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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[ ] Transitional Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended April 30, 1999
Commission File No. 0-24512
E-NET FINANCIAL CORPORATION
(Name of small business issuer in its charter)
E-NET CORPORATION
(Former name of small business issuer)
Nevada 84-1273503
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2102 Business Center Drive, Suite 115E
Irvine, CA 92612
(949) 253-4633
(Address, including zip code and telephone number, including area code, of
registrant's executive offices)
Securities registered under Section 12(b) of the Exchange Act:
none
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [ ] No [x]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is 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. x
(Continued on Following Page)
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Issuer's revenues for its most recent fiscal year: $_________
State the aggregate market value of the voting stock held by non-affiliates,
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: As of August 4, 1999:
$22,500,000.
State the number of shares outstanding of each of the issuer's common equity, as
of the latest practicable date: As of August 4, 1999, there were 4,500,000
shares of the Company's common stock issued and outstanding.
Documents Incorporated by Reference: None
This Form 10-KSB consists of 29 Pages.
Exhibit Index is Located at Page 26
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
E-NET FINANCIAL CORPORATION
PAGE
Facing Page
Index
PART I
Item 1. Description of Business......................... 4
Item 2. Description of Property......................... 13
Item 3. Legal Proceedings............................... 13
Item 4. Submission of Matters to a Vote of
Security Holders........................... 13
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters............ 14
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 15
Item 7. Financial Statements............................ 18
Item 8. Changes in and Disagreements on Accounting
and Financial Disclosure................... 19
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act.......... 20
Item 10. Executive Compensation.......................... 21
Item 11. Security Ownership of Certain Beneficial
Owners and Management...................... 23
Item 12. Certain Relationships and Related
Transactions............................... 24
PART IV
Item 13. Exhibits and Reports on Form 8-K............... 26
SIGNATURES................................................ 28
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STATEMENTS IN THIS REPORT THAT RELATE TO FUTURE RESULTS AND EVENTS ARE BASED ON
THE COMPANY'S CURRENT EXPECTATIONS. ACTUAL RESULTS IN FUTURE PERIODS MAY DIFFER
MATERIALLY FROM THOSE CURRENTLY EXPECTED OR DESIRED BECAUSE OF A NUMBER OF RISKS
AND UNCERTAINTIES. FOR A DISCUSSION OF FACTORS AFFECTING THE COMPANY'S BUSINESS
AND PROSPECTS, SEE "ITEM 1 - FACTORS AFFECTING THE COMPANY'S BUSINESS AND
PROSPECTS."
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
E-Net Financial Corporation, f/k/a E-Net Corporation and Suarro
Communications, Inc. (the "Company") was incorporated on August 18, 1988, under
the laws of the State of Nevada to engage in any lawful corporate undertaking.
On July 11, 1994 the Company submitted its Form 10-SB to the Securities and
Exchange Commission, which was declared effective on December 22, 1994, at which
time the Company became a reporting company under Section 12(g) of the 1934
Securities and Exchange Act. On August 16, 1996 the Company changed its name to
Suarro Communications, Inc., and on February 12, 1999 and May 12, 1999,
respectively, the Company changed it name to E-Net Corporation and E-Net
Financial Corporation. The Company is also qualified to do business in
California
RECENT CHANGE IN BUSINESS STRATEGY AND CHANGE IN CONTROL
Effective March 15, 1999 the Company acquired E-Net Mortgage
Corporation, a Nevada Corporation, and City Pacific International, U.S.A., Inc.,
a Nevada corporation, in exchange for 2,500,000 restricted shares of common
stock of the Company (allocated 2 million shares for the mortgage company and
500,000 shares for City Pacific). Pursuant to the Share Exchange Agreement and
Plan of Reorganization dated March 1, 1999, the Company issued these shares in
exchange for all of the issued and outstanding shares of both entities. E-Net
Mortgage Corporation and City Pacific International, U.S.A., Inc., will be
operated as wholly owned subsidiaries of the Company. E-Net Mortgage will
operate from the Company's offices at 2102 Business Center Dr., Suite 115E,
Irvine, California and branch offices in Costa Mesa, San Jose and Las Vegas and
City Pacific will operate from the Company's offices located at 1061 East
Flamingo Road, Suite 3, Las Vegas, Nevada.
Members of the Company's Board of Directors prior to the acquisitions
resigned. The following persons were appointed to the Board of Directors and
elected as officers: Michael P. Roth, President and Ted A. Bohrer,
Vice-President. Additionally, Jean Oliver was appointed as Secretary-Treasurer
and Controller.
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The Company intends to act as a technology driven financial resource to
serve the needs of both the commercial and consumer markets in supplying fast
and affordable mortgages and telecommunications via the Internet and through
strategic alliances and partnering with established industry leaders. The
Company will engage in the business of providing mortgage products and services
on both the retail and wholesale levels, as well as providing telecommunications
products and services for commercial and residential customers, directly or
through joint ventures with strategic partners. With respect to its mortgage
business, the approach to accomplishing the Company's goals is to utilize
innovative technological products to improve the mortgage-related processes.
This will enable E-Net Mortgage Corporation to be more responsive to its
customer base by rapidly providing top quality products and services. In its
telecommunications subsidiary, the Company intends to act as a facilitator to
other telecommunications companies to provide them with resources such as
equipment and financing in strategic alliances with customers.
Through E-Net Mortgage Corporation, which is licensed with the
California Department of Real Estate, this subsidiary will offer residential
mortgages for both owner occupied properties as well as residential income
properties. The services to be offered will include a paperless on-line system
over the internet allowing an immediate direct relationship between the point of
sale customer and the investor community.
Through City Pacific International U.S.A., Inc., the Company intends to
provide products and interconnectivity to telecommunications companies by
purchase of essential equipment and/or lease of communication lines or satellite
pathways to enable the carriers to transport voice and date information. On the
retail level, through joint ventures with other providers, this subsidiary will
offer debit cards for corporate customers, calling card services, long distance
services and international termination. This entity will also provide switch
co-location and billing services.
RECENT ACTIVITIES OF THE COMPANY
Activities of the Parent Company
The Company announced in June 1999 that it had executed a joint venture
agreement with Genesis Residential Healthcare, Inc. to develop a mixed use
residential/health care project. The project integrates residential developments
and senior healthcare facilities onto campuses that are tied together with
cutting edge communication technology. The result is senior residential living
areas that deliver various levels of assisted care. This model makes it possible
to shift available resources from administrative overhead to client oriented
benefits. Genesis has been in the development and construction business for over
thirty with its principal focus on healthcare facilities.
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Activities of E-Net Mortgage Corporation
This subsidiary has opened branch offices in San Jose, Las Vegas and
Costa Mesa in May, June and August 1999, respectively. The offices are part of a
planned series of efficient, high technology facilities based on a dynamically
improved business model in the real estate financing industry. The model
implements the use of modern website and network technologies and procedures to
speed up the loan process, reduce costs and increase client satisfaction Six
additional satellite office facilities are planned during the remainder of this
year. Each office satellite will be strategically located near its client base
in order to maintain that personal service touch so vital still in a
people-oriented industry.
Activities of City Pacific International, U.S.A., Inc.
On February 25, 1999 this subsidiary executed a joint venture contract
with Omnetrix International Inc., a Los Angeles-based communications company.
One of the first projects to be launched is the "500 Minute Prepaid Calling
Card." This card will provide for fifteen cent per minute calls within the
continental United States and additionally provides international service at
unusually competitive rates. Marketing strategies are aimed at corporations,
businesses as well as public consumers, attracted through the Internet ads, the
Omnetrix web site, print media, and direct mail.
BUSINESS STRATEGY OF E-NET MORTGAGE CORPORATION
Business Concept
E-Net Mortgage's core strategy is a new management model for the
mortgage industry. Each office will be staffed by a team of two specialists. The
model involves integrating and redistributing the various functions of the loan
cycle among these four specialists. The first is the Loan Officer. The Loan
Officer is the licensee and is ultimately responsible for the loan process. The
second team member is called a "Rainmaker." The Rainmaker is the marketer. It is
the responsibility of this individual to get the deals. The last two members of
the team are the underwriter and the processor/closer.
It is projected that the team will close an average of one loan per day.
Each loan will be originated, processed and closed within ten business days.
Achieving this rate will reduce production costs to approximately 50% of the
industry standard. This efficiency will be achieved through the specialization
just described and through careful but relaxed management. Each office will be
semi-autonomous. But, it will be electronically linked to corporate management
on a virtual private network.
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Local offices will be organized in "Stars". Each office will be a
satellite of a Star. Each Star will be a cluster of five satellites. Stars will
be placed strategically, nationwide, in areas of high property value. This will
assure a high average loan amount. Continuing the metaphor, E-Net will be a
nationwide galaxy of semi-autonomous but uniformly run mortgage offices.
E-Net will establish its first satellite office in the heart of the
Silicon Valley at the San Jose International Jet Center. The Silicon Valley was
selected as the first unit because of the favorable demographics and because of
the availability of qualified personnel. The San Jose International Jet Center
compliments the image presented by E-Net's new business model. About the time
that the fourth and fifth satellites are coming on line in the Silicon Valley
Star, E-Net will begin deploying additional Stars in Los Angeles, San Diego,
Orange County, Austin, Atlanta, Honolulu and similar locations. E-Net Mortgage
intends to add one Star each quarter.
Products and Services
As a retail mortgage broker, E-Net Mortgage has developed relationships
with many of the key mortgage lenders in the State of California. This
subsidiary is in the process of putting similar relationships in place
nationwide. With these relationships in place this subsidiary believes that it
will be able to offer a wide range of mortgage loan products and services.
E-Net Mortgage is active as a mortgage broker, using the trade name
"E-Net Mortgage". E-Net Mortgage originates its own loans on a retail basis and
provides lending services to its satellite offices. E-Net Mortgage assists its
brokers by reviewing their activities and business development plans on a
continuing basis. E-Net Mortgage management regularly meets with its loan
officers and staff to train, develop rapport, explain objectives, and describe
methods of operation. In addition, after set up, E-Net Mortgage provides loan
origination, processing support, and underwriting assistance to ensure efficient
and timely closings.
In addition to initial training, continuous retraining and activity
monitoring, E-Net Mortgage will provide each Broker with a Policies and
Procedures Manual. This outlines and explains E-Net's method of operation and
quality control guidelines. These policies and procedures, when followed, should
significantly reduce the incidence of problems that cause delay in loan
processing. E-Net Mortgage expects to finalize the Policies and Procedures
Manual in the near future. E-Net Mortgage provides its Brokers with current
Mortgage product descriptions and guidelines, continuously updating the rates
for all of its products on its virtual private network.
Target Markets
E-Net Mortgage is mainly in the residential mortgage business, providing
residential mortgages at the retail level. At the present time, the retail
business is providing 100% of revenue. The wholesale business is under
development. E-Net Mortgage's current target market is direct consumers.
Currently, E-Net Mortgage is hiring and training personnel who will service this
customer base. This direct relationship enables E-Net Mortgage to establish
point-of-sale opportunities to originate and process mortgage loans.
E-Net Mortgage plans to expand its market base by including a commercial
element. Potentially, it plans to target: developers and builders, housing
manufacturers, lawyers and accountants, insurance companies, the securities
industry, and credit counseling agencies.
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BUSINESS STRATEGY OF CITY PACIFIC INTERNATIONAL U.S.A., INC.
Business Concept
City Pacific International, U.S.A., Inc. ("CPI"), is a
telecommunications company. This subsidiary takes advantage of rapid changes in
the industry to offer innovative, cost effective, quality products and services
more quickly than can larger, more traditional companies. CPI's business focuses
on providing its customers products and telecommunication services that are
innovative, timely, and cost effective. CPI constantly reassesses its marketing
campaigns, sales tools, and product packages. It works continuously to identify
reliable marketing and distribution channels.
Target Markets
Latin America is of special interest. CPI has identified an opportunity
to create a unique competitive advantage over major telecommunication service
providers by providing wholesale telecommunication services to carriers. AT&T,
for example, does not have its own network to Mexico. AT&T purchases this
traffic directly from TelMex. The focus of this project is to take advantage of
the wholesale market for terminating long distance telecommunications traffic
into Mexico from the United States.
CPI will phase in a number of switch sites in Mexico, including Mexico
City, Monterey, Nueva Laredo, Ciudad Juarez, and Guadalajara. The Mexican
government prohibits voice transmission into Mexico. However, voice over data
transmission is allowed. This project will achieve this edge by dividing voice
bit streams and compressing them into data packets. These compressed voice
packets are transmitted over data lines, providing toll-quality sound and
network reliability.
Products and Services
In the telecommunications industry, equipment and products not only
change rapidly but constantly. In today's global marketplace, a broadly based
telecommunications organization must offer a wide range of products and services
- - debit cards, internet access, local and long distance services, voice response
units, information services, and many other products and services.
Telecommunications is experiencing explosive growth as well as rapid
technological change.
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PRIOR BUSINESS HISTORY OF THE COMPANY
Prior to the acquisitions of E-Net Mortgage Corporation and City Pacific
International, U.S.A., Inc. the Company was inactive. It operated as a shell
company without revenues, while it sought an appropriate merger with a private
company.
In August, 1996, the Company acquired all of the issued and outstanding
common stock of Suarro Communications, Inc., a Texas corporation ("Suarro"),
wherein it undertook a forward split of its issued and outstanding common stock
whereby twenty (20) shares of common stock were issued in exchange for each
share of common stock previously issued and outstanding. Thereafter, the Company
acquired all of the issued and outstanding securities of Suarro in exchange for
issuance by the Company of 5,200,000 shares of "restricted" common stock of the
Company to Suarro shareholders. The consideration given and received was
determined by arms-length negotiations between the principals of the Company and
Suarro. As part of the terms of the aforesaid transaction, the Company also
changed its name to "Suarro Communications, Inc."
Various disputes arose subsequent to the closing of the Suarro
transaction referenced above. Applicable thereto, an action was filed in the
Second Judicial District Court of the State of Nevada, in and for the County of
Washoe, entitled Lee R. Goldberg v. Suarro Communications, Inc. et al., Cause
No. CV-97-05053, relevant to certain claims held by shareholders of the Company
relating to representations made by the shareholders of Suarro in the
reorganization between the companies. A stipulation, Mutual Release and
Indemnity Agreement was reached in relation to such action, with the results of
such settlement being that the Suarro transaction described above was rescinded
effective September 9, 1997, with all of the 5,200,000 shares issued in favor of
the Suarro shareholders being returned to the Company's treasury.
Certain additional matters were undertaken by the Company at the time of
the Suarro transaction described above, including the shareholders undertaking
adoption of an amendment to the Company's Articles of Incorporation whereby the
Company's shareholders increased the number of shares of common stock authorized
for issuance from 1,000,000 common shares, par value $0.001 per share, to
20,000,000 common shares, par value $0.001 per share. Additionally, 1,000,000
shares of preferred stock, no par value per share, were also authorized.
Further, as a result of the rescission of the Suarro transaction, management of
the Company changed.
FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS
The following discussion should be read in conjunction with the audited
consolidated financial statements contained herein. In addition to the factors
set forth herein, there may be other factors, or factors which arise in the
future which may affect the future performance of the Company.
GOING CONCERN; LIMITED OPERATING HISTORY AND REVENUES AND MINIMAL ASSETS
The Company's financial statements accompanying this report have been
prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The financial statements do not include any
adjustment that might result from the outcome of this uncertainty. The Company
has had a limited operating history and revenues and no earnings from
operations. The Company has no significant assets or financial resources.
SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS
The success of the Company's proposed plan of operation will depend to a
great extent on the operations, financial condition and management of its
recently acquired subsidiaries. The Company's ability to integrate these
subsidiaries' activities into its consolidated operations is uncertain. The
success of the Company's operations may be dependent upon numerous factors
beyond the Company's control.
COMPETITION
Competition is vigorous in all sectors of the markets in which the
Company competes. The Company has numerous competitors in each of its business
lines, which vary widely in their size, capabilities, market segments and
geographic areas, many of which are larger and have financial
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resources far greater than the Company. There can be no assurance that the
Company can effectively compete with any or all of its competitors in any of its
business lines.
DEPENDENCE ON KEY PERSONNEL
Competition for qualified personnel in the Company's market segments is
intense and there can be no assurance that the Company will be able to attract
and retain a sufficient number of qualified employees. As the business of the
Company grows, it may become increasingly difficult for it to hire, train and
assimilate the new employees needed. The Company's success
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depends to a significant degree upon the continued contributions of its key
management and operational personnel. The Company's officers have entered into
written employment agreements, but the ability of the Company to enforce such
contracts is uncertain. The Company has not obtained key man life insurance on
any of its officers or directors. Loss of the services of any of these
individuals would adversely affect development of the Company's business and its
likelihood of continuing operations. See "PART III, Item 9 - Directors,
Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
of the Exchange Act."
CONFLICTS OF INTEREST - GENERAL
Officers and directors of the Company may in the future participate in
business ventures which could be deemed to compete directly with the Company.
Additional conflicts of interest and non-arms length transactions may also arise
in the future in the event the Company's officers or directors are involved in
the management of any firm with which the Company transacts business.
NEED FOR ADDITIONAL FINANCING; REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING
FINANCING
The Company's primary plan of operation will require additional
capitalization to allow for its implementation. Any financing, would in all
likelihood, result in the Company issuing a substantial amount of new Common
Shares to third parties. The issuance of previously authorized and unissued
Common Shares of the Company would result in reduction in percentage of shares
owned by present and prospective shareholders of the Company and may result in a
change in control or management of the Company.
LIQUIDITY: VOLATILITY OF STOCK PRICE
Historically, trading volume of the Company's Common Stock has been
small or non-existent, and the market for the Common Stock has been less liquid
than that of many other publicly traded companies. There can be no assurance
that a stockholder who desires to sell shares of Common Stock can sell all of
the shares that the stockholder desires to sell, either at all or at the desired
times or prices. The Company expects that the market price of the Common Stock
will be volatile. Factors such as quarterly fluctuations in the Company's
results of operations, trading volume, the announcement of technological
innovations or new products by the Company or its competitors, general
conditions in the Company's market segments, and economic conditions generally,
may have a significant impact on the market price of the Common Stock.
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS AND SERVICES
The Company's activities in the mortgage loan and telecommunications
businesses will continue to be subject to frequent and rapid changes in
technology and customer preferences. Customers may delay purchases in
anticipation of technological changes. Any failure by the Company to anticipate
or respond adequately to the changes in technology and customer preferences, or
to develop and introduce new products or services in a timely fashion, could
materially adversely affect the Company's business and operating results.
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YEAR 2000 COMPLIANCE RISKS
The Year 2000 compliance issue arises from the fact that a significant
percentage of the software utilized by United States businesses relies on
two-digit date codes to perform computations and decision-making functions.
Commencing on January 1, 2000, these computer programs may fail from an
inability to interpret date codes properly, misinterpreting "00" as the year
1900 rather than 2000. The Company is currently in the process of evaluating its
information technology systems for year 2000 compliance and believes that most
of its operating systems have been modified to address Year 2000 issues. At this
time, the Company does not believe that the costs associated with implementing
its Year 2000 compliance plan will be material to the Company's financial
condition or operations.
The Company's E-Net Mortgage computers consist of a mixture of personal
computers and Macintoshes that are Y2K ready. Mission critical software (Loan
processing program called Point by Calyx Software Company) is also Y2K ready
compliant. Point is also compliant with the Fannie Mae and Freddie Mac
interfaces, certified Y2K compliant by both organizations.
Any business disruptions to E-Net Mortgage would be the result of Y2K
conflicts from our lenders, credit reporting agency, or title companies. The
Company relies substantially on each of these service providers for business
continuity. There can be no assurance that such third party software will be
free of errors and defects or be Year 2000 compliant. Any business interruptions
of third party service suppliers could result in loss of revenues, and could
adversely affect the Company's market penetration and reputation, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
EMPLOYEES
During the fiscal year ended April 30, 1999, the Company and
subsidiaries employed four executive personnel (its President, Vice President
and Secretary/Treasurer and the President of City Pacific International U.S.A.,
Inc.) and three non-executive personnel. See "PART II, Item 9 - Directors,
Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
of the Exchange Act."
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ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES. The Company operates its primary executive offices from 2102
Business Center Drive, Suite 115E, Irvine, CA 92612. The lease is on a
month-to-month basis commencing February 19, 1999 for a monthly rental of
$1,195. The Company has also executed a lease for a term of 38 months commencing
August 15, 1999 for 2,071 square feet located at 3200 Bristol Street, Suite 700,
Costa Mesa, California, where the monthly rental is $4,660. The Company also has
an office in Las Vegas, Nevada on a month-to-month basis wherein the rental is
$850 per month. The Company's E-Net Mortgage division also maintains a separate
branch office in San Jose and operates its executive offices and other branch
offices, respectively, in the Company's Irvine, Costa Mesa and Las Vegas
offices. The San Jose office lease is month-to-month for a rental of $850 per
month. The Company's City Pacific division maintains its executive offices at
the Company's offices in Las Vegas. The Company maintains certain business
property at each of these locations consisting of office furniture, computers,
software, copiers, telecommunications equipment, and internet and networking
systems.
OTHER PROPERTY. The Company owns no other property.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings which are pending or have been
threatened against the Company of which management is aware as of the date of
this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Effective February 15, 1999 the Company acquired E-Net Mortgage
Corporation, a Nevada Corporation, and City Pacific International, U.S.A., Inc.,
a Nevada corporation, in exchange for 2,500,000 restricted shares of common
stock of the Company. Pursuant to the Share Exchange Agreement and Plan of
Reorganization dated March 1, 1999, the Company issued these shares in exchange
for all of the issued and outstanding shares of both entities. E-Net Mortgage
Corporation and City Pacific International, U.S.A., Inc. At the same time the
shareholders of the Company authorized a 2:1 forward split of the 1,000,000
outstanding shares of the Company's stock resulting in 2,000,000 shares being
outstanding prior to the issuance of the additional 2.5 million shares.
In May 1996, the Company's Board of Directors called a special meeting
of the Company's shareholders in order to obtain approval of various matters,
including approval of the reorganization between the Company and Suarro, as well
as authorizing various amendments to the Company's Articles of Incorporation.
All matters presented to the Company's shareholders were approved. However,
subsequent to approval, the reorganization between the Company and Suarro was
rescinded. See "PART I, Item 1 -Description of Business," above for a more
detailed description of these events. The amendments authorized at the meeting
of shareholders remain in effect.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a) Market Information. The Company's common stock was approved for
trading on the OTC Bulletin Board operated by the National Association of
Securities Dealers in April 1997. Prior to that date none of the Company's
securities were traded. The initial trading price on April 30, 1997 was $5.25
bid, $6.00 asked. Since April 30, 1997, the price of the Company's common stock
has traded between $2.00 and $8.00. The Company's common stock presently trades
under the symbol "ENNT". The transfer agent is Holladay Stock Transfer, 2939
North 67th Place, Scottsdale, AZ 85251. The CUSIP number is 26874T104.
(b) Holders. There are nine (9) holders of the Company's Common
Stock, not including those persons or entities who hold their securities in
"street name." There are presently outstanding 4,500,000 shares of Common Stock
of the 20,000,000 shares authorized.
As of the date of this report all but 2,500,000 shares of the Company's
Common Stock are eligible for sale under Rule 144 promulgated under the
Securities Act of 1933, as amended, subject to certain limitations included in
said Rule. In general, under Rule 144, a person (or persons whose shares are
aggregated), who has satisfied a two year holding period, under certain
circumstances, may sell within any three-month period a number of shares which
does not exceed the greater of one percent of the then outstanding Common Stock
or the average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has satisfied a
three-year holding period and who is not, and has not been for the preceding
three months, an affiliate of the Company.
(c) Dividends.
(1) The Company has not paid any dividends on its Common Stock. The
Company does not foresee that the Company will pay dividends in the immediate
future as it intends to reinvest any net income for the purpose of
implementation of its business plan and the business plans of its wholly owned
subsidiaries.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Company's audited financial statements and notes thereto included herein. In
connection with, and because it desires to take advantage of, the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the Company
cautions readers regarding certain forward looking statements in the following
discussion and elsewhere in this report and in any other statement made by, or
on the behalf of the Company, whether or not in future filings with the
Securities and Exchange Commission. Forward looking statements are statements
not based on historical information and which relate to future operations,
strategies, financial results or other developments. Forward looking statements
are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the Company's control and many of which,
with respect to future business decisions, are subject to change. These
uncertainties and contingencies can affect actual results and could cause actual
results to differ materially from those expressed in any forward looking
statements made by, or on behalf of, the Company. The Company disclaims any
obligation to update forward looking statements.
(a) Plan of Operation.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan described herein. Because the Company has
limited capital with which to pay these anticipated expenses, present management
of the Company will pay these charges with their personal funds, as interest
free loans to the Company. Management has agreed among themselves that the
repayment of any loans made on behalf of the Company will not impede, or be made
conditional in any manner, to consummation of a proposed transaction.
Revenues are projected to be derived from fees earned by e-Net Mortgage
based on real estate loans brokered, and from City Pacific's joint venture with
Omnetrix. Until these revenues provide sufficient cash flow to cover operations,
the company will continue to rely upon such loans while seeking private
placement of its securities. Plans are also being developed for a possible
public offering of common stock.]
Because the Company presently has nominal overhead or other material
financial obligations, management of the Company believes that the Company's
short term cash requirements can be satisfied by management injecting whatever
nominal amounts of cash into the Company to cover these incidental expenses.
There are no assurances whatsoever that any additional cash will be made
available to the Company through any means. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements made by, or on
behalf of, the Company. The Company disclaims any obligation to update forward
looking statements.
