
in the business, or financial condition or the operations of the Corporation or,
to the best knowledge of Gold any occurrence, circumstance, or combination
thereof which reasonably could be expected to result in such a material adverse
change in the future.
(c) At closing there will be no more than $150,000 in liabilities
whether absolute or contingent of the Corporation.
(d) Since June 9, 1998, the Corporation has not sold or otherwise
disposed of or encumbered any of the properties or assets reflected on the
Financial Statements, or otherwise owned or leased by it except in the ordinary
course of business, except as described in Schedule 2.05.
(e) The Corporation's liabilities or obligations, whether accrued or
unaccrued, fixed or contingent, do not exceed $150,000.
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2.06 Tax Matters.
(a) There is no pending or, to the best knowledge of the Corporation,
any threatened federal, state or local tax audit of Gold; there is no agreement
with any federal, state or local taxing authority that may affect the subsequent
tax liabilities of the Corporation.
2.07 Party to Agreements.
(a) Except as disclosed in Schedule 2.07, the Corporation is not a
party to any contract or other arrangements except those made in the ordinary
course of business or which are terminable on the giving of sixty (60) days (or
less) notice of the Corporation's intent to terminate such contract. The
Corporation is not in default in any material respect under any contract or
agreements to which it is a party or by which it or any of its assets is or may
be bound.
(b) Schedule 2.07 is a true and complete list of all contracts,
understandings, commitments, arrangements and agreements (all of which, and any
other agreements set forth on any other Schedule or list, or furnished in
writing to AmeriResources pursuant to this Agreement, are collectively referred
to in this Agreement as "contracts"), which are in full force and effect,
unperformed in whole or in part, to which The Corporation is a party, including,
but not limited to, the following:
(i) bonus, incentive, pension, profit-sharing, hospitalization,
insurance, deferred compensation, retirement, stock option or
stock purchase plans or similar plans providing employee
benefits;
(ii) factoring, loan, note, financing or similar contracts with
any lenders, or guarantees of undertakings to answer for the
debts or defaults of another, or any contracts encumbering title
to any of The Corporation's assets;
(iii) contracts for the acquisition or disposition of the
property, assets or capital stock or other securities of a
business or company;
(iv) management or consulting contracts;
(v) partnership or joint venture contracts involving a sharing of
profits;
(vi) contracts for the employment or compensation of any
employee, officer, director or agent; and
(vii) contracts not made in the ordinary course.
2.08 Litigation. Except as disclosed in Schedule 2.08, there are no
actions, suits, investigations, or proceedings pending, or, to the knowledge of
the Corporation, threatened, against or affecting or which may adversely affect
the Corporation, in any court or by or before any governmental body or agency,
including without limitation any claim, proceeding or litigation for the purpose
of challenging, enjoining or preventing the execution, delivery or consummation
of this Agreement; and the Corporation does not know of any state of facts which
would give rise to any such action, suit, investigation or proceeding. The
Corporation is not subject to any order, judgment, decree, stipulation or
consent or any agreement with any governmental body or agency which affects its
business or operation.
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2.09 Governmental Approval. The Corporation has all permits, licenses,
orders and approvals of all federal, state, local or foreign governmental or
regulatory bodies required for the Corporation to conduct its business as
presently conducted. All such permits, licenses, orders and approvals are in
full force and effect and no suspension or cancellation of any of them is
threatened, and none of such permits licenses, orders of approvals will be
affected by the consummation of the transactions contemplated by this Agreement.
2.10 Salaries and Accrued Compensation. Schedule 2.10 annexed hereto and
made a part hereof is a true and complete list, as of the date of this
Agreement, of all of the persons who are employed by the Corporation with
compensation (including bonuses) in excess of $2,500 per year, and the
Corporation does not have outstanding liability for payment of wages, vacation
pay (whether accrued or otherwise), salaries, bonuses, pensions or contributions
under any labor or employment contract, whether oral or written, or by reason of
any past practices with respect to such employees based upon or accruing with
respect to services of present or former employees of the Corporation, except as
disclosed in Schedule 2.10.
2.11 Employee Benefit Plans. Except as disclosed in Schedule 2.11, the
Corporation does not have any pension plan, profit-sharing plan or employees'
savings plan, and the Corporation is not otherwise subject to any applicable
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
2.12 Title to Assets. The Corporation has good, valid and, except as to
leased assets, marketable title to all of its assets (real and personal,
tangible and intangible), including, but not limited to, all assets reflected or
required to be reflected in the Financial Statements and all assets purchased or
leased by them since June 9, 1998 (except for properties and assets so reflected
or required to be reflected, which have been sold or otherwise disposed of in
the ordinary course of business), subject to no liens, pledges, encumbrances,
mortgages, security interests, charges or other similar restrictions of any
nature whatsoever, except as disclosed in the Financial Statements or in
Schedules to this Agreement and which shall in no event exceed the amount of
$150,000. The personal property owned or leased by The Corporation for the
operation of, or used in, its business is in its possession and is in good
operating or working condition and repair, after taking into account routine
maintenance and repair, age of equipment and ordinary wear and tear, and is
adequate for the operation of its business as presently conducted.
2.13 Patents and Trademarks.
(a) Except as disclosed in Schedule 2.13, The Corporation does not own
or use in its operations, any patent or any applications therefor. All
trademarks, trade names, service marks or applications owned by The Corporation
or used in its operations are listed on Schedule 2.13 and, to the extent
indicated thereon, have been duly registered and filed.
(b) All copyright registrations (both U.S. and foreign), pending
copyright registration applications, all common law copyrights and other
intellectual property rights owned by The Corporation or used in its operations
are listed on Schedule 2.13 and, to the extent indicated thereon, have been duly
registered and, filed.
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(c) The Corporation has not been charged with infringement or
violation of, or otherwise been put on notice of the existence of, any adversely
held patent, trademark, trade name, service mark, copyright or other
intellectual property right.
2.14 Environmental Concerns. The Corporation has not engaged in any
operations which have resulted or will result in any chemicals, hazardous,
noxious or toxic wastes being deposited, spilled, leaked, disposed of, dumped or
buried at any facility, contiguous property, or any other real property, which
have, will, or may result in property damages, personal injury or clean-up
costs.
2.15 Labor Matters. The Corporation has not entered into any collective
bargaining agreements and is not in discussions with any labor group seeking to
become a bargaining unit for any of the Corporations employees.
2.16 Material Misstatements or Omissions. No representations or warranties
made by Gold in this Agreement or in any certificate, schedule or other document
furnished in connection with the transactions contemplated by this Agreement,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements of fact
contained therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMERIRESOURCES
AmeriResources represents and warrants to Gold, to the best of its
knowledge, knowing and intending that Gold will rely on these representations
and warranties in entering into this Agreement, as follows:
3.01 Corporate Authority. AmeriResources has the corporate power and
authority to enter into this Agreement and to carry out its obligation
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by its Board of
Directors and, except for the approval of its stockholders, no other corporate
proceedings on the part of such Company are necessary to authorize this
Agreement and the transactions contemplated hereby.
