PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is entered into effective
the 22nd day of January, 2001, by and among AMERICAN FINANCIAL HOLDING, INC., a
Delaware corporation (the "Company"), and the persons, whether natural persons
or legal entities, named as purchasers on the signature page hereof (each a
"Purchaser" and together the "Purchasers").
AGREEMENT:
FOR AND IN CONSIDERATION of the mutual promises and covenants contained
in this Agreement, it is hereby agreed as follows:
Article I
Purchase and Sale of Securities
1.1 Sale and Purchase. Subject to the terms and conditions of this
Agreement, the Company agrees to sell and issue to the several Purchasers, and
the several Purchasers agree to pay for and purchase from the Company:
(a) an aggregate of 15,000,000 shares (the "Shares") of common
stock at a price of $0.01 per share (the "Purchase Price"), or an
aggregate of $150,000, as the number of Shares and Purchase Price for
each Purchaser are set forth opposite the name of the each Purchaser on
the signature page hereof (to be consolidated into 700,935 post
reverse-split shares); and
(b) an aggregate of $150,000 in principal amount of promissory
notes convertible into an aggregate of 49,200,000 shares of common
stock, subject to the recapitalization of the Company by effecting a
21.4-to-1 reverse split of the issued and outstanding shares
accompanied by a change in the authorized capitalization of the Company
so the conversion of the note will not result in the issuance of common
stock by the Company below par value (to be consolidated into 2,299,065
post reverse-split shares). The form of the convertible note (the
"Note") is attached hereto as Exhibit A and incorporated herein by
reference.
Together, the 15,000,000 and 49,200,000 aggregate shares, or a total of
64,200,000 shares, will be consolidated into 3,000,000 shares of common stock
after giving effect to the required 21.4-to-one reverse stock split. The Shares
and the Notes are sometimes together referred to as the "Securities." The
foregoing transactions are reflected in the following table:
After 21.4-to-One
Person or Group Before Reverse Split Reverse Split
Present stockholders................................................ 4,279,449 200,000*
Purchasers
Common stock................................................... 15,000,000 700,935
Note conversion common stock equivalents ...................... -- 2,299,065
▇▇▇▇▇▇ ▇▇▇▇▇▇....................................................... -- 400,000
---------- ----------
19,279,449 3,600,000*
========== ==========
* Rounded
1.2 Deliveries at Execution. Contemporaneous with the execution and
delivery of this Agreement:
(a) the Purchasers shall deposit in the client trust account
of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ (the "Custodian") the sum of $300,000 to be
held on the account of the Company and for the benefit of the payees
named in the schedule attached as Exhibit B and incorporated herein by
reference; and
(b) the Company shall deposit in the client trust account of
the Custodian certificates for the fully paid and nonassessable Shares
and the originals of the Notes, issued in the names of the respective
Purchasers, to be held for the benefit of the Purchasers;
all to be released and delivered to the parties to this Agreement as hereinafter
provided on the Release Date, as defined below.
Pending the Release, the Custodian shall deposit the $300,000 in an
interest-bearing account, with the interest to be disbursed to the recipient of
the funds when they are delivered on Release in accordance with this Agreement.
1.3 Conditions Precedent to Release. The delivery of the $300,000 cash
to the payees named on Exhibit B on behalf of the Company and the delivery of
the Securities to the Purchasers are conditioned on the satisfaction, on or
prior to the Release, of the following:
(a) the deposit of the shares of Tambora Financial Corporation
in accordance with the provisions of section 3.1;
(b) the payment or compromise of liabilities in accordance
with the provisions of section 3.2;
(c) the filing by the Company with the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") of:
(i) the annual report on Form 10-KSB for the fiscal
year ended December 31, 1999,
(ii) quarterly reports on Form 10-QSB for the
quarters ended March 31, June 30, and September 30, 2000, and
(iii) the annual report on Form 10-KSB for the fiscal
year ended December 31, 2000,
all in accordance with the provisions of section 3.3, which together
shall include a description of all material events and management since
the last Form 10-KSB filing for the year ended December 31, 1996;
(d) the resumption of quotations of the common stock of the
Company on the over-the-counter electronic bulletin board maintained by
the National Association of Securities Dealers, Inc. ("NASD") in
accordance with the provisions of section 3.4;
(e) the completion of arrangements reasonably satisfactory to
Purchasers respecting that certain lawsuit in the Third District Court
in Salt Lake County, Utah, styled Bridge v. American Financial Holding,
Inc., Triad Financial Systems, Inc., ▇▇▇▇▇▇▇ ▇. Punta, and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (Civil No. 990912544), in accordance with the provisions of
section 3.5;
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(f) the effectiveness of the Company's 21.4-to-1 reverse split
of the issued and outstanding shares accompanied by a change in the
authorized capitalization of the Company in accordance with the
provisions of section 3.6, which results in 3,600,000 (rounded) shares
issued and outstanding after giving effect to the conversion of the
Notes; and
(g) the delivery of resignations of the incumbent officers and
directors of the Company in accordance with the provisions of section
3.7.
1.4 Termination. This Agreement may be terminated on five days' written
notice from either the majority of the Purchasers or the Company if the Release
does not occur on or before March 15, 2001. Upon such termination, the Custodian
shall return to the Purchasers the $300,000 deposited, plus accrued interest,
and shall return to the Company the Shares and the Notes. If this Agreement is
terminated, no party shall have any right, remedy, claim for relief, or cause of
action against any other party in connection herewith, and each shall pay its
own legal and other costs incurred in negotiating, executing, and performing its
obligations hereunder.
Article II
The Release
2.1 The Release. The release and deliveries from the custody of the
Custodian of the Securities and the consideration therefor contemplated by this
Agreement shall be consummated (the "Release") at a mutually convenient time and
date (the "Release Date") and place promptly following the satisfaction by the
Company of all conditions required to be satisfied prior to Release, or if not
closed earlier, at the offices of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇, at 10:00 a.m., local time, on March 15,
2001.
2.2 Payments at Release. At the Release, the Custodian shall deliver to
the payees identified on Exhibit B in the amounts and priority set forth therein
for the account of the Company the full amount of the Purchase Price for the
Shares and the principal amount of the Notes, plus accrued interest.
2.3 Delivery of Certificates for Shares and Notes. At the Release and
subject to receipt of payment therefor, the Custodian shall deliver to each of
the Purchasers certificates evidencing the Shares purchased, together with an
originally executed Note.