The Company's E-Net Mortgage Corporation subsidiary is engaged in the
mortgage loan industry as a full service mortgage loan broker. It is in the
process of developing a replicable structure of satellite mortgage loan
brokerage offices. On May 19, 1999 this subsidiary opened its first branch
office in San Jose, California. On June 7, 1999 this subsidiary, opened another
mortgage loan origination and financial services office in Las Vegas, Nevada,
and a third office was opened in Costa Mesa, California in August 1999. These
offices are part of a planned series of efficient, high technology facilities
based on a dynamically improved business model in the real estate financing
industry. The model uses modern website and network technologies and procedures
to speed up the loan process, reduce costs and increase client satisfaction.
15
<PAGE> 16
The technology involves extensive use of the Internet, both as a channel
to the Company's retail customers and business-to-business connectivity among
its offices and associate relationships. This subsidiary has selected LION
(Lenders Interactive Online Network) as its on-line mortgage server. E-Net
Mortgage has an Internet site accepting retail loan applications. E-Net Mortgage
can also initiate real-time loan program searches. The LION loan search database
is updated daily and represents 400,000 to 600,000 pricing variants from up to
80 wholesale lenders on a regional basis with over 400 wholesale lenders in
total). This is significant benefit for the Company's clients and a major
competitive advantage for E-Net Mortgage Corporation.
The prototypical office consists of a two-person crew and incorporates
the latest in technology, software and processes. The crewmembers are
independent contractors and remunerated on a percentage basis per funded loan.
E-Net Mortgage also has customized procedural relationships with strategic
partners that provide loan processing, credit, title, escrow and funding
services. As strategic partners, e-Net does not incur any overhead expenses
normally associated with these services, rather the costs are paid for on a
transactional basis. The Silicon Valley satellite office represents a successful
beta test for an improved business model in the industry. Compared to industry
standard, e-Net's model offers lower operating costs, higher production levels,
and enhanced profitability.
City Pacific International, U.S.A., Inc. is a telecommunications
company. It is engaged in the business of providing access to the Internet, as
an Internet service provider (ISP) to both commercial clients and to
individuals. It will market this service aggressively in under-served markets,
worldwide. It will build an integrated network to interface with
16
<PAGE> 17
the backbone of the Internet through both acquisition and original development.
On March 19, 1999 City Pacific International, U.S.A., Inc. negotiated a
joint venture partnership contract with Omnetrix International Inc., a Los
Angeles-based communications company. One of the first projects to be launched
is the "500 Minute Prepaid Calling Card."
The card provides fifteen cent per minute calls within the continental
United States and additionally provides international service at unusually
competitive rates. Marketing strategies are aimed at corporations, and
businesses as well as public consumers. Advertising is through Internet ads, the
Omnetrix web site, print media, and direct mail.
City Pacific International, U.S.A., Inc. through its joint venture
partner Omnetrix is also involved in traditional telecommunications services as
a carrier of long distance service. In addition the Omnetrix joint venture
provides carrier services: international termination, switch co-location,
billing and customer service.
On April 20, 1999, the company entered into a letter of intent to joint
venture the purchase and development of residential healthcare facilities with
Genesis Development in California and other states. Genesis will be providing
in-depth planning and study for a highly innovative national program for the
21st century by creating well planned communities that provide the best services
in healthcare, social, spiritual, and financial benefits at an affordable cost.
The result of this cost-effective program will generate a substantial return on
investment while still providing the best in senior care.
The company engaged Atlantic Union Distribution Ltd. as an
investment-banking consultant to access $20,000,000 from foreign sources under a
limited partnership agreement to finance the Genesis project. Under this
partnership agreement, the Company will act as the general partner and pledge
its preferred stock as security for investors. The terms and conditions of this
class of preferred stock have not yet been determined.
17
<PAGE> 18
ITEM 7. FINANCIAL STATEMENTS
(To Be Filed Supplementally)
In May 1999, Gary Case, CPA, Brea, CA was retained to produce audited financial
statements for the year ended April 30, 1999. Mr. Case resigned July 16, 1999
having determined that he was not technically able to perform the work. The firm
of Cacciamatta Accountancy Corporation was promptly retained on July 23, 1999 to
produce the required financial statements reports. Audited financial statements
are currently being developed.
18
<PAGE> 19
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On April 30, 1998 R. E. Bassie & Co., the Registrant's independent
accountant for the Registrant's three most recent fiscal years, resigned. The
Registrant's financial statements for the last three fiscal years (the years
ending April 30, 1996, 1997 and 1998) prepared by R. E. Bassie & Co. contained
no adverse opinion or disclaimer of opinion, or was qualified as to uncertainty,
audit scope, or accounting principles.
There were no disagreements within the last three fiscal years and
subsequent periods with R. E. Bassie & Co. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope of
procedure, which disagreement(s), if not resolved to the satisfaction of R. E.
Bassie & Co. would have caused that firm to make reference in connection with
its reports to the subject matter of the disagreement(s) or any reportable
events.
Also on July 23, 1999, the Registrant engaged the accounting firm of
Cacciamatta Accountancy Corporation as the independent public accountants to
audit the Registrant's fiscal year ended April 30, 1999, as well as future
financial statements, to replace the firm of R. E. Bassie & Co. This change in
independent accountants was approved by the Board of Directors of the
Registrant.
19
<PAGE> 20
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors are elected for one-year terms or until the next annual
meeting of shareholders and until their successors are duly elected and
qualified. Officers continue in office at the pleasure of the Board of
Directors.
The Directors and Officers of the Company as of the date of this report
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael Roth President, Director
Theodore A. Bohrer Vice President, Director
Jean Oliver Secretary/Treasurer
</TABLE>
All Directors of the Company will hold office until the next annual meeting of
the shareholders and until successors have been elected and qualified. Officers
of the Company are elected by the Board of Directors and hold office until their
death or until they resign or are removed from office.
There are no family relationships among the officers and directors.
There is no arrangement or understanding between the Company (or any of its
directors or officers) and any other person pursuant to which such person was or
is to be selected as a director or officer.
(b) RESUMES
Set forth below is biographical information about each of the Company's
executive officers, and a key employee of one of the Company's subsidiaries.
MICHAEL ROTH has served as President and Director of the Company since April
1999. He has also served as President and Director of E-Net Mortgage Corporation
since March 1, 1998. He has had over 13 years experience in real estate lending
and consumer finance including branch management positions with Standard
Financial Services and TransAmerica, with experience in networking,
underwriting, customer service and sales in FNMA and Freddie Mac Loans.
THEODORE A. BOHRER has served as Vice President and Director of the Company
since April 1999. He has also served as Vice President and a Director of E-Net
Mortgage Corporation since February 1, 1999. Mr. Bohrer's career in financial
institutions and information services has spanned 25 years after serving as a
Naval Lieutenant Commander. Before joining E-Net Mortgage as broker of record,
his most recent position involved developing Net Fund, a mortgage company in San
Jose. Positions in the financial community include banking experience as Vice
President and broker of record of San Francisco Bancorp from 1980-83, Director
for State Wide Thrift and Loan Association (F.D.I.C. approved) 1984-88; and
founder and President of Concept 2001 from 1989-1997.
JEAN OLIVER has been Secretary/Treasurer and Controller of the Company and E-Net
Mortgage Corporation since April, 1999. From February 1996 to March 1999 she
served as Comptroller for Copp Materials, Inc., a rock crushing company. From
October 1994 to January 1996 she served as Comptroller for Rar-Bro, Inc., a
construction firm. From August 1993 through September 1994 she served as
Comptroller for Pacific Print Works, a silk screen printing company.
20
<PAGE> 21
E.G. MARCHI has been President, Secretary/Treasurer and sole Director of City
Pacific International, U.S.A., Inc., a wholly owned subsidiary of the Company,
since April 1999. From 1997 through 1998, in addition to his executive
consulting business, Mr. Marchi served as Chief Executive Officer of a publicly
held company, Alliance Biotechnology International, where he directed its
activities towards its ultimate sale and merger. From 1994 through 1997, he was
general partner of American Capital Growth, where he assisted in capitalization
and starting an investment banking organization raising over 7 million dollars
to finance emerging companies through IPO's. From 1983 through 1994 he
subsequently established and operated a management consulting practice providing
service to a variety of industries, including serving in short term full time
positions as a top executive for a variety of clients, specializing in mergers,
acquisitions, divestitures, and capital formation.
Mr. Marchi is a seasoned business executive whose early career has included
positions as a corporate marketing executive with IBM from 1957 to 1969, and
from 1969 to 1977 as vice-president of Marketing for Greyhound Corporation and
vice-president and founder of the Government Services Division for Greyhound.
From 1977 to 1980 served as President of Control Information, Inc., a
manufacturing consulting company, where he successfully conducted and expanded
this 30 member business, and ultimately sold this enterprise to a national
consulting corporation. From 1980 to 1983 he was Vice President of South Pacific
Industries, a plastic manufacturing company where he directed its growth,
internally and through acquisitions, developing sales to over 12 million dollars
annually.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and person who own more than 10% of the Company's
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. All of the aforesaid persons are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. As of the date of this report, the Company has not received any such
filings from the applicable persons responsible for filing these reports.
However, it is believed that there has been no change in each applicable
persons' ownership of the Company's securities since they acquired the same.
ITEM 10. EXECUTIVE COMPENSATION.
REMUNERATION
The following table reflects all forms of compensation for services to
the Company for the fiscal year ended April 30, 1999 for the chief executive
officer of the Company.
21
<PAGE> 22
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------
Annual Compensation Awards Payouts
--------------------- -------------------- -------
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------- ---- ------ ----- ------ -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael Roth
President & 1999 $ 0 $ 0 $ 0 $ 0 0 $ 0 $ 0
Director(1)
</TABLE>
- -------------------------
(1) Mr. Roth assumed his positions with the Company in April 1999 under the
terms of the Share Exchange Agreement and Plan of Reorganization with E-Net
Mortgage Corporation and City Pacific International, U.S.A., Inc. See "PART I,
Item - Description of Business."
The Company maintains a policy whereby the directors of the Company may
be compensated for out of pocket expenses incurred by each of them in the
performance of their relevant duties. The Company did not reimburse any director
for such expenses during the fiscal year ended April 30, 1999.
In addition to the cash compensation set forth above, the Company
reimburses each executive officer for expenses incurred on behalf of the Company
on an out-of-pocket basis. The Company cannot determine, without undue expense,
the exact amount of such expense reimbursement. However, such reimbursements did
not exceed, in the aggregate, $1,000 during fiscal year 1999.
The Company or its principal subsidiaries have executed the following
employment agreements: (a) the Company has executed a one year employment
agreement with Michael Roth effective August 1, 1999 to act as President of the
Company and E-Net Mortgage Corporation at an annual salary of $78,000; Mr. Roth
has also received options to acquire 100,000 shares of the common stock of the
Company at $1.00 per share, which vest on the first anniversary date of his
employment agreement; (b) the Company has executed a one year employment
agreement with Theodore Bohrer effective August 1, 1999 to act as Vice President
of the Company and E-Net Mortgage Corporation at an annual salary of $78,000;
Mr. Bohrer has also received options to acquire 75,000 shares of the common
stock of the Company at $1.00 per share, which vest on the first anniversary
date of his employment agreement;(c) the Company has executed a one year
employment agreement with Jean Oliver effective August 1, 1999 to act as
Secretary/Treasurer and Comptroller of the Company at an annual salary of
$71,500. Ms. Oliver has also received options to acquire 50,000 shares of the
common stock of the Company at $1.00 per share, which vest on August 1, 2000;
and (d) City Pacific International U.S.A., Inc has executed a one year
employment agreement with E.G. Marchi effective August 1, 1999 to act as
President of this subsidiary at an annual salary of $78,000; Mr. Marchi has also
received options to acquire 100,000 shares of the common stock of the Company at
$1.00 per share, which vest on the first anniversary date of his employment
agreement.
22
<PAGE> 23
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) and (b) Security Ownership of Certain Beneficial Owners and
Management.
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner of
more than 5% of such securities, as well as by all directors and officers of the
issuer. Unless otherwise indicated, the shareholders listed possess sole voting
and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NAME AND AMOUNT AND
ADDRESS OF NATURE OF
BENEFICIAL BENEFICIAL PERCENT OF
TITLE OF CLASS OWNER OWNER CLASS
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Common H-Group, LLC(1) 2,000,000 44.44%
3601 Empire Avenue
Burbank, CA 91505
Common Jim Thuney 791,600 17.59%
11017 NE Sherwood Dr.
Vancouver, WA 98686
Common Joseph J. Thuney 600,000 13.33%
11506 NE 33rd Ave.
Vancouver, WA 98686
Common Michael Roth(1)(2) 2,000,000 -
2102 Business Center Dr.,
Suite 115E
Irvine, CA 92612
Common E.G. Marchi(2) 500,000 11.11%
2102 Business Center Dr.,
Suite 115E
Irvine, CA 92612
Common Dovecote Ltd. 405,600 9.01%
Watergardens 5, Suite 14
Gibralter
Common Theodore A. Bohrer(2) 0 -
2102 Business Center Drive,
Suite 115E
Irvine, CA 92612
Common Jean Oliver(2) 0 -
2102 Business Center Drive,
Suite 115E
Irvine, CA 92612
Common All Officers and 2,500,000 55.55%
Directors as a
Group (4 persons)(3)
- -----------------------------------------------------------------------------
</TABLE>
(1) Michael Roth is the beneficial owner of 100% of the equity
interests in H-Group, LLC.
(2) Officer and/or director.
(3) Includes E.G. Marchi who is President and Director of one of the
Company's wholly owned subsidiaries, City Pacific International, U.S.A., Inc.
23
<PAGE> 24
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The following related party transactions occurred during the past fiscal
year and through the period ending July 31, 1999:
On March 1, 1999, Michael Roth, President of the Company, executed an equipment
lease for office equipment and furniture with E-Net Mortgage Corporation for a
term expiring February 28, 2004 and a monthly lease payment of $500.
On March 11, 1999 Michael Roth, President of the Company, loaned E-Net Mortgage
Corporation $2,950 for a term of 90 days which term has been extended through
September 11, 1999 10% interest. The balance due on the loan as of July 31, 1999
was $3,066.56.
Commencing on March 16, 1999 through July 31, 1999 a total of $70,550 in 20
advances was loaned by Market Ability, Incorporated, an Affiliate of E.G.
Marchi, President of City Pacific International U.S.A., Inc. to City Pacific
International U.S.A., Inc. for a term of 90 days, which term has been extended
for an additional 90 days for all unpaid advances, at 10% interest. The balance
due on the loans as of July 31, 1999 was $66,341.74.
On March 25, 1999 Lohr Group Limited, an Affiliate of Theodore Bohrer, Vice
President of the Company, loaned E-Net Mortgage Corporation $3,500 for a term of
90 days, at 10% interest. The balance due on the loan as of July 31, 1999 was
$0.
On March 31, 1999 City Pacific International U.S.A., Inc. sold $4,550 of
communication equipment to the Company. The current balance due to City Pacific
related to this sale, as of July 31, 1999 was $4,704.00.
On April 9, 1999, Lohr Group Limited, an Affiliate of Theodore Bohrer, Vice
President of the Company, loaned E-Net Mortgage Corporation $5,000 for a term of
90 days, at 10% interest. The balance due on the loan as of July 31, 1999 was
$0.
On April 17, 1999, Lohr Group Limited, an Affiliate of Theodore Bohrer, Vice
President of the Company, loaned E-Net Mortgage Corporation $10,000 for a term
of 90 days, at 10% interest. The balance due on the loan as of July 31, 1999 was
$0.
Commencing on April 23 through April 30, 1999 a total of $6,500 in three
advances was loaned by Lohr Group Limited, an Affiliate of Theodore Bohrer, Vice
President of the Company, to City Pacific International U.S.A., Inc. for a term
of 90 days, which term has been extended for an additional 90 days for all
unpaid advances, at 10% interest. The balance due on the loans as of July 31,
1999 was $6,670.41.
24
<PAGE> 25
On May 13, 1999, Lohr Group Limited, an Affiliate of Theodore Bohrer, Vice
President of the Company, loaned the Company $15,000 for a term of 90 days,
which term has been extended for an additional 90 days through November 13, 1999
at 10% interest. The balance due on the loan as of July 31, 1999 was $15,326.95.
Commencing on May 17, 1999 through July 28, 1999 a total of $22,500 in five
advances was loaned by Market Ability, Incorporated, an Affiliate of E.G.
Marchi, President of City Pacific International U.S.A., Inc. to the Company for
a term of 90 days, which term will be extended for an additional 90 days for all
unpaid advances, at 10% interest. The balance due on the loans as of July 31,
1999 was $14,664.92.
On May 21, 1999, Lohr Group Limited, an Affiliate of Theodore Bohrer, Vice
President of the Company, loaned E-Net Mortgage Corporation $13,000 for a term
of 90 days, at 10% interest. The balance due on the loan as of July 31, 1999 was
$9,397.26.
On June 7, 1999 Foothill Equities Corporation, an Affiliate of Jim Thuney, a
former director and current 5% shareholder, loaned the Company $3,000 for a term
of 90 days at 10% interest.
On June 14, 1999, June 22, 1999 and June 28, 1999, respectively, Market Ability
Incorporated, an Affiliate of E.G. Marchi, President of City Pacific
International U.S.A., Inc. loaned E-Net Mortgage Corporation a total of $12,000
for a term of 90 days at 10% interest. The balance due on the loan as of July
31, 1999 was $12,135.07.
25
<PAGE> 26
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
2.0 Letter of Intent between the Company and Suarro Communications,
Inc. as filed in the Exhibits to Form 8-K, on or about June 6,
1996.*
2.1 Plan of Reorganization between the Company and Suarro
Communications, Inc. as filed in the Company's Definitive Proxy
Statement on or about August 16, 1996.*
2.2 Rescission Agreement dated September 9, 1997 in the Company's
Form 10- KSB filed on or about January 4, 1998.*
2.3 Share Exchange Agreement and Plan of Reorganization dated March
1, 1999 between the Company and E-Net Mortgage Corporation.
2.4 Share Exchange Agreement and Plan of Reorganization dated March
1, 1999 between the Company and City Pacific International,
U.S.A, Inc.
3.1 Certificate and Articles of Incorporation, as filed in the
Exhibits to Form 10-SB, on or about September 1, 1994.*
3.2 Bylaws, as filed in the Exhibits to Form 10-SB, on or about
September 1, 1994.*
3.3 Certificate of Amendment to Articles of Incorporation in the
Company's Form 10-KSB filed on or about January 4, 1998.*
3.4 Certificate of Amendment to Articles of Incorporation in as
filed with the Nevada Secretary of State on or about February
19, 1999.
3.5 Certificate of Amendment to Articles of Incorporation as filed
with the Nevada Secretary of State on May 12, 1999.
10.1 Joint Venture Agreement between City Pacific International
U.S.A., Inc. and Omnetrix International, Inc. dated February 25,
1999.
10.2 Limited Partnership Agreement between the Company and Genesis
Residential Healthcare, Inc. dated July 1, 1999.
10.3 Employment Agreement between the Company and Michael Roth, dated
March 1, 1999.
10.4 Employment Agreement between the Company and Theodore A. Bohrer
dated March 1, 1999.
10.5 Employment Agreement between the Company and Jean Oliver dated
March 22, 1999.
10.6 Employment Agreement between City Pacific International U.S.A.,
Inc. and E.G. Marchi dated March 1, 1999.
16.1 Letter from Kish, Leake & Associates, P.C., resigning as
independent accountant for the Company in Company's Form 8-K
filed on or about August 28, 1996.*
21.1 Subsidiaries of E-Net Financial Corporation.
23.1 Consent of Cacciamatta Accountancy Corporation.**
27 Financial Data Schedule Year Ended April 30, 1999.**
----------------
* Previously filed.
** To be filed by amendment.
26
<PAGE> 27
(b) Reports on Form 8-K
The Company did not file a report on Form 8-K dated March 5, 1999.
27
<PAGE> 28
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company caused this amendment to its report to be signed on its behalf
by the undersigned, thereunto duly authorized, on August 13, 1999.
E-NET FINANCIAL CORPORATION
f/k/a E-NET CORPORATION and SUARRO
COMMUNICATIONS, INC.
(Registrant)
By: /s/ Michael Roth
--------------------------------------------
Michael Roth, President
In accordance with the Exchange Act, this amendment to its report has
been signed below by the following persons on behalf of the Registrant and in
the capacities indicated on August 13, 1999.
/s/ Michael Roth
- ---------------------------------
Michael Roth, Director
/s/ Theodore A. Bohrer
- ---------------------------------
Theodore A. Bohrer, Director
28
<PAGE> 1
EXHIBIT 2.3
SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, made and entered into this 1st day of March, 1999, by
and between E-Net Corporation, Inc.(formerly Suarro Communications, Inc.)
("Public Company"), a publicly held Nevada corporation, and E-Net Mortgage Corp.
("Company"), a privately held Nevada corporation ("Company") and the individuals
listed on Exhibit "A" attached hereto and specifically incorporated herein by
this reference (the "Company Shareholders").
WITNESSETH:
WHEREAS, Public Company desires to acquire all of the issued and
outstanding capital stock of Company; and
WHEREAS, the Company Shareholders are the sole holders of all Company's
capital stock outstanding and they desire to transfer the same to Public Company
in exchange for such consideration as is set forth herein; and
WHEREAS, it is the intention of the parties to this Agreement that the
transactions evidenced hereby qualify as a reorganization pursuant to such
sections of the Internal Revenue Code of 1954, as amended (the "Code"), as are
applicable, including, without limitation, Section 368(a)(1)(b) thereof, and
that there not be a taxable gain or loss recognized by Public Company, Company
or the Company Shareholders upon consummation of the transactions evidenced
hereby; and
WHEREAS, the transactions evidenced hereby are to be submitted for
approval at a special meeting of the Board of Directors of Public Company and
Company and by the Company Shareholders by unanimous consent, dated on even date
herewith;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, terms and conditions set forth herein, and such other and
further consideration, the receipt and sufficiency of which is hereby
acknowledged, this Agreement is adopted as a reorganization pursuant to the Code
and THE PARTIES AGREE AS FOLLOWS:
1
<PAGE> 2
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF PUBLIC COMPANY
Public Company represents and warrants to Company and the Company
Shareholders as follows:
1.1 COMPANY PROFILE; ASSETS AND LIABILITIES. Public Company is not
currently conducting, and has only engaged in the business as set forth in its
reports on Form 10-KSB, 10-QSB and 8-K. Other than the costs associated with the
transaction proposed herein, Public Company has only those liabilities shown in
its most recent 10-KSB.
1.2 FINANCIAL STATEMENTS. Public Company has delivered audited financial
statements dated, and for the period ended April 30, 1998.
1.3 ABSENCE OF CERTAIN CHANGES. Since the date of the most recent
financial statements delivered hereunder, Public Company has not:
(a) Suffered any material and adverse change in its financial condition,
working capital, assets, liabilities, reserves, business, operations or
prospects;
(b) Suffered any loss, damage, destruction or other casualty materially
and adversely affecting any of its properties, assets or business (whether or
not covered by insurance);
(C) Borrowed or agreed to borrow any funds or incurred, or assumed or
become subject to, whether directly or by way of guarantee or otherwise, any
obligation or liability, except as related to the costs associated with the
proposed transaction herein and to its transfer agent;
(d) Paid, discharged or satisfied any claims, liabilities or
obligations, other than in the normal course of its business;
(e) Permitted or allowed any of its property or assets (real, personal
or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind;
(f) Canceled any debts or waived any claims or rights of substantial
value, or sold, transferred, or otherwise disposed
2
<PAGE> 3
of any of its properties or assets (real, personal or mixed, tangible or
intangible);
(g) Granted any increase in the compensation of directors, officers or
employees (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment), or any increase in the compensation
payable or to become payable to any director, officer or employee;
(h) Made any capital expenditure or commitment outside of its normal
course of business;
(i) Declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or, directly or indirectly,
redeemed, purchased or otherwise acquired any shares of its capital stock or
other securities, other than as required hereunder;
(j) Made any change in any method of accounting or accounting practice;
(k) Paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible), to, or entered into any affiliate or associate of any of its
directors or officers, except for directors' fees and compensation to officers
at rates set forth in any Form 10-K or 10-KSB of Public Company filed with the
Securities and Exchange Commission, none of which shall result in any liability
or indebtedness which shall survive this closing;
(l) Entered into any transaction, contract or commitment, other than as
disclosed herein;
(m) Been subject to any other event or condition of any character that
has or might reasonably have a material and adverse effect upon the financial
condition, business, assets or properties of Public Company;
(n) Agreed, whether in writing or otherwise, to take any action other
than as described in this Agreement.
1.4 AFFIRMATIVE REPRESENTATIONS REGARDING ACTION OF PUBLIC COMPANY
BETWEEN DATE OF FINANCIAL STATEMENTS DELIVERED AND CLOSING. Between the date of
the most recent financial statements delivered hereunder and the date of this
Agreement, Public Company has conducted its business in the same
3
<PAGE> 4
manner as conducted before the date of such financials. Public Company will
continue to conduct its business in the same manner as conducted before the date
of the financial statements through the date of closing, as defined hereinbelow.
1.5 EMPLOYMENT AGREEMENTS; BENEFIT PLANS. There is not currently any
employment or severance agreement to which Public Company was or is subject, or
by which it was or is bound. Further, no such agreements will arise in the
future as a result of acts which have occurred previous to, or concurrent with,
the date hereof. Further, Public Company is not subject to, nor has it
established, a benefit plan, whether pursuant to the Code or otherwise, other
than disclosed in Public Company's Prospectus. No shares of common stock,
options to acquire common stock or other benefits have been issued under, or
pursuant to, any such plan or arrangement.