3.02 No Conflict or Default. Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, including
without limitation the consummation of the transactions contemplated hereby,
will violate any statute, regulation or ordinance of any governmental authority,
or conflict with or result in the breach of any term, condition or provisions of
the Articles of Incorporation or By-laws of AmeriResources, or of any agreement,
deed, contract, mortgage, indenture, writ, order decree, legal obligation or
instrument to which AmeriResources is a party or by which it or any of its
respective assets or properties are or may be bound, or constitute a default (or
an event which, with the lapse of time or the giving of notice, or both, would
constitute a default) thereunder or result in the creation or imposition of any
lien, charge or encumbrance, or restriction of any nature whatsoever with
respect to any properties or assets of AmeriResources, or give to others any
interest or rights, including rights of termination, acceleration or
cancellation in or with respect to any of the properties, assets, contracts or
business of AmeriResources.
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3.03 Due Organization; Power; Qualification; Subsidiaries and Affiliates,
Etc.
(a) AmeriResources is a corporation duly organized, validly existing,
in good standing under the laws of the State of Delaware and is authorized to do
business in the states where it is presently conducting operations and has the
corporate power to own its property and to carry on its business as now
conducted. The nature of the business now conducted by AmeriResources, the
character of the property owned by it, or any other state of facts does not
require AmeriResources to be qualified to do business as a foreign corporation
in any jurisdiction.
3.04 Capitalization. The authorized capital stock of AmeriResources
consists of 500,000,000 shares of common stock, $.0001 par value per share, of
which 472,000,000 shares are issued and outstanding as of the date hereof; and
2,500,000 shares of Class A Preferred Stock are authorized, each convertible to
one share of common stock, of which 2,296,312 shares are issued and outstanding
as of the date hereof and 2,500,000 shares of Class B Preferred Stock, each
convertible to one share of common stock, of which 777,012 shares are issued and
outstanding as of the date hereof. There are no options, warrants, convertible
securities or rights which may require AmeriResources to issue additional shares
of its capital stock, except as disclosed in Schedule 3.03. All the outstanding
shares of common stock and preferred stock of AmeriResources have been duly
authorized, and are validly issued, fully paid and nonassessable. AmeriResources
has no obligation of any kind to issue any additional securities, except as
disclosed in Schedule 3.03, or as provided for herein.
3.05 Financial Information; No Material Adverse Change.
(a) AmeriResources has heretofore delivered to Gold the financial
information for itself as requested by Gold (collectively, "Financial
Statements"):
All of the Financial Statements provided to Gold (i) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods, (ii) fairly present the financial condition, results
of its operations and changes in its financial position at and for the periods
therein specified for the entities covered thereby, (iii) are true and complete,
(iv) are consistent with the books and records of the entities covered thereby,
and (v) with respect to any unaudited financial statements, include all
adjustments, consisting only of normal recurring adjustments, required for a
fair presentation. As of the respective dates, such Financial Statements did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
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(b) Since September 30, 1998 there has not been any material adverse
change in the business, or financial condition or the operations of the
AmeriResources or, to the best knowledge of AmeriResources, any occurrence,
circumstance, or combination thereof which reasonably could be expected to
result in such a material adverse change in the future.
(c) At September 30, 1998, there were no liabilities, absolute or
contingent of AmeriResources that were not shown or reserved against on the
balance sheets included in the Financial Statements, except obligations under
the contracts shown on or as otherwise disclosed in Schedule 3.05.
(d) Since September 30, 1998, AmeriResources has not sold or otherwise
disposed of or encumbered any of the properties or assets reflected on the
Financial Statements, or otherwise owned or leased by it except in the ordinary
course of business, except as described in Schedule 3.05.
(e) AmeriResources has no liabilities or obligations, whether accrued
or unaccrued, fixed or contingent, which have not been reflected in the
Financial Statements or described on Schedules to this Agreement, except
liabilities incurred and obligations entered into in the ordinary course of
business since September 30, 1998, and is not in default with respect to any
such liability or obligation.
3.06 Party to Agreements.
(a) Except as disclosed in its SEC filings, AmeriResources is not a
party to any contract or other arrangement except those made in the ordinary
course of business.
3.07 Litigation. Other than as disclosed in its Financial Statements or in
a Schedule 3.08, there are no actions suits, investigations, or proceedings
pending, or, to the knowledge of AmeriResources , threatened, against or
affecting or which may affect AmeriResources, the performance of the terms and
conditions hereof, or the consummation of the transactions contemplated hereby,
in any court or by or before any governmental body or agency, including without
limitation any claim, proceeding or litigation for the purpose of challenging,
enjoining or preventing the execution, delivery or consummation of this
agreement; and except as otherwise disclosed herein does not know of any state
of facts which would give rise to any such action, suit investigation or
proceeding.
3.08 Governmental Approval. AmeriResources has all permits, licenses,
orders and approvals of all federal state, local or foreign governmental or
regulatory bodies required for AmeriResources to conduct its business as
presently conducted. All such permits, licenses, orders and approvals are in
full force and effect and no suspension or cancellation of any of them is
threatened, and none of such permits licenses, orders of approvals will be
affected by the consummation of the transactions contemplated by this Agreement.
3.09 Salaries and Accrued Compensation. Schedule 2.10 annexed hereto and
made a part hereof is a true and complete list, as of the date of this
Agreement, of all of the persons who are employed by the Corporation with
compensation (including bonuses) in excess of $25,000 per year, and the
Corporation does not have outstanding liability for payment of wages, vacation
pay (whether accrued or otherwise), salaries, bonuses, pensions or contributions
under any labor or employment contract, whether oral or written, or by reason of
any past practices with respect to such employees based upon or accruing with
respect to services of present or former employees of the Corporation, except as
disclosed in SEC filings of AmeriResources.
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3.10 Employee Benefit Plans. AmeriResources does not have any pension plan,
profit-sharing plan or employees' savings plan, and AmeriResources is not
otherwise subject to any applicable provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
3.11 Title to Assets. AmeriResources has good, valid and, except as to
leased assets, marketable title to all of its assets (real and personal,
tangible and intangible), including, but not limited to, all assets reflected or
required to be reflected in the Financial Statements and all assets purchased or
leased by them since September 30, 1998 (except for properties and assets so
reflected or required to be reflected, which have been sold or otherwise
disposed of in the ordinary course of business), subject to no liens, pledges,
encumbrances, mortgages, security interests, charges or other similar
restrictions of any nature whatsoever, except as disclosed in the Financial
Statements or in Schedules to this Agreement. The personal property owned or
leased by AmeriResources for the operation of, or used in, its business is in
its possession and is in good operating or working condition and repair, after
taking into account routine maintenance and repair, age of equipment and
ordinary wear and tear, and is adequate for the operation of its business as
presently conducted.
3.12 Patents and Trademarks.
(a) AmeriResources does not own or use in its operations, any patent
or any applications therefor. All trademarks, trade names, service marks or
applications owned by AmeriResources or used in its operations are listed on
Schedule 3.13 and, to the extent indicated thereon, have been duly registered
and filed.
(b) All copyright registrations (both U.S. and foreign), pending
copyright registration applications, all common law copyrights and other
intellectual property rights owned by AmeriResources or used in its operations
are listed on Schedule 3.13 and, to the extent indicated thereon, have been duly
registered and, filed.