2.4 Issuance Expenses. The Company shall pay for all costs and expenses
of issuing and delivering the certificates for the Shares, including all
transfer taxes, if any, respecting the issuance and delivery of the Shares to
the Purchaser.
Article III
Additional Covenants
3.1 Distribution of Tambora Stock. The Company currently holds
4,899,533 shares of common stock (the "Tambora Stock") of Tambora Financial
Corporation ("Tambora"), which the Company received in consideration of the
transfer to Tambora of all of the issued and outstanding common stock of Income
Builders, Inc. Such Tambora Stock is to be distributed as follows:
(a) 4,279,449 shares received from Tambora for distribution to
the Company's existing stockholders, as of a record date selected by
the board of directors and excluding the Shares, together with all
considerations received on the sale of the officer and director notes
in accordance with section 3.4, pro rata in proportion to the number of
shares of stock of the Company held by each, as of a record date
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immediately preceding the Release, as determined by the board of
directors;
(b) 320,000 shares to East Bay Trust to satisfy the Company's
antidilution obligation to East Bay Trust in connection with funding
provided by it prior to December 31, 1997; and
(c) 300,084 shares to the previous investors in Triad
Financial Corporation in order for the Company to offer shares in
Tambora to certain unaffiliated persons who had purchased 300,084
shares of preferred stock of Triad Financial Corporation, a previous
subsidiary of the Company, in satisfaction of their right to convert
Triad Financial Corporation preferred stock into the Company's common
stock.
In order to effectuate the foregoing transfers, at the Release, the Tambora
Stock shall be deposited with a custodian designated by the Company to hold such
securities in trust for the benefit of the transferees referred to above until
Tambora has completed, at its expense, a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering such
transactions, at which time the distributions as outlined above shall be
effectuated. Neither the Shares nor the shares issuable on conversion of the
Notes shall be entitled to participate in the foregoing distribution of shares
of Tambora Stock to the Company's stockholders, East Bay Trust, and Triad
Financial Corporation stockholders. Prior to the Release Date and pending their
distribution, such Tambora shares shall be placed into a voting trust to be
voted by the board of directors of Tambora or its designee until such shares are
distributed as provided above or until ten years after creation of the trust,
whichever occurs first.
3.2 Payment or Compromise of Liabilities of the Company. The Company
currently owes certain amounts as reflected in its financial statements as of
September 30, 2000, and the schedule dated as of December 31, 2000, attached as
Exhibit B hereto and incorporated herein by reference. At the Release, the
$300,000 proceeds from the sale of the Shares and the issuance of the Notes
shall be disbursed from the trust account of the attorney for Purchasers in the
amounts set forth opposite the names of the respective creditors as set forth on
said exhibit, to be applied to the amounts due by the Company to each such
creditor against receipt by such counsel of an acknowledgment that such payment
constitutes payment in full of the amount due such creditor and releasing the
Company from any further liability to such creditor. At the Release, the Company
shall deliver or cause to be delivered evidence reasonably satisfactory to the
Purchasers that the Company has paid or made arrangements for payment or
compromise and settlement of all of such liabilities.
At the Release, the Company shall provide the Purchasers with a
certification of the directors of the Company that the Company has no
liabilities, together with such other documents as they may reasonably request
to the effect respecting the elimination of any and all other liabilities of the
Company not paid as set forth above.
The effect of the foregoing is illustrated in the pro forma financial
statements of the Company provided to Purchasers and attached hereto as Exhibit
C in accordance with the provisions of section 4.6(c).
3.3 Filing of SEC Reports. The Company shall promptly file with the SEC
the Company's annual report on Form 10-KSB for the fiscal year ended December
31, 1999, and quarterly reports on Form 10-QSB for the quarters ended March 31,
June 30, and September 30, 2000, under the Exchange Act. Further, the Company
will file prior to the Release its annual report on Form 10-KSB for the fiscal
year ended December 31, 2000.
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3.4 OTC EBB Quotation of Company Common Stock. The Company will take
such steps as reasonably may be required, promptly following the filing of all
reports required to be filed by it under the Exchange Act, to have its common
stock quoted on the over-the-counter electronic bulletin board maintained by the
NASD.
3.5 Certain Pending Contingencies. The Company shall enter into
separate confidential arrangements reasonably acceptable to the Purchasers
relating to that certain lawsuit in the Third District Court in Salt Lake
County, Utah, styled Bridge v. American Financial Holding, Inc., Triad Financial
Systems, Inc., ▇▇▇▇▇▇▇ ▇. Punta, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Civil No. 990912544).
3.6. Company Recapitalization. The Company shall effect a 21.4-to-1
reverse split of the issued and outstanding shares accompanied by an increase in
the authorized capitalization of the Company to 50,000,000 shares of common
stock and an authorization of 5,000,000 shares of "blank check" preferred stock
in accordance with the provisions of the Delaware General Corporation Law, the
Company's certificate of incorporation and bylaws, and Schedule 14C of the
Exchange Act. Upon the effectiveness of such recapitalization, the Notes will be
converted into an aggregate of 2,299,065 reverse-split shares.
3.7 Reorganization of the Board. At the election of the Purchasers, at
the Release, the board of directors of the Company shall be reorganized to
consist of ▇▇▇▇ Avignon, ▇▇▇▇ ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇, or other designees of
the Purchasers. In order to effectuate such reorganization, the Company shall
either (a) cause its current directors to tender their resignations as
directors, effective upon acceptance by the board of directors, so the other
directors can accept each such resignation and appoint a designee of the
Purchasers to fill the resulting vacancy in a series, so that the entire board
of directors can be changed without the necessity of holding a stockholder
meeting, or (b) elect new directors by majority written consent of the
stockholders. The Purchasers shall be responsible for preparing and filing such
reports and notices of the foregoing as may be required under the Exchange Act.
3.8 Voting of Shares. The Purchasers shall vote their shares or consent
in writing in lieu thereof in support of the recapitalization of the Company
contemplated by section 3.6 and the reorganization of the board as contemplated
by section 3.7. No action shall be taken by the board of directors or the
stockholders prior to the Release except as provided in this Agreement or to
effect the transactions contemplated hereby.
Article IV
Representations of the Company
The Company hereby represents and warrants to the Purchasers as
follows, as of the date of the Company's execution of this Agreement and at and
as of the Release Date:
4.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
Delaware. The Company is duly qualified or otherwise authorized to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on the
operations or financial condition of the Company. The Company has no
subsidiaries.