1.6 PERMITS AND LICENSES. The business of Public Company has complied
and currently complies in all material respects with all applicable laws and
regulations and with its Prospectus. Further, the business of Public Company
does not currently require, and has not in the past required, application to
procure any license, permit, franchise, order or approval.
1.7 LITIGATION. There is no litigation or proceeding pending or
threatened against or relating to Public Company or its business. There is no
factual basis, whether known or unknown, for any claim or action to be
threatened or asserted against Public Company.
1.8 CONTRACTS, AGREEMENTS AND LEASES. Other than its agreement with its
legal counsel and transfer agent, Public Company is not a party to any
contracts, agreements, permits, licenses, plans, leases or similar arrangements.
The obligations of Public Company owed to its legal counsel and transfer agent
will be paid in full through closing by Public Company, without exception.
1.9 PRINCIPAL SHAREHOLDERS. Public Company has previously provided to
Company or its counsel a current list of its shareholders and as of the date of
this Agreement and affirmatively states that no additional shares have been
issued by the Board of Directors of Public Company, nor is issuance of such
additional shares contemplated as of the date of this Agreement, other than as
described herein. The shareholder list delivered to Company is, to best
knowledge of management, accurate and complete as of the Closing Date herein.
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1.10 AUTHORIZATION. Public Company has duly taken all corporate action
necessary to authorize the execution and delivery of this Agreement, the
consummation of the transactions evidenced hereby and the performance of its
obligations hereunder.
1.11 ENFORCEABLE OBLIGATIONS. This Agreement is a legal and binding
obligation of Public Company, enforceable in accordance with the terms hereof,
except as limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights and general equitable
principles.
1.12 NO CONFLICTS OR CONSENTS. The execution and delivery by Public
Company of this Agreement and the performance of its obligations have not
conflicted and will not conflict with any provision of law, statute, rule or
regulation or any judgment applicable to or binding upon Public Company, nor
will it result in the creation of any lien, charge or encumbrance. No consent,
approval, authorization or order of any court or governmental authority or third
party has been or is required in connection with the execution and delivery by
Public Company of this Agreement or the consummation of the transactions
evidenced hereby. Neither the execution nor the consummation of this Agreement
in accordance with the terms and conditions set forth herein has conflicted or
will conflict with or constitute a default under or a breach or violation or
grounds for termination of or an event which with the lapse of time or notice
and the lapse of time could or would constitute a default under the Articles
(Certificate) of Incorporation or bylaws of Public Company.
1.13 ORGANIZATION AND GOOD STANDING. Public Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has all corporate powers required to carry on its business
and enter into and carry out the transactions evidenced herein. Public Company
is qualified to do business and is in good standing as a foreign corporation in
all jurisdictions wherein the character of the properties owned or held by it or
the nature of the business transacted makes such qualification necessary. As of
the date hereof, Public Company does not have any subsidiaries or interests in
any corporation, partnership, limited partnership or other business entity.
1.14 CAPITALIZATION. Prior to execution of this
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Agreement, the shareholders of Public Company have adopted certain resolutions,
including ratifying a two to one (2 to 1)forward split of the Public Company
common stock. As a result of the adoption of these resolutions and amendments,
the authorized capital stock of Public Company now consists of 20,000,000 shares
of common stock, $.001 par value, of which 2,000,000 of such shares are issued
and outstanding,(post-split) all fully paid for and nonassessable, and no shares
of preferred stock are issued or otherwise outstanding. All references to the
capitalization of Public Company in this Agreement reflect the changes so
authorized by the Public Company shareholders.
Public Company has no other outstanding rights, options, warrants, contracts,
commitments or demands of any character which would require the issuance (or
transfer out of treasury), by Public Company of any shares of its capital stock,
other than the agreement with City Pacific Group, Inc., of which Company is
aware. All outstanding securities were issued in accordance with applicable
federal and state securities laws or exemptions therefrom. The Public Company
Prospectus was duly registered with the U.S. Securities and Exchange Commission
("SEC") and all applicable state securities departments (collectively referred
to as "State Registrations"). All SEC and State Registrations complied with all
applicable laws, rules and regulations. No claims or actions have been
threatened or asserted arising out of, or concerning, the Prospectus, SEC
Registrations, State Registrations or the sale of securities of Public Company.
1.15 FILING OF REPORTS. Public Company is presently current (if
required) in the requirement to file all Form 10-KSB and 8-K reports required to
be filed pursuant to the Securities Exchange Act of 1934, as amended. However,
it is delinquent in the filing of its 10-QSB Reports which are in process.
Further, Public Company has filed all required reports of application of
proceeds with all applicable state securities departments on the appropriate
forms and will, prior to or at Closing, file the final Form SR with the SEC. All
forms, filings and reports, including but not limited to the Prospectus, filed
by Public Company with the SEC and each state securities department were
complete and accurate and contained no material misstatements or omissions of a
material fact.
1.16 TAX FILINGS. Public Company has not filed all federal, state, local
and foreign tax reports and returns required to be filed by it and has not duly
paid all taxes and other charges due or claimed to be due from it by any
federal, state, local or foreign tax authorities. Further, the reserve
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for taxes, if any, reflected in the balance sheet delivered hereunder is
adequate and there are no tax liens upon any property or assets of Public
Company. Further, no state of facts exists or has existed which would constitute
grounds for the assessment of any significant tax liability. All deficiencies
and assessments resulting from an examination of state, local, federal and
foreign tax returns and reports have been paid. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any federal, state, local, or foreign tax return or report for any period.
Public Company is not a "consenting corporation" within the meaning of Section
341(f)(1) of the Code.
1.17 COMPLIANCE WITH LAW. Public Company is in compliance with all laws,
regulations and orders applicable to its business, including but not limited to,
all applicable laws, rules and regulations of the U.S. Securities and Exchange
Commission and all applicable state securities departments. Further, Public
Company has not received any notification that it is in violation of any laws,
regulations or orders and, to the best knowledge of management of Public
Company, no such violations exist. Neither Public Company nor any employee or
agent of Public Company has made any payment to any person which violates any
statutes or law required to be disclosed under applicable disclosure policies of
the Securities and Exchange Commission.
1.18 DISCLOSURE. No representations or warranties by Public Company in
this Agreement and no statement contained in any document (including, without
limitation, financial statements), certificate or other writing furnished or to
be furnished by Public Company to Company or the Company Shareholder pursuant to
the provisions hereof or in connection with the transactions contemplated
hereby, contained or will contain any untrue statement of material facts or
omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. There are no facts known to Public Company which,
either individually or in the aggregate, could or would materially and adversely
affect or involve any substantial possibility of having a material and adverse
effect on the condition (financial or otherwise), results of operations, assets,
liabilities or business of Public Company.
1.19 OFFICERS' CERTIFICATES. At closing, the President of Public Company
shall provide a Certificate, dated as of the closing date and certified by the
Secretary of Public Company,
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to the effect that:
(a) Public Company is not currently conducting, and has never been
engaged in, any business other than set forth in its public filings.
(b) Public Company has delivered audited financial statements dated, and
for the fiscal year ended, April 30, 1998, together with all Notes thereto,
prepared in reasonable detail in accordance with generally accepted accounting
principles applied on a consistent basis, which financial statements contain a
balance sheet dated April 30, 1998, and the following statements for the period
then ended: a statement of operations, a statement of stockholders' equity, and
a statement of cash flows. Further, Public Company has delivered, or will
deliver upon request of Company, all books and records, as well as all required
substantiating documentation, to Company, which are necessary to compile
financial statements for periods subsequent to the date of, and the periods
covered by, the most recent financial statements delivered hereunder. Further,
Public Company has delivered, or otherwise made available, true and correct
copies of the Articles of Incorporation and bylaws of Public Company, minutes of
all meetings of its directors and shareholders, true and correct copies of all
filings made in respect of Public Company's initial public offering and such
other and further material as has been requested.
(c) Since the date of the most recent financial statements delivered
hereunder, Public Company has not (unless otherwise described herein):
(1) Suffered any material and adverse change in its financial condition,
working capital, assets, liabilities, reserves, business, operations or
prospects;
(2) Suffered any loss, damage, destruction or other casualty materially
and adversely affecting any of its properties, assets or business (whether or
not covered by insurance);
(3) Borrowed or agreed to borrow any funds or incurred, or assumed or
become subject to, whether directly or by way of guarantee or otherwise, any
obligation or liability;
(4) Paid, discharged or satisfied any claims, liabilities or
obligations, other than in the ordinary course of its business;
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(5) Permitted or allowed any of its property or assets (real, personal
or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind;
(6) Canceled any debts or waived any claims or rights of substantial
value, or sold, transferred, or otherwise disposed of any of its properties or
assets (real, personal or mixed, tangible or intangible);
(7) Granted any increase in the compensation of directors, officers or
employees (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment) or any increase in the compensation
payable or to become payable to any director, officer or employee;
(8) Made any capital expenditure or commitment other than in the normal
course of its business or as disclosed herein;
(9) Declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or, directly or indirectly,
redeemed, purchased or otherwise acquired any shares of its capital stock or
other securities, other than as required hereunder to consummate the transaction
proposed herein;
(10) Made any change in any method of accounting or accounting practice;
(11) Paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of its
directors or officers or any affiliate or associate of any of its directors or
officers;
(12) Entered into any transaction, contract or commitment other than as
described in the Public Company public filings, the City Pacific Group, Inc.
transaction or as otherwise previously described to Company;
(13) Been subject to any other event or condition of any character that
has or might reasonably have a material and adverse effect upon the financial
condition, business, assets or properties of Public Company;
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(14) Agreed, whether in writing or otherwise, to take any action
described in this paragraph of the Agreement;
(d) Between the date of the most recent financial statements delivered
hereunder and the date of this Agreement, Public Company has conducted its
business in the same manner as conducted before the date of such financials and
in accordance with the Public Company Business Plan described in its Prospectus.
(e) There is not currently any employment or severance agreement to
which Public Company was or is subject, or by which it was or is bound. Further,
no such agreements will arise in the future as a result of acts which have
occurred previous to, or concurrent with, the date hereof.
(f) There is no litigation or proceeding pending or threatened against
or relating to Public Company, or its business.
(g) Public Company is not a party to any contract, agreement, permit,
license, plan, lease or similar arrangement which will survive closing, other
than its existing agreement with its transfer agent and the City Pacific Group,
Inc. Agreement.
(h) The execution and delivery by Public Company of this Agreement and
the performance of its obligations have not conflicted and will not conflict
with any provisions of law, statute, rule or regulation or any judgment
applicable to or binding upon Public Company, nor will it result in the creation
of any lien, charge or encumbrance. No consent, approval, authorization or order
of any court or governmental authority or third party has been or is required in
connection with the execution and delivery by Public Company of this Agreement
or the consummation of the transactions evidenced hereby. Neither the execution
nor the consummation of this Agreement in accordance with the terms and
conditions set forth herein, has conflicted or will conflict with or constitute
a default under or a breach or violation or grounds for termination of or an
event which with the lapse of time or notice and the lapse of time could or
would constitute a default under the Articles of Incorporation, as amended, or
bylaws of Public Company.
(i) Public Company is in compliance with all laws,
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regulations and orders applicable to its business. Further, Public Company has
not received any notification that it is in violation of any laws, regulations
or orders and no such violations exist. Neither Public Company, nor any employee
or agent of Public Company, has made any payment to any person which violates
any statutes or law required to be disclosed under applicable disclosure
policies of the Securities and Exchange Commission.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF COMPANY AND THE COMPANY SHAREHOLDERS
Company and the Company Shareholders represent and warrant to Public
Company as follows:
2.1 ORGANIZATION AND GOOD STANDING. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all corporate powers required to carry on its business. Company
is qualified to do business and is in good standing as a foreign corporation in
all jurisdictions wherein the character of its properties or the nature of its
business makes such qualification necessary.
2.2 AUTHORIZATION. The Company Shareholders have duly taken all action
necessary to authorize the execution and delivery of this Agreement and to
authorize the consummation of the transactions evidenced hereby and the
performance of their obligations and the obligations of Company hereunder.
2.3 NO CONFLICTS OR CONSENTS. The execution and delivery by the Company
Shareholders of this Agreement and their performance of those obligations set
forth herein have not conflicted and will not conflict with any provision of
law, statute, rule or regulation or of any agreement or judgment applicable to
or binding upon them or Company, or result in the creation of any lien, charge
or encumbrance upon any of their assets or properties, or upon those of Company.
No consent, approval, authorization or order of any court or governmental
authority or third party is required in connection with the execution and
delivery by Company, or by the Company Shareholders, of this Agreement or the
consummation of the transactions evidenced hereby. Neither the execution of this
Agreement nor its consummation in accordance with its terms has conflicted or
will conflict with or constitute a default under
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or breach or violation or grounds for termination of or an event which with the
lapse of time or notice and the lapse of time would or could constitute a
default under any note, indenture, mortgage, deed of trust or other agreement or
instrument to which Company or the Company Shareholders are a party or by which
either or all of them are bound.
2.4 ENFORCEABLE OBLIGATIONS. This Agreement is a legal and binding
obligation of Company and the Company Shareholders, enforceable in accordance
with its terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to the enforcement of creditor's rights and general
equitable principles.
2.5 CAPITALIZATION. The authorized capital stock of Company consists of
25,000 shares of common stock, of which 1,000 are issued in outstanding and
fully paid for and nonassessable. Company has no outstanding rights, options,
warrants, contracts, commitments or demands of any character which would require
the issuance (or transfer out of treasury), by Company of any shares of its
capital stock. All outstanding securities were issued in accordance with
applicable federal and state securities laws or exemptions therefrom.
2.6 FINANCIAL STATEMENTS. Company shall deliver audited financial
statements dated, and for the period ended, March 1, 1998, together with all
notes thereto, prepared in reasonable detail in accordance with generally
accepted accounting principles applied on a consistent basis, to Public Company
on or before the Closing Date.
2.7 OTHER INFORMATION AND INSPECTIONS. Company has made available for
inspection and copying all books and records of Company and has fully and
completely furnished to Public Company such information as has been requested.
Company is aware of the terms and conditions of the City pacific Group, Inc.
transaction with Public Company and the issuance of 500,000 restricted common
shares of Public Company to the shareholders of City Pacific, Inc., concurrent
with this transaction.
2.8 DISCLOSURE. No representations or warranties by Company or the
Company Shareholders in this Agreement and no statement contained in any
document, certificate or other writing furnished or to be furnished by Company
or the Company Shareholders to Public Company pursuant to the provisions hereof,
or in connection with the transaction contemplated hereby, contained or will
contain any untrue statements of material facts
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or omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. Unanimous consents of the Company Shareholders and
directors were executed, to be effective on or before March 1, 1999. Under the
respective consents, all transactions evidenced hereby obtained the requisite
approval.
ARTICLE III
CLOSING AND EXCHANGE OF SHARES
3.1 TERMS OF THE EXCHANGE. On the Closing Date, or such date as stated
below:
(a) On or before ten (10) days after the Closing Date, Public Company
shall cause to be delivered to the Company Shareholders, in an acceptable form,
certificates for 2,000,000 "restricted" shares, of its $.001 par value voting
common stock (the "Exchange Shares"), free and clear of all mortgages, pledges,
claims, liens and other rights and encumbrances whatsoever, except as disclosed
in 3.1(b), below. The Company Shareholders shall not be diluted as a result of
any debt, lien, encumbrance, action or liability, or any cost or expense related
thereto of Public Company, or any breach of any representation or warranty of
Public Company contained herein ("Subsequent Liabilities"). Accordingly, in
addition to any other remedy, either in law or in equity, the Company
Shareholders shall be issued such additional shares of Common Stock of Public
Company as may be required to off-set any such Subsequent Liabilities. The
number of shares to be issued to the Company Shareholders shall be determined as
follows: (i) in the event shares are sold by Public Company to pay or satisfy
the Subsequent Liabilities, Public Company shall issue such number of shares as
are necessary to maintain the same percentage of ownership by the Company
Shareholders as they had before said issuance; or (ii) in the event Public
Company does not issue additional shares to satisfy the Subsequent Liabilities,
shares equal to the amount of the Subsequent Liabilities, with a market value at
bid price, will be issued to the Company Shareholders.
(b) The Exchange Shares shall not be subject to any preemptive rights,
options or similar rights on the part of any shareholder or creditor of Public
Company, or any other person whatever.
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(c) The Company Shareholders shall, in consideration for their receipt
of the Exchange Shares, transfer and deliver to Public Company certificates
representing all 1,000 of the issued and outstanding Company Shares owned by
them. Public Company shall receive good and merchantable title to the Company
Shares, which shall be transferred to Public Company free and clear of all
liens, mortgages, pledges, claims or other rights or encumbrances whatever.
3.2 RESTRICTIONS ON TRANSFER. The Exchange Shares, when issued and
delivered hereunder, will not be registered under the Securities Act of 1933, as
amended, nor will the Company Shareholders be granted any registration rights
under such Act as to such shares. The Company Shareholders shall execute and
deliver to Public Company an investment letter satisfactory in form and
substance to Public Company's counsel which states, among other things, that the
Exchange Shares have been acquired for investment and with no present intent to
make any resale, assignment, transfer or hypothecation of all or any part
thereof and that the certificates representing the Exchange Shares will bear a
restrictive legend which states in effect that such shares have not been
registered under the Securities Act of 1933, as amended, and consequently may
not be resold, assigned, transferred or hypothecated unless registered under
such Act or, in the opinion of Public Company's counsel, an exemption from the
registration requirements of such Act is available for any such transaction.
3.3 CHANGES IN CAPITALIZATION OF PUBLIC COMPANY. If, between the date of
the most recent financial statements of Public Company delivered to Company and
the Company Shareholders and the Closing Date, the outstanding shares of the
capital stock of Public Company are found to have been increased, decreased,
changed into or exchanged for a different number or kind of said shares or
securities of Public Company through reorganization, reclassification, stock
dividend stock split, reverse stock split or similar change in the
capitalization of Public Company and such has not been disclosed to the Company
Shareholders hereunder, Public Company, at the election of the Company
Shareholders, shall issue and deliver to the Company Shareholders such number of
Public Company shares as will reflect an equitable adjustment of the Public
Company shares specified in Paragraph 1 of this Article III on account of any
such increase, decrease, change or exchange. In the event of any such change in
the capitalization of Public Company, all references to the shares herein shall
refer to the number of Public Company shares as thus adjusted. However, it is
specifically acknowledged, agreed and
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understood that the shareholders of Public Company have conditionally approved a
proposal to undertake a "forward split" of the Public Company common stock,
wherein 2 shares of common stock issued and outstanding will be exchanged for 1
share of common stock, as well as additional matters more specifically stated in
that certain Proxy Statement, which is in progress and which will, when
completed, be attached hereto and incorporated herein as Exhibit "B". The sole
condition to the approval of the aforesaid forward stock split is the successful
consummation of the transaction proposed herein. Public Company shall have no
obligation to issue any additional shares to the Company Shareholders as
described herein as a result of the aforesaid reverse stock split.
3.4 CLOSING DATE/EFFECTIVE DATE. The Closing Date of the transactions
contemplated hereby shall be March 1, 1999, or such later date as the parties
may so choose thereafter. All representations of the parties hereto shall
survive the closing and the representations and warranties shall be made as in
effect on the Closing Date.
The Effective Date shall be the date in which all of the certificates
necessary to effectuate this transaction have been duly issued by the respective
party and all other matters relevant to the closing of the transaction
contemplated herein have been accomplished.
3.5 CLOSING DOCUMENTS.
A. To Be Delivered by Public Company:
(1) Certificates representing 2,000,000 shares of "restricted"
common stock to the Company Shareholders;
(2) Certified copy of minutes of shareholder and directors,
authorizing this transaction;
(3) Certificate of Good Standing;
(4) Opinion of legal counsel acceptable to Company;
(5) Certificate of President;
(6) Resignation letters of Adam Stull, Libbie Stull and George
Unwin as officers and directors, as applicable.
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(B) To be delivered by Company or Company Shareholders:
(1) Certificates representing 1,000 shares of Company, together
with an assignment of said shares, separate from said Certificates;
(2) Certified copy of minutes of shareholders and directors of
Company, authorizing this transaction;
(3) Certificate of Good Standing;
(4) Legal opinion of counsel, acceptable to Public Company;
(5) Certificate of President;
(6) Investment letter from Company Shareholders relating to
issuance of Public Company common stock relevant herein.
ARTICLE V
COVENANTS OF COMPANY AND THE COMPANY SHAREHOLDERS
Company and, insofar as they have the power to direct Company by
ownership of voting securities or otherwise, the Company Shareholders (Company
and the Company Shareholders being collectively referred to below as the
"Company Parties"), covenant and agree that, prior to the Effective Date:
5.01 EFFECTUATION OF THIS AGREEMENT. The Company Parties will use their
best efforts to cause this Agreement to become effective, and all transactions
herein contemplated to be consummated, in accordance with their terms, to obtain
all required consents and authorizations of the Company Parties, to make all
filings and give all notices to those regulatory authorities or other third
parties which may be necessary or reasonably required in order to effect the
transactions contemplated in this Agreement, and to comply with all federal and
state securities laws and other laws as may be applicable to the contemplated
transactions.
5.02 TRANSACTIONS. The Company Parties will carry on Company's business
diligently and substantially in the same manner as heretofore conducted, and
will not enter into any transactions which are not in the ordinary course of
Company's
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business, or which would singly or in the aggregate be materially adverse to
Company's business, prospects or financial condition, taken as a whole, or which
had not been previously disclosed to Public Company.
5.03 CONDUCT OF BUSINESS. (a) The Company Parties will not (I) permit or
do or cause to be done anything which Company has represented in Article II not
to have been done, except as otherwise permitted in this Agreement or consented
to by Public Company in advance and in writing; (ii) make or permit any
amendment to Company's Articles of Incorporation or bylaws; (iii) cause or
permit to be declared or paid any dividend, stock split, combination (reverse
split) or other recapitalization or distribution in respect of Company's common
stock, nor cause or permit the issuance of any additional shares of Company's
common stock; (iv) permit the increase of compensation of any type to any
director or officer or other employee of Company; (v) to the best ability of the
Company Parties, permit or do any act or omission to act the effect of which
would be to breach or violate any contract or commitment to which Company is a
party; (vi) to the best ability of the Company Parties, permit or cause the
waiver of the provisions of any statute of limitations applicable to the levy or
assessment of any federal, state, municipal or foreign taxes payable by Company;
or (vii) organize any subsidiary of Company, or acquire or permit the
acquisition of any equity interest in any other business or entity, with the
exception of those proposed transactions presently in negotiations and disclosed
herein in Exhibit "C".
(b) To the best of their ability, the Company Parties will: (i) maintain
Company's books, accounts, and records as now being maintained, on a consistent
basis; (ii) maintain Company's properties in good repair; (iii) comply with and
not violate any law, rule, regulation, or ordinance whatever applicable to
Company or its business or any license or permit issued to Company; and (iv)
take each and every step necessary to preserve the charter issued by the State
of Florida, including timely filing of corporate reports and current payment of
all taxes now and hereafter due and owing.
5.04 ISSUANCE OF ADDITIONAL SECURITIES. Company shall not issue or
permit the issuance of any common stock of Company or of any warrant, option or
other right to subscribe for or acquire common stock or any other securities
whatever of Company, nor shall any stock option or stock purchase plan,
incentive stock option plan or similar plan be adopted whereby persons could
acquire securities of Company, or any option or
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similar right to acquire such securities.
5.05 PUBLICITY AND FILINGS. All press releases, shareholder
communications, filings with the Securities and Exchange Commission or other
governmental agency or body and other information and publicity generated by
Company regarding the transactions contemplated in this Agreement shall be
reviewed and approved by Public Company and its counsel before release or
dissemination to the public or filing with any governmental agency or body
whatever.
5.06 ACCESS. The Company Parties agree that they will allow Public
Company's directors, officers, accountants, attorneys and other representatives
full access, during normal business hours throughout the term or applicability
of this Agreement, to all information whatever concerning Company's respective
affairs, operations and properties as Public Company may reasonably request. All
information provided shall be furnished strictly subject to the confidentiality
provisions of this Agreement. The Company Parties may refuse to allow copies or
abstracts to be made of any formula, design plans for machinery or equipment, or
any plans or details as to manufacturing or chemical processes, and the like;
provided that representatives of Public Company shall be allowed access to such
things for inspection, in order to satisfy themselves that such things exist and
are substantially as represented to Public Company.
5.07 STAND-STILL AGREEMENT. Other than those potential acquisitions
which have previously been disclosed to Public Company, the Company Parties
agree not to solicit from any third party an offer or expression of interest in
or with respect to any acquisition, combination or similar transaction involving
Company, or substantially all of its assets or securities (whether outstanding
or authorized but unissued) and further agree that they will promptly inform
Public Company of the existence of any such unsolicited offer or expression of
interest.
ARTICLE VI
COVENANTS OF PUBLIC COMPANY
Public Company covenants and agrees that, prior to the
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Effective Date:
6.01 EFFECTUATION OF THIS AGREEMENT. Public Company will use its best
efforts to cause this Agreement to become effective, and all transactions herein
contemplated to be consummated, in accordance with their terms, to obtain all
required consents and authorizations of third parties, to make all filings and
give all notices to those regulatory authorities or other third parties which
may be necessary or reasonably required in order to effect the transactions
contemplated in this Agreement, and to comply with all federal and state
securities laws and other laws as may be applicable to the contemplated
transactions.
6.02 CONDUCT. (a) Public Company will not (I) permit or do or cause to
be done anything which Public Company has represented in Article I not to have
been done, except as otherwise permitted in this Agreement, or consented to by
Company in advance and in writing; (ii) make or permit any amendment to the
Public Company Articles of Incorporation or bylaws, other than those matters
included in Exhibit "B" hereto; (iii) cause or permit to be declared or paid any
dividend, stock split, combination (reverse split) or other recapitalization or
distribution in respect of Public Company's capital stock, other than as
disclosed in the aforesaid Proxy documents; (iv) to Public Company's best
ability, permit or cause the waiver of the provisions of any statute of
limitations applicable to the levy or assessment of any federal, state,
municipal or foreign taxes payable by Public Company.