(c) AmeriResources has not been charged with infringement or violation
of, or otherwise been put on notice of the existence of, any adversely held
patent, trademark, trade name, service mark, copyright or other intellectual
property right.
3.13 Environmental Concerns. AmeriResources has not engaged in any
operations which have resulted or will result in any chemicals, hazardous,
noxious or toxic wastes being deposited, spilled, leaked, disposed of, dumped or
buried at any facility, contiguous property, or any other real property, which
have, will, or may result in property damages, personal injury or clean-up
costs.
3.14 Labor Matters. AmeriResources has not entered into any collective
bargaining agreements and is not in discussions with any labor group seeking to
become a bargaining unit for any of the Corporations employees.
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3.15 Material Misstatements or Omissions. No representations or warranties
made by AmeriResources in this Agreement or in any certificate, schedule or
other document furnished in connection with the transactions contemplated by
this Agreement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements of fact contained therein not misleading.
3.16 Securities Filings. AmeriResources will have on the closing date and
thereafter, made all filings required to be made by it with the Securities and
Exchange Commission and any state securities authorities, and will have done so
in a timely manner.
ARTICLE IV
COVENANTS
4.01 Covenants of AmeriResources. AmeriResources agrees that prior to the
closing date:
(a) No dividend shall be declared or paid by other distribution
(whether in cash, stock, property or any combination thereof) or payment
declared or made in respect to AmeriResources common stock or preferred stock,
nor shall AmeriResources purchase, acquire or redeem or split, combine or
reclassify any shares of its capital stock from execution hereof until closing.
(b) Except as herein provided, no change shall be made in the number
of shares of authorized or issued AmeriResources common stock; nor shall any
option, warrant, call, right, commitment or agreement of any character be
granted or made by AmeriResources relating to its authorized or issued
AmeriResources common or preferred stock; nor shall AmeriResources issue, grant
or sell any securities or obligations convertible into or exchangeable for
shares of AmeriResources common or preferred stock from execution hereof until
closing.
4.02 Covenants of Gold. Gold agrees that prior to the closing date:
(a) Except as herein provided, no change shall be made in the number
of shares of authorized or issued common stock of the Corporation; nor shall any
option, warrant, call, right, commitment or agreement (other than this
Agreement) of any character be granted or made relating to the authorized or
issued stock of the Corporation, nor shall there be issued, granted or sold any
securities or obligation convertible into or exchangeable for shares of common
stock.
(b) The Corporation will not (i) incur any indebtedness for borrowed
money; (ii) assume, guarantee, endorse, or otherwise become liable or
responsible (whether directly contingently or otherwise) for the obligations of
any other individual, firm or corporation; or (iii) make any loans, advances of
capital contributions to or investments in, any other individual, firm or
corporation.
(c) The Corporation will not alter or change any employment or other
contract with any of its management personnel or make, adopt, alter, revise, or
amend any pension, bonus, profit-sharing or other employee benefit plan, or
grant any salary increase or bonus to any person or owe any accrued salary or
other compensation under any agreement or plan without the prior written consent
of AmeriResources.
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(d) The Corporation will not take, agree to take, or knowingly permit
to be taken any action, or do, or knowingly permit to be done anything in the
conduct of its business, or otherwise, which would be contrary to or in breach
of any of the terms or provisions of this Agreement, or which would cause any of
the representations contained herein to be or become untrue in any material
respect at the Closing Date.
4.03 Mutual Covenants. Gold and AmeriResources further agree and covenant
as follows:
(a) Corporate Action. AmeriResources and Gold will take all actions
necessary in accordance with applicable law and each company's Articles of
Incorporation and By-Laws to authorize and consummate the transactions
contemplated herein.
(b) Conduct of Business. Prior to closing, unless the parties shall
otherwise agree in writing, the Corporation and AmeriResources shall not operate
their businesses otherwise than in the ordinary course.
(c) Access. Prior to the closing, AmeriResources shall afford to the
officers, attorneys, accountants, and other authorized representatives of Gold
free and full access to the premises, books and records of AmeriResources in
order that Gold may make such investigation as it may desire of the affairs of
AmeriResources. Prior to the closing, Gold shall afford to the officers,
attorneys, accountants, and other authorized representatives of AmeriResources
free and full access to the premises, books and records of the Corporation so
that AmeriResources may make such investigations as it may desire of the affairs
of the Corporation.
ARTICLE V
CONDITIONS
5.01 Conditions to the Obligations of Gold. The obligations of Gold to
consummate the sale contemplated by this Agreement are subject to the
satisfaction, at or before the closing, of each of the following conditions:
(a) No action shall have been threatened, taken by or be pending
before, and no statute, rule, regulation or order shall have been promulgated,
enacted, entered, enforced or deemed applicable to the transaction by any
federal, state or foreign government or governmental authority or by any court,
domestic or foreign, including the entry of a preliminary or permanent
injunction, which would (i) make the sale illegal, (ii) require the divestiture
by Gold of any shares of Gold or the Corporation or of a material portion of the
business of Gold, (iii) impose material limits on the ability of Gold to
effectively control the businesses of Gold, (iv) otherwise materially adversely
affect Gold or (v) if the sale is consummated, subject any officer, director, or
employee of Gold to criminal penalties or to civil liabilities not adequately
covered by insurance or enforceable indemnification maintained by Gold.
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(b) AmeriResources shall have complied in all material respects with
its agreements and covenants herein, and all representations and warranties of
AmeriResources herein shall be true and correct in all material respects at the
time of closing as if made at that time, except to the extent they expressly
relate to an earlier date, and Gold shall have received a certificate to that
effect to the best of the knowledge of AmeriResources, signed by the President
of AmeriResources.
(c) The officers and directors of the Corporation shall each have
executed releases for any claims for compensation or other payment for services
rendered as of the closing date.
5.02 Conditions to the Obligations of AmeriResources. The obligations of
AmeriResources to consummate the purchase contemplated by this Agreement are
subject to the satisfaction, at or before the closing, of each of the following
conditions:
(a) No action shall have been threatened, taken by or be pending
before, and no statute, rule, regulation or order shall have been promulgated,
enacted, entered, enforced or deemed applicable to the purchase by any federal,
state of foreign government or governmental authority or by any court, domestic
or foreign, including the entry of a preliminary or permanent injunction, which
would (i) make the purchase illegal, (ii) require the divestiture by
AmeriResources of the shares of AmeriResources or of a material portion of the
business of AmeriResources, (iii) impose material limits on the ability of
AmeriResources to effectively control the business of AmeriResources, (iv)
otherwise materially adversely affect AmeriResources or (v) if the purchase is
consummated, subject any officer, director, or employee of AmeriResources to
criminal penalties or to civil liabilities not adequately covered by insurance
of enforceable indemnification maintained by AmeriResources.
(b) Gold shall have complied in all material respects with its
agreements and covenants herein, and all representations and warranties of Gold
as to the Corporation shall be true and correct in all material respect at the
time of closing as if made at the time, except to the extent they expressly
relate to an earlier date, and AmeriResources shall have received a certificate
to that effect to the best of the knowledge of Gold, signed by the President of
Gold.