4.2 Capitalization. The Company is authorized to issue 20,000,000
shares of common stock, $0.01 par value per share, of which 4,279,449 shares are
issued and outstanding. The Company has no outstanding options, warrants, or
other rights to acquire common stock as of the date of this Agreement. All of
the issued and outstanding shares of capital stock of the Company have been duly
5
authorized and validly issued and are fully paid and nonassessable and not
issued in violation of the preemptive right of any person. The Company is not
authorized to issue preferred stock.
4.3 Authority for Agreement. Except for the action to be completed in
accordance with section 3.6, the execution, delivery, and performance of this
Agreement by the Company have been duly authorized by the board of directors and
all other necessary corporate action. This Agreement has been duly executed and
delivered by the Company. This Agreement constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium, and similar
laws affecting the rights and remedies of creditors generally and to general
principles of equity.
4.4 Issuance and Sale of Shares. Except for the action to be completed
in accordance with section 3.6, the issuance and sale of the Shares by the
Company have been duly authorized and the Shares have been duly reserved for
issuance by all necessary corporate action on the part of the Company, and the
Shares, when issued and delivered against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued, fully paid and
nonassessable and not issued in violation of the preemptive right of any person.
Based in part on the representations made by or on behalf of the Purchasers in
Article V hereof, the offer, issuance, and sale of the Shares pursuant to this
Agreement are exempt from registration under the Securities Act and applicable
state securities laws.
4.5 No Breach. Except for the action to be completed in accordance with
section 3.6, neither the execution, delivery nor performance of this Agreement
by the Company will (a) conflict with or violate any provision of the articles
of incorporation or bylaws of the Company as in effect as of the date hereof,
(b) require on the part of the Company any filing with, or permit,
authorization, consent or approval of, any governmental entity, (c) result in
breach of, constitute a default under, or require any notice, consent, or waiver
under any contract, agreement, or other instrument to which the Company is a
party or by which it is bound (other than any consent or waiver that has already
been obtained), or (d) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to the Company, excluding from all of the
foregoing such matters as would not in the aggregate have a material adverse
effect on the assets, business, or financial condition of the Company or upon
the transactions contemplated hereby.
4.6 Reports and Financial Statements.
(a) As of the Release Date, the Company shall have filed and
furnished to the Purchasers complete and accurate copies, as amended or
supplemented, of all delinquent filings, including its (i) annual
report on Form 10-KSB for the fiscal year ended December 31, 1999, as
filed with the SEC, (ii) quarterly reports on Form 10-QSB for the
quarters ended March 31, June 30, and September 30, 2000; and (iii) all
other reports filed by the Company with the SEC under the Exchange Act
since December 31, 1999, which together shall include a description of
all material events and management since the last Form 10-KSB filing
for the year ended December 31, 1996 (such reports are collectively
referred to herein as the "Company Reports"). The Company Reports
constitute all of the documents required to be filed by the Company
under Sections 13, 14, or 15(d) of the Exchange Act with the SEC since
December 31, 1999. As a condition precedent to the Release, the Company
will file its annual report on Form 10-KSB for the year ended December
31, 2000.
(b) The consolidated financial statements of the Company
included in the Company Reports (i) comply as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby
6
(except as may be indicated therein or in the notes thereto), (iii)
fairly present the consolidated financial condition, results of
operations, and cash flows of the Company as of the respective dates
thereof and for the periods referred to therein, and (iv) are
consistent with the books and records of the Company.
(c) Attached as Exhibit C and incorporated herein by reference
are the Company's pro forma balance sheets as of September 30, 2000,
and the related pro forma statements of operations for the nine months
ended September 30, 2000, and the year ended December 31, 1999.
4.7 No Actions and Proceedings. Except for the contingency identified
in section 1.3, there are no actions, suits or claims, legal or arbitral
proceedings, governmental inquiries or investigations pending or, to the
Company's knowledge, threatened against the Company, that question the validity
of this Agreement or the right of the Company to enter into it, or which might
result, either individually or in the aggregate, in any material adverse change
in the business, prospects, assets, or condition, financial or otherwise, of the
Company.
4.8 No Material Adverse Change. Since September 30, 2000, and as
provided in or contemplated by this Agreement, there has not been any material
adverse change in the assets, business, financial condition, or results of
operations of the Company.
4.9 Accuracy of Information. The information contained in the Company
Reports, as of their respective dates, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
4.10 Taxes and Tax Returns.
(a) The Company has not filed its federal or state income tax
returns for 1997, 1998, 1999, or 2000, but as of the Release Date, will
have duly filed (and until the Release Date will so file) all returns,
declarations, reports, information returns and statements ("Returns")
required to be filed by it in respect of any other government's,
national, regional, state and local taxes (including property taxes,
withholding taxes, penalties or other payments required) (the "Taxes")
and has and as of the Release Date will have duly paid (and until the
Release Date will so pay) all such Taxes due and payable, other than
Taxes or other charges that are being contested in good faith. The
Company has established (and until the Release Date will establish) on
its books and records reserves that it reasonably believes are adequate
for the payment of all Taxes not yet due and payable, but are
anticipated to be incurred in respect of the Company through the
Release Date. None of the applicable tax returns of the Company have
been examined by the applicable authorities (or are closed to
examination due to the expiration of the statute of limitations) and no
deficiencies were asserted as a result of such examinations that have
not been resolved and paid in full. To the knowledge of the Company,
there are no audits or other administrative or court proceedings
presently pending, or claims asserted, for Taxes or assessments upon
the Company, nor has the Company given any currently outstanding
waivers or comparable consents regarding the application of the statute
of limitations with respect to any Taxes or tax Returns. No Taxes will
accrue or occur as a result of the Purchase and the other transactions
contemplated in this Agreement.
(b) The Company (i) has not requested any extension of time
within which to file any tax Return which Return has not since been
filed, and (ii) is not a party to any agreement providing for the
allocation or sharing of Taxes.
7
4.11 Employee Benefit Plans.
(a) The Company does not maintain or contribute to any stock
option plan, stock purchase plan, deferred compensation plan, severance
plan, bonus plan, employment agreement or other similar plan, program
or arrangement.
(b) The Company does not maintain or otherwise pay for life
insurance policies (other than group term life policies on employees)
with respect to any director, officer or employee.
(c) The Company does not maintain any retirement plan or
retiree medical plan or arrangement for directors. The Company's
Disclosure Schedule sets forth the complete documentation and actuarial
evaluation of any such plan.