(b) To the best of its ability, Public Company will: (i) maintain its
books, accounts and records as now being maintained, on a consistent basis; (ii)
comply with and not violate any law, rule, regulation or ordinance whatsoever
applicable to Public Company; and (iii) take each and every step necessary to
preserve the charter issued by the State of Nevada, including timely filing of
corporate reports and current payment of all taxes now and hereafter due and
owing.
6.03 ACCESS. Public Company agrees that it will allow Company's
directors, officers, accountants, attorneys and other representatives full
access, during normal business hours throughout the term or applicability of
this Agreement, to all information whatever concerning its affairs as the
Company Parties may reasonably request. All information provided shall be
furnished strictly subject to the confidentiality provisions of this Agreement.
19
<PAGE> 20
ARTICLE VII
GENERAL PROVISIONS
7.01 FURTHER ASSURANCES. At any time and from time to time after the
date of this Agreement, each and every party hereto shall execute such
additional instruments and take such other and further action as may be
reasonably requested by any other party to carry out the intent and purpose of
this Agreement.
7.02 WAIVER. Any failure on the part of any party hereunder to comply
with any of their obligations, agreements or conditions may be waived in writing
by the party to whom such compliance is owed; however, waiver on one occasion
does not operate to effectuate a waiver on any other occasion.
7.03 BROKERS. Each party represents to every other party that no brokers
or finders have acted for it in connection with this Agreement and that no
obligations of Public Company, Company and the Company Shareholders need to be
satisfied as of the date of this Agreement.
7.04 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid, first class, registered or certified mail, return receipt requested, as
first set forth above; and for the Company Shareholders as set forth under their
names on Exhibit A.
7.05 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation or communication, whether oral or written, between the parties
and relating to the transactions evidenced hereby or the subject matter hereof.
7.06 HEADINGS. The article and paragraph headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.07 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the state in which the Public
Company is domiciled.
7.08 COUNTERPARTS. This Agreement may be executed
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simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
7.09 NO ORAL MODIFICATION. This Agreement may be amended solely in
writing, and only after the mutual agreement of the parties affected hereby.
7.10 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties, covenants and agreements contained herein shall
survive the date and execution of this Agreement.
7.11 LEGAL COUNSEL; EXPENSES. The parties hereby acknowledge that they
have had an opportunity to obtain legal counsel for Company, and that the
Company Shareholders have consulted independent legal counsel in respect of all
matters leading to, and including, the transactions evidenced hereby.
7.12 SIMULTANEOUS CLOSING. Public Company and the Company Parties
specifically acknowledge and represent that the closing hereunder was, in
effect, simultaneously completed with Public Company and the Company Parties on
the date of this Agreement.
7.13 RESCISSION OF AGREEMENT. The parties hereby agree that they are
relying on the representations and projections contained in this Agreement, in
the Company Business Plan and in other documents regarding the future of the
Company submitted to the Public Company. In the event that such any such
representations, projections or material facts about Company are found to be
untrue, or otherwise materially affect the business prospects of the Public
Company and/or the value of the securities issued by the Public Company, a
majority of the shareholders of the Public Company (as determined as of the date
immediately prior to the execution of this Agreement) may immediately rescind
this Agreement with written notice to the Company and may return to the Company
all of its assets and liabilities as if the transaction contemplated hereby had
never taken place. In addition, the parties hereto may mutually agree to rescind
this Agreement by executing a writing to that effect, which shall operate in the
same manner as if Public Company had given unilateral written notice to the
Company. No decision of any court or other governmental or regulatory agency
shall be necessary to effectuate the rescission. The rescission shall entitle
the Public Company to proceed to elect
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new officers and directors and to proceed to acquire a private company which has
a valid business plan and potential value to the shareholders of the Public
Company. A notice of rescission to the Company shall not entitle the Company or
its shareholders to obtain any damages, fees or other costs from the Public
Company or its shareholders as a result of the rescission and the Company shall
only be entitled to those assets which were in existence as of the date
immediately preceding the effective date of this Agreement.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed on the date and year first above written.
E-NET CORPORATION, a Nevada corporation ("PUBLIC COMPANY")
/s/ ADAM STULL
- -------------------------------------
ADAM STULL, President
PUBLIC COMPANY
Attest:
/s/ LIBBIE STULL
- -------------------------------------
LIBBIE STULL, Secretary
E-NET MORTGAGE CORP, a Nevada corporation ("COMPANY")
/s/ MICHAEL P. ROTH
- -------------------------------------
MICHAEL P. ROTH, President
COMPANY
Attest:
/s/ KAREN CONWAY
- -------------------------------------
KAREN CONWAY, Secretary
COMPANY SHAREHOLDERS:
H-GROUP, LLC, a Nevada Limited Liability Company
1,000 shares
/s/ MICHAEL P. ROTH
- -------------------------------------
MICHAEL P. ROTH, Managing Director and Sole Interest Holder
22
<PAGE> 23
EXHIBIT A
COMPANY SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND ADDRESS # OF COMPANY SHARES # OF PUBLIC COMPANY SHARES
- ---------------- ------------------- --------------------------
<S> <C> <C>
H-GROUP, LLC, a Nevada 1,000 2,000,000
Limited Liability Company
</TABLE>
- -------------------
<PAGE> 24
EXHIBIT B
NOTICE OF SPECIAL SHAREHOLDER MEETING,
PROXY AND PROXY STATEMENT
<PAGE> 25
EXHIBIT C
LIST OF PENDING CONTRACTS OF COMPANY
Contract for consulting services with EMB Corporation, an Hawaii
corporation.
<PAGE> 1
EXHIBIT 2.4
SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, made and entered into this 1st day of March, 1999, by
and between E-Net Corporation, Inc.(formerly Suarro Communications, Inc.)
("Public Company"), a publicly held Nevada corporation, and City Pacific
International, U.S.A., Inc. ("Company"), a privately held Nevada corporation
("Company") and the individuals listed on Exhibit "A" attached hereto and
specifically incorporated herein by this reference (the "Company Shareholders").
WITNESSETH:
WHEREAS, Public Company desires to acquire all of the issued and
outstanding capital stock of Company; and
WHEREAS, the Company Shareholders are the sole holders of all Company's
capital stock outstanding and they desire to transfer the same to Public Company
in exchange for such consideration as is set forth herein; and
WHEREAS, it is the intention of the parties to this Agreement that the
transactions evidenced hereby qualify as a reorganization pursuant to such
sections of the Internal Revenue Code of 1954, as amended (the "Code"), as are
applicable, including, without limitation, Section 368(a)(1)(b) thereof, and
that there not be a taxable gain or loss recognized by Public Company, Company
or the Company Shareholders upon consummation of the transactions evidenced
hereby; and
WHEREAS, the transactions evidenced hereby are to be submitted for
approval at a special meeting of the Board of Directors of Public Company and
Company and by the Company Shareholders by unanimous consent, dated on even date
herewith;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, terms and conditions set forth herein, and such other and
further consideration, the receipt and sufficiency of which is hereby
acknowledged, this Agreement is adopted as a reorganization pursuant to the Code
and THE PARTIES AGREE AS FOLLOWS:
1
<PAGE> 2
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF PUBLIC COMPANY
Public Company represents and warrants to Company and the Company
Shareholders as follows:
1.1 COMPANY PROFILE; ASSETS AND LIABILITIES. Public Company is not
currently conducting, and has only engaged in the business as set forth in its
reports on Form 10-KSB, 10-QSB and 8-K. Other than the costs associated with the
transaction proposed herein, Public Company has only those liabilities shown in
its most recent 10-KSB.
1.2 FINANCIAL STATEMENTS. Public Company has delivered audited financial
statements dated, and for the period ended April 30, 1998.
1.3 ABSENCE OF CERTAIN CHANGES. Since the date of the most recent
financial statements delivered hereunder, Public Company has not:
(a) Suffered any material and adverse change in its financial condition,
working capital, assets, liabilities, reserves, business, operations or
prospects;
(b) Suffered any loss, damage, destruction or other casualty materially
and adversely affecting any of its properties, assets or business (whether or
not covered by insurance);
(c) Borrowed or agreed to borrow any funds or incurred, or assumed or
become subject to, whether directly or by way of guarantee or otherwise, any
obligation or liability, except as related to the costs associated with the
proposed transaction herein and to its transfer agent;
(d) Paid, discharged or satisfied any claims, liabilities or
obligations, other than in the normal course of its business;
(e) Permitted or allowed any of its property or assets (real, personal
or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind;
2
<PAGE> 3
(f) Canceled any debts or waived any claims or rights of substantial
value, or sold, transferred, or otherwise disposed of any of its properties or
assets (real, personal or mixed, tangible or intangible);
(g) Granted any increase in the compensation of directors, officers or
employees (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment), or any increase in the compensation
payable or to become payable to any director, officer or employee;
(h) Made any capital expenditure or commitment outside of its normal
course of business;
(i) Declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or, directly or indirectly,
redeemed, purchased or otherwise acquired any shares of its capital stock or
other securities, other than as required hereunder;
(j) Made any change in any method of accounting or accounting practice;
(k) Paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible), to, or entered into any affiliate or associate of any of its
directors or officers, except for directors' fees and compensation to officers
at rates set forth in any Form 10-K or 10-KSB of Public Company filed with the
Securities and Exchange Commission, none of which shall result in any liability
or indebtedness which shall survive this closing;
(l) Entered into any transaction, contract or commitment, other than as
disclosed herein;
(m) Been subject to any other event or condition of any character that
has or might reasonably have a material and adverse effect upon the financial
condition, business, assets or properties of Public Company;
(n) Agreed, whether in writing or otherwise, to take any action other
than as described in this Agreement.
1.4 AFFIRMATIVE REPRESENTATIONS REGARDING ACTION OF PUBLIC COMPANY
BETWEEN DATE OF FINANCIAL STATEMENTS DELIVERED AND CLOSING. Between the date of
the most recent financial
3
<PAGE> 4
statements delivered hereunder and the date of this Agreement, Public Company
has conducted its business in the same manner as conducted before the date of
such financials. Public Company will continue to conduct its business in the
same manner as conducted before the date of the financial statements through the
date of closing, as defined herein below.
1.5 EMPLOYMENT AGREEMENTS; BENEFIT PLANS. There is not currently any
employment or severance agreement to which Public Company was or is subject, or
by which it was or is bound. Further, no such agreements will arise in the
future as a result of acts which have occurred previous to, or concurrent with,
the date hereof. Further, Public Company is not subject to, nor has it
established, a benefit plan, whether pursuant to the Code or otherwise, other
than disclosed in Public Company's Prospectus. No shares of common stock,
options to acquire common stock or other benefits have been issued under, or
pursuant to, any such plan or arrangement.
1.6 PERMITS AND LICENSES. The business of Public Company has complied
and currently complies in all material respects with all applicable laws and
regulations and with its Prospectus. Further, the business of Public Company
does not currently require, and has not in the past required, application to
procure any license, permit, franchise, order or approval.
1.7 LITIGATION. There is no litigation or proceeding pending or
threatened against or relating to Public Company or its business. There is no
factual basis, whether known or unknown, for any claim or action to be
threatened or asserted against Public Company.
1.8 CONTRACTS, AGREEMENTS AND LEASES. Other than its agreement with its
legal counsel and transfer agent, Public Company is not a party to any
contracts, agreements, permits, licenses, plans, leases or similar arrangements.
The obligations of Public Company owed to its legal counsel and transfer agent
will be paid in full through closing by Public Company, without exception.
1.9 PRINCIPAL SHAREHOLDERS. Public Company has previously provided to
Company or its counsel a current list of its shareholders and as of the date of
this Agreement and affirmatively states that no additional shares have been
issued by the Board of Directors of Public Company, nor is issuance of such
additional shares contemplated as of the date of this Agreement, other than as
described herein. The shareholder list
4
<PAGE> 5
delivered to Company is, to best knowledge of management, accurate and complete
as of the Closing Date herein.
1.10 AUTHORIZATION. Public Company has duly taken all corporate action
necessary to authorize the execution and delivery of this Agreement, the
consummation of the transactions evidenced hereby and the performance of its
obligations hereunder.
1.11 ENFORCEABLE OBLIGATIONS. This Agreement is a legal and binding
obligation of Public Company, enforceable in accordance with the terms hereof,
except as limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights and general equitable
principles.
1.12 NO CONFLICTS OR CONSENTS. The execution and delivery by Public
Company of this Agreement and the performance of its obligations have not
conflicted and will not conflict with any provision of law, statute, rule or
regulation or any judgment applicable to or binding upon Public Company, nor
will it result in the creation of any lien, charge or encumbrance. No consent,
approval, authorization or order of any court or governmental authority or third
party has been or is required in connection with the execution and delivery by
Public Company of this Agreement or the consummation of the transactions
evidenced hereby. Neither the execution nor the consummation of this Agreement
in accordance with the terms and conditions set forth herein has conflicted or
will conflict with or constitute a default under or a breach or violation or
grounds for termination of or an event which with the lapse of time or notice
and the lapse of time could or would constitute a default under the Articles
(Certificate) of Incorporation or bylaws of Public Company.
1.13 ORGANIZATION AND GOOD STANDING. Public Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has all corporate powers required to carry on its business
and enter into and carry out the transactions evidenced herein. Public Company
is qualified to do business and is in good standing as a foreign corporation in
all jurisdictions wherein the character of the properties owned or held by it or
the nature of the business transacted makes such qualification necessary. As of
the date hereof, Public Company does not have any subsidiaries or interests in
any corporation, partnership, limited partnership or other business entity.
5
<PAGE> 6
1.14 CAPITALIZATION. Prior to execution of this Agreement, the
shareholders of Public Company have adopted certain resolutions, including
ratifying a two to one (2 to 1)forward split of the Public Company common stock.
As a result of the adoption of these resolutions and amendments, the authorized
capital stock of Public Company now consists of 20,000,000 shares of common
stock, $.001 par value, of which 2,000,000 of such shares are issued and
outstanding, (post-split) all fully paid for and non-assessable, and no shares
of preferred stock are issued or otherwise outstanding. All references to the
capitalization of Public Company in this Agreement reflect the changes so
authorized by the Public Company shareholders.
Public Company has no other outstanding rights, options, warrants, contracts,
commitments or demands of any character which would require the issuance (or
transfer out of treasury), by Public Company of any shares of its capital stock,
other than the agreement with E-Net Mortgage Corp., of which Company is aware.
All outstanding securities were issued in accordance with applicable federal and
state securities laws or exemptions therefrom. The Public Company Prospectus was
duly registered with the U.S. Securities and Exchange Commission ("SEC") and all
applicable state securities departments (collectively referred to as "State
Registrations"). All SEC and State Registrations complied with all applicable
laws, rules and regulations. No claims or actions have been threatened or
asserted arising out of, or concerning, the Prospectus, SEC Registrations, State
Registrations or the sale of securities of Public Company.
1.15 FILING OF REPORTS. Public Company is presently current (if
required) in the requirement to file all Form 10-KSB and 8-K reports required to
be filed pursuant to the Securities Exchange Act of 1934, as amended. However,
it is delinquent in the filing of its 10-QSB Reports which are in process.
Further, Public Company has filed all required reports of application of
proceeds with all applicable state securities departments on the appropriate
forms and will, prior to or at Closing, file the final Form SR with the SEC. All
forms, filings and reports, including but not limited to the Prospectus, filed
by Public Company with the SEC and each state securities department were
complete and accurate and contained no material misstatements or omissions of a
material fact.
1.16 TAX FILINGS. Public Company has not filed all
6
<PAGE> 7
federal, state, local and foreign tax reports and returns required to be filed
by it and has not duly paid all taxes and other charges due or claimed to be due
from it by any federal, state, local or foreign tax authorities. Further, the
reserve for taxes, if any, reflected in the balance sheet delivered hereunder is
adequate and there are no tax liens upon any property or assets of Public
Company. Further, no state of facts exists or has existed which would constitute
grounds for the assessment of any significant tax liability. All deficiencies
and assessments resulting from an examination of state, local, federal and
foreign tax returns and reports have been paid. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any federal, state, local, or foreign tax return or report for any period.
Public Company is not a "consenting corporation" within the meaning of Section
341(f)(1) of the Code.
1.17 COMPLIANCE WITH LAW. Public Company is in compliance with all laws,
regulations and orders applicable to its business, including but not limited to,
all applicable laws, rules and regulations of the U.S. Securities and Exchange
Commission and all applicable state securities departments. Further, Public
Company has not received any notification that it is in violation of any laws,
regulations or orders and, to the best knowledge of management of Public
Company, no such violations exist. Neither Public Company nor any employee or
agent of Public Company has made any payment to any person which violates any
statutes or law required to be disclosed under applicable disclosure policies of
the Securities and Exchange Commission.
1.18 DISCLOSURE. No representations or warranties by Public Company in
this Agreement and no statement contained in any document (including, without
limitation, financial statements), certificate or other writing furnished or to
be furnished by Public Company to Company or the Company Shareholder pursuant to
the provisions hereof or in connection with the transactions contemplated
hereby, contained or will contain any untrue statement of material facts or
omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. There are no facts known to Public Company which,
either individually or in the aggregate, could or would materially and adversely
affect or involve any substantial possibility of having a material and adverse
effect on the condition (financial or otherwise), results of operations, assets,
liabilities or business of Public Company.
7
<PAGE> 8
1.19 OFFICERS' CERTIFICATES. At closing, the President of Public Company
shall provide a Certificate, dated as of the closing date and certified by the
Secretary of Public Company, to the effect that:
(a) Public Company is not currently conducting, and has never been
engaged in, any business other than set forth in its public filings.
(b) Public Company has delivered audited financial statements dated, and
for the fiscal year ended, April 30, 1998, together with all Notes thereto,
prepared in reasonable detail in accordance with generally accepted accounting
principles applied on a consistent basis, which financial statements contain a
balance sheet dated April 30, 1998, and the following statements for the period
then ended: a statement of operations, a statement of stockholders' equity, and
a statement of cash flows. Further, Public Company has delivered, or will
deliver upon request of Company, all books and records, as well as all required
substantiating documentation, to Company, which are necessary to compile
financial statements for periods subsequent to the date of, and the periods
covered by, the most recent financial statements delivered hereunder. Further,
Public Company has delivered, or otherwise made available, true and correct
copies of the Articles of Incorporation and bylaws of Public Company, minutes of
all meetings of its directors and shareholders, true and correct copies of all
filings made in respect of Public Company's initial public offering and such
other and further material as has been requested.
(c) Since the date of the most recent financial statements delivered
hereunder, Public Company has not (unless otherwise described herein):
(1) Suffered any material and adverse change in its financial condition,
working capital, assets, liabilities, reserves, business, operations or
prospects;
(2) Suffered any loss, damage, destruction or other casualty materially
and adversely affecting any of its properties, assets or business (whether or
not covered by insurance);
(3) Borrowed or agreed to borrow any funds or incurred, or assumed or
become subject to, whether directly or by way of
8
<PAGE> 9
guarantee or otherwise, any obligation or liability;
(4) Paid, discharged or satisfied any claims, liabilities or
obligations, other than in the ordinary course of its business;
(5) Permitted or allowed any of its property or assets (real, personal
or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind;
(6) Canceled any debts or waived any claims or rights of substantial
value, or sold, transferred, or otherwise disposed of any of its properties or
assets (real, personal or mixed, tangible or intangible);
(7) Granted any increase in the compensation of directors, officers or
employees (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment) or any increase in the compensation
payable or to become payable to any director, officer or employee;
(8) Made any capital expenditure or commitment other than in the normal
course of its business or as disclosed herein;
(9) Declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or, directly or indirectly,
redeemed, purchased or otherwise acquired any shares of its capital stock or
other securities, other than as required hereunder to consummate the transaction
proposed herein;
(10) Made any change in any method of accounting or accounting practice;
(11) Paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of its
directors or officers or any affiliate or associate of any of its directors or
officers;
(12) Entered into any transaction, contract or commitment other than as
described in the Public Company public filings, the E-Net Mortgage Corp.
transaction or as otherwise previously described to Company;
9
<PAGE> 10
(13) Been subject to any other event or condition of any character that
has or might reasonably have a material and adverse effect upon the financial
condition, business, assets or properties of Public Company;
(14) Agreed, whether in writing or otherwise, to take any action
described in this paragraph of the Agreement;
(d) Between the date of the most recent financial statements delivered
hereunder and the date of this Agreement, Public Company has conducted its
business in the same manner as conducted before the date of such financials and
in accordance with the Public Company Business Plan described in its Prospectus.
(e) There is not currently any employment or severance agreement to
which Public Company was or is subject, or by which it was or is bound. Further,
no such agreements will arise in the future as a result of acts which have
occurred previous to, or concurrent with, the date hereof.
(f) There is no litigation or proceeding pending or threatened against
or relating to Public Company, or its business.
(g) Public Company is not a party to any contract, agreement, permit,
license, plan, lease or similar arrangement which will survive closing, other
than its existing agreement with its transfer agent and the E-Net Mortgage Corp.
Agreement.
(h) The execution and delivery by Public Company of this Agreement and
the performance of its obligations have not conflicted and will not conflict
with any provisions of law, statute, rule or regulation or any judgment
applicable to or binding upon Public Company, nor will it result in the creation
of any lien, charge or encumbrance. No consent, approval, authorization or order
of any court or governmental authority or third party has been or is required in
connection with the execution and delivery by Public Company of this Agreement
or the consummation of the transactions evidenced hereby. Neither the execution
nor the consummation of this Agreement in accordance with the terms and
conditions set forth herein, has conflicted or will conflict with or constitute
a default under or a breach or violation or grounds for termination of or an
event which with the lapse of time or notice and the lapse of time could or
would constitute a default under the Articles of
10
<PAGE> 11
Incorporation, as amended, or bylaws of Public Company.
(i) Public Company is in compliance with all laws, regulations and
orders applicable to its business. Further, Public Company has not received any
notification that it is in violation of any laws, regulations or orders and no
such violations exist. Neither Public Company, nor any employee or agent of
Public Company, has made any payment to any person which violates any statutes
or law required to be disclosed under applicable disclosure policies of the
Securities and Exchange Commission.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF COMPANY AND THE COMPANY SHAREHOLDERS
Company and the Company Shareholders represent and warrant to Public
Company as follows:
2.1 ORGANIZATION AND GOOD STANDING. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all corporate powers required to carry on its business. Company
is qualified to do business and is in good standing as a foreign corporation in
all jurisdictions wherein the character of its properties or the nature of its
business makes such qualification necessary.
2.2 AUTHORIZATION. The Company Shareholders have duly taken all action
necessary to authorize the execution and delivery of this Agreement and to
authorize the consummation of the transactions evidenced hereby and the
performance of their obligations and the obligations of Company hereunder.
2.3 NO CONFLICTS OR CONSENTS. The execution and delivery by the Company
Shareholders of this Agreement and their performance of those obligations set
forth herein have not conflicted and will not conflict with any provision of
law, statute, rule or regulation or of any agreement or judgment applicable to
or binding upon them or Company, or result in the creation of any lien, charge
or encumbrance upon any of their assets or properties, or upon those of Company.
No consent, approval, authorization or order of any court or governmental
authority or third party is required in connection with the
11
<PAGE> 12
execution and delivery by Company, or by the Company Shareholders, of this
Agreement or the consummation of the transactions evidenced hereby. Neither the
execution of this Agreement nor its consummation in accordance with its terms
has conflicted or will conflict with or constitute a default under or breach or
violation or grounds for termination of or an event which with the lapse of time
or notice and the lapse of time would or could constitute a default under any
note, indenture, mortgage, deed of trust or other agreement or instrument to
which Company or the Company Shareholders are a party or by which either or all
of them are bound.
2.4 ENFORCEABLE OBLIGATIONS. This Agreement is a legal and binding
obligation of Company and the Company Shareholders, enforceable in accordance
with its terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to the enforcement of creditor's rights and general
equitable principles.
2.5 CAPITALIZATION. The authorized capital stock of Company consists of
25,000 shares of common stock, of which 1,000 are issued in outstanding and
fully paid for and nonassessable. Company has no outstanding rights, options,
warrants, contracts, commitments or demands of any character which would require
the issuance (or transfer out of treasury), by Company of any shares of its
capital stock. All outstanding securities were issued in accordance with
applicable federal and state securities laws or exemptions therefrom.
2.6 FINANCIAL STATEMENTS. Company shall deliver audited financial
statements dated, and for the period ended, March 1, 1998, together with all
notes thereto, prepared in reasonable detail in accordance with generally
accepted accounting principles applied on a consistent basis, to Public Company
on or before the Closing Date.
2.7 OTHER INFORMATION AND INSPECTIONS. Company has made available for
inspection and copying all books and records of Company and has fully and
completely furnished to Public Company such information as has been requested.
Company is aware of the terms and conditions of the E-Net Mortgage Corp.
transaction with Public Company and the issuance of 2,000,000 restricted common
shares of Public Company to the shareholders of City Pacific, Inc., concurrent
with this transaction.
2.8 DISCLOSURE. No representations or warranties by Company or the
Company Shareholders in this Agreement and no
12
<PAGE> 13
statement contained in any document, certificate or other writing furnished or
to be furnished by Company or the Company Shareholders to Public Company
pursuant to the provisions hereof, or in connection with the transaction
contemplated hereby, contained or will contain any untrue statements of material
facts or omits or will omit to state any material fact necessary in order to
make the statements herein or therein, in light of the circumstances under which
they were made, not misleading. Unanimous consents of the Company Shareholders
and directors were executed, to be effective on or before March 1, 1999. Under
the respective consents, all transactions evidenced hereby obtained the
requisite approval.