(c) AmeriResources shall have received from the accountants for the
Corporation, an opinion, in form and substance satisfactory to AmeriResources,
that there has been no material or adverse change in the financial condition of
the Corporation as of the date of closing, or reflected in the Financial
Statements.
ARTICLE VI
INTENTIONALLY LEFT BLANK
ARTICLE VII
INDEMNIFICATION AND WAIVER OF CLAIMS
7.01 Survival of Representations and Warranties. Notwithstanding the
closing of the transactions contemplated by this Agreement or any investigation
made by or on behalf of Gold or AmeriResources, the representations and
warranties of Gold and AmeriResources contained in this Agreement or in any
certificate, schedule, chart, list, letter, compilation or other document
delivered pursuant hereto, shall survive the Closing for a period of one (1)
year; provided, however, that the representations and warranties contained in
Sections 2.05 and 3.05 with respect to tax matters shall be deemed to survive
for so long as any applicable statute of limitations with respect to tax claims
shall not have expired, shall have been suspended or shall have been waived or
extended, and for thirty (30) days thereafter; provided further, however, that
as to any breach of or misstatement in any such representation or warranty as to
which the non-breaching party has given notice to the breaching party on or
prior to the expiration of the applicable period as to tax or non-tax matters,
as above set forth, the same shall continue to survive beyond said period, but
only as to the matters contained in such notice.
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7.02 Indemnification. Gold and AmeriResources each agree to save, defend
and indemnify the other against and hold it harmless from any and all
liabilities, of every kind, nature and description, fixed or contingent
(including, without limitation, counsel fees and expenses in connection with any
action, claim or proceeding relating to such liabilities) arising out of any
misrepresentation made by such indemnifying party or any transaction or event
commencing or occurring on or prior to Closing, which is not fully disclosed or
provided for in the Financial Statements, this Agreement or the exhibits hereto.
7.03 Defense of Claims. An indemnified party shall notify the indemnifying
party with reasonable promptness of any claim asserted against it in respect of
which the indemnifying party may be liable under this Agreement, which
notification shall be accompanied by a written statement setting forth the basis
of such claim and the manner of calculation thereof. The indemnifying party
shall have the right to defend any such claim at its own expense and with
counsel of its choice; provided, however, that such counsel shall have been
approved by the indemnified party prior to engagement; which approval shall not
be unreasonably withheld or delayed; and provided further, that the indemnified
party may participate in such defense, if it so chooses, with its own counsel
and at its own expense.
7.04 Rights Without Prejudice. The rights of Gold and AmeriResources under
this Article VII are without prejudice to any other rights or remedies that
either may have by reason of this Agreement or as otherwise provided by law.
ARTICLE VIII
CLOSING
8.01 Time and Location. The Closing provided for herein shall take place at
such time and place as may be mutually agreed to by the parties hereto. Such
date is referred to in this Agreement as the "Closing".
8.02 Items to be Delivered by Gold. At the Closing, Gold will deliver or
cause to be delivered to Company:
(a) Certificates representing the Shares or stock powers in accordance
with Section 1.01 hereof, accompanied by all instruments and documents as in the
reasonable opinion of AmeriResources's counsel, shall be necessary to effect the
transfer of and to vest title in and to the Shares in Company, free and clear of
all manner of liens, pledges, encumbrances, charges and claims thereon;
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(b) The certificate required by Section 5.02(b);
(c) Such other certified resolutions, documents and certificates as
are required to be delivered by Gold pursuant to the provisions of this
Agreement.
8.03 Items to be Delivered by AmeriResources. At the Closing,
AmeriResources will deliver or cause to be delivered to Gold:
(a) The Purchase Price in accordance with Section 1.02, being a
Convertible Debenture in the amount of $3,350,000, with a three year maturity
and redeemable in cash or in common stock of AmeriResources valued at the bid
price on the date of conversion.
(b) Such other certified resolutions, documents and certificates as
are required to be delivered by AmeriResources pursuant to the provisions of
this Agreement;
ARTICLE IX
TERMINATION
9.01 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions provided
for herein abandoned at any time prior to the Closing:
(a) By mutual consent of parties.
(b) By Gold if any of the conditions set forth in Section 5.01 have
not been fulfilled on or prior to the Closing, or shall become incapable of
fulfillment at any time, and shall not have been waived;
(c) By AmeriResources if any of the conditions set forth in Section
5.02 have not been fulfilled on or prior to the Closing Date, or shall have
become incapable of fulfillment at any time, and shall not have been waived;
(d) By Gold or AmeriResources if any material legal action or
proceedings shall have been instituted or threatened seeking to restrain,
prohibit, invalidate or otherwise adversely affect the consummation of the
transactions contemplated by this Agreement.
(e) If items to be delivered at Closing are not delivered.
In the event that the Agreement is terminated as described above, this
Agreement shall be void and of no force and effect, without any liability or
obligation on the part of any of the parties hereto.
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ARTICLE X
NO WAIVER
10.01 The failure of any party at any time or times to require performance
of any provision hereto shall in no manner effect the right of such party at a
later time to enforce the same. No waiver by any party of the breach of any
term, covenant, representation or warranty contained in this Agreement shall
release or affect any liability resulting from such breach, and no waiver of any
nature, whether by conduct or otherwise, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or of any breach of any other term, covenant, representation or
warranty of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.01 Waiver of Conditions. Any condition to the performance of either
party which legally may be waived on or prior to the Closing may be waived at
any time by the party entitled to the benefit thereof by action taken or
authorized by an instrument in writing executed by the relevant party.
11.02 Expenses. Whether or not any sale is consummated, all out-of-pocket
costs and expenses incurred in connection with the transaction and this
agreement will be paid by the party incurring such expenses.
11.03 Entire Agreement. This Agreement contains the entire agreement
between Gold and AmeriResources with respect to the sale of the Shares and any
other transactions contemplated hereby.
11.04 Tax Structure of Sale. The sale contemplated by this Agreement is
intended to qualify as a tax-free reorganization, as contemplated by Section
368(A) of the Internal Revenue Code of 1986, as amended. To the extent that the
parties' legal, tax and accounting advisors indicate that all or a portion of
the transactions contemplated hereby adversely affect the tax-free nature of
such transactions, the parties agree to negotiate, in good faith, modifications
to this Agreement so as to enable the parties to consummate the transactions
contemplated hereby without adverse tax consequences to the parties or their
shareholders.
11.05 Schedules. The parties agree that the Schedules contemplated by this
Agreement shall be delivered by each party to the other not more than 10 days
following the date hereof. The information set forth on the Schedules shall be
subject to the parties due diligence review and to the provisions of Section
5.03.
11.07 Brokers. No broker or finder is entitled to any brokerage or finder's
fee or other commission or fee from any Company or based upon arrangements made
by or on behalf of any Company with respect to the transactions contemplated by
this Agreement.