4.12 Compliance with Applicable Law. The Company holds all material
licenses, franchises, permits, and authorizations necessary for the lawful
conduct of its business, and has complied with and is not in default in any
respect under any, applicable law, statute, order, rule, regulation, policy,
and/or guideline of any national, state, or local governmental authority
relating to the Company (other than where such defaults or noncompliance will
not, alone or in the aggregate, result in a material adverse effect on the
business, operations, assets, or financial condition of the Company), and the
Company has not received notice of violation of, nor does it know of any
violations (other than violations which will not, alone or in the aggregate,
result in a material adverse effect on the business, operations, assets or
financial condition of the Company) of, any of the above.
4.13 Certain Contracts.
(a) Except as set forth in this Agreement, the Company is not
a party to or bound by any contract or understanding (whether written
or, to its knowledge, oral) with respect to the employment or
termination of any present or former officers, employees, directors or
consultants.
(b) As of the date of this Agreement, (i) the Company is not a
party to or bound by any commitment, agreement, or other instrument
(excluding commitments and agreements in connection with extensions of
credit by the Company) that contemplates the payment of amounts in
excess of $10,000, or that otherwise is material to the operations,
assets, or financial condition of the Company, including but not
limited to any royalty, franchising fees, or any other fee based on a
percentage of revenues or income, and (ii) no commitment, agreement, or
other instrument to which the Company is a party or by which it is
bound limits the freedom of the Company to compete in any line of
business or with any person.
(c) As of the date of this Agreement, the Company is not in
default in any material respect under any material lease, contract,
mortgage, promissory note, deed of trust, loan agreement, license
agreement, or other commitment or arrangement, except for the
obligations listed on Exhibit B.
(d) As of the date of this Agreement, to the knowledge of the
Company, any other party thereto is not in default in any material
respect under any material lease, contract, mortgage, promissory note,
deed of trust, loan agreement, license agreement, or other commitment
or arrangement that is material to the Company.
8
4.14 Minute Books. The minute books of the Company contain and will
contain on the Release Date records that, in all material respects, accurately
record all meetings and other corporate action of its shareholders and board of
directors (including committees of its board of directors).
4.15 Environmental Matters:
(a) The Company has not received any written notice, citation,
claim, assessment, proposed assessment, or demand for abatement
alleging that the Company is responsible for the correction or cleanup
of any condition resulting from the violation of any law, ordinance, or
other governmental regulation regarding environmental matters, which
correction or cleanup would be material to the business, operations,
assets, or financial condition of the Company. The Company has no
knowledge that any toxic or hazardous substances or materials have been
emitted, generated, disposed of, or stored on any real property owned
or leased by the Company, or owned or controlled by the Company as a
trustee or fiduciary (collectively "Properties"), in any manner that
violates or, after the lapse of time may violate, any presently
existing Malaysian, national, state, or local law or regulation
governing or pertaining to such substances and materials, the violation
of which would have a material adverse effect on the business,
operations, assets, or financial condition of the Company.
(b) The Company has no knowledge that any of the Properties
has been operated in any manner in the ten years prior to the date of
this Agreement that violated any applicable national, state, or local
law or regulation governing or pertaining to toxic or hazardous
substances and materials, the violation of which would have a material
adverse effect on the business, operations, assets, or financial
condition of the Company.
4.16 Reserves. To the knowledge of the Company, the allowance for
possible losses in the September 30, 2000 Company financial statements was
adequate at the time based upon past loss experiences and potential losses at
the time to cover all known or reasonably anticipated losses.
4.17 Labor Disputes. The Company is not directly or indirectly involved
in or threatened with any labor dispute or trouble or organizational effort,
including, without limitation, matters regarding actual or alleged
discrimination by reason of race, creed, sex, disability or national origin,
that might materially and adversely affect the financial condition, assets,
businesses, or results of operations of the Company, taken as a whole.
4.18 Absence of Liabilities. As of the Release Date, the Company will
not have any liabilities, absolute or contingent, of any kind or nature, except
for the contingency for which separate arrangements have been made in accordance
with the provisions of section 3.5.
Article V
Representations of Each Purchaser
Each Purchaser, separately and not jointly or severally with any other
Purchaser, represents and warrants to the Company as follows as of the date of
the Purchaser's execution of this Agreement and at and as of the Release Date:
5.1 Investment. The Purchaser (a) is acquiring the Shares solely for
its own account for investment purposes and not with a view to, or for sale in
connection with, any distribution thereof, and not with any present intention of
distributing the same, (b) has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness, or commitment providing for
the disposition thereof, and (c) is fully aware that in agreeing to sell the
9
Shares and entering into this Agreement, the Company is relying upon the truth
and accuracy of the representations and warranties contained herein.
5.2 Authority for Agreement. The Purchaser has full power and authority
to execute, deliver, and perform its obligations under this Agreement in
accordance with its terms. The Purchaser has not been organized, reorganized, or
recapitalized specifically for the purpose of investing in the Company. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
a valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms.
5.3 Information. The Purchaser, or its Purchaser representative or
other duly constituted representative, (a) has reviewed the information and
representations of the Company contained in or incorporated by reference into
this Agreement and the Company Reports, and (b) has had the opportunity to make
inquiry concerning the Company and its business and personnel. The officers of
the Company have made available to each such person any and all written
information that it has requested and have answered to each such person's
satisfaction all inquiries made. The undersigned understands that an investment
in the Company involves a degree of risk, as set forth in the information
provided by the Company.
5.4 Accredited Investor. The Purchaser is an "accredited investor," as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act. The Purchaser, either alone or with its Purchaser representative
or other duly constituted representative, has sufficient knowledge and
experience in investing in companies similar to the Company, so as to be able to
evaluate the risks and merits of its investment in the Company and is able
financially to bear the risks thereof, including a complete loss of its entire
investment.