ARTICLE III
CLOSING AND EXCHANGE OF SHARES
3.1 TERMS OF THE EXCHANGE. On the Closing Date, or such date as stated
below:
(a) On or before ten (10) days after the Closing Date, Public Company
shall cause to be delivered to the Company Shareholders, in an acceptable form,
certificates for 500,000 "restricted" shares, of its $.001 par value voting
common stock (the "Exchange Shares"), free and clear of all mortgages, pledges,
claims, liens and other rights and encumbrances whatsoever, except as disclosed
in 3.1(b), below. The Company Shareholders shall not be diluted as a result of
any debt, lien, encumbrance, action or liability, or any cost or expense related
thereto of Public Company, or any breach of any representation or warranty of
Public Company contained herein ("Subsequent Liabilities"). Accordingly, in
addition to any other remedy, either in law or in equity, the Company
Shareholders shall be issued such additional shares of Common Stock of Public
Company as may be required to off-set any such Subsequent Liabilities. The
number of shares to be issued to the Company Shareholders shall be determined as
follows: (i) in the event shares are sold by Public Company to pay or satisfy
the Subsequent Liabilities, Public Company shall issue such number of shares as
are necessary to maintain the same percentage of ownership by the Company
Shareholders as they had before said issuance; or (ii) in the event Public
Company does not issue additional shares to satisfy the Subsequent Liabilities,
shares equal to the amount of the Subsequent Liabilities, with a market value at
bid price, will be issued to the Company Shareholders.
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<PAGE> 14
(b) The Exchange Shares shall not be subject to any preemptive rights,
options or similar rights on the part of any shareholder or creditor of Public
Company, or any other person whatever.
(c) The Company Shareholders shall, in consideration for their receipt
of the Exchange Shares, transfer and deliver to Public Company certificates
representing all 1,000 of the issued and outstanding Company Shares owned by
them. Public Company shall receive good and merchantable title to the Company
Shares, which shall be transferred to Public Company free and clear of all
liens, mortgages, pledges, claims or other rights or encumbrances whatever.
3.2 RESTRICTIONS ON TRANSFER. The Exchange Shares, when issued and
delivered hereunder, will not be registered under the Securities Act of 1933, as
amended, nor will the Company Shareholders be granted any registration rights
under such Act as to such shares. The Company Shareholders shall execute and
deliver to Public Company an investment letter satisfactory in form and
substance to Public Company's counsel which states, among other things, that the
Exchange Shares have been acquired for investment and with no present intent to
make any resale, assignment, transfer or hypothecation of all or any part
thereof and that the certificates representing the Exchange Shares will bear a
restrictive legend which states in effect that such shares have not been
registered under the Securities Act of 1933, as amended, and consequently may
not be resold, assigned, transferred or hypothecated unless registered under
such Act or, in the opinion of Public Company's counsel, an exemption from the
registration requirements of such Act is available for any such transaction.
3.3 CHANGES IN CAPITALIZATION OF PUBLIC COMPANY. If, between the date of
the most recent financial statements of Public Company delivered to Company and
the Company Shareholders and the Closing Date, the outstanding shares of the
capital stock of Public Company are found to have been increased, decreased,
changed into or exchanged for a different number or kind of said shares or
securities of Public Company through reorganization, reclassification, stock
dividend stock split, reverse stock split or similar change in the
capitalization of Public Company and such has not been disclosed to the Company
Shareholders hereunder, Public Company, at the election of the Company
Shareholders, shall issue and deliver to the Company Shareholders such number of
Public Company shares as will reflect an equitable adjustment of the Public
Company shares
14
<PAGE> 15
specified in Paragraph 1 of this Article III on account of any such increase,
decrease, change or exchange. In the event of any such change in the
capitalization of Public Company, all references to the shares herein shall
refer to the number of Public Company shares as thus adjusted. However, it is
specifically acknowledged, agreed and understood that the shareholders of Public
Company have conditionally approved a proposal to undertake a "forward split" of
the Public Company common stock, wherein 2 shares of common stock issued and
outstanding will be exchanged for 1 share of common stock, as well as additional
matters more specifically stated in that certain Proxy Statement, which is in
progress and which will, when completed, be attached hereto and incorporated
herein as Exhibit "B". The sole condition to the approval of the aforesaid
forward stock split is the successful consummation of the transaction proposed
herein. Public Company shall have no obligation to issue any additional shares
to the Company Shareholders as described herein as a result of the aforesaid
reverse stock split.
3.4 CLOSING DATE/EFFECTIVE DATE. The Closing Date of the transactions
contemplated hereby shall be March 1, 1999, or such later date as the parties
may so choose thereafter. All representations of the parties hereto shall
survive the closing and the representations and warranties shall be made as in
effect on the Closing Date.
The Effective Date shall be the date in which all of the certificates
necessary to effectuate this transaction have been duly issued by the respective
party and all other matters relevant to the closing of the transaction
contemplated herein have been accomplished.
3.5 CLOSING DOCUMENTS.
A. To Be Delivered by Public Company:
(1) Certificates representing 500,000 shares of "restricted"
common stock to the Company Shareholders;
(2) Certified copy of minutes of shareholder and directors,
authorizing this transaction;
(3) Certificate of Good Standing;
(4) Opinion of legal counsel acceptable to Company;
15
<PAGE> 16
(5) Certificate of President;
(6) Resignation letters of Adam Stull, Libbie Stull and George
Unwin as officers and directors, as applicable.
(B) To be delivered by Company or Company Shareholders:
(1) Certificates representing 1,000 shares of Company, together
with an assignment of said shares, separate from said Certificates;
(2) Certified copy of minutes of shareholders and directors of
Company, authorizing this transaction;
(3) Certificate of Good Standing;
(4) Legal opinion of counsel, acceptable to Public Company;
(5) Certificate of President;
(6) Investment letter from Company Shareholders relating to
issuance of Public Company common stock relevant herein.
ARTICLE V
COVENANTS OF COMPANY AND THE COMPANY SHAREHOLDERS
Company and, insofar as they have the power to direct Company by
ownership of voting securities or otherwise, the Company Shareholders (Company
and the Company Shareholders being collectively referred to below as the
"Company Parties"), covenant and agree that, prior to the Effective Date:
5.01 EFFECTUATION OF THIS AGREEMENT. The Company Parties will use their
best efforts to cause this Agreement to become effective, and all transactions
herein contemplated to be consummated, in accordance with their terms, to obtain
all required consents and authorizations of the Company Parties, to make all
filings and give all notices to those regulatory authorities or other third
parties which may be necessary or reasonably required in order to effect the
transactions contemplated in this Agreement, and to comply with all federal
16
<PAGE> 17
and state securities laws and other laws as may be applicable to the
contemplated transactions.
5.02 TRANSACTIONS. The Company Parties will carry on Company's business
diligently and substantially in the same manner as heretofore conducted, and
will not enter into any transactions which are not in the ordinary course of
Company's business, or which would singly or in the aggregate be materially
adverse to Company's business, prospects or financial condition, taken as a
whole, or which had not been previously disclosed to Public Company.
5.03 CONDUCT OF BUSINESS. (a) The Company Parties will not (i) permit or
do or cause to be done anything which Company has represented in Article II not
to have been done, except as otherwise permitted in this Agreement or consented
to by Public Company in advance and in writing; (ii) make or permit any
amendment to Company's Articles of Incorporation or bylaws; (iii) cause or
permit to be declared or paid any dividend, stock split, combination (reverse
split) or other re-capitalization or distribution in respect of Company's common
stock, nor cause or permit the issuance of any additional shares of Company's
common stock; (iv) permit the increase of compensation of any type to any
director or officer or other employee of Company; (v) to the best ability of the
Company Parties, permit or do any act or omission to act the effect of which
would be to breach or violate any contract or commitment to which Company is a
party; (vi) to the best ability of the Company Parties, permit or cause the
waiver of the provisions of any statute of limitations applicable to the levy or
assessment of any federal, state, municipal or foreign taxes payable by Company;
or (vii) organize any subsidiary of Company, or acquire or permit the
acquisition of any equity interest in any other business or entity, with the
exception of those proposed transactions presently in negotiations and disclosed
herein in Exhibit "C".
(b) To the best of their ability, the Company Parties will: (i) maintain
Company's books, accounts, and records as now being maintained, on a consistent
basis; (ii) maintain Company's properties in good repair; (iii) comply with and
not violate any law, rule, regulation, or ordinance whatever applicable to
Company or its business or any license or permit issued to Company; and (iv)
take each and every step necessary to preserve the charter issued by the State
of Florida, including timely filing of corporate reports and current payment of
all taxes now and hereafter due and owing.
17
<PAGE> 18
5.04 ISSUANCE OF ADDITIONAL SECURITIES. Company shall not issue or
permit the issuance of any common stock of Company or of any warrant, option or
other right to subscribe for or acquire common stock or any other securities
whatever of Company, nor shall any stock option or stock purchase plan,
incentive stock option plan or similar plan be adopted whereby persons could
acquire securities of Company, or any option or similar right to acquire such
securities.
5.05 PUBLICITY AND FILINGS. All press releases, shareholder
communications, filings with the Securities and Exchange Commission or other
governmental agency or body and other information and publicity generated by
Company regarding the transactions contemplated in this Agreement shall be
reviewed and approved by Public Company and its counsel before release or
dissemination to the public or filing with any governmental agency or body
whatever.
5.06 ACCESS. The Company Parties agree that they will allow Public
Company's directors, officers, accountants, attorneys and other representatives
full access, during normal business hours throughout the term or applicability
of this Agreement, to all information whatever concerning Company's respective
affairs, operations and properties as Public Company may reasonably request. All
information provided shall be furnished strictly subject to the confidentiality
provisions of this Agreement. The Company Parties may refuse to allow copies or
abstracts to be made of any formula, design plans for machinery or equipment, or
any plans or details as to manufacturing or chemical processes, and the like;
provided that representatives of Public Company shall be allowed access to such
things for inspection, in order to satisfy themselves that such things exist and
are substantially as represented to Public Company.
5.07 STAND-STILL AGREEMENT. Other than those potential acquisitions
which have previously been disclosed to Public Company, the Company Parties
agree not to solicit from any third party an offer or expression of interest in
or with respect to any acquisition, combination or similar transaction involving
Company, or substantially all of its assets or securities (whether outstanding
or authorized but unissued) and further agree that they will promptly inform
Public Company of the existence of any such unsolicited offer or expression of
interest.
18
<PAGE> 19
ARTICLE VI
COVENANTS OF PUBLIC COMPANY
Public Company covenants and agrees that, prior to the Effective Date:
6.01 EFFECTUATION OF THIS AGREEMENT. Public Company will use its best
efforts to cause this Agreement to become effective, and all transactions herein
contemplated to be consummated, in accordance with their terms, to obtain all
required consents and authorizations of third parties, to make all filings and
give all notices to those regulatory authorities or other third parties which
may be necessary or reasonably required in order to effect the transactions
contemplated in this Agreement, and to comply with all federal and state
securities laws and other laws as may be applicable to the contemplated
transactions.
6.02 CONDUCT. (a) Public Company will not (I) permit or do or cause to
be done anything which Public Company has represented in Article I not to have
been done, except as otherwise permitted in this Agreement, or consented to by
Company in advance and in writing; (ii) make or permit any amendment to the
Public Company Articles of Incorporation or bylaws, other than those matters
included in Exhibit "B" hereto; (iii) cause or permit to be declared or paid any
dividend, stock split, combination (reverse split) or other re-capitalization or
distribution in respect of Public Company's capital stock, other than as
disclosed in the aforesaid Proxy documents; (iv) to Public Company's best
ability, permit or cause the waiver of the provisions of any statute of
limitations applicable to the levy or assessment of any federal, state,
municipal or foreign taxes payable by Public Company.
(b) To the best of its ability, Public Company will: (I) maintain its
books, accounts and records as now being maintained, on a consistent basis; (ii)
comply with and not violate any law, rule, regulation or ordinance whatsoever
applicable to Public Company; and (iii) take each and every step necessary to
preserve the charter issued by the State of Nevada, including timely filing of
corporate reports and current payment of all taxes now and hereafter due and
owing.
6.03 ACCESS. Public Company agrees that it will allow
19
<PAGE> 20
Company's directors, officers, accountants, attorneys and other representatives
full access, during normal business hours throughout the term or applicability
of this Agreement, to all information whatever concerning its affairs as the
Company Parties may reasonably request. All information provided shall be
furnished strictly subject to the confidentiality provisions of this Agreement.
ARTICLE VII
GENERAL PROVISIONS
7.01 FURTHER ASSURANCES. At any time and from time to time after the
date of this Agreement, each and every party hereto shall execute such
additional instruments and take such other and further action as may be
reasonably requested by any other party to carry out the intent and purpose of
this Agreement.
7.02 WAIVER. Any failure on the part of any party hereunder to comply
with any of their obligations, agreements or conditions may be waived in writing
by the party to whom such compliance is owed; however, waiver on one occasion
does not operate to effectuate a waiver on any other occasion.
7.03 BROKERS. Each party represents to every other party that no brokers
or finders have acted for it in connection with this Agreement and that no
obligations of Public Company, Company and the Company Shareholders need to be
satisfied as of the date of this Agreement.
7.04 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid, first class, registered or certified mail, return receipt requested, as
first set forth above; and for the Company Shareholders as set forth under their
names on Exhibit A.
7.05 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation or communication, whether oral or written, between the parties
and relating to the transactions evidenced hereby or the subject matter hereof.
7.06 HEADINGS. The article and paragraph headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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<PAGE> 21
7.07 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the state in which the Public
Company is domiciled.
7.08 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.09 NO ORAL MODIFICATION. This Agreement may be amended solely in
writing, and only after the mutual agreement of the parties affected hereby.
7.10 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties, covenants and agreements contained herein shall
survive the date and execution of this Agreement.
7.11 LEGAL COUNSEL; EXPENSES. The parties hereby acknowledge that they
have had an opportunity to obtain legal counsel for Company, and that the
Company Shareholders have consulted independent legal counsel in respect of all
matters leading to, and including, the transactions evidenced hereby.
7.12 SIMULTANEOUS CLOSING. Public Company and the Company Parties
specifically acknowledge and represent that the closing hereunder was, in
effect, simultaneously completed with Public Company and the Company Parties on
the date of this Agreement.
7.13 RESCISSION OF AGREEMENT. The parties hereby agree that they are
relying on the representations and projections contained in this Agreement, in
the Company Business Plan and in other documents regarding the future of the
Company submitted to the Public Company. In the event that such any such
representations, projections or material facts about Company are found to be
untrue, or otherwise materially affect the business prospects of the Public
Company and/or the value of the securities issued by the Public Company, a
majority of the shareholders of the Public Company (as determined as of the date
immediately prior to the execution of this Agreement) may immediately rescind
this Agreement with written notice to the Company and may return to the Company
all of its assets and liabilities as if the transaction contemplated hereby had
never taken place. In addition, the parties hereto may mutually agree
21
<PAGE> 22
to rescind this Agreement by executing a writing to that effect, which shall
operate in the same manner as if Public Company had given unilateral written
notice to the Company. No decision of any court or other governmental or
regulatory agency shall be necessary to effectuate the rescission. The
rescission shall entitle the Public Company to proceed to elect new officers and
directors and to proceed to acquire a private company which has a valid business
plan and potential value to the shareholders of the Public Company. A notice of
rescission to the Company shall not entitle the Company or its shareholders to
obtain any damages, fees or other costs from the Public Company or its
shareholders as a result of the rescission and the Company shall only be
entitled to those assets which were in existence as of the date immediately
preceding the effective date of this Agreement.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed on the date and year first above written.
E-NET CORPORATION, a Nevada corporation ("PUBLIC COMPANY")
___________________________________
ADAM STULL, President
PUBLIC COMPANY
Attest:
___________________________________
LIBBIE STULL, Secretary
CITY PACIFIC GROUP, INC. a Nevada corporation ("COMPANY")
___________________________________
E.G. MARCHI, President
COMPANY
Attest:
22
<PAGE> 23
___________________________________
E.G. MARCHI, Secretary
COMPANY SHAREHOLDERS:
___________________________________
E.G.MARCHI, SOLE SHAREHOLDER
EXHIBIT A
COMPANY SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND ADDRESS # OF COMPANY SHARES # OF PUBLIC COMPANY SHARES
- ---------------- ------------------- --------------------------
<S> <C> <C>
E.G. MARCHI 1,000 500,000
</TABLE>
23
<PAGE> 24
EXHIBIT B
NOTICE OF SPECIAL SHAREHOLDER MEETING,
PROXY AND PROXY STATEMENT
<PAGE> 25
EXHIBIT C
LIST OF PENDING CONTRACTS OF COMPANY
No such contracts exist.
<PAGE> 1
EXHIBIT 3.4
[SECRETARY OF STATE OF NEVADA STAMP]
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
SUARRO COMMUNICATIONS, INC.
We the undersigned Adam R. Stull (President) and Libbie Stull (Secretary) of
SUARRO COMMUNICATIONS, INC. (Name of Corporation) Do hereby certify:
That the Board of Directors of said corporation at a meeting duly
convened, held on the 12th day of February, 1999, adopted a resolution to amend
the original articles as follows:
Article II is hereby amended to read as follows:
A. The name of this corporation is E-NET CORPORATION
The number of shares of the corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 1,000,000 that the said
changes and amendment have been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
/s/ ADAM R. STULL
-----------------------------
President or Vice President
/s/ LIBBIE STULL
-----------------------------
Secretary or Asst. Secretary
STATE OF CALIFORNIA )
) ss.
COUNTY OF ORANGE )
On this 16th day of February, 1999, before me the undersigned Notary
Public, personally appeared Adam R. Stull and Libbie Stull
[ ] Personally known to me
Or
[X] Proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) are subscribed to the within Instrument and acknowledged
to me that they executed the same in their authorized capacity(ies), and that by
their signatures on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature Lea M Lynch (Seal)
<PAGE> 1
EXHIBIT 3.5
[SECRETARY OF STATE OF NEVADA STAMP]
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
E-NET CORPORATION
We the undersigned Michael P. Roth (President) and Karen Conway
(Secretary) of E-NET CORPORATION (Name of Corporation) Do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
held on the 6th day of April, 1999, adopted a resolution to amend the original
articles as follows:
Article II is hereby amended to read as follows:
A. The name of this corporation is "E-NET FINANCIAL CORPORATION"
The number of shares of the corporation outstanding and entitled to vote
on an amendment to the Articles of Incorporation is 4,500,000 that the said
changes and amendment have been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
/s/ MIKE ROTH
------------------------------
President or Vice President
/s/ KAREN M. CONWAY
------------------------------
Secretary or Asst. Secretary
State of California )
) ss.
County of Orange )
On this 12th day of April, 1999, before me the undersigned Notary
Public, personally appeared Karen M. Conway.
[X] Personally known to me
Or
[ ] Proved to me on the basis of satisfactory evidence to be the
person whose name is subscribed to the within Instrument and acknowledged to me
that she executed the same in her authorized capacity, and that by her signature
on the instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
Signature Angela M. Bernard (Seal)
<PAGE> 1
EXHIBIT 10.1
JOINT VENTURE AGREEMENT
Joint Venture Agreement made the 25th day of February 1999 by and
between CITY PACIFIC INTERNATIONAL U.S.A., INC. ("CITY") , [a Nevada
corporation] and OMNETRIX INTERNATIONAL INC.("OMX"), [a Nevada corporation]
(individually the "Venturer" and collectively the "Joint Venturers").
In consideration of the mutual terms, conditions and covenants
hereinafter set forth, the Joint Venturers agree as follows:
1. The Joint Venturers hereby form a "Joint Venture", conducting business
under the name eNET.COM JV PARTNERS (ENET JV] at Los Angeles, California, for
the purposes of (1) promoting the marketing of retail telecommunication
services, (2) creating co-location business for telco carriers and ISP's, and
(3) acquisition of resources required to build a global network of telecom
connectivity.
2. The term of the Joint Venture shall be five years.
3. The Joint Venturers shall execute the necessary documents to register
the Joint Venture with the proper governmental offices in the County of Los
Angeles, State of California.
4. The Capital of the Joint Venture shall consist of contributions by the
joint Venture partners as set forth below:
a. CITY PACIFIC INTERNATIONAL U.S.A., INC. shall contribute assets
as set forth in Attachment A.; and
b. OMNETRIX INTERNATIONAL INC. shall contribute its contractual
rights and equipment and other assets as set forth in Attachment B;
5. The profits and losses of the Joint Venture shall be determined in
accordance with good accounting practices and shall be shared among the Joint
Venturers as set forth in Attachment C.
6. OMNETRIX INTERNATIONAL INC. and CITY PACIFIC INTERNATIONAL U.S.A., INC.
shall jointly appoint a Joint Venture Manager, OMX LLC, who shall have the sole
discretion, management and entire control of the conduct of the business of the
Joint Venture as the "Venture Manager."
7. As compensation for its services the Venture Manager shall be paid per
Schedule D during the duration of the Joint Venture and shall be reimbursed for
all reasonable expenses incurred in the performance of its duties as Venture
Manager.
8. Each Joint Venturer shall be bound by any action taken by the Venture
Manager in good faith under this Agreement. In no event shall any Joint Venturer
be called upon to pay any amount beyond the liability arising against him on
account of his capital contribution.
9. The Venture Manger shall not be liable for any error in judgment or any
mistake of law or fact or any act done in good faith in the exercise of the
power and authority as Venture Manager but shall be liable for gross negligence
or willful default.
10. The relationship between the Joint Venturers shall be limited to the
performance of the terms and conditions of this Agreement. Nothing herein shall
be construed to create a general partnership between the Joint Venturers, or to
authorize any Venturer to act as a general agent for another, or to permit any
Venturer to bind another other than as set forth in this Agreement, or to borrow
money on behalf of another Venturer, or to use the credit of any Venturer for
any purpose.
<PAGE> 2
11. Neither this Agreement nor any interest in the Joint Venture may be
assigned, pledged, transferred or hypothecated without the prior written consent
of the Joint Venturers hereto.
12. This Agreement shall be governed by and interpreted under the laws of
the State of Nevada. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association in
the City of Las Vegas, State of Nevada, and judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof.
13. Any and all notices to be given pursuant to or under this Agreement
shall be sent to the party to whom the notice is addressed at the address of the
Venturer maintained by the Joint Venture and shall be sent Certified Mail,
Return Receipt Requested.
14. This Agreement constitutes the entire agreement between the Joint
Venturers pertaining to the subject matter contained in it, and supersedes all
prior and contemporaneous agreements, representations, warranties and
understandings of the parties. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by all the parties hereto.
No waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether similar or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless in writing signed by the party malting the waiver.
The parties hereto, intending to be bound, have signed this Agreement as
of the date and year first above written.
CITY CORPORATION
BY /s/ E.G. MARCHI
----------------------------------
E.G. Marchi, President
OMNETRIX INTERNATIONAL INC.
BY /s/ WILLIAM VAN VLIET
----------------------------------
William Van Vliet, President
<PAGE> 3
ATTACHMENT A
Contribution of Omnetrix to the name eNET.COM JV PARTNERS (ENET JV):
1. The business of Omnetrix related to the high end debit card production
and sale of 500 minute cards designed for the corporation market.
2. Omnetrix rights to conduct a co-location business at 1200 W. Seventh
Street, Suite L2-290, Los Angeles, California.
3. Omnetrix rights to customer databases and marketing expertise and
licensing required for conducting long distance business on a contract
by contract basis.
ATTACHMENT B
Contribution of City Pacific to the name eNET.COM JV PARTNERS (ENET JV):
1. Funds to costs of printing and web marketing for production and sale of
the high end debit cards referred to in Attachment A.
2. Funds to cover co-location lease and equipment costs incidental to the
business conducted at 1200 W. Seventh Street, Suite L2-290, Los
Angeles, California.
3. Provide funding and financial enhancement and guarantees required to
create business in carrying global voice and data long distance
telecommunications traffic.
ATTACHMENT C
Omnetrix and City Pacific as joint venture partners shall share equally in the
net profits, as determined after payments are made as required to the Joint
Venture Manager, of the business conducted under the joint venture.
SCHEDULE D
The joint venture manager, OMX LLC, shall be compensated at the rate of 50% of
the net profit derived from conducting the business of the joint venture, after
computing all applicable expenses of operation; but in no instance shall such
compensation be less than $2500.00 per month.
<PAGE> 1
EXHIBIT 10.2
EXHIBIT "A"
PARTNERSHIP AGREEMENT
GENESIS RESIDENTIAL HEALTHCARE COMMUNITY -
PERRIS, LTD.
AGREEMENT OF LIMITED PARTNERSHIP
Exhibit A
1
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
SECTION Page No.