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11.08 Arbitration. Any controversy arising out of, connected to, or
relating to any matters herein or the transactions contemplated by this
Agreement, or the breach thereof, including, but not limited to any claims of
violations of Federal and/or State Securities Acts, Banking Statutes, Consumer
Protection Statutes, Federal and/or State anti-Racketeering (e.g. RICO) claims
as well as any common law claims and any State Law claims of fraud, negligence,
negligent misrepresentations, and/or conversion shall be settled by arbitration
in the State of Florida, under the rules of the American Arbitration
Association; and judgment on the arbitrator's award may be entered in any court
having jurisdiction thereof in accordance with the provisions of the law of the
State of Nevada. In the event of such a dispute, each party to the conflict
shall select an arbitrator, both of whom shall select a third arbitrator which
shall constitute the three person arbitration board. The decision of a majority
of the board of arbitrators shall be binding upon the parties.
11.09 Other Actions. Each of the parties hereto agrees to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
11.10 Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party which is or whose stockholders are, entitled to the
benefits thereof and this Agreement may be amended or supplemented at any time.
No such waiver, amendment or supplement shall be effective unless in writing and
signed by the party or parties necessary thereto.
11.11 Applicable Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Kansas.
11.12 Descriptive Headings. The descriptive headings are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
11.13 Notices. All notes or other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by registered or certified mail postage prepaid, to the party's address set
forth above with copies to:
If to Gold, to: SONNENBLICK PARKER & SELVERS, P.C.
Attention: Mark S. Vincent, Esq.
4400 Route 9 South, Suite 3000
Freehold NJ 07728
If to AmeriResources, to: Delmar Janovec
8815 Long St.
Lenexa, Kansas 66215
11.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one agreement.
11.15 Signatures. Each of the undersigned, have been duly authorized to
execute this Agreement on behalf of Gold and AmeriResources, respectively.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first
hereinabove written.
ATTEST: Gold Coast Resources, Inc.
______________________ By:_/s/ Richard Baker__________
RICHARD BAKER, President
AmeriResources Technologies, Inc.
______________________ By:_/s/ Delmar Janovec_________
Delmar Janovec, Chief Executive Officer
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GUARANTEE
THIS AGREEMENT TO GUARANTEE is made this 14th day of December, 1998 by and
between Gold Coast Resources, Inc., a Nevada corporation (the "Seller"), and
Lexington Sales Corporation Ltd., Isle of Man corporation (the "Guarantor") and
AmeriResource Technologies, Inc., a Delaware corporation (the "Buyer").
WHEREAS, the Seller has entered into a Stock Purchase Agreement for the
sale of 100% of the common stock of the Travel Agent's Hotel Guide, Inc.
("Travel") with the Buyer for $3,350,000;
WHEREAS, the Seller has received a Convertible Debenture as payment in lieu
of cash and is requiring the Buyer to find a third party to guarantee that the
Seller receive no less than $3,350,000 in value for the 100% interest in Travel
in the event that the Debenture does not satisfy the $3,350,000 obligation;
WHEREAS, the Guarantor agrees to guarantee that the Seller will receive no
less than $3,350,000 in value for the purchase of Travel by the Buyer in
exchange for Twenty Million (20,000,000) shares of the Buyer's common stock;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, the Seller, Buyer and
Guarantor agree as follows:
Section 1 - Terms and Compensation
A. Guarantor shall guarantee Buyer's performance under the Stock Purchase
Agreement between the Seller and Buyer dated December 14, 1998, by
paying sufficient value to Seller for any deficiencies under the Stock
Purchase Agreement up to $3,350,000.
B. Buyer shall pay Guarantor Twenty Million (20,000,000) shares of Buyer's
common stock in exchange for guaranteeing payment to Seller
Section 2 - Buyer's Representations
Buyer represents, warrants and covenants to Guarantor that each of the
following are true and complete as of the date of this Agreement:
A. Corporate Existence. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the state of its
incorporation, with full corporate power and authority and all
necessary governmental authorizations to own, lease and operate
property and carry on its business as it is now being conducted. Buyer
is duly qualified to do business in and is in good standing in every
jurisdiction in which the nature of its business or the property owned
or leased by it makes such qualifications necessary.
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B. Disclosure Documents. Buyer has or will cause to be delivered,
concurrent with the execution of this Agreement, copies of its articles
of incorporation and bylaws, each as amended and as in effect on the
date hereof, and any documents that may be required to effectuate any
transaction contemplated herein.
C. Buyer's Capitalization. The authorized capitol stock of Buyer consists
of 500,000,000 shares of common stock, par -----------------------
value $.0001 per share, of which 472,000,000 shares are issued and
outstanding. Buyer has no treasury stock. All of the shares to be
issued hereunder have been, or will be at the time of issuance, duly
authorized and validly issued, are fully paid and nonassessable and
will be issued to the Guarantor free and clear of any liens, charges,
encumbrances, security interests, options, rights or claims of others
with respect thereto. There are no preemptive or similar rights on the
part of any holder of any class of securities of Buyer. No options,
warrants, calls, conversion, subscription or other rights, agreements
or commitments of any kind obligating Buyer contingently, or otherwise,
to issue or sell any shares of its capital stock of any class, or any
securities convertible into or exchangeable for any such shares, are
outstanding and no authorization therefor has been given. The shares
are not subject to any contractual restrictions relating to their
disposition. All voting rights are vested exclusively in the common
stock of Buyer.
D. Buyer's Authority for Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated herein
have been duly authorized by the Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes the valid and legally
binding obligation of Buyer enforceable in accordance with its terms,
except to the extent that enforceability may be subject to or limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditor's rights generally. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
herein will not conflict with or result in any violation of any
provision of the Articles of Incorporation or Bylaws of Buyer. To the
best of Buyer's knowledge, after due inquiry, the execution and
delivery of this agreement and the consummation of the transaction
contemplated herein will not conflict with any mortgage, indenture,
lease, contract, commitment, agreement, or other instrument, permit,
concession, grant, franchise, license, judgement, order, decree,
statute, law, ordinance, rule or regulation applicable to Buyer or any
of its properties or assets.
E. Consents and Authorizations. No consent, approval, order or
authorization of, or registration, declaration, compliance with or
filing with, any governmental or regulatory authority is required in
connection with the execution and delivery of this Agreement to permit
the consummation by Buyer of the transactions contemplated herein or to
prevent the termination of any material right, privilege, license or
agreement of Buyer or to prevent any material loss to Buyer or the
Buyer's business, by reason of the transactions contemplated herein.
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F. Financial Statements.
(i) Buyer has delivered to the Guarantor a true and complete copy of
the Buyer's Form 10KSB as of December 31, 1997, and each subsequent
Form 10QSB filed up to September 30, 1998.
G. Compliance with Law. To the best of Buyer's knowledge, after due
inquiry, Buyer is not in violation of or default under any statute,
law, ordinance, rule, regulation, judgment, order, decree, permit,
concession, grant, franchise, license or other governmental
authorization or approval applicable to it or any of its properties or
business. There are no proceedings pending or threatened which may
result in the revocation, cancellation, suspension, or any adverse
modification of any permit, concession, grant, franchise, license or
other governmental authorization or approval necessary for the conduct
of Buyer's business or which question the validity of this Agreement or
of any action taken or to be taken in connection herewith or the
consummation of the transactions contemplated hereby. Buyer has all
franchise, licenses, permits and other governmental approvals necessary
to enable it to carry on its business as presently conducted, except
where the failure to have such franchises, licenses or permits or other
governmental approvals would not have, individually or in the
aggregate, a material and adverse affect on Buyer's business.