5.5 Restrictions on Transfer. The Purchaser understands that the Shares
have not been registered, but are being acquired by reason of a specific
exemption under the Securities Act as well as under certain state statutes for
transactions by an issuer not involving any public offering, and that any
disposition of the Shares may, under certain circumstances, be inconsistent with
this exemption and may make the undersigned an "underwriter" within the meaning
of the Securities Act. The Purchaser acknowledges that the Shares must be held
and may not be sold, transferred, or otherwise disposed of for value unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
5.6 Brokerage. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇, no broker, finder, agent, or
similar intermediary has acted on behalf of the Purchasers in connection with
the Agreement or the transactions contemplated hereby, and there are no
brokerage commissions, finder's fees, or similar fees or commissions payable in
connection therewith based on any agreement, arrangement, or understanding with
the Purchasers. Within five days after the completion of the 21.4-to-one reverse
stock split as contemplated by this Agreement, the Company shall issue to ▇▇▇▇▇▇
▇▇▇▇▇▇ for the ▇▇▇▇▇▇ ▇▇▇▇▇▇ promotional group 400,000 post reverse-split shares
of restricted common stock (equivalent to 8,560,000 shares before giving effect
to such reverse split) in consideration of his services in introducing the
Purchasers to the Company, subject to his delivery of written representations to
the effect that he is acquiring such securities for investment, that there is a
reasonable basis for issuing such shares in reliance on exemptions from
registration under the Securities Act, and that he is a finder not required to
be registered as a securities broker-dealer in connection with this transaction.
At the Release, the Company shall execute and deliver such written evidence as
▇▇▇▇▇▇ ▇▇▇▇▇▇ may reasonably request to evidence the obligation contained in
this section.
10
Article VI
Additional Covenants of the Company
The Company agrees with each Purchaser as follows:
6.1 Information to Be Furnished. So long as the Purchaser holds at
least 50% of the total Shares issued to such Purchaser under this Agreement, the
Company shall deliver to the Purchaser with reasonable promptness, such notices,
information, and data with respect to the Company as the Company files with the
SEC or delivers to all holders of its common stock, and such other information
and data as the Purchaser may from time to time reasonably request.
6.2 Reservation of Shares. The Company shall reserve and maintain a
sufficient number of shares of common stock for issuance upon conversion of the
Notes.
6.3 Possible Additional Company Reports. In consideration of the cash
payment being made to Tambora in accordance with this Agreement, if, at any time
after the Release, any governmental authority requires the Company to respond to
staff inquiries, comments, requirements, or questions, or to file additional
periodic reports under Sections 13, 14, or 15(d) of the Exchange Act, including
any reports for any period prior to the date of this Agreement, Tambora shall
pay the costs of the Company's accountants, attorneys, and other advisors in
completing such reports. Contemporaneous with the execution of this Agreement,
(a) Tambora shall deliver its indemnification undertaking, and (b) each of the
officers of the Company shall deliver his personal undertaking to participate,
assist, and cooperate in such efforts without compensation.
6.4 Distribution of Tambora Stock. In consideration of the cash payment
to Tambora in accordance with this Agreement, Tambora covenants and agrees to
file and pursue with diligence and dispatch a registration statement under the
Securities Act covering the distribution of Tambora Stock to the Company's
stockholders as referred to in section 3.1. Tambora shall complete such
registration at its own cost and expense and shall indemnify the Company and
hold it harmless from any claims or assertions of claims, including costs of
defense that may arise out of such distribution.
Article VII
Indemnification by the Purchaser
Each Purchaser hereby agrees to indemnify and hold harmless the Company
and each of its directors, officers, and controlling persons, from and against
any and all liability, damage, cost, or expense, including reasonable attorney's
fees incurred, on account or arising out of:
(a) any inaccuracy in its, his, or her declarations,
representations, and warranties set forth herein or made by the
undersigned to the Company in connection with Purchaser's subscription;
(b) the disposition of any Shares contrary to Purchaser's
declarations, representations, and warranties set forth herein; and
(c) any action, suit, or proceeding based on (i) the claim
that said declarations, representations, or warranties made by the
Purchaser were inaccurate or misleading or otherwise cause for
obtaining damages or redress from the Company, (ii) the disposition of
any of the Shares or any part thereof, or (iii) the breach by the
Purchaser of any part of this Agreement.
11
Article VIII
Miscellaneous
8.1 No Assignment. This Agreement and the rights and obligations of the
Purchaser may not be assigned, in whole or in part, by the Purchaser to any
person or entity without the prior written consent of the Company, which such
consent may be granted or withheld by the Company in its sole discretion.
8.2 Costs. The Company and the Purchaser shall each pay all of its own
costs and expenses incurred or to be incurred by each in negotiating and
preparing this Agreement and in Release and carrying out the transactions
contemplated by this Agreement, except as expressly otherwise provided herein.
8.3 Confidentiality. The Purchaser shall keep confidential and will not
disclose or divulge any confidential, proprietary, or secret information that
such Purchaser may obtain from the Company pursuant to financial statements,
reports, and other materials submitted by the Company to such Purchaser pursuant
to this Agreement, or pursuant to visitation or inspection courtesies extended
to such Purchaser, unless such information is known, or until such information
becomes known, to the public; provided, however, that the Purchaser may disclose
such information (i) to its attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in connection
with its investment in the Company, (ii) to any permitted prospective purchaser
of any Shares from a Purchaser, as long as such prospective purchaser agrees in
writing to be bound by the provisions of this section, or (iii) to any affiliate
of a Purchaser; subject to the agreement of such party to keep such information
confidential as set forth herein.
8.4 Notice. All notices, demands, requests, or other communications
required or authorized hereunder shall be in writing and shall be deemed to have
been given on the date of service if personally served or by facsimile
transmission (if receipt is confirmed by the facsimile operator of the
recipient), or on the following day if delivered by overnight courier service,
or on the fifth day after mailing if mailed by certified mail, return receipt
requested, addressed as follows:
If to the Company, to: American Financial Holding, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Electronic Mail: ▇-▇-▇@▇▇▇▇▇▇▇▇.▇▇▇
With a courtesy copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.C.
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Electronic Mail: ▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇ ▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇▇
Facsimile: 532-7944
Electronic Mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
12
If to Purchasers, in care of: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Benchmark Equity Group, Inc.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Electronic Mail: ▇▇▇▇▇@▇▇▇▇.▇▇▇
With a courtesy copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Electronic Mail: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
or such other addresses and facsimile numbers as shall be furnished in writing
by any party in the manner for giving notices hereunder, and any such notice,
demand, request, or other communication shall be deemed to have been given as of
the date so delivered or sent by facsimile transmission (if receipt is confirmed
by the facsimile operator of the recipient), five days after the date so mailed,
or one day after the date so sent by overnight delivery.
8.5 Attorneys' Fees. In the event that any party institutes any action
or suit to enforce this Agreement or to secure relief from any default hereunder
or breach hereof, the breaching party shall reimburse the nonbreaching party for
all costs, including reasonable attorneys' fees, incurred in connection
therewith and in enforcing or collecting any judgment rendered therein,
including such costs that are incurred in any bankruptcy or appellate
proceeding.