<S> <C>
1. AGREEMENT OF LIMITED PARTNERSHIP. 3
2. NAME OF THE PARTNERSHIP. 3
3. PURPOSE, BUSINESS AND AUTHORITY. 3
4. PLACE OF BUSINESS. 3
5. DEFINITIONS. 4
6. TERM OF THE PARTNERSHIP. 6
7. PARTNERSHIP CAPITAL CONTRIBUTIONS; ADVANCES; ADMISSION
OF NEW LIMITED PARTNERS. 6
8. ALLOCATION OF NET INCOME, NET LOSS, GAIN AND LOSS. 6
9. DISTRIBUTIONS. 8
10. RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER. 9
11. SPECIAL RIGHTS OF LIMITED PARTNERS. 11
12. COMPENSATION OF GENERAL PARTNER. 15
13. DISSOLUTION OF PARTNERSHIP. 12
14. DEATH OF A LIMITED PARTNER. 12
15. WITHDRAWAL OF GENERAL PARTNER. 12
16. TRANSFER AND ASSIGNMENTS. 13
17. SUBSTITUTE LIMITED PARTNERS. 13
18. BOOKS AND RECORDS. 14
19. REPORTS. 14
20. POWER OF ATTORNEY. 14
21. INDEMNIFICATION. 15
22. MISCELLANEOUS. 15
</TABLE>
GENESIS RESIDENTIAL HEALTHCARE COMMUNITY - PERRIS, LTD
CALIFORNIA LIMITED PARTNERSHIP
2
<PAGE> 3
AGREEMENT OF LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP is entered into as of July 1, 1999, by and
between E-Net Financial Corporation, a Nevada Corporation, and Genesis
Residential Healthcare, Inc. a California Corporation (the "CO-General
Partners"), and those persons named on Exhibit "A", attached hereto and
incorporated herein by reference, whose addresses are those shown on Exhibit "A"
(the "Limited Partners"). The parties agree, pursuant to the following
provisions, to form a limited partnership to acquire, hold, own, improve,
manage, operate, lease, alter, sell, transfer, and convey certain real property
as described herein and in that certain Private Placement Memorandum of even
date herewith (the "Memorandum").
1. AGREEMENT OF LIMITED PARTNERSHIP.
The parties hereby form a limited partnership (the "Partnership ") pursuant to
the provisions of the Act, upon the terms and conditions herein set forth. All
provisions of the Act shall he deemed to be superseded by the express terms of
this Agreement to the extent necessary to effect the intent of the parties
reflected herein. As soon as is practical following the execution of this
Agreement, a Certificate of Limited Partnership, in a form prescribed by the
Act, shall be filed in the office of the California Secretary of State.
2. NAME OF THE PARTNERSHIP.
The name under which the Partnership will conduct its business is:
GENESIS RESIDENTIAL HEALTHCARE COMMUNITY - PERRIS, LTD.
A California Limited Partnership
General Partner. The name, addresses of the CO-General Partners are as follows:
E-Net Financial Corporation
2102 Business Center Drive, Suite 115E
Irvine, CA 92612
Genesis Residential Healthcare, Inc.
3200 Bristol 8th Floor
Costa Mesa, CA 92626
Agent for service of Process. In accordance with the requirements of Section
15614 (b) of the California Corporations Code, the name and address of the
Partnership's agent for service of process are as follows:
William W. Ashby
3200 Bristol, 8th Floor
Costa Mesa, CA 92626
3. PURPOSE BUSINESS AND AUTHORITY.
The purpose of the Partnership is the purchase of land, planning, engineering,
development, and construction of a residential healthcare senior citizen
community, and operation of new and environmentally safer community. The
Partnership may sell, lease, operate, maintain or otherwise dispose of all or
part of the units to be built, and do such things incidental thereto as are
deemed necessary or appropriate by the General Partner, in its sole discretion,
as a General Partner, to effect these purposes.
Notwithstanding the foregoing, the Limited Partners acknowledge that their
interest in the Project derives solely from the General Partner's relationship
as a general partner. Nothing contained in this Partnership Agreement shall be
deemed to expand or limit the rights of the partners under the GENESIS
RESIDENTIAL HEALTHCARE COMMUNITY, PERRIS, LTD., Partnership Agreement.
4. PLACE OF BUSINESS.
The principal place of business of this Partnership shall be:
Genesis Residential Healthcare Community, Perris, Ltd.
3200 Bristol 8th Floor
Costa Mesa, CA 92626
Or at such other place or places in the State of California as the General
Partner may, from time to time, determine, upon giving written notice of such
change to the Limited Partners.
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5. DEFINITIONS.
Unless the context of their use requires otherwise, the following terms whether
or not capitalized, have the meanings stated when used in this Agreement:
Act means the California Revised Limited Partnership Act, as amended.
Adjusted Invested Capital of a Partner means the Original Invested Capital paid
for or attributable to such Partner's Partnership Interest, reduced by the total
cash distributed to him from Net Proceeds from Sale or Refinancing.
Affiliate means:
(a) Any person directly or indirectly controlling, controlled by or
under common control with another person;
(b) A person owning or controlling ten percent (10%) or more of the
outstanding voting securities of such other person;
(c) Any officer, director or partner of such person; and
(d) If such Person is an officer, director or partner, any company for
which such person acts in any such capacity.
Assignee means a person who has acquired a beneficial interest in one or more
Partnership Units from a third party, but who is neither an Assignee of Record
nor a Substitute Limited Partner.
Assignee of Record means an Assignee who, in compliance with Section 16 hereof,
has acquired a beneficial interest in one or more Units, or any part of a Unit,
and whose ownership of such Units has been recorded in the books of the
Partnership, but who has not been admitted as a Substitute Limited Partner of
the Partnership.
Bankruptcy or Insolvency means the filing in any court pursuant to any statute
of the United States or of any state, a petition in bankruptcy or insolvency, or
filing for reorganization or for the appointment of a receiver or trustee of all
or a material portion of the Partner's assets an assignment for the benefit of
creditors, if the Partner admits in writing its inability to pay its debts as
they fall due, or the seeking, consenting to or acquiescing in the appointment
of a trustee, receiver, or liquidation of any material portion of its property.
The phrase "bankruptcy" or "insolvency" shall also include the filing against
any Partner in any court pursuant to any statute of the United States or of any
state, a petition in bankruptcy or insolvency, or for reorganization, or for
appointment of a receiver or a trustee of all or a material portion of the
Partner's property, and within ninety (90) days after such commencement of any
such proceeding against the Partner such petition shall not have been dismissed
(or satisfactory evidence that such Partner is diligently contesting such
petition shall not have been received by the General Partner, provided such
Partner is not otherwise in default hereunder). In addition, if the whole or any
portion of the Partnership Interest of any Partner is subject to levy or
attachment, and such levy or attachment is not released or discharged within
sixty (60) days, such Partner shall be deemed bankrupt or insolvent for the
purposes of this Agreement.
Capital Account Balance means a Unit holder's Original Invested Capital less his
or her share of Net Loss, Loss and Distributions, plus his or her share of Net
Income and Gain.
Cash Flow from Operations means Distributed Funds from the sale or rental of
units to be built for the project and other recurring operating income,
(including any surplus of contributed capital resulting from cost savings
realized by the Partnership, and interest on any debt representing the deferred
portion of the purchase price on a sale of real property.
Code means the Internal Revenue code of 1986, as the same may be amended from
time to time.
Distributed Funds means the amount, if any, by which the gross revenues received
by the Partnership during any calendar year from all sources exceed the costs
and expenses of the Partnership paid during such period, after payment or
adequate provision for payment has been made with respect to all outstanding
debts, taxes obligations and liabilities of the Partnership (including those to
Partners), and the establishment of such reserves for operating expenses and/or
contingent liabilities as the General Partner may, in its sole discretion, deem
appropriate for the efficient operation of the Partnership's business.
Distributions means any cash or property distributed to the Partners in relation
to their respective capital interests in the Partnership from any funds to be
distributed.
Gain means the taxable income recognized by the Partnership from the sale,
condemnation or other disposition of all or a portion of Partnership Property.
CO-General Partners means E-Net Financial Corporation, a Nevada Corporation, and
Genesis Residential Healthcare, Inc., a California corporation, or any successor
entity.
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Gross Revenues means all revenues from the sales, rentals, and operation of the
residential healthcare community project owned by the Partnership, other than
revenue from security deposits paid by lessees thereof which are not forfeited.
"Gross Revenues" shall not include revenues from the sale, refinancing, or other
disposition of Partnership Property or from earnings on savings or invested
funds.
Limited Partners means those persons who purchase Limited Partnership Units and
any other persons who are admitted to the Partnership as additional or
Substitute Limited Partners. Reference to a "Limited Partner" shall refer to any
one of them.
Loss means any taxable loss recognized by the Partnership from the sale,
condemnation or other disposition of all or a portion of Partnership Property.
Majority Vote of the Limited Partners means the vote or written consent of the
Limited Partners then holding of record, in the aggregate, more than fifty
percent (50%) of the then issued and outstanding Units.
Memorandum means the Private Placement Memorandum dated JULY 1, 1999, by which
the Units are offered and sold.
Net Income or Net Loss means the taxable income or tax loss resulting from
Partnership operations, as determined in accordance with generally accepted
accounting principles consistently applied, and as permitted by Code, excluding
any Gain or Loss.
Net Proceeds from Sale or Refinancing means Distributed Funds resulting from a
sale or from a taking under the power of eminent domain of all or a portion of
the Partnership Property, or from insurance proceeds not required for the
restoration of casualty damage and/or the payment of other damages, or from
reserves (surplus) or excess loan or refinancing proceeds, or from any other
source other than the rents or other recurring operating income of the
Partnership.
Operating Reserves means amounts retained by the Partnership, from time to time,
to pay for Partnership debts and contingencies, including, but not limited to,
amounts deemed necessary by the General Partner, in its sole discretion, to
acquire Partnership Property, develop or maintain the Project, or to fund the
Partnership business.
Original Invested Capital means the amount contributed to the capital of the
Partnership by each Partner, which amount shall be attributed to such Partner's
successor, Assignee of Record or Substitute Limited Partner.
Partners means the General Partner and the Limited Partners, collectively.
"Partner" shall refer to any one of the Partners.
Partnership means the limited partnership created under this Partnership
Agreement, as it may from time to time be amended.
Partnership Interest means the entire ownership interest (which may be segmented
into and/or expressed as a percentage of various rights and/or obligations) of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled as provided
in this Agreement and in the Act, together with the obligations of such Partner
to comply with all the terms and provisions of this Agreement and of the Act.
Partnership Percentage Interest or Percentage Interest means each Partner's
percentage of total Partnership Interest in the Partnership, as set forth in
Section 7.1.
Partnership Property means property or any interest therein, acquired directly
or indirectly by the Partnership, including any property purchased with any Net
Proceeds from Sale or Refinancing.
Person means any individual or entity, and the heirs, executors, administrators,
successors and assigns of such person where the context so admits,
Project means the purchase of land, planning, engineering, development,
construction and operation of a residential healthcare community.
Reserve Fund means the fund or separate accounts established by the General
Partner to pay for needed or anticipated maintenance, repair, replacement and/or
capital improvement of equipment, and for future interest payments due limited
partners. The fund will be established from capital contributions, but later may
be funded from either capital contributions or cash flow from operations.
Substitute Limited Partner means an Assignee of Record who has become a Limited
Partner pursuant to Section 17 hereof.
Super Majority Vote Of The Limited Partners means the vote or written consent of
the Limited Partners then holding of record, in the aggregate, more than
sixty-seven percent (67%) of the then issued and outstanding units. For purposes
of a Super Majority Vote, any Units held of record by the General Partners shall
be deemed non-voting.
Unit holder means a person who owns a beneficial interest in one or more Units,
or any portion thereof, and is admitted as a Limited Partner, or is an Assignee
of Record of a Unit.
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Unit of participation means the unit of Limited Partner participation, and each
unit shall require an Original Invested Capital contribution of $100,000. A unit
shall entitle the holder thereof to an interest in the income, Losses, and
Distributions of the Partnership attributable to the number of Units held.
6. TERM OF THE PARTNERSHIP.
The Partnership shall commence on the date that the Certificate of Limited
Partnership on Form LP-1 is duly filed in the Office of the California Secretary
of State (the "Effective Date"), and shall continue until the date of the first
to occur of the following events, unless sooner terminated pursuant to
Section 13 hereof:
(a) On July 1, 2019;
(b) At any time, by the election of the General Partner with the affirmative
Majority Vote of the Limited Partners;
(c) The Bankruptcy or Insolvency of the General Partner; or
(d) At any time after July 1, 2019, without the General Partner's consent, upon
the affirmative Majority Vote of the Limited Partners to dissolve and wind up
the affairs of the Partnership.
7. PARTNERSHIP CAPITAL CONTRIBUTIONS; ADVANCES; ADMISSION OF NEW LIMITED
PARTNERS.
7.1 Partnership Percentage Interests. Upon the Effective Date, the respective
Percentage Interests of the Partners shall be the same as the Percentage
Interest of the Limited Partners shall be allocated among them in the same ratio
as they hold Units, except as otherwise required by Section 7.5(a).
7.2 General Partners Original Invested Capital. The General Partner, in its
capacity as General Partner and for its interest in Partnership Distributions,
Net Income, Gain, Net Loss and Loss, shall make a contribution of Original
Invested Capital of all of its right, title and interest in the Project, as
determined by an independent, qualified appraiser, together with all designs,
specifications, plans, permits and approvals for the Project. The value of the
Original Invested Capital Contribution is hereby agreed to be $10,000. A General
Partner may purchase one or more Units and, to that extent, will also be a
Limited Partner. A General Partner may also become a Substitute Limited Partner
in accordance with Section 17 hereof.
7.3 Loans With the exception of capital contributions referenced in Sections 7.2
and 7.6, any sum advanced to the Partnership by a General Partner shall be
deemed a "loan" to the Partnership, which loan shall be repaid with interest at
a rate not to exceed that then charged by unrelated lending institutions for
comparable loans, but not to exceed the maximum rate permitted by law. No
General Partner loans to the Partnership may be secured by Partnership Property
unless the security interest is first approved by a Majority Vote of the Limited
Partners. Nothing herein shall be deemed to require that the General Partner
advance or loan funds to the Partnership.
7.4 Limited Partners' original Invested Capital. The Partnership shall offer,
sell and issue 200 Units (two Unit purchase minimum) at a price of $100,000 per
Unit, for a total consideration of $20,000,000 and admit the purchasers thereof
as Limited Partners. Each Limited Partner shall make a cash contribution of
Original Invested Capital upon adoption of this Agreement in the amount of
$100,000 for each Unit subscribed; provided, however, the General Partner may
contribute $100,000 net of underwriting commissions for each Unit it purchases.
The General Partner, in its sole discretion, may allow subscriptions for partial
Units, or for less than the two Unit minimum.
7.5 Additional Contributions.
(a) The General Partner may request a voluntary assessment of the Limited
Partners to contribute additional fees.
7.6 Interest Bearing. Capital contributions of the Limited Partners shall bear
interest at the rate of 7% per annum.
7.7 No Mandatory Additional Contributions. Except as may be required by law, no
Partner shall be required to make any additional capital contributions.
Additional capital contributions shall be made only pursuant to the terms of
Section 7.6 hereof.
8 ALLOCATION OF NET INCOME, NET LOSS GAIN AND LOSS.
8.1 Capital Account. A separate capital account shall be maintained for each
Partner (a "Capital Account"). Each Partner's Capital Account shall be increased
by (1) the amount of money contributed by it to the Partnership, (2) the fair
market value of any property contributed by it to the Partnership (net of any
liabilities securing such contributed property that the Partnership is
considered to assume or take subject to under Section 752 of the Code), and (3)
allocations to it of income or gain (or items thereof), including income and
gain exempt from tax, and income and gain described in paragraph (b)(2)(iv)(g)
of Treasury Regulations (the "Regulations") Section 1.704-1, but excluding
income and gain described in paragraph (b)(4)(i) of Regulations Section 1.704-1;
and shall be decreased by (4) the amount of money distributed to it by the
Partnership, (5) the fair market value of property distributed to it by the
Partnership (net of liabilities securing such distributed property that such
Partner is considered to assume or take subject to under Section 752 of the
Code), (6) allocations to it of expenditures of the Partnership of the type
described in Code Section
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705(a)(2)(B), and (7) allocations of deduction and loss, including items of loss
and deduction described in paragraphs (b)(4)(i) or (b)(4)(iii) of Regulations
Section 1.704-1(b)(2)(iv). For purpose of this Agreement, a Partner who has more
than one interest in the Partnership shall have a single Capital Account that
reflects all such interest, regardless of the class of interests owned by such
Partner, and regardless of the time or manner in which such interests were
acquired. All items of income exempt from federal income tax, and expenditures
not deductible in computing federal income tax shall be allocated among the
Partners in accordance with their allocable share of income, gain, deduction or
losses (as the case may be). If the book values of Partnership assets are
adjusted, the Capital Accounts of all Partners shall be adjusted simultaneously
to reflect the aggregate net adjustment as if the Partnership recognized gain or
loss equal to the amount of such aggregate net adjustment. Subject to Section
9.4, if any assets of the Partnership are to be distributed in kind, such assets
shall be distributed on the basis of their fair market value as determined by
independent appraisal after the Partners' Capital Accounts have been adjusted to
reflect the manner in which any unrealized gain and loss with respect to such
assets (that have not been reflected in their Capital Accounts previously) would
be allocated among the Partners if there were a taxable disposition of the
property for its fair market value. It is the intent of the Partnership that the
Capital Accounts of all Partners be determined and maintained in accordance with
the principles of Regulations Section 1.704-1 at all times throughout the full
term of the Partnership, and this Section 8.1 shall be so interpreted and
applied.
8.2 Deficit Capital Account Balances. Upon liquidation of the Partnership or the
liquidation of a Partner's interest in the Partnership, any General Partner with
a deficit balance in its Capital Account shall have the obligation to restore
such deficit balance by making an additional contribution of the capital of the
Partnership.
8.3 Allocations.
(a) Allocation of Items of Income. Gain Loss Deduction and Credit. Except as
otherwise provided in this Article 8, items of Net Income, Gain, Net Loss, Loss,
deduction and credit for each calendar year of the Partnership shall be
allocated to the Partners in the same ratio as they receive distributions of
funds resulting from items of Net income, Gain, Net Loss, Loss, deduction or
credit.
(b) Minimum Gain Chargeback. If there is a net decrease in Partnership Minimum
Gain during a Partnership taxable year, each Limited Partner with a deficit
Capital Account Balance at the end of such year (excluding from each Limited
Partner's deficit Capital Account Balance any amount that such Partner is
obligated to restore under Regulations Section 1.704-1(b)(2)(ii)(c), as well as
any addition thereto pursuant to the next-to-last sentence of Regulations
Section 1.704-l(b)(4)(iv)(f) computed with respect to the amount of Partnership
minimum gain after such net decrease) will be allocated, before any other
allocation is made under Section 704(b) of the Code for Partnership items for
such taxable year, items of income and gain for such year (and, if necessary,
subsequent years) in the amount and in the proportions needed to eliminate such
deficits as quickly as possible. Any allocation of items of income and gain
pursuant to this Section 8.3(b) shall be taken into account in computing
subsequent allocations of items of income and gain under this Agreement, so that
the net amount of any such items so allocated and the losses and all other items
allocated to each such Limited Partner shall, to the extent possible, be equal
to the net amount that would have been allocated to each such Limited Partner if
the allocations pursuant to this Section 8.3(b) had not occurred. It is the
intent of this Section 8.3(b) to provide for a "Minimum Gain Chargeback" as that
term is defined in Regulations Section 1.704-1(b)(4)(iv)(e), and all the
provisions hereof shall be construed, interpreted and applied to assure
compliance with such "Minimum Gain Chargeback" provisions.
(c) Qualified Income Offset. To the extent the allocation of any loss or
deduction would cause the sum of the deficit Capital Account Balances of any
Limited Partner to exceed the Partnership's minimum gain, such Limited Partner
shall not be allocated a loss or deduction which will cause or increase a
deficit balance in such Partner's Capital Account in excess of any dollar amount
of such deficit balance that such Partner is obligated to restore upon
liquidation, as of the end of the Partnership's taxable year to which such
allocation relates. For purposes of this Section 8.3(c) only, the Capital
Account of each Limited Partner shall be reduced (1) for any distributions that
as of the end of such year, are reasonably expected to be made to such Partner
to the extent they exceed offsetting increases to such Partner's Capital Account
that are reasonably expected to occur during (or prior to) the Partnership
taxable years in which such distributions are reasonably expected to be made,
(2) adjustments that, as of the end of such year, are reasonably expected to be
made for depletion adjustments, and (3) allocations that, as of the end of such
year, are reasonably expected to be made pursuant to Section 704(e)(2) of the
Code (dealing with family partnerships), Section 706(d) of the Code (dealing
with changes in Partner's interest) and Regulations Section 1.751-1 (dealing
with unrealized receivables and inventory items), all as described in
Regulations Section 1.704-1(b)(2)(ii)(d). A Limited Partner who unexpectedly
receives an adjustment, allocation or distribution described above which causes
or increases a deficit balance in such Partner's Capital Account (in excess of
any dollar amount of such deficit balance that such Partner is obligated to
restore upon liquidation, as of the end of the Partnership's taxable year to
which such allocation relates) will be allocated items of income and gain in an
amount and manner sufficient to eliminate such deficit balance as quickly as
possible.
(d) The foregoing notwithstanding, losses allocated to the Limited Partners in
any tax year shall not exceed an amount that, when allocated pursuant to the
foregoing, would cause any Limited Partner to have a negative Capital Account
Balance, and any such excess losses shall be allocated to the General Partner
for such period.
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8.4 Taxable Gain on Exchange. Any taxable gain incurred by the Partnership as a
result of receiving taxable "boot" in an otherwise tax-deferred exchange of a
Partnership Property shall be allocated to the Partners receiving said funds and
other consideration as said allocation is provided in Code Section 704(a) and
704(b), but only to the extent that the total Gain so allocated does not exceed
the amount of gain that would be allocated to the Partner had the Property been
sold outright for all cash by the Partnership for the net amount credited to the
Partnership in the exchange. Any such excess shall he allocated to the remaining
Partners in the same ratio that total Gain would have been allocated had the
Property been sold outright for all cash by the Partnership for the net amount
credited to the Partnership in the exchange.
8.5 Depreciation Recapture. The initial Capital Account Balance for a transferee
of Units pursuant to this Agreement shall be that of the transferor on the date
the transfer is effective hereunder. To the extent possible, if taxable gain to
be allocated includes income resulting from the sale or disposition of
Partnership Property which is treated as ordinary income for income tax
purposes, such gain so treated as ordinary income shall be allocated to and
reported by each Partner in proportion to allocations received by that Partner
of the items that gave rise to such ordinary income recapture, and the
Partnership shall keep records of such allocations.
8.6 Allocation Between Assignor and Assignee. The portion of the income, gain,
losses, credits and deductions of the Partnership for any fiscal year of the
Partnership during which a Partner transfers its interest in the Partnership
pursuant to this Agreement is allocable to the transferor and the transferee on
the basis of the number of days during the relevant fiscal year that each is the
owner thereof, using a reasonable daily pro ration method.
8.7 Express Consent to Allocations. Each Partner expressly consents to the
allocations, which are to be made pursuant to this Agreement, including
allocations of distributions.
8.8 Adjustments to Gain and Loss. For purposes of computing Gain or Loss on the
disposition of Partnership Property, or for purposes of determining the cost
recovery, depreciation or amortization deduction with respect to any asset, the
Partnership shall use such Property's book value, as determined in accordance
with Regulations Section 1.704-1(b). Consequently, each Property's book value
shall be equal to its adjusted basis for federal income tax purposes, except as
follows:
(a) The initial book value of the property shall be the fair market value net of
encumbrances on such property.
(b) The book values of all Partnership properties shall be adjusted to equal
their respective gross fair market values, as determined by the General Partner,
as of the following times: (i) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a capital
contribution of $1,000.00; (ii) the distributions by the Partnership to a
Partner of more than a de minims amount of Partnership property other than
money; (iii) the termination of the Partnership for federal income tax purposes
pursuant to Code Section 708(b)(1)(B); and (iv) the liquidation of any Partner's
interest in the Partnership.
(c) If the book value of property has been determined pursuant to subsection
8.8(a) or 8.8(b), such book value shall thereafter be adjusted by depreciation
or amortization, if any, taken into account with respect to such property for
purposes of computing income, Gain or Loss.
8.9 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations, income, Gain, Loss and deduction with respect to any
property contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for federal
income tax purposes and its initial book value (computed in accordance with
Section 8.8).
(a) If the book value of any Partnership property is adjusted pursuant to
Section 8.8, subsequent allocations of income, Gain, Loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such property for federal income tax purposes and its book value in the
same manner as under Code Section 704(c) and the Regulations.
(b) The General Partner in any manner that reasonably reflects the purpose and
intention of this Agreement shall make any elections or other decisions relating
to such allocations. Allocations pursuant to this Section 8.9 are solely for
purposes of federal, state and local taxes and shall not affect, or in any way
be taken into account in computing, any Partner's Capital Account Balance.
9. DISTRIBUTIONS.
9.1 Share Of Distributions. Except as otherwise provided in this Agreement, and
in connection with winding up and liquidation of the Partnership, available cash
shall be distributed to the Partners as follows:
(a) First, Ninety (90%) Percent to the participants and Ten (10%) Percent to the
Managing Partner until payout is achieved, as determined on a partner by partner
basis.
(b) Thereafter, fifty (50%) Percent to the participants and fifty (50%) Percent
to the Managing General Partner.
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9.2 Allocation Among Partners.
All Distributions to the Limited Partners shall be allocated among them in
proportion to the number of Units owned by them, of record on the last day of
the month preceding the month in which the Distribution is made. Such
allocations shall be made without regard to Capital Account Balances or the
length of time the Unit was owned (except as provided in Section 7.5).
9.3 Liquidation or Dissolution.
(a) In the event the Partnership is liquidated or dissolved, the assets of the
Partnership shall be distributed to the Partners in accordance with Section 9.1,
but only after the payment of Partnership debts and the establishment of
reasonable reserves for anticipated contingencies, if any.
(b) No Partner with a negative Capital Account Balance following the
distribution of liquidation proceeds shall be required to restore such balance
to the Partnership except as may be required under the Act.
(c) Any Limited Partner who has a separate written obligation approved by the
General Partner to make additional Capital Contributions to the Partnership
which has not been paid at the date of liquidation shall pay such amount to the
Partnership within ninety (90) days of the liquidation of the Partnership, or
such obligation may be set off against any distributions to be made to such
Limited Partner.