H. Nature of Representations. No representation or warranty made by Buyer
in this Agreement, nor any document or information furnished or to be
furnished by Buyer to the Guarantor in connection with this Agreement,
contains or will contain any untrue statement of material fact, or
omits or will omit to state any material fact necessary to make the
statements contained therein not misleading, or omits to state any
material fact relevant to the transactions contemplated by this
Agreement.
Section 3 - Miscellaneous
A. Authority. The execution and performance of this Agreement have been
duly authorized by all requisite corporate action. This Agreement
constitutes a valid and binding obligation of the parties hereto.
B. Amendment. This Agreement may be amended or modified at any time and in
any manner only by an instrument in writing executed by the parties
hereto.
C. Waiver. No term of this Agreement shall be considered waived and no
breach excused by either party unless made in writing. No consent,
waiver or excuse by either party, express or implied, shall constitute
a subsequent consent, waiver or excuse.
D. Assignment:
(i) The rights and obligations of the Guarantor under this Agreement
shall inure to the benefit of and shall be binding upon its successors
and assigns. There shall be no rights of transfer or assignment of this
Agreement by Buyer except with the prior written consent of the
Guarantor.
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(ii) Nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties and their successors,
any rights or remedies under this Agreement.
E. Notices. Any notice or other communication required or permitted by
this Agreement must be in writing and shall be deemed to be properly
given when delivered in person to an officer of the other party, when
deposited in the Unites States mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public
telegraph company for transmittal or when sent by facsimile
transmission, charges prepaid provided that the communication is
addressed:
(i) In the case of Guarantor to:
Lexington Sales Corporation Ltd.
________________________________
________________________________
________________________________
(ii) In the Case of Buyer to:
AmeriResource Technologies, Inc.
8815 Long Street
Lenexas, Kansas 66215
or to such other person or address designated by Buyer in writing to
receive notice.
F. Headings and Captions. The headings of paragraphs are included solely
for convenience. If a conflict exists between any heading and the text
of this Agreement, the text shall control.
G. Entire Agreement. This instrument and the exhibits to this instrument
contain the entire Agreement between the parties with respect to the
transaction contemplated by the Agreement. It may be executed in any
number of counterparts but the aggregate of the counterparts together
constitute only one and the same instrument.
H. Effect of Partial Invalidity. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of
this Agreement, but this Agreement shall be constructed as if it never
contained any such invalid, illegal or unenforceable provisions.
I. Controlling Law. The validity, interpretation, and performance of this
Agreement shall be governed by the laws of the State of Kansas, without
regard to its law on the conflict of laws. Any dispute arising out of
this Agreement shall be brought in a court of competent jurisdiction in
Johnson County, Kansas. The parties exclude any and all statutes, laws
and treaties which would allow or require any dispute to be decided in
another forum or by other rules of decision than provided in this
Agreement.
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J. Attorney's Fees. If any action at law or in equity, including an action
for declaratory relief, is brought to ---------------- enforce or
interpret the provisions of this Agreement, the prevailing party shall
be entitled to recover actual attorney's fees, court costs, and other
costs incurred in proceeding with the action from the other party. The
attorney's fees, court costs or other costs, may be ordered by the
court in its decision of any action described in this paragraph or may
be enforced in a separate action brought for determining attorney's
fees, court costs, or other costs. Should either party be represented
by in-house counsel, all parties agree that that party may recover
attorney's fees incurred by that in-house counsel in an amount equal to
that attorney's normal fees for similar matters, or, should that
attorney not normally charge a fee, by the prevailing rate charged by
attorneys with similar background in that legal community.
K. Time is of the Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
L. Mutual Cooperation. The parties hereto shall cooperate with each other
to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transactions described herein.
M. Indemnification. Buyer and Guarantor agree to indemnify, hold harmless
and, at the party seeking indemnification's sole option, defend the
other from and against all demands, claims, actions, losses, damages,
liabilities, costs and expenses, including without limitation,
interest, penalties, court fees, and attorneys' fees and expenses
asserted against or imposed or incurred by either party by reason of or
resulting from a breach of any representation, warranty, covenant
condition or agreement of the other party to this Agreement. Neither
party shall be responsible to the other party for any consequential or
punitive damages.
N. No Third Party Beneficiary. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person, other than the parties
hereto and their successors, any rights or remedies under or by reason
of this Agreement, unless this Agreement specifically states such
intent.
O. Facsimile Counterparts. If a party signs this Agreement and transmits
an electronic facsimile of the signature page to the other party, the
party who receives the transmission may rely upon the electronic
facsimile as a signed original of this Agreement.
94
<PAGE>
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of the
date first written above.
AMERIRESOURCE TECHNOLOGIES INC.
By: /s/ Delmar Janovec
------------------
Name: Delmar Janovec
Title: Chief Executive Officer
Gold Coast Resources, Inc.
By:
Name:
Title:
Lexington Sales Corporation Ltd.
By: /s/ Gordon Haywood
------------------
Name: Gordon Heywood
Title:
95
DEBENTURE
THIS DEBENTURE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER, (THE
"1933 ACT") AND MAY ONLY BE OFFERED OR SOLD PURSUANT TO REGISTRATION UNDER OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
7.0% CUMULATIVE CONVERTIBLE DEBENTURE DUE
$3,350,000 December 14, 1998
FOR VALUE RECEIVED, AmeriResources Technologies, Inc, a Delaware
corporation, (the "Company"), hereby promises to pay to or registered assigns
(the "Holder"), on December 14, 2001 (the "Maturity Date"), the principal amount
of Three Million Three Hundred Fifty Thousand Dollars ($3,350,000) USD, and to
pay interest on the principal amount hereof, in such amounts, at such times and
on such terms and conditions as are specified herein.
Article 1. Interest
The Company shall pay interest on the unpaid principal amount of the
Debenture (the "Debenture") at the rate of Seven Percent (7.0%) per year,
payable at the time of each conversion until the principal amount hereof is paid
in full or has been converted. Interest on this Debenture shall accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from December 14, 1998. Interest shall be computed on the basis of a 360
day year of 12, 30 day months. If the Holder shall convert this Debenture during
any quarter, the Company shall pay to the Holder, upon conversion, the pro-rata
portion of accrued interest payable through the conversion date.
Article 2. Method of Payment
This Debenture must be surrendered to the Company in order for the Holder
to receive payment of the principal amount hereof. The Company shall have the
option of paying the interest on this Debenture in United States dollars or in
Common Stock upon conversion pursuant to Article 3 hereof. The Company may draw
a check for the payment of interest to the order of the Holder of this Debenture
and mail it to the Holder's address as shown on the Register (as defined in
Section 7.2 below). Interest and principal payments shall be subject to
withholding under applicable United States Federal Internal Revenue Service
Regulation.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right , at its option, to
convert it into shares of common stock, par value $0.0001 per share, of the
Company ("Common Stock") at any time after December 14, 2001, except as set
forth in Section 3.1(c) below. The number of shares of Common Stock issuable
upon conversion of this Debenture is determined by dividing the principal amount
hereof to be converted plus all accrued an unpaid interest thereof minus any
required withholding by the conversion price in effect on the conversion date
(as defined in paragraph (b) of this Section 3.1 below) and rounding the result
to the nearest whole share. On conversion, no payment of or adjustment (other
than as provided in the previous sentence) for accrued and unpaid interest shall
be made whether or not such conversion occurs before, on or after an interest
payment date.