8.6 Survival. The representations, warranties, and covenants of the
respective parties shall survive the Release.
8.7 Form of Execution; Counterparts. A valid and binding signature
hereto or any notice or demand hereunder may be in the form of a manual
execution or a true copy made by photographic, xerographic, or other electronic
process that provides similar copy accuracy of a document that has been
executed. This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall be but a
single instrument.
8.8 Construction. This Agreement is the result of negotiation between
the parties hereto, each of which has been or has had the opportunity to be
represented by independent legal counsel of such party's own selection.
Accordingly, no provision of this Agreement or any agreement, certificate, or
other writing delivered in accordance with this Agreement shall be constructed
against any party merely because of such party's involvement in its preparation.
8.9 Amendment or Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law, or in equity, and may be enforced concurrently herewith, and no waiver by
any party of the performance of any obligation by the other shall be construed
as a waiver of the same or any other default then, theretofore, or thereafter
occurring or existing. At any time prior to the Release date, this Agreement may
be amended by a writing signed by all parties hereto, with respect to any of the
terms contained herein, and any term or condition of this Agreement may be
13
waived or the time for performance thereof may be extended by a writing signed
by the party or parties for whose benefit the provision is intended.
8.10 Validity of Provisions and Severability. If any provision of this
Agreement is, becomes, or is deemed invalid, illegal, or unenforceable in any
jurisdiction, such provision shall be deemed amended to conform to the
applicable jurisdiction, or if it cannot be so amended without materially
altering the intention of the parties, it will be stricken. However, the
validity, legality, and enforceability of any such provisions shall not in any
way be affected or impaired thereby in any other jurisdiction and the remainder
of this Agreement shall remain in full force and effect.
8.11 Facsimile Signatures. This Agreement and any document executed and
delivered in connection with the consummation of the transaction contemplated
hereby shall be deemed to have been signed if it is manually executed and a true
copy thereof is delivered by facsimile or other electronic process that provides
similar copy accuracy of a document that has been executed.
8.12 Entire Agreement; Modification. This Agreement constitutes the
entire agreement and understanding between the parties pertaining to the subject
matter of this Agreement. This Agreement supersedes all prior agreements, if
any, any understandings, negotiations, courses of dealing, and discussions,
whether oral or written, between the parties hereto, including any subsidiary of
the Company. No supplement, modification, waiver, or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby.
8.13 Governing Law. This Agreement shall be governed by, enforced, and
construed under and in accordance with the laws of the United States of America
and, with respect to matters of state law, with the laws of the state of
Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first written above.
AMERICAN FINANCIAL HOLDING, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. Punta
--------------------
▇▇▇▇▇▇▇ ▇. Punta, Vice-President
Number of Note Amount
Purchasers Shares Principal Due
---------- ---------- ---------- --------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 5,000,000 $50,000 $100,000
--------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ Avignon 5,000,000 $50,000 $100,000
--------------------------------
▇▇▇▇▇ Avignon
Lighthouse Capital Insurance Co.
By /s/ ▇▇▇▇▇▇▇ ▇▇▇ 5,000,000 $50,000 $100,000
------------------------------
Duly authorized officer
For MeesPierson Management
(Cayman) Limited
14
Exhibit A
Convertible Promissory Note
These securities have not been registered with the United States
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), and are being offered in reliance on exemptions from
registration provided in Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder and preemption from the registration or
qualification requirements (other than notice filing and fee provisions)
of applicable state laws under the National Securities Markets
Improvement Act of 1996.
-------------------------
CONVERTIBLE NOTE
OF
AMERICAN FINANCIAL HOLDING, INC.
$50,000 January __, 2001
American Financial Holding, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
____________________________________________________________(the "Holder"), at
___________________________________________________________________, or its
assigns, the sum of fifty thousand dollars ($50,000), or such other amount as
may be outstanding, without interest. The principal amount of this Note shall be
payable at the principal offices of the Holder or by mail to the registered
address of the Holder of this Note on the earliest to occur of (a) [December 31,
2002], or (b) a default under this Note in accordance with section 8 below,
unless this Note shall have been previously converted pursuant to section 2
hereof or as provided otherwise in this Note.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:
1. Non-negotiable. This Note is non-negotiable.
2. Conversion. At the effective time of the 21.4-to-one reverse split
of the issued and outstanding common stock of the Company to be effected by the
Company, the principal on this Note shall automatically be converted into an
aggregate of 766,355 shares of post-reverse-split common stock (the "Conversion
Stock"). Upon conversion under this section 2, the Holder shall promptly
surrender this Note at the principal offices of the Company.
3. Issuance of Conversion Stock. As soon as practicable after
conversion of this Note, the Company, at its expense, will cause to be issued in
the name of and delivered to the Holder of this Note, a certificate or
certificates for the number of shares of Conversion Stock to which the Holder
A-1
shall be entitled upon such conversion (bearing such legends as may be required
by applicable state and federal securities laws in the opinion of legal counsel
of the Company).
4. Adjustment of Number of Shares. Except for the proposed 21.4-to-one
reverse stock split to be effected by the Company, the number and character of
shares of Conversion Stock issuable upon conversion of this Note (or any shares
of stock or other securities or property at the time receivable or issuable upon
conversion of this Note) are subject to adjustment upon the occurrence of any of
the following events:
4.1 Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. In the event that the Company shall fix a record date
for the determination of holders of securities affected by any stock split,
stock dividend, reclassification, recapitalization, or other similar event that
will, in the future, affect the number of outstanding shares of the Company's
capital stock, then, and in each such case, the Holder, upon conversion of this
Note at any time after the Company shall fix the record date for such event,
shall receive, in addition to the shares of Conversion Stock issuable upon
conversion on the conversion date, the right to receive the securities of the
Company to which such Holder would have been entitled if such Holder had
converted this Note immediately prior to such record date (all subject to
further adjustment as provided in this Note).
4.2 Adjustment for Dividends and Distributions. In the event
that the Company shall make or issue, or shall fix a record date for the
determination of eligible holders of securities entitled to receive, a dividend
or other distribution payable with respect to the Conversion Stock (or any
shares of stock or other securities at the time issuable upon conversion of this
Note) that is payable in securities of the Company, other than capital stock, or
any other assets, then, and in each such case, the Holder, upon conversion of
this Note at any time after the consummation, effective date, or record date of
such event, shall receive, in addition to the shares of Conversion Stock (or
such other stock or securities) issuable upon such conversion prior to such
date, the securities or such other assets of the Company to which such Holder
would have been entitled upon such date if such Holder had converted this Note
immediately prior thereto (all subject to further adjustment as provided in this
Note).