9.4 Valuation. For the purpose of valuing Distributions hereunder, Distributions
in kind of notes or other evidences of indebtedness or interests therein shall
be valued at their face amount.
9.5 Amount and Time Distributions will be made at such times and in such amounts
as the General Partner may, in its sole discretion, determine. The Partnership
may be restricted from making Distributions under the terms of notes, mortgages
or other debt obligations which it may obtain from lenders in connection with
Partnership lows. Distributions may also be restricted or suspended whenever the
General Partner, in its sole discretion, determines that such action is in the
best interests of the Partnership. All Distributions are subject to the payment
of Partnership expenses, including maintenance of reasonable Operating Reserves.
9.6 General Provisions Relating to Distributions. Net Income and Net Loss
Allocations.
(a) For each taxable year of the Partnership, all Net Income and Net Loss of the
Partnership shall be allocated at and as of the end of the taxable year. The
General Partner shall distribute to each Partner a report of the allocations of
Net Income and Net Loss within seventy-five (75) days after the end of such
taxable year (or later if due to a delay beyond the control of the General
Partner).
(b) Net Income and Net Loss shall be allocated, and all Distributions shall be
distributed, as the case may be, to the Persons shown on the records of the
Partnership to have been Partners as of the last day of the taxable year for
which the allocation or Distribution is to be made. Notwithstanding the
foregoing, if a Partner transfers all or any portion of his Partnership Interest
to any Person who during such taxable year is admitted as a Substitute Limited
Partner, the Net Income and Net Loss shall be allocated between the transferor
and the transferee on the basis of the number of days of the taxable year in
which each was a Partner or Assignee of Record, as the case may be.
(c) Each Partner as an express material condition to becoming a Partner hereby
expressly consents to the methods set forth herein above by which Net Income,
Net Loss, and the Distributions are allocated, apportioned and paid.
10. RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER.
10.1 Exclusive Authority. Except as otherwise set forth in this Agreement, the
General Partner has the exclusive right to manage and control the business of
the Partnership for the purposes herein stated, and is hereby authorized to take
any and all actions it deems necessary in accordance with the provisions of this
Agreement.
10.2 Scope Of Authority. The General Partner, on behalf of the Partnership and
in furtherance of its business, shall have the authority to perform all acts
which general partners of partnerships similar to the Partnership are authorized
to perform, including, but not limited to, the following:
(a) To acquire and develop the Project, including the execution of all necessary
documents and evidences of indebtedness and payment of all sums as described in
the Memorandum;
(b) To enter into such leases with respect to all or any portion of the Project,
whether or not such leases (including renewal terms) shall extend beyond the
date of termination of the Partnership, at such rents or amounts and upon such
terms, as they deem proper;
(c) To maintain, manage, improve, develop, operate, lease or otherwise dispose
of the Project or any related real or personal property.
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(d) To employ, on behalf of the Partnership, legal, financial, accounting and
operational agents, counsel and assistance, as well as initial and non-recurring
professional evaluation, advice and recommendations concerning and with respect
to selection, acquisition, operation and disposition of the Project.
(e) To invest in short-term debt obligations (including obligations of federal,
state and local governments and their agencies' commercial paper, and
certificates of deposit of commercial banks, savings banks or savings and loan
associations or credit unions) such funds as are temporarily not required for
investment in the Project or for Distribution to the Partners.
(f) To borrow money (and execute promissory notes) for initial or supplemental
investment in the Project, and payment of fees and expenses (including the
General Partner's fees and expenses.
(g) To execute, sign and deliver in furtherance of any or all of the purposes of
the Partnership, any and all agreements, contracts, documents, certifications,
subscriptions and other instruments necessary or convenient in connection with
the business of the Partnership. All of which may contain such terms,
provisions, and conditions as the General Partner, in its sole discretion, shall
deem appropriate, including, but not limited to, the power to execute and
deliver on behalf of the Partnership any and all documents that the General
Partner deems necessary or appropriate in connection with the acquisition of the
Project and completion of the Project; and to do any and all other acts or
things necessary, proper, convenient or advisable to effectuate and carry out
the intent and purposes of the Partnership;
(h) To compromise, submit to arbitration, sue on, or defend all claims in favor
of or against the Partnership.
(i) To make and revoke any election permitted the Partnership by any taxing
authority.
(j) To do all acts it deems necessary or appropriate for the protection and
preservation of the Partnership's assets;
(k) To finance, refinance, sell or otherwise dispose of all or substantially all
the assets of the Partnership at any onetime, as limited by Section 11.1.
(l) To pay or reimburse any and all actual fees, costs, and expenses incurred in
the formation and organization of the Partnership, except as limited by Section
12.8; and
(m) To engage in any kind of activity and to perform and carry out contracts of
any kind necessary to, or in connection with, or incidental to the
accomplishment of the purposes of the Partnership, as may be lawfully carried on
or performed by a partnership formed under the Act.
10.3 Lease Of Project. The General Partner shall have the exclusive right to
lease the Project, including the setting of rents and cost allocations, and
determining the terms and conditions of leases.
10.4 Delegation of Authority. The General Partner may delegate all or any of its
duties hereunder, and in furtherance of any such delegation, appoint, employ, or
contract with any person, including Affiliates, that it, in its sole discretion,
deems necessary or desirable for the transaction of the business of the
Partnership, which persons may, under the supervision of the General Partner,
among other things: (i) administer the day-to-day operation of the Partnership;
(ii) act as consultants, accountants, attorneys, or in any other capacity deemed
by the General Partner as necessary or appropriate; and (iii) perform such other
acts or services for the Partnership as the General Partner, in its sole and
absolute discretion, may determine.
10.5 Reliance on Position. No person dealing with the General Partner shall be
required to determine its authority to make any commitment or undertaking on
behalf of the Partnership, nor to determine any fact or circumstance bearing
upon the existence of its authority. In addition, no purchaser of any asset
owned by the Partnership shall be required to determine the sole and exclusive
authority of the General Partner to sign and deliver, on behalf of the
Partnership, any such instrument of transfer, or to see the application or
distribution of revenues or proceeds therefrom by the Partnership, unless such
purchasers are paid or credited in connection therewith, or unless such
purchasers shall have received prior written notice from the Partnership
affecting the same.
10.6 Devotion of Time. The General Partner shall devote only such time and
effort to the business and affairs of the Partnership as is necessary or
appropriate to competently effect the Partnership's purposes and activities.
10.7 Other Activities. Any Partner, General or Limited, or any of their
respective Affiliates, may engage in or possess an interest in other business
ventures of every nature and description or, independently of the others,
including, but not limited to, the ownership, financing, leasing, operation,
management, syndication, brokerage and development of real property; and neither
the Partnership nor the Partners (whether General or Limited) shall have any
right, by virtue of this Agreement, in and to such other ventures or to the
income or profits derived therefrom. No Partner shall be required to present any
business or investment opportunity to the Partnership or any of the Partners.
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10.8 No Participation in Management. No Limited Partner (except one who may also
be a General Partner, and then only in his capacity as a General Partner within
the scope of his authority hereunder) shall participate in or have any control
over the Partnership business (except as provided in Section 11.1 below), nor
shall any Limited Partner have any authority or right to act for or bind the
Partnership. The Limited Partners hereby consent to the exercise by the General
Partner of the powers conferred on it by this Agreement.
11. SPECIAL RIGHTS OF LIMITED PARTNERS.
11.1 Actions Requiring Approval. The Limited Partners shall have the right to
vote on Partnership matters only as expressly provided in this Agreement.
Anything in this Agreement to the contrary notwithstanding, the General Partner
shall not do any of the following acts without the Majority Vote of the Limited
Partners:
(a) Amend the Agreement [except for those amendments specified in Section
20.1(a)].
(b) Dissolve the Partnership; or
(c) Resign as General Partner.
In voting on the foregoing matters, the Limited Partners shall vote as a single
class.
11.2 Removal and Replacement of General Partner.
(a) The Limited Partners, by a Super Majority vote, may elect to remove and
replace the General Partner only for cause. For purposes of this Section 11.2,
"cause" shall consist of (i) the material breach of a material provision of this
Agreement, (ii) the Bankruptcy or Insolvency of any Person who controls at least
fifty-one percent (51%) of the equity interest in the General Partner, or in any
entity constituting all or part of the General Partner, or (iii) the conviction
of any Person (or any individual controlling such Person) of any felony, or any
misdemeanor involving moral turpitude.
(b) In the event the General Partner is removed for cause; it shall be served
notice of such removal. The notice shall specify the effective date of the
removal, which date shall not be less than thirty (30) days from the date of the
notice and shall identify the replacement General Partner. Upon removal, the
removed General Partner's Percentage Interest in Partnership Distributions, Net
Income and Net Loss shall, at the option of the Limited Partners as determined
by their Super Majority Vote either (1) remain unchanged, with the removed
General Partner becoming a Limited Partner with respect to such interest; or (2)
be purchased by the Partnership at its then appraised value upon the payment of
twenty percent (20%) thereof in cash and the balance evidenced by the
Partnership's promissory note (the "Promissory Note"). The Promissory Note shall
(i) provide for quarterly payments of interest only, (ii) provide for payment in
full of principal and any accrued but unpaid interest in sixty (60) months from
the date thereof, (iii) bear simple interest at the lesser of ten percent (10%)
per annum, or the maximum rate permitted by California law, and (iv) be secured
by a deed of trust on the Project, but only if such lien does not violate any
due on sale or due on encumbrance provision of an institutional lender whose
interest in the Project is first and prior to that described herein.
(c) In the event the removed General Partner and the Partnership cannot agree on
the appraised value of the removed General Partner's interest, the value shall
be the average of the appraised values determined by two qualified appraisers,
one appointed by the Partnership and the other by the removed General Partner.
Each party shall bear the cost of its appraiser. Upon removal, the removed
General Partner shall be indemnified and held harmless by the Partnership
against any loss or expense resulting from any obligation or liability of the
Partnership after the date of its removal, except as may result from its limited
partner status. The Partnership shall publish such notices and notify such
persons of its removal, as the removed General Partner may reasonably deem
necessary.
11.3 Meetings. A meeting of the Limited Partners may be called by the General
Partner, or the Limited Partners holding at least fifty-one percent (51%) of the
then outstanding Units, with respect to any matters for which the Partners may
vote as set forth in this Agreement. Within ten (10) days after receipt of a
written request, either in person or by registered or certified mail, stating
the purpose(s) of the requested meeting, the General Partner shall provide all
Partners (either in person or by registered or certified mail) with notice of
the meeting. The meeting shall be held on a date not less than fifteen (15) nor
more than sixty (60) days after receipt of said request, at a time and place
convenient to the Partners. Even though properly noticed pursuant hereto, the
General Partner may adjourn any meeting if Partners present at the meeting
represent less than a majority of the outstanding Units, either in person or by
proxy.
12. COMPENSATION OF GENERAL PARTNER.
12.1 Specified Compensation Only. The General Partner and its Affiliates may not
receive compensation from the Partnership except as provided by this Agreement.
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12.2 Acquisition and Development Fee. The General Partner shall receive set fees
(see "MANAGEMENT COMPENSATION"), Partnership administration fee payable to the
Managing General Partner, 5% of the gross offering in organizing, syndication
forming and managing the administration of the Partnership, 2% for legal fees
and costs. Operational stage, Net cash flow distribution from sale or rental of
units to be built in the residential healthcare community project. 10% to the
Managing General partner and 90% to the Limited Partners until the Limited
Partners have received a full return of their investment, and thereafter 50% to
the CO-Managing General Partners, and 50% to the Limited Partners. The Managing
partner is to receive an annual 5% management fee. Liquidation stage,
distribution from the project: 10% to the Managing General Partner and 90% to
the Partners until the limited partners have received a full return of their
investment, and thereafter, 50% to the Managing General Partner and 50% to the
limited partners.
12.3 Share Of Distributions. Notwithstanding the fees payable to the General
Partner and/or its Affiliates as described in this section 12, the General
Partner shall also be entitled to its allocation of Distributions of Cash Flow
from Operations and Net Proceeds from Sale or Refinancing as set forth in
Section 9 of this Agreement.
12.4 Reimbursement. The General Partner shall have the right to be reimbursed
for funds advanced and expenses incurred by it on behalf of the Partnership,
including expenses incurred in the offer and sale of the Units and for goods,
materials and services actually used by or for the Partnership; provided,
however, that the amount of such reimbursements shall not exceed its actual
costs therefor. No Partner may be reimbursed hereunder for costs for which it
is reimbursed under any other provision of this Agreement, or pursuant to any
other contract with the Partnership.
13.DISSOLUTION OF PARTNERSHIP.
13.1 Events of Dissolution. The Partnership shall be dissolved upon the
happening of any of the following events:
(a) The Bankruptcy, Insolvency, retirement, withdrawal, dissolution, death or
insanity of the last remaining General Partner, unless the Limited Partners
shall, by the affirmative vote of them all, elect one or more replacement
General Partners pursuant to Section 15632(b)(5)(1) and Section 15636 of the
Act.
(b) The expiration of the Partnership's term or the election by the Partners to
dissolve under Section 6 above.
13.2 Liquidation. Should the Partnership dissolve, either by voluntary agreement
or by any other event, the General Partner, if any, shall wind up and terminate
the affairs of the Partnership. In the event that there is no remaining General
Partner, the Limited Partners shall meet on the date and at the place within the
County of Orange specified in the first notice sent by any Limited Partner to
all other Limited Partners, at least ten (10) but not more than thirty (30) days
prior to the meeting date. At such meeting, the Limited Partners, by a Majority
Vote, shall appoint a trustee (who may be a Partner) to wind up and terminate
the affairs of the Partnership.
14. DEATH OF A LIMITED PARTNER.
The death, incompetence, Bankruptcy or Insolvency of one or more of the Limited
Partners shall not dissolve or terminate the Partnership, nor entitle his
representatives to a return of capital. The right of such Limited Partner to
share in the Partnership's Net Income, Gain, Net Loss, Loss and Distributions
shall devolve onto his personal representative, subject to the terms and
conditions of this Agreement and the Partnership shall continue as a Limited
Partnership under the Act.
However, in no event shall such personal representative, or any successor to a
Limited Partner, become a Substitute Limited Partner unless the requirements of
Sections 16 and 17 of this Agreement are satisfied.
15. WITHDRAWAL OF GENERAL PARTNER.
15.1 Withdrawal of Interest. Except to the extent provided in this Section 15,
the General Partner agrees not to resign or withdraw from the Partnership, nor
to assign, pledge, encumber, sell or otherwise dispose (collectively referred
to as "Transfer") its Partnership Interest as a General Partner, without the
prior Majority Vote of the Limited Partners.
15.2 Wrongful Transfer. Any Transfer or attempt to Transfer by the General
Partner of its Percentage Interest in violation of this Agreement shall be null
and void. A Transfer of more than fifty percent (50%) of the Partnership
Interest of the General Partner shall be considered a "Transfer" of its
Partnership Interest for the purposes hereof.
15.3 Wrongful Withdrawal. If the General Partner resigns or withdraws from the
Partnership in violation of this Agreement, it shall remain liable to the
Partnership as General Partner for Partnership debts and obligations at the time
of such wrongful withdrawal or resignation, and for any and all damages,
including lost profits, resulting from such wrongful withdrawal or resignation.
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16. TRANSFER AND ASSIGNMENTS.
16.1 Transfer Requirements. Except as provided in Section 16.3, no Partner may
transfer, sell, encumber or otherwise alienate (collectively referred to as an
"assignment") his interest in the Partnership without complying with Section
16.2 below and delivering to the General Partner such executed instruments as it
deems necessary or appropriate to verify such assignment and enter it onto the
records of the Partnership. Upon compliance with the foregoing, the Assignee
shall become an Assignee of Record.
16.2 Assignment of Interest. A Participant may not withdraw or sell, assign,
transfer, mortgage, encumber, charge or otherwise dispose of his interest in the
Partnership or assign his right to receive distributions hereunder unless the
assignment is by a written instrument in form satisfactory to the Managing
General Partner evidencing the Assignor's and Assignee's consent to the
assignment and provided further that;
(a) The Managing General Partner consents in writing to the assignment, which
consent may be given or withheld in the Managing General Partner's sole
discretion in the event of a proposed substitution of a Participant, except that
the Managing General Partner shall not consent to an assignment which, in the
opinion of the Managing General Partner, would jeopardize the status of the
Partnership as a partnership for federal income tax purposes, would cause a
termination of the Partnership within the meaning of Section 708(h) of the Code
would violate, or cause the Partnership to violate, any applicable law or
government rule or regulation.
(b) In the case of the proposed substituted Participant, the proposed
substituted Participant consents in writing in form and substance satisfactory
to the Managing General partner to become a substitute Participant and to be
bound by the terms of the Partnership Agreement in the place and stead of the
assigning Participant. No substitution of a Participant which has been consented
to by the Managing General Partner shall be effective until the assignor,
assignee, and the Managing General Partner execute all certificates and other
documents deemed necessary or appropriate by the Managing General Partner to
constitute such Assignee a Participant and to preserve the status of the
Partnership as a limited partnership after the completion of such substitution.
(c) No transfer, sale or any exchange by a Partner shall be approved if the same
shall require registration under the Securities Act of 1933 or pursuant to any
federal or state statute, and any such attempt to transfer, sale or issuance
shall be voided.
(d) If, during the term of the Partnership, a Participant dies or is adjudicated
insane or incompetent, his legal representative shall have the rights of an
assignee of a partnership interest, but not the rights of a substituted partner
unless such legal representative is admitted as such pursuant to (a) above. The
legal representative may dispose of the interest of the Participant only in
accordance with the terms of this Partnership Agreement as amended from time to
time.
When the substitution of a Participant becomes effective, but not before, the
assigning Participant shall be relieved of all of his obligations hereunder to
the extent permitted by law with respect to his assigned interest. By executing
the Subscription Agreement, each Participant shall be deemed to have consented
to any substitution consented to by the Managing General Partner.
16.3 Transfers Not Requiring Consent. A Limited Partner may transfer an interest
in any one or more Units to his spouse or to any of his descendants without
having to comply with this Section 2 if the transfer is without consideration.
16.4 Recognition. The Partnership shall recognize the assignment not later than
the last day of the calendar month next following compliance by the Assignee
with the provisions of this Section 16.
16.5 No Effect. The assignment of a Limited Partner's Interest shall not
dissolve or terminate the Partnership.
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17. SUBSTITUTED LIMITED PARTNERS.
17.1 Conditions To Substitution. Subject to compliance with Section 16 of this
Agreement, an Assignee of Record shall have the right to become a Substitute
Limited Partner within the meaning of the Act as hereinafter provided. No
Assignee of Record of an interest in Units shall have the right to become a
substitute Limited Partner as to such Unit or Units in the place of his assignor
unless the substitution is first approved by the General Partner, which approval
will not be unreasonably withheld. The admission of an Assignee of Record as a
Substitute Limited Partner shall further be conditioned on the following:
(a) The Assignee of Record shall adopt and agree in writing on a form deemed
necessary by the General Partner to be bound by all of the terms and provisions
of this Agreement, as the same may be amended.
(b) The Assignee of Record shall execute and acknowledge such instruments, as
the General Partner deems necessary or appropriate to effect such admission.
(c) The General Partner shall first receive payment of the reasonable expenses
connected with the Assignee of Record's admission to the Partnership, including,
but not limited to, the cost of preparing any amendment of this Agreement.
17.2 Status Prior to Substitution. Unless and until there has been compliance
with the provisions of this Section 17, an Assignee of Record shall have no
right: (i) any information regarding an accounting of the Partnership's
transactions (ii) to inspect the Partnership's books; or (iii) to vote on any
matter presented to the Limited Partners hereunder.
17.3 Transfer To Surviving Joint Tenant. Anything herein to the contrary
notwithstanding, an assignment of a Unit to a surviving joint tenant of a
deceased Limited Partner, pursuant to Section 22.9(d) hereof, shall entitle such
surviving joint tenant to become a Substitute Limited Partner without having to
comply with the provisions of Section 17.1(a) above.
18. BOOKS AND RECORDS.
18.1 Partnership Books and Records. At all times during the continuance of the
Partnership, the General Partner shall keep, in accordance with either the cash
or the accrual method of accounting, consistently applied, full and true books
of account, in which shall be entered all of the contributions of capital to the
Partnership and each transaction of the Partnership. The General Partner may
make such elections for federal and state income tax purposes, as it deems
appropriate.
18.2 Inspection by Partners. All of such books and records, together with an
executed copy of this Agreement, all amendments thereto, and a list of the names
and addresses of all Partners shall, at all times, be maintained at the
principal office of the Partnership, and shall be open, during reasonable
business hours, for the inspection and examination by the Limited Partners or
their representatives, who shall have the right to make copies thereof at their
own expense.
18.3 Fiscal Year. The fiscal year of the Partnership shall be the calendar year.
19. REPORTS.
The General Partner shall cause to be prepared and distributed to the Partners,
within seventy-five (75) days following the end of each fiscal year of the
Partnership, such reports as are necessary to include all
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information required for the preparation of each individual Partner's federal
income tax returns. The General Partner shall also cause to be prepared and
distributed to the Partners, no less frequently than quarterly, a progress
report describing the status of the Project.
20. POWER OF ATTORNEY.
20.1 Appointment. Each Limited Partner hereby irrevocably makes, constitutes and
appoints the General Partner, and any successor of a General Partner duly
elected in accordance with the provisions of this Agreement, his true and lawful
attorney-in-fact for him and in his name, place and stead and for his use and
benefit, from time to time:
(a) To make all agreements amending this Agreement, as now or hereafter amended,
that may be appropriate to reflect:
(i) A change in the name or location of the principal place of business of the
Partnership;
(ii) The disposition by any Limited Partner of his Partnership Interest, as
permitted by this Agreement;
(iii) The admission of Limited Partners or Substitute Limited Partners to the
Partnership, as permitted by this Agreement;
(iv) A reduction in, return of, or withdrawal of all or any portion of any
Limited Partner's capital contribution, as provided elsewhere in this Agreement;
(v) A clarification or resolution of any ambiguity in any of the terms and
provisions hereof, provided that such amendment does not materially and
adversely affect the rights of any Limited Partner hereto; and
(vi) Any amendment to this Agreement otherwise adopted in accordance with
Section ll.1(a).
(b) To make such certificates, instruments and documents as may be required by,
or may be appropriate under, applicable laws in connection with the use of the
Partnership's name by the Partnership.
(c) To make such certificates, instruments and documents as such Limited Partner
may be required, or as may be appropriate for such Limited Partner to make, in
accordance with applicable laws to reflect;
(d) A change in name or address of such Limited Partner; and
(ii) Any permitted changes in, or amendments to, this Agreement, or pertaining
to the Partnership, of any kind referred to herein.
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20.2 Extent of Authority.
(a) Each of such agreements, certificates, instruments and documents shall be in
such form as the attorney-in-fact and counsel for the Partnership shall deem
appropriate. The powers hereby conferred to make agreements, certificates,
instruments and documents shall be deemed to include, without limitations the
powers to sign, execute, acknowledge, swear to, verify, deliver, file, record or
publish the same.
(b) Each Limited Partner authorizes such attorney-in-fact to take any further
action which such attorney-in-fact shall consider necessary, or advisable in
connection with any of the foregoing, hereby giving such attorney-in-fact full
power and authority to do and perform each and every act or thing whatsoever
requisite or advisable to be done in and about the foregoing, as fully as such
Limited Partner might or could do if personally present and hereby ratifies and
confirms all that such attorney-in-fact shall lawfully do or cause to be done by
virtue hereof.
20.3 Nature of Power. The power of attorney granted pursuant to this Section 20:
(a) Is a special power of attorney, coupled with an interest, and is
irrevocable;
(b) May be exercised by such attorney-in-fact by listing all of the Limited
Partners executing any agreement, certificate, instrument or document with
the single signature of such attorney-in-fact acting as attorney-in-fact
for all of them; and
(c) Shall survive the sale transfer, assignment or other disposition by a
Limited Partner of all or a portion of his Partnership Interest; provided,
however, that if the Assignee of Record of a Unit is admitted as a
Substitute Limited Partner, the assignor's power of attorney with respect
to such Unit shall survive such admission for the sole purpose of enabling
such attorney-in-fact to execute, acknowledge, file, record and publish any
such agreement, certificate, instrument, or document necessary to effect
such substitution.
21. INDEMNIFICATION.
21.1 Indemnification of the General Partner. To the minimum extent permitted by
law, the Partnership, its receiver or its trustee, shall indemnify, hold
harmless and pay all judgments and claims arising against the General Partner
and its Agents (as defined in Section 21.4 below) from any liability, loss or
damage incurred by them by reason of any act performed or omitted to be
performed by them, including costs and reasonable attorneys fees and any amounts
expended in the settlements of any claims of liability, loss or damage; provided
that the indemnity must have determined, in good faith, that such course of
conduct was in the best interests of the Partnership, and (i) if such liability,
loss, or claim arises out of any action or inaction of a General Partner or its
Agent, such actions or inactions must have occurred while such parties were
engaged in activities which could have been engaged in by the General Partner in
its capacity as such, and such course of conduct did not constitute gross
negligence or misconduct; (ii) if such liability, loss or claim arises out of
any action or inaction of the General Partner, such course of conduct did not
constitute gross negligence or willful misconduct by the General Partner; and
(iii) any such indemnification shall be recoverable only from the assets of the
Partnership and not from the assets of the Limited Partners. All judgments
against the General Partner or its Agents wherein such person is entitled to
indemnification must first be satisfied from Partnership assets before such
party is responsible for these obligations.