(b) The conversion price and procedures are set forth in Section 3.2.
(c) Less than all of the principal amount of this Debenture may be
converted into Common Stock of the Company if the portion converted is $5,000 or
a whole multiple of $5,000 and the provisions of this Article 3 that apply to
the conversion of all of the Debenture shall also apply to the conversion of a
portion of it. All accrued and unpaid interest on this Debenture shall be added
to the amount converted if less than all of the principal amount of this
Debenture is converted and shall be deemed to be paid and discharged thereby.
This Debenture may not be converted, whether in whole or in part, except in
accordance with Section 3.2.
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<PAGE>
Section 3.2. Conversion Procedure
(a) Debentures. Upon the conversion of this Debenture, the holder thereof
shall submit such Debenture to the Company, and the Company shall, within
fourteen (14) business days of receipt of such Debenture, instruct the Company's
transfer agent to issue on or more Certificates representing that number of
shares of Common Stock into which the Debenture is convertible in accordance
with the provisions regarding conversion set forth in Exhibit A hereto. The
Company's transfer agent or attorney shall act as Debenture Registrar and shall
maintain an appropriate ledger containing the necessary information with respect
to each Debenture.
(b) Common Stock to be Issued With Restrictive Legend. Upon the conversion
of this Debenture and upon receipt by the Company of a facsimile or original of
Purchaser's signed Notice of Conversion and Purchaser Representation Letter (See
Exhibits A and B attached hereto) the Company shall instruct the Company's
transfer agent to issued Stock Certificates with restrictive legend or stop
transfer instruction in the name of Purchaser (or its nominee as may be
designated by Purchaser prior to the closing) and in such denominations to be
specified at conversion representing the number of shares of Common Stock
issuable upon such conversion, as applicable. Seller warrants that no
instruction other than these instructions have been given or will be given to
the transfer agent and that the Common Stock shall be restricted on the books
and records of the Company. Nothing in this Section 3.2, however, shall affect
in any way Purchaser's or such nominee's obligations and agreements to comply
with all applicable securities laws upon resale of the Securities.
(c) The holder of the Debenture ("Holder") is entitled, at its option, on
December 14, 2001 to convert the original principal amount of the Debenture into
shares of Common Stock, $0.0001 par value per share, of the Company (the "Common
Stock"), at a conversion price for each share of Common Stock equal to the
average closing bid price of the Company's Common Stock for the five (5) trading
days immediately preceding and ending on the day preceding the date of
conversion. Such conversion shall be effectuated by surrendering to the Company,
or its attorney, the original Debenture to be converted together with a
facsimile or original of the signed Notice of Conversion and facsimile or
original of the signed Purchaser Representation Letter, see Exhibits A and B
attached hereto, which evidences such Holder's intention to convert the
Debenture or a specified portion thereof, and accompanied by proper assignment,
if applicable. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded
up or down, as the case may be, to the nearest whole share. The date on which
notice of conversion is effective ("Conversion Date") shall be deemed to be the
date on which the Holder has delivered to the Company the original Debenture, a
facsimile or original of the signed Notice of Conversion and a facsimile or
original of the signed Purchaser Representation Letter.
(d) Nothing contained in this Debenture or paragraph 3.2(f) hereof, shall
be deemed to establish or require the payment of interest to the Purchaser at a
rate in excess of the maximum rate permitted by governing law. In the event that
the rate on interest required to be paid under the Debenture exceeds the maximum
rate permitted by governing law, the rate of interest required to be paid
thereunder shall be automatically reduced to the maximum rate permitted under
the governing and any amounts collected in excess of the permissible amount
shall be deemed a payment of principal. To the extent that such excess amount
exceeds the aggregate principal amount of this Debenture, such excess shall be
returned with reasonable promptness by the Holder to the Company.
(e) Within fourteen (14) business days after receipt of the documentation
referred to above in Section 3.2(c), the Company shall deliver instructions to
its transfer agent to issue the number of shares of Common Stock issuable upon
the conversion. It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the certificate of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. No payment of adjustment shall be made for
accrued and unpaid interest until the earlier of the Conversion Date or the
mandatory conversion date. Upon surrender of any Debentures that are to be
converted in part, the Company shall issue to the Purchase a new Debenture qual
to the unconverted amount, if so requested by Purchaser.
97
<PAGE>
Section 3.3 Fractional Shares. The Company shall not issue a fractional
share of Common Stock upon the conversion of this Debenture. Instead, the
Company shall round up or down, as the case may be, to the nearest whole share.
Section 3.4 Taxes on Conversion. The Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon the conversion of this Debenture. However, the Holder shall pay any
such tax which is due because the shares are issued in a name other than its
name.
Section 3.5 Company to Reserve Stock. The Company shall reserve out of its
authorized but unissued Common Stock or Common Stock held in treasury a
sufficient number of shares of Common Stock to permit the conversion of this
Debenture. All shares of Common Stock which may be issued upon the conversion
hereof shall upon issuance be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture and the Common Stock
issuable upon the conversion hereof have not been registered under the
Securities Act of 1933, as amended, (the "Act") and have been sold pursuant to
Rule 144 under the Act ("Rule 144"). The Debenture and the Common Stock issuable
upon the conversion thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or consolidates with
another corporation or sells or transfers all or substantially all of its assets
to another person and the holders of the Common Stock are entitled to receive
stock, securities or property in respect of or in exchange for Common Stock,
then as a condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation , sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable to adjustments provided for in this Article 3.
Article 4. Mergers
The Company shall not consolidate or merge into, or transfer all or
substantially all of its assets to, any person, unless such person assumes the
obligations of the Company under his Debenture and immediately after such
transaction no Event of Default exists. Any reference herein to the Company
shall refer to such surviving or transferee corporation and the obligations of
the Company shall terminate upon such assumption.
Article 5. Reports
The Company will mail to the Holder hereof at its address as shown on the
Register a copy of any annual, quarterly or current report that it files with
the Securities and Exchange Commission promptly after the filing thereof and a
copy of any annual, quarterly or other report or proxy statement that it gives
to its shareholders generally at the time such report or statement is sent to
shareholders.