4.3 Adjustment for Reorganization, Consolidation, Merger. In
the event of any reorganization of the Company (or any other corporation the
stock or other securities of which are at the time receivable upon the
conversion of this Note) after the date of this Note, or in the event, after
such date, the Company (or any such corporation) shall consolidate with or merge
into another corporation or convey all or substantially all of its assets to
another corporation, then, and in each such case, the Holder, upon the
conversion of this Note (as provided in section 2) at any time after the
consummation of such reorganization, consolidation, merger, or conveyance, shall
be entitled to receive, in lieu of the stock or other securities and property
receivable upon the conversion of this Note prior to such consummation, the
stock or other securities or property to which such Holder would have been
entitled upon the consummation of such reorganization, consolidation, merger, or
conveyance if such Holder had converted this Note immediately prior thereto, all
subject to further adjustment as provided in this section 4, and the successor
or purchasing corporation in such reorganization, consolidation, merger, or
conveyance (if other than the Company) shall duly execute and deliver to the
Holder a supplement hereto acknowledging such corporation's obligations under
this Note. In each such case, the terms of the Note shall be applicable to the
shares of stock or other securities or property receivable upon the conversion
of this Note after the consummation of such reorganization, consolidation,
merger, or conveyance.
4.4 Notice of Adjustments. The Company shall promptly give
written notice of each adjustment or readjustment of the number of shares of
Conversion Stock or other securities issuable upon conversion of this Note, by
first class mail, postage prepaid, to the registered Holder of this Note at the
A-2
Holder's address as shown on the Company's books. The notice shall describe the
adjustment or readjustment and show in reasonable detail the facts on which the
adjustment or readjustment is based.
4.5 No Change Necessary. The form of this Note need not be
changed because of any adjustment in the number of shares of Conversion Stock
issuable upon its conversion.
4.6 Reservation of Stock. The Company has taken all necessary
corporate action and obtained all necessary government consents and approvals to
authorize the issuance of this Note and, prior to the conversion hereof, the
shares of Conversion Stock issuable upon conversion of this Note. If at any time
the number of authorized but unissued common stock or other securities shall not
be sufficient to effect the conversion of this Note, then the Company will take
such corporate action as may, in the opinion of its legal counsel, be necessary
to increase its authorized but unissued common stock or other securities to such
number of shares of common stock or other securities as shall be sufficient for
such purpose.
5. Fully Paid Shares. All shares of Conversion Stock issued upon the
conversion of this Note shall be validly issued, fully paid, and nonassessable.
6. No Rights or Liabilities as Stockholder. This Note does not by
itself entitle the Holder to any voting rights or other rights as a stockholder
of the Company. In the absence of conversion of this Note, no provisions of this
Note and no enumeration herein of the rights or privileges of the Holder shall
cause such Holder to be a stockholder of the Company for any purpose.
7. Corporate Action; No Impairment. The Company will not, by amendment
of its articles of incorporation or bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, repurchase of
securities, sale of assets, or any other action, avoid or seek to avoid the
observance or performance of any of the terms of this Note, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate, or as reasonably
requested by Holder, in order to protect the rights of the Holder under this
Note against wrongful impairment. The Company shall not amend its articles of
incorporation or issue any capital stock or options to purchase any capital
stock of the Company without the prior written consent of the Holder.
8. Default. The Company will be in default if the Company fails to make
any payment when due hereunder. The Company will also be in default if any of
the following occurs and such default is not cured within a 10-day period after
the Holder has given the Company written notice of such default:
(a) the Company breaches any material obligation to the Holder
hereunder; or
(b) a receiver is appointed for any part of the Company's
property, the Company makes an assignment for the benefit of creditors,
or any proceeding is commenced either by the Company or against the
Company under any bankruptcy or insolvency laws.
In the event of a default under this section 8, Holder shall, in addition to any
other remedies allowed by law, be entitled to accelerate all unpaid principal
under this Note.
9. WAIVER AND AMENDMENT. ANY PROVISION OF THIS NOTE MAY BE AMENDED,
WAIVED, MODIFIED, DISCHARGED, OR TERMINATED SOLELY UPON THE WRITTEN CONSENT OF
BOTH THE COMPANY AND THE HOLDER.
A-3
10. Assignment; Binding upon Successors and Assigns. The Company may
not assign any of its obligations hereunder without the prior written consent of
Holder. The terms and conditions of this Note shall inure to the benefit of and
be binding upon the successors and permitted assigns of the parties.
11. Waiver of Notice; Attorneys' Fees. The Company and all endorsers of
this Note hereby waive notice, demand, notice of nonpayment, presentment,
protest, and notice of dishonor. If any action at law or in equity is necessary
to enforce this Note or to collect payment under this Note, the Holder shall be
entitled to recover, as an element of the costs of suit and not as damages,
reasonable attorneys' fees, costs, and necessary disbursements in addition to
any other relief to which it may be entitled. Holder will be entitled to recover
its costs of suit, regardless of whether such suit proceeds to final judgment.
12. Construction of Note. The terms of this Note have been negotiated
by the Company, the original Holder of this Note, and their respective
attorneys, and the language hereof will not be construed for or against either
Company or Holder. Unless otherwise explicitly set forth, a reference to a
section will mean a section in this Note. The titles and headings herein are for
reference purposes only and will not in any manner limit the construction of
this Note, which will be considered as a whole.
13. Notices. Any notice or other communication required or permitted to
be given under this Note shall be in writing, shall be delivered by hand or
overnight courier service, by certified mail, postage prepaid, or by facsimile,
and will be deemed given upon delivery, if delivered personally, one business
day after deposit with a national courier service for overnight delivery, or one
business day after transmission by facsimile with confirmation of receipt, and
three days after deposit in the mails, if mailed, to the following addresses:
(a) If to the Holder:
_________________________________
_________________________________
_________________________________
_________________________________
(b) If to Company: American Financial Holding, Inc.
_________________________________
_________________________________
_________________________________
or to such other address as may have been furnished to the other party in
writing pursuant to this section 13, except that notices of change of address
shall only be effective upon receipt.