21.2 Attorneys' Fees and Costs of Defense. The Partnership may advance funds to
the General Partner and/or its Agents for legal expenses and other costs
incurred as a result of any legal action threatened or initiated against them
unless the legal action is brought by or on behalf of the other Partners of the
Partnership against such Person, and such action relates to the performing of
duties or services by the General Partner or its Agents on behalf of the
Partnership, and the General Partner or its Agents undertakes to repay the
advances to the Partnership in cases in which it is ultimately determined that
it would not be entitled to indemnification hereunder.
21.3 The Partnership may purchase liability insurance or enter into a captive
insurance or reinsurance arrangement with other persons including the General
Partner or its Agents; to insure the General Partner
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and its Agents against any liabilities, which such persons are, permitted to be
indemnified pursuant to the provisions hereof. The Partnership may not incur the
cost of that portion of liability insurance, which insures the General Partner,
or any of such persons for any liability as to which such persons are prohibited
from being indemnified hereunder.
21.4 Definition of "Agent". For the purposes of this Section 21, the term
"Agent" shall mean any person performing services on behalf of the Partnership
who: (i) directly or indirectly controls, is controlled by, or is under common
control with the General Partner; (ii) owns or controls ten percent (10%) or
more of the interest in any entity comprising the General Partner, or (iii) is
an officer, director, partner or trustee of any entity comprising the General
Partner.
22. MISCELLANEOUS.
22.1 Notices. All notices under this Agreement shall be in writing and shall be
given to the parties by hand delivery, or by deposit into the United States
mail, postage prepaid, and sent certified or registered mail, return receipt
requested at the addresses herein set forth for the Partners, and to the
Partnership at its principal office, or at such other address as any of the
parties may hereafter specify in the same manner.
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22.2 Counterparts. This Agreement may, be executed in one or more counterparts,
and all so executed shall constitute one agreement, binding on all the parties,
notwithstanding that all the parties are not signatory to the original or the
same counterpart.
22.3 Survival. Except as provided to the contrary, this Agreement shall be
binding upon and inure to the benefit of the parties, their personal
representatives, and assigns.
22.4 Headings. The headings used herein do not define, limit, extend or
interpret the scope of this agreement or of any particular section.
22.5 Additional Documents. Each party agrees to execute, with acknowledgment or
affidavit, if required, any and all documents and writings, which may be
reasonably necessary or expedient in the creation of this Partnership and the
achievement of its purposes.
22.6 Interpretation. When the context indicates that such is the intent, words
in the singular shall include the plural and vice versa, and words in the
masculine shall include the feminine and neuter and vice-versa.
22.7 Validity. In the event that any provisions of this Agreement shall be held
to be invalid, the same shall not affect the validity of the remainder of this
Agreement.
22.8 Partition. The Partners agree that the Partnership business is not and will
not be suitable for partition. Accordingly, each of the Partners hereby
irrevocably waives any and all rights that he may have to maintain any action
for partition of any Property or the business of the Partnership.
22.9 Joint Ownership. For all purposes hereunder, in those cases where two
persons we indicated as Limited Partners holding their Units as joint tenants,
the following shall apply:
(a) To the extent required by law, such persons shall each be considered a
Limited Partner hereunder; each shall be deemed to have contributed one-half of
the capital contribution and to own one-half of such Units; and each shall be
deemed to have an Original Invested Capital consisting of one-half of the
capital contribution as set forth opposite their respective names.
(b) For purpose of voting upon or consenting to any actions or matters as
provided herein or by law, the vote or consent of either of such persons shall
be deemed to be the vote or consent of both such persons, unless both such
persons are present and voting or indicate otherwise in writing. In the event
that both are present and voting or submit written consents or refusals, then
each shall vote as to one-half of the Units which may be voted by both.
(c) Upon the death of either person and the passing of the decedents Partnership
Interest to the survivor of such person, such passing is hereby established as
an assignment, carrying with it the right to be a Substitute Limited Partner as
to the decedent's Partnership Interest by virtue of this provision, and without
the requirement of consent of any other party.
(d) Any notices given to either of such persons shall, unless the Partnership is
otherwise advised in writing, be deemed notice given to both persons.
22.10 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns.
The preceding sentence shall not affect any restriction on assignment set forth
elsewhere in this Agreement.
22.11 Choice of Law. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
California, including all matters of construction, validity, performance, and
enforcement, and without giving effect to the principles of conflict of laws
and, to the extent applicable, international law.
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22.12 Jurisdiction. The parties submit to the jurisdiction of the Superior Court
of the State of California, located in Orange County, California or a Federal
Court impaneled in the United States District Court for the Central District of
California, for the resolution of all legal disputes arising under the terms of
this Agreement, including, but not limited to, enforcement of any arbitration
award.
22.13 Entire Agreement. Except as provided herein, this Agreement, including
exhibits, contains the entire agreement of the parties, and supersedes all
existing negotiations, representations agreements and all other oral, written,
or other communications between them concerning the subject matter of this
Agreement.
22.14 Attorneys' Fees. Except as otherwise provided herein, if a dispute should
arise between any of the parties including but not limited to arbitration, the
prevailing party shall be reimbursed for all reasonable expenses incurred in
resolving such dispute, including attorneys' fees and related costs.
19
<PAGE> 20
22.15 Arbitration. Any dispute, controversy or claim arising out of, or in
connection with or relating to this Agreement, or any breach or alleged breach
hereof, except allegations of violations of federal or state securities laws,
shall be submitted to and settled by arbitration in the County of Orange, State
of California, pursuant to the rules then in effect of the American Arbitration
Association (or at any other place or under any other form of arbitration
mutually acceptable to the parties so involved). Notwithstanding the foregoing,
the provisions of California Code of Civil Procedure Section 1283.05 shall be
applicable to such arbitration, but contrary to subparagraph (e) of Section
1293.05, depositions for discovery can be taken without leave to do so having
first been granted by the arbitrator or arbitrators. Any award rendered shall be
final and conclusive upon the parties, and a judgment thereon may be entered in
the highest court of the forum (state or federal) having jurisdiction, as
provided elsewhere in this Section 22.
22.16 Tax Matters Partner. The General Partner is hereby designated as the Tax
Matters Partner for the Partnership, for the purposes of representing the
Partnership in any matter relating to an Internal Revenue Service examination of
the Partnership's tax return(s).
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
GENERAL PARTNER
E-NET FINANCIAL CORPORATION, a Nevada Corporation
By: /s/ MICHAEL P. ROTH
- -----------------------------------------
MICHAEL P. ROTH, President
By: /s/ JEAN OLIVER
- -----------------------------------------
Jean Oliver, Secretary
CO-GENERAL PARTNER
GENESIS RESIDENTIAL HEALTHCARE, INC. a California Corporation
By: /s/ WILLIAM W. ASHBY
- -----------------------------------------
WILLIAM W. ASHBY, President
LIMITED PARTNERS:
Those persons listed on Exhibit "A" attached hereto.
20
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
Employment Agreement this 1st day of March 1999 by an between the
parties hereto:
e-Net Corporation, a Nevada Corporation ("Employer") and Michael P Roth
("Employee").
Employer employs the Employee and the Employee accepts employment, upon
the terms conditions and covenants as follows:
1. The term of employment shall be for one year, commencing from March 1,1999
and renewable annually automatically unless terminated by either party by
written 30 day notice to the other.
2. Effective March 1, 1999 employee shall receive, for all services rendered, a
salary of $1500 per week, payable biweekly within three days after the end of
each pay period. Salary payments shall be subject to withholding and other
applicable deductions.
3. The duties of Employee shall be to serve as the President for the Employer
and for the subsidiaries and affiliates of the Employers business. The Employee
shall devote his full and entire time and attention to the Employer's business.
4. Employee shall have an office, facilities and services that are suitable to
the position and appropriate for the performance of Employee's duties.
5. Employer shall reimburse Employee for all reasonable expenses incurred in the
performance of Employee's business, e.g. entertainment, travel, etc. Employee
will be reimbursed upon submission of an itemized account of such expenditures
with receipts where practicable.
6. Employee shall be entitled to two weeks of paid vacation each year,
commencing after January 1,2000.
7. If Employee is unable to perform Employee's duties by reason of illness or
incapacity for a consecutive period of more than 2 weeks, the compensation
payable after the aforesaid period shall be $500 per week for the following 12
weeks. Upon return to full employment, full compensation shall be reinstated.
<PAGE> 2
8. Notwithstanding any provision in this Employment Agreement to the contrary,
if Employee is unable to perform or is absent from employment for a period of
more than 3 months, Employer may terminate this Employment Agreement, without
further cause, and all obligations of Employer hereunder shall terminate.
9. This Employment Agreement may be terminated, at will, at any time and without
cause, by either party upon thirty days' written notice to the other. If
Employer elects to terminate, Employer shall pay to Employee on the last day of
employment severance pay of $5000.00 subject to withholding and deductions. If
Employee elects to terminate, Employee shall receive salary up to the last day
of employment but no severance pay.
10. In the event Employee dies during the term of Employment, Employer shall pay
to Employee's estate the salary that would otherwise be payable to the end of
the month in which the Employee died, and as a death benefit a sum equal to
$10,000. Employee agrees to be covered by insurance procured by the Employer at
Employer's expense for this purpose.
11. Any controversy or claim arising out of, or relating to this Employment
Agreement, or the breach thereof, shall be settled by arbitration in the City of
Irvine, State of California, in accordance with the then governing rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
12. Any notice required to be given shall be either: (i) personally delivered,
or (ii) sent by U.S. Postal Service, postage pre-paid, Certified Mail, Return
Receipt Requested to the Employer at the place of employment and to the Employee
at the last residence address given to and on file with the Employer.
13. A waiver of a breach of any provision of this Employment Agreement shall not
operate or be construed as a waiver of any subsequent breach.
14. The services of Employee are personal and unique and therefore Employee may
not assign this Employment Agreement nor delegate the duties and obligations
hereunder except In the normal course of business.
<PAGE> 3
15. Stock Purchase Option:
As further compensation you will be entitled to the following stock
options:
1. Stock purchase option
The corporation hereby grants the employee the option, for five years to
purchase One Hundred Thousand (100,000) shares of stock at one dollar
per share. The rights granted under this option vest after one year
following the effective date of this contract and are subject to the
terms and conditions of the Stock Purchase Option Agreement.
2. Deferred Stock Option
Each quarter any salary payment which has been deferred by the employee
(not to exceed 1/3 of the total quarterly salary) may at the election of
the employee be converted to an option to purchase stock at one dollar
per share, exercisable by giving seven days written notice following the
close of the quarter subject to the terms and conditions of the Stock
Purchase Agreement.
Rights granted hereby are assignable and may be hypothecated.
16. This Employment Agreement and the related Stock Purchase Options Agreements
contains the entire understanding of the parties, except as may be set forth in
writing signed by the party against whom enforcement may be sought,
simultaneously with or subsequent to the execution of this Employment Agreement.
17. At this time, other than establishing a stock option plan for employees, the
Board of Directors has not taken action with respect to the establishment of any
other employee benefit plans, such as bonus, profit sharing, pension,
retirement, medical, and life and disability insurance, or similar plans and
programs. It is presently contemplated that the Board of Directors will take
action to institute one or more of such plans and programs in the near future.
<PAGE> 4
INTENDING TO BE LEGALLY BOUND, the parties have executed this Employment
Agreement as of the date first above written Employer: e-Net Financial
Corporation
BY /s/ MICHAEL P. ROTH
- --------------------------------------
MICHAEL P. ROTH
Employee: /s/ MICHAEL P. ROTH
- --------------------------------------
MICHAEL P. ROTH
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
Employment Agreement this 1st day of March 1999 by an between the
parties hereto:
e-Net Corporation, a Nevada Corporation ("Employer") and Theodore
Bohrer("Employee").
Employer employs the Employee and the Employee accepts employment, upon
the terms conditions and covenants as follows:
1. The term of employment shall be for one year, commencing from March 1,1999
and renewable annually automatically unless terminated by either party by
written 30 day notice to the other.
2. Effective March 1, 1999 employee shall receive, for all services rendered, a
salary of $1500 per week, payable biweekly within three days after the end of
each pay period. Salary payments shall be subject to withholding and other
applicable deductions.
3. The duties of Employee shall be to serve as the Vice President for the
Employer and for the subsidiaries and affiliates of the Employers business. The
Employee shall devote his full and entire time and attention to the Employer's
business.
4. Employee shall have an office, facilities and services that are suitable to
the position and appropriate for the performance of Employee's duties.
5. Employer shall reimburse Employee for all reasonable expenses incurred in the
performance of Employee's business, e.g. entertainment, travel, etc. Employee
will be reimbursed upon submission of an itemized account of such expenditures
with receipts where practicable.
6. Employee shall be entitled to two weeks of paid vacation each year,
commencing after January 1,2000.
7. If Employee is unable to perform Employee's duties by reason of illness or
incapacity for a consecutive period of more than 2 weeks, the compensation
payable after the aforesaid period shall be $500 per week for the following 12
weeks. Upon return to full employment, full compensation shall be reinstated.
<PAGE> 2
8. Notwithstanding any provision in this Employment Agreement to the contrary,
if Employee is unable to perform or is absent from employment for a period of
more than 3 months, Employer may terminate this Employment Agreement, without
further cause, and all obligations of Employer hereunder shall terminate.
9. This Employment Agreement may be terminated, at will, at any time and without
cause, by either party upon thirty days' written notice to the other. If
Employer elects to terminate, Employer shall pay to Employee on the last day of
employment severance pay of $5000.00 subject to withholding and deductions. If
Employee elects to terminate, Employee shall receive salary up to the last day
of employment but no severance pay.
10. In the event Employee dies during the term of Employment, Employer shall pay
to Employee's estate the salary that would otherwise be payable to the end of
the month in which the Employee died, and as a death benefit a sum equal to
$10,000. Employee agrees to be covered by insurance procured by the Employer at
Employer's expense for this purpose.
11. Any controversy or claim arising out of, or relating to this Employment
Agreement, or the breach thereof, shall be settled by arbitration in the City of
Irvine, State of California, in accordance with the then governing rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
12. Any notice required to be given shall be either: (i) personally delivered,
or (ii) sent by U.S. Postal Service, postage pre-paid, Certified Mail, Return
Receipt Requested to the Employer at the place of employment and to the Employee
at the last residence address given to and on file with the Employer.
13. A waiver of a breach of any provision of this Employment Agreement shall not
operate or be construed as a waiver of any subsequent breach.
14. The services of Employee are personal and unique and therefore Employee may
not assign this Employment Agreement nor delegate the duties and obligations
hereunder except In the normal course of business.
<PAGE> 3
15. Stock Purchase Option:
Effective August 1,1999 as further compensation you will be entitled to
the following stock options:
1. Stock purchase option
The corporation hereby grants the employee the option, for five years to
purchase Seventy Five Thousand (75,000) shares of stock at one dollar
per share. The rights granted under this option vest after one year
following the effective date of this contract and are subject to the
terms and conditions of the Stock Purchase Option Agreement.
2. Deferred Stock Option
Each quarter any salary payment which has been deferred by the employee
(not to exceed 1/3 of the total quarterly salary) may at the election of
the employee be converted to an option to purchase stock at one dollar
per share, exercisable by giving seven days written notice following the
close of the quarter subject to the terms and conditions of the Stock
Purchase Agreement.
Rights granted hereby are assignable and may be hypothcated.
16. This Employment Agreement and the related Stock Purchase Options Agreements
contains the entire understanding of the parties, except as may be set forth in
writing signed by the party against whom enforcement may be sought,
simultaneously with or subsequent to the execution of this Employment Agreement.
17. At this time, other than establishing a stock option plan for employees, the
Board of Directors has not taken action with respect to the establishment of any
other employee benefit plans, such as bonus, profit sharing, pension,
retirement, medical, and life and disability insurance, or similar plans and
programs. It is presently contemplated that the Board of Directors will take
action to institute one or more of such plans and programs in the near future.
<PAGE> 4
INTENDING TO BE LEGALLY BOUND, the parties have executed this Employment
Agreement as of the date first above written
Employer: e-Net Financial Corporation
BY /s/ MICHAEL P. ROTH
- -------------------------------------
MICHAEL P. ROTH
Employee: /s/ THEODORE BOHRER
- -------------------------------------
THEODORE BOHRER
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
Employment Agreement this 22nd day of March 1999 by and between parties
hereto e-Net Corporation (Employer) and Jean Oliver (Employee).
Employer employs the Employee and the Employee accepts employment upon the
term's conditions and covenants as follows:
1. The term of the employment shall be for one year commencing from April
5th, 1999 and renewable annually automatically unless terminated by
either party by written 30 day notice to the other.
2. Employee shall receive for all services a salary of $1,375.00 per week
payable biweekly within three days after the end of each pay period.
Salary payments shall be subject to withholding and other applicable
deductions.
3. The duties of the Employee shall be to serve as the Comptroller for the
Employer and for the subsidiaries and affiliates of the Employers
business.
4. Employee shall have an office, facilities and services that are suitable
to the position and appropriate for the performance of the Employee's
duties.
5. Employer shall reimburse Employee for all reasonable expenses incurred
in the performance of Employee's business, e.g. entertainment, travel,
etc. Employee will be reimbursed upon submission of an itemized account
of such expenditures with receipts where practicable.
6. Employee shall be entitled to two weeks of paid vacation each year.
7. If employee is unable to perform Employee's duties by reason of illness
or incapacity for a consecutive period of more than two weeks, the
compensation payable after the aforesaid period shall be $500.00 per
week for the following 12 weeks. Upon return to full employment full
compensation shall be reinstated.
8. Notwithstanding any provision in this Employment Agreement to the
contrary, if Employee's unable to perform or is absent from employment
for a period of more than three months. Employer may terminate this
Employment Agreement, without further cause and all obligations of
Employer hereunder shall terminate.
<PAGE> 2
9. The Employment Agreement may be terminated at anytime and without cause
by either party upon thirty days written notice to the other. If
Employer elects to terminate, Employer shall pay to the Employee on the
last day of employment severance pay of $5,000.00 subject to withholding
and deductions. If Employee elects to terminate Employee shall receive
salary up to the last day of employment but no severance pay.
10. In the event Employee dies during the term of employment, Employer shall
pay to employee's estate the salary that would otherwise be payable to
the end of the month in which the Employee died and as a death benefit
the sum equal to $10,000.00. Employee agrees to be covered by insurance
procured by Employer at Employer's expense for this purpose.
11. Any controversy or claim arising out of or relating to this Employment
Agreement or the breach thereof shall be settled by arbitration in the
City of Irvine, State of California, in accordance with the then
governing rules of the American Arbitration Association. Judgement upon
the award rendered by the arbitrator(s) may be entered in any court of
competent jurisdiction.
12. Any notice required to be given shall be either: (i) personally
delivered, or (ii) sent by U S Postal Service, postage prepaid,
Certified Mail, Return Receipt Requested to the Employer at the place of
employment and the Employee at the residence address given to and on
file with the Employer.
13. A waiver of a breach of any provision of this Employment Agreement shall
not operate or be construed as a waiver of any subsequent breach.
14. The services of Employee are personal and unique and therefore Employee
may not assign this Employment Agreement nor delegate the duties and
obligations hereunder except in the normal course of business.
15. This Employment Agreement contains the entire understanding of the
parties, except as may be set forth in writing signed by the party
against whom enforcement may be sought simultaneously with or subsequent
to the execution of this Employment Agreement.
<PAGE> 3
INTENDING TO BE LEGALLY BOUND, the parties have executed this Employment
Agreement as of the date first above written.
Employer:
e-Net Corporation
BY: /s/ MICHAEL P. ROTH
- ----------------------------------
MICHAEL P. ROTH
Employee:
/s/ JEAN OLIVER
- ----------------------------------
JEAN OLIVER
<PAGE> 4
This is an addendum to the contact between e-Net Financial Corporation
and Jean Oliver dated March 22,1999. The following paragraphs are to be read as
being consistent with the terms of that employment agreement.
Stock Purchase Option:
Effective August 1, 1999 as further compensation you will be entitled to
the following stock options:
1. Stock purchase option
The corporation hereby grants the employee the option, or five years to
purchase Fifty Thousand(50,000)shares of stock at one dollar per share.
The rights granted under this option vest after one year following the
effective date of this contract and are subject to the terms and
conditions of the Stock Purchase Option Agreement; or
2. Deferred Stock Option
Each quarter any salary payment which has been deferred by the employee
(not to exceed 1/3 of the total quarterly salary) may at the election of the
employee be converted to an option to purchase stock at one dollar per share,
exercisable by giving seven days written notice following the close of the
quarter subject to the terms and conditions of the Stock Purchase Agreement.
Rights granted hereby are assignable and may be hypothecated.
I have read and understood the statements contained in this document.
BY: /s/ MICHAEL P. ROTH
- -------------------------------
MICHAEL P. ROTH
BY: /s/ JEAN OLIVER
- -------------------------------
JEAN OLIVER
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
Employment Agreement this 1st day of March 1999 by an between the
parties hereto:
City Pacific International USA Inc., a Nevada Corporation ("Employer")
and E G Marchi ("Employee").
Employer employs the Employee and the Employee accepts employment, upon
the terms conditions and covenants as follows:
1. The term of employment shall be for one year, commencing from March 1,1999
and renewable annually automatically unless terminated by either party by
written 30 day notice to the other.
2. Effective March 1, 1999 employee shall receive, for all services rendered, a
salary of $1500 per week, payable biweekly within three days after the end of
each pay period. Salary payments shall be subject to withholding and other
applicable deductions.
3. The duties of Employee shall be to serve as the President for the Employer
and for the subsidiaries and affiliates of the Employers business. The Employee
shall devote his full and entire time and attention to the Employer's business.
4. Employee shall have an office, facilities and services that are suitable to
the position and appropriate for the performance of Employee's duties.
5. Employer shall reimburse Employee for all reasonable expenses incurred in the
performance of Employee's business, e.g. entertainment, travel, etc. Employee
will be reimbursed upon submission of an itemized account of such expenditures
with receipts where practicable.
6. Employee shall be entitled to two weeks of paid vacation each year,
commencing after January 1,2000.
7. If Employee is unable to perform Employee's duties by reason of illness or
incapacity for a consecutive period of more than 2 weeks, the compensation
payable after the aforesaid period shall be $500 per week for the following 12
weeks. Upon return to full employment, full compensation shall be reinstated.
<PAGE> 2
8. Notwithstanding any provision in this Employment Agreement to the contrary,
if Employee is unable to perform or is absent from employment for a period of
more than 3 months, Employer may terminate this Employment Agreement, without
further cause, and all obligations of Employer hereunder shall terminate.
9. This Employment Agreement may be terminated, at will, at any time and without
cause, by either party upon thirty days' written notice to the other. If
Employer elects to terminate, Employer shall pay to Employee on the last day of
employment severance pay of $5000.00 subject to withholding and deductions. If
Employee elects to terminate, Employee shall receive salary up to the last day
of employment but no severance pay.
10. In the event Employee dies during the term of Employment, Employer shall pay
to Employee's estate the salary that would otherwise be payable to the end of
the month in which the Employee died, and as a death benefit a sum equal to
$10,000. Employee agrees to be covered by insurance procured by the Employer at
Employer's expense for this purpose.
11. Any controversy or claim arising out of, or relating to this Employment
Agreement, or the breach thereof, shall be settled by arbitration in the City of
Irvine, State of California, in accordance with the then governing rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
12. Any notice required to be given shall be either: (i) personally delivered,
or (ii) sent by U.S. Postal Service, postage pre-paid, Certified Mail, Return
Receipt Requested to the Employer at the place of employment and to the Employee
at the last residence address given to and on file with the Employer.
13. A waiver of a breach of any provision of this Employment Agreement shall not
operate or be construed as a waiver of any subsequent breach.
14. The services of Employee are personal and unique and therefore Employee may
not assign this Employment Agreement nor delegate the duties and obligations
hereunder except In the normal course of business.
<PAGE> 3
15. Stock Purchase Option:
As further compensation you will be entitled to the following stock
options:
1. Stock purchase option
The corporation hereby grants the employee the option, for five years to
purchase One Hundred Thousand (100,000) shares of stock of the parent
company e-Net Financial Corporation, at one dollar per share. The rights
granted under this option vest after one year following the effective
date of this contract and are subject to the terms and conditions of the
Stock Purchase Option Agreement.
Rights granted hereby are assignable and may be hypothecated.
2. Deferred Stock Option
Each quarter any salary payment which has been deferred by the employee
(not to exceed 1/3 of the total quarterly salary) may at the election of
the employee be converted to an option to purchase stock at one dollar
per share, exercisable by giving seven days written notice following the
close of the quarter subject to the terms and conditions of the Stock
Purchase Agreement.
16. This Employment Agreement and the related Stock Purchase Options Agreements
contains the entire understanding of the parties, except as may be set forth in
writing signed by the party against whom enforcement may be sought,
simultaneously with or subsequent to the execution of this Employment Agreement.
17. At this time, other than establishing a stock option plan for employees, the
Board of Directors has not taken action with respect to the establishment of any
other employee benefit plans, such as bonus, profit sharing, pension,
retirement, medical, and life and disability insurance, or similar plans and
programs. It is presently contemplated that the Board of Directors will take
action to institute one or more of such plans and programs in the near future.
<PAGE> 4
INTENDING TO BE LEGALLY BOUND, the parties have executed this Employment
Agreement as of the date first above written
Employer: City Pacific International USA, Inc.
BY /s/ MICHAEL R. ROTH
- ------------------------------------
MICHAEL P. ROTH
Employee: /s/ E.G. MARCHI
- ------------------------------------
E.G. MARCHI
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF E-NET FINANCIAL CORPORATION
(4/30/99)
The following is a list of showing E-Net Financial Corporation and each of its
subsidiaries, as of April 30, 1999, indicating each jurisdiction under the laws
of which it was organized.
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
E-Net Mortgage Corporation Nevada
City Pacific International, Nevada
U.S.A., Inc.
</TABLE>
29