Article 6. Defaults and Remedies
Section 6.1 Events of Default. an "Event of Default" occurs if (a) the
Company does not make the payment of the principal of this Debenture when the
same becomes due and payable at maturity, upon redemption or otherwise, (b) the
Company does not make a payment, other than a payment of principal, for a period
of 5 days thereafter, (c) the Company fails to comply with any of its other
agreements in this Debenture and such failure continues for the period and after
the notice specified below, (d) the Company pursuant to or within the meaning of
any Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an involuntary
case; (iii) consents to the appointment of a Custodian (as hereinafter defined)
98
<PAGE>
of it or for all or substantially all of its property or (iv) makes a general
assignment for the benefit of its creditors or (v) a court of competent
jurisdiction enters an order or decree under any Bankruptcy Law that : (A) is
for relief against the Company in an involuntary case; (B) appoints a Custodian
of the Company or for all or substantially all of its property or (C) orders the
liquidation of the Company, and the order or decree remains unstayed and in
effect for 60 days, (D) the Company shall have its Common Stock delisted from an
exchange or over-the-counter market. As used in this Section 6.1, the term
"Bankruptcy Law" means Title 11 of the United States Code or any similar federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law. A
default under clause (C)above is not an Event of Default until the holders of at
least 25% of the aggregate principal amount of the Debentures outstanding notify
the Company of such default and the Company does not cure it within five (5)
days after the receipt of such notice, which must specify the default, demand
that it be remedied and state that it is a "Notice of Default."
Section 6.2. Acceleration. If an Event of Default occurs and is continuing,
the Holder hereof by notice to the Company, may declare the principal of and
accrued interest on this Debenture to be due and payable. Upon such declaration,
the principal and interest hereof shall be due and payable immediately.
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a numbered series of
Debentures having an aggregate principal amount of $3,350,000 which are
identical except as to the principal amount and date of issuance thereof and as
to any restriction on the transfer thereof in order to comply with the
Securities Act of 1933 and the regulations of the Securities and Exchange
Commission promulgated thereunder. Such Debentures are referred to herein
collectively as the "Debentures." The Debentures shall be issued in whole
multiples of $5,000.
Section 7.2. Record Ownership. The Company, or its attorney, shall maintain
a register of the holders of the Debentures (the "Register") showing their names
and addresses and the serial numbers and principal amounts of Debentures issued
to or transferred of record by them from time to time. The Register may be
maintained in electronic, magnetic or other computerized form. The Company may
treat the person named as the Holder of this Debenture in the Register as the
sole owner of this Debenture. The Holder of this Debenture is the person
exclusively entitled to receive payments of interest on this Debenture, receive
notifications with respect to this Debenture, convert it into Common Stock and
otherwise exercise all rights and powers as the absolute owner hereof.
Section 7.3. Registration of Transfer. Transfers of this Debenture may be
registered on the books of the Company maintained for such purpose pursuant to
Section 7.2 above (i.e., the Register). Transfers shall be registered when this
Debenture is presented to the Company with a request to register the transfer
hereof and the Debenture is duly endorsed by the appropriate person, reasonable
assurances are made that the endorsements are genuine and effective, and the
Company has received evidence satisfactory to it that such transfer is rightful
and in compliance with all applicable laws, including tax laws and state and
federal securities laws. When this Debenture is presented for transfer and duly
transferred hereunder, it shall be canceled and a new Debenture showing the name
of the transferee as the record holder thereof shall be issued in lieu hereof.
When this Debenture is presented to the Company with a reasonable request to
exchange it for an equal principal amount of Debentures of other denominations,
the Company shall make such exchange and shall cancel this Debenture and issue
in lieu thereof Debentures having a total principal amount equal to this
Debenture in the denominations requested by the Holder. The Company may charge a
reasonable fee for any registration of transfer or exchange other than one
occasioned by a notice of redemption or the conversion hereof.
Section 7.4. Worn or Lost Debentures. If this Debenture becomes worn,
defaced or mutilated but is still substantially intact and recognizable, the
Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company actually received by the Company before it is notified that the
Debenture has been acquired by a bona fide purchaser and the Holder has
delivered to the Company an indemnity bond in such amount and issued by such
surety as the Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form with such proof or verification
as the Company may request.
99
<PAGE>
Article 8. Notices
Any notice which is required or convenient under the terms of this
Debenture shall be duly given if it is in writing and delivered in person or
mailed by first class mail, postage prepaid and directed to the Holder of the
Debenture at its address as it appears on the Register or if to the Company to
its principal executive offices. The time when such notice is sent shall be the
time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture. Where time is extended
by virtue of the provisions of this Article 9, such extended time shall not be
included in the computation of interest. A "business day" shall mean a day on
which banks are not required or allowed to be closed.
Article 10. Waivers
The holders of a majority in principal amount of the Debentures may waive a
default or rescind the declaration of an Event of Default and its consequences
except for a default in the payment of principal of or interest on any
Debenture.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this Debenture shall be
governed and construed by the provisions hereof and in accordance with the laws
of the State of Kansas.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.
AMERIRESOURCES TECHNOLOGIES INC.
By: /s/ Delmar Janovec
Name: Delmar Janovec
Title: Chief Executive Officer
100
<PAGE>
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert
the Debentures.)
The undersigned hereby irrevocably elects, as of , 199 to convert $ of the
Debentures into Shares of Common Stock (the "Shares") of AmeriResources
Technologies, Inc. (the "Company") according to the conditions set forth in the
Stock Purchase Agreement dated December 14, 1998.
Date of Conversion __________________
Applicable Conversion Price _____________
Number of Shares Issuable upon this conversion _______________
Signature ______________________________________
[Name]
Address _____________________________________
_____________________________________________
Phone _______________________ Fax ____________________
101
<PAGE>
EXHIBIT B
PURCHASER REPRESENTATION LETTER
Dear Sirs:
The undersigned , has purchased on December 14, 1998, One (1) convertible
Debenture(s) of AmeriResource Technologies, Inc. (the "Company") in the amount
of $_____________ , (the "Debenture(s)"). In connection with such purchase, the
undersigned has executed and delivered a Stock Purchase Agreement ("Stock
Purchase Agreement") of your design.
The undersigned represents and warrants as follows:
Dated this _____ day of the month of ________________, 1998.
By:
______________________________ ________________________
Official Signature of Purchase Title
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s)
_____________________________________________
unto __________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
(Name, address, and SSN or EIN of assignee)
_____________________________Dollars ($__________________ )
(principal amount of Debenture, $ or integral multiples of $ )
of principal amount of this Debenture together with all accrued and unpaid
interest hereon.
Date:_______________ Signed: ___________________________________________
(Signature must conform in all respects to shown name of Holder of face of
Debenture)
Signature __________________________ Guaranteed:__________________
102
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
UNAUDITED CONDENSED FINANCIAL STATEMENTS FILED WITH THE COMPANY'S DECEMBER 31,
1998, ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 36,152
<SECURITIES> 257,893
<RECEIVABLES> 1,117,594
<ALLOWANCES> 711,937
<INVENTORY> 0
<CURRENT-ASSETS> 441,809
<PP&E> 42,358
<DEPRECIATION> 32,804
<TOTAL-ASSETS> 1,881,520
<CURRENT-LIABILITIES> 2,718,080
<BONDS> 0
0
0
<COMMON> 3,089
<OTHER-SE> (5,827,417)
<TOTAL-LIABILITY-AND-EQUITY> 1,881,080
<SALES> 0
<TOTAL-REVENUES> 47,560
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,504,010
<INTEREST-EXPENSE> 219,549
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 623,924
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