14. Governing Law. This Note shall be governed by and construed under
the internal laws of the United States and the State of Utah as applied to
agreements among Utah residents entered into and to be performed entirely within
Utah, without reference to principles of conflict of laws or choice of laws.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name as of the date first above written.
AMERICAN FINANCIAL HOLDING, INC.
By: ______________________________
[_____________], its President
A-4
Exhibit B
Payment or Compromise of Liabilities
Balance as of
September 30, 2000
(unless otherwise
Creditor indicated) Action
--------------------------------- -------------------------- -------------------------------------------------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ $197,000 (approx) plus $150,000 payable at Release against delivery of
accruals as of the date acknowledgment of full satisfaction of amounts due.
of this Agreement
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇. LLC $54,682.04 at December $50,000 payable at Release against delivery of
31, 2000, plus accruals acknowledgment of full satisfaction of amounts due,
as of the date of this less amount by which interest accrued is less
Agreement than amount required to pay ▇▇▇▇▇▇ ▇▇▇▇▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇ transaction fees $5,000 payable at Release against delivery of
acknowledgment of full satisfaction of amounts due
Contingency--Bridge suit per Disputed $100,000 to be placed on deposit with ▇▇▇▇▇, ▇▇▇▇▇
Form 10-KSB & ▇▇▇▇▇▇▇ for defense and resolution if not
resolved by Release date; if resolved by Release
date, amount required to defend and/or settle suit
paid for such purposes
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $18,865 $18,865, to the extent of funds available, against
delivery of acknowledgment of full satisfaction of
amounts due
Tambora Financial Corporation The balance, to the extent of funds available,
Principal $177,380 against delivery of acknowledgment of full
Interest 15,964 satisfaction of amounts due and agreement to pay
direct costs of additional or curative SEC filings
Triad preferred stock $240,014 Satisfied with distribution of 300,084 shares of
Tambora common stock by the Company
Triad preferred stock accrued $123,962 Satisfied with distribution of 300,084 shares of
dividend Tambora common stock by the Company
Total $300,000, plus accrued interest
===============================
B-1
Exhibit C
Pro Forma Financial Statements
AMERICAN FINANCIAL HOLDING, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
Page
Unaudited Pro Forma Condensed Financial Statements .................... F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheet -
December 31, 1999 ............................................. F-3
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements .......................................... F-4
---------------------------
F-1
AMERICAN FINANCIAL HOLDING, INC. AND SUBSIDIARY
(UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
During September 1997, American Financial Holding, Inc. ("AFH"), and Tambora
Financial Corporation ("Tambora"), corporations under common control, entered
into an agreement whereby AFH would transfer all of the outstanding common stock
of Income Builders, Inc. ("Income Builders"), a master insurance agency, to
Tambora. Under the terms of the agreement, Tambora purchased Income Builders by
paying AFH $500,000 during 1997, 1998 and 1999 and issuing AFH 4,899,533 shares
of Tambora common stock on October 24, 2000, whereupon AFH transferred Income
Builders to Tambora.
The carrying value of Income Builders was a negative $(271,569) at December 31,
1999. No gain or loss was recognized on the transfer since it was between
entities under common control and none will be realized because the planned
subsequent spin-off of the Tambora shares to the AFH shareholders. However, the
carrying value of the Tambora shares was increased to zero as a capital
contribution because the Company has no financial or other commitment to support
the operations of Tambora in any manner.
The historical statements of operations of AFH present the operations of Income
Builders as discontinued operations. There are no pro forma adjustments to
continuing operations as a result of the transfer. Accordingly, a pro forma
statement of operations is not presented herein.
F-2
AMERICAN FINANCIAL HOLDING, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA BALANCE SHEET
DECEMBER 31, 1999
Pro Forma
AFH Adjustments Pro Forma
------------- ------------- -------------
ASSETS
Current Assets
Cash $ 1,203 $ -- $ 1,203
------------- ------------- -------------
Total Current Assets 1,203 -- 1,203
------------- ------------- -------------
Net Property and Equipment 211 -- 211
------------- ------------- -------------
Investment in Tambora -- -- --
------------- ------------- ------------
Total Assets $ 1,414 $ -- $ 1,414
============= ============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 170,835 $ -- $ 170,835
Payable to related party 677,380 (B) (500,000) 177,380
Accrued interest payable to related party 15,964 -- 15,964
Payable to Triad Financial Systems, Inc. owners 240,014 (C) (240,014) --
Interest payable to Triad Financial Systems,
Inc. owners 123,962 (C) (123,962) --
Accrued rent payable to officers 168,000 -- 168,000
Payable to officers 18,865 -- 18,865
Net liabilities of discontinued operations 271,569 (A) (271,569) --
------------- ------------- ------------
Total Current Liabilities 1,686,589 (1,135,545) 551,044
------------- ------------- -------------
Stockholders' Equity
Common stock 42,794 -- 42,794
Additional paid-in capital 7,431,326 (A) 271,569
(B) 500,000
(C) 363,976 8,566,871
Stockholders' receivable net of reserve
of $2,701,917 (168,000) -- (168,000)
Accumulated deficit (8,991,295) -- (8,991,295)
------------- ------------- -------------
Total Stockholders' Deficit (1,685,175) 1,135,545 (549,630)
------------- ------------- -------------
Total Liabilities and Stockholders' Deficit $ 1,414 $ -- $ 1,414
============= ============= =============
F-3
AMERICAN FINANCIAL HOLDING, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA STATEMENT OF OPERATIONS
(A) The net effect of the transfer of Income Builders from AFH to Tambora
was a reduction of AFH's liabilities (representing an assumption of the
net liabilities belonging to Income Builders by Tambora) and an
increase in additional paid-in capital (representing a capital
contribution from Tambora) for the same amount.
(B) During 1997, 1998 and 1999, Tambora made payments to AFH totaling
$677,380, this balance was shown on AFH's balance sheet as payable to
related party. This adjustment is to apply $500,000 of that balance
towards the purchase of Income Builders, which amount is accounted for
as additional paid-in capital.
(C) Of the 4,899,533 shares of Tambora common stock issued in the Income
Builders transfer, 300,084 shares are to be distributed to investors in
preferred stock of Triad Financial Corporation ("Triad"), a previous
subsidiary of AFH. Triad was unsuccessful in obtaining the capital
required to implement its business plan and was dissolved. The 300,084
shares will be distributed to such former investors of Triad in
satisfaction of their right to convert Triad preferred stock into AFH
common stock. This adjustment eliminates the liability to the Triad
investors and records the offsetting additional paid-in capital.
F-4