EXHIBIT (10)
AGREEMENT PROVIDING FOR REORGANIZATION OF R & J
WAREHOUSE LENDING, L.L.C. INTO R J LENDING, INC.
THIS AGREEMENT is dated as of February 15, 2002 and is entered into by
R & J WAREHOUSE LENDING, LLC ("LLC"), R J LENDING, INC. ("RJ Inc") and the
undersigned member of LLC.
BACKGROUND
It has been determined that the business of LLC may more appropriately
be conducted if LLC converts to the corporate form of business organization.
Accordingly, Articles of Incorporation have been filed for RJ, Inc. with the
Department of State, State of Florida and a Certificate of Incorporation for
RJ, Inc. has been issued by the Department of State, State of Florida on
January 31, 2002.
The undersigned, together with all other members of LLC have consulted
with the Managing Member of LLC which is R & J One of Sarasota, Inc. The
Managing Member is constituted by Ronald R. Shenkin and John Kurz. Accordingly,
it is agreed and acknowledged by LLC, RJ, Inc. and the undersigned member as
follows:
RJ, Inc. will assume all of the assets and liabilities of LLC, as such
exist as of January 1, 2002, and at times subsequent to January 1, 2002. LLC
will terminate its existence.
The undersigned member hereby acknowledges that his membership
interest in the LLC will also extinguish and that he will receive in its place
the 12% Unsecured Subordinated Promissory Notes of RJ, Inc., the form of which
12% Unsecured Subordinated Promissory Note is included with this Agreement and
by this reference made a part hereof.
While the form of 12% Unsecured Subordinated Promissory Note is
adopted as a part of this Agreement, the undersigned signatories to this
Agreement acknowledge that the series of 12% Unsecured Subordinated Promissory
Notes of RJ, Inc. incorporate the following terms and conditions:
1. All payees of the 12% Unsecured Subordinated Promissory Notes
shall be entitled to receive interest at the Note Rate of 12%
based upon a 365 day year until the principal amount of each
such Note is paid or fully converted into the Common Stock of
RJ, Inc. as hereinafter described. The Note Rate interest
shall be paid quarterly commencing March 31, 2002.
2. Each payee of a 12% Unsecured Subordinated Promissory Note
will be entitled to receive additional interest ("Additional
Interest"), which Additional Interest shall be that cash
determined available by the Board of Directors of RJ, Inc.
and representative of the net income of RJ, Inc. for each of
its fiscal years (December 31 of each year) which results
from the operations of RJ,
Inc. after provision for any corporate and other taxes
accrued and payable for such fiscal year and any then current
absorption of any operating loss carry forward allocable to
such fiscal year, such representative cash being distributed
as a dividend to the holders of RJ, Inc.'s outstanding Common
Stock as of the end of any such fiscal year and to the payees
of the holders of the 12% Unsecured Subordinated Promissory
Notes in accordance with the following formula:
Representative Cash = Each Common Stock or Note
--------------------------- holder's entitlement to shares
Number of Shares of Common of Representative Cash
Stock outstanding as of the (assuming that Notes were
Close of Each Fiscal Year fully converted at the close
assuming the conversion of of such fiscal year)
all of the outstanding
principal amount of the
outstanding 12% Unsecured
Promissory Notes at the
conclusion of such fiscal
year of the Company's Notes
into Common Stock
3. For a period of ten years from the date of each 12% Unsecured
Subordinated Promissory Note, the payee thereof may convert
his or her Note in whole or in part into shares of the Common
Stock of RJ, Inc., $.01 par value (the "Common Stock" or the
"Shares") at a conversion rate providing for the issuance of
one share of such Common Stock for each $.6749 principal
amount of Notes so converted. Such conversion right may not
be terminated by the action of RJ, Inc. and shall be
protected and is protected by anti- dilutive provisions
requiring that in the event that the number of shares of
Common Stock of RJ, Inc. outstanding from time to time is
increased or decreased, the number of Shares issuable upon
conversion of all or a portion of the principal amount of
each such 12% Unsecured Subordinated Promissory Note shall be
adjusted upward or downward to take into account such
alteration in the number of Shares of RJ, Inc. outstanding,
which increase or decrease in outstanding Shares occurs by
reason of any stock split, stock dividend or reclassification
or any business combination transaction with respect to which
RJ, Inc. is a constituent and the surviving entity. In the
event that RJ, Inc. is a constituent entity to any business
combination in which it is not the surviving entity, then the
conversion feature afforded each such 12% Unsecured
Subordinated Promissory Note shall extinguish on the
effective date of such business combination transaction or,
if later, the termination date of RJ, Inc.'s existence.
2
4. The principal and interest obligation represented by each 12%
Unsecured Subordinated Promissory Note is unsecured and
subordinate, junior and inferior to the obligation of RJ,
Inc. represented by its Secured Promissory Notes - First
Series which may be outstanding from time to time, as well as
any obligation of RJ, Inc. represented by the proceeds
received and obligation arising from the receipt of such
proceeds and owing by RJ, Inc. from time to time to any bank,
deposit institution or other credit provider. The principal
obligation of each of the 12% Unsecured Subordinated
Promissory Notes may also be utilized by RJ, Inc. in
initially and continually complying with the "net capital
requirements" imposed by the Rules of the Division of
Securities, Department of Banking and Finance, State of
Florida, which requirement relates to the qualification by
RJ, Inc. to function as its own issuer-dealer pursuant to the
Florida Securities and Investor Protection Act and rules and
regulations promulgated thereunder in order that it may act
as its own distributor of its Secured Promissory Notes -
First Series.
5. Each 12% Unsecured Subordinated Promissory Note and Shares
issued upon conversion of all or part of any such 12%
Unsecured Subordinated Promissory Note constitute Restricted
Securities under the Securities Act of 1933, as amended (the
"Act") or any applicable state securities statutes,
including, without limitation, the Florida Securities and
Investor Protection Act.
6. At and subsequent to the time that 50% or more of the
aggregate initial principal amount of all of the 12%
Unsecured Subordinated Promissory Notes has been converted
into Shares and upon receipt by RJ, Inc. of the written
request of all of the holders of such Shares issued upon such
conversion, RJ, Inc. shall cause to be promptly prepared a
Registration Statement covering such Shares issued upon such
conversion transactions and those Shares issuable upon
conversion of the remaining outstanding principal amount of
12% Unsecured Subordinated Promissory Notes, which
Registration Statement shall be filed under the Act and
processed to effectiveness by RJ, Inc. at its expense. Such
Registration Statement shall contain a form of Prospectus
which when the Registration Statement becomes effective under
the Act may be delivered by the holders of the Shares issued
in such conversion transactions to be used by such holders in
transactions relating to the sale of such Shares to the
public.
The signatories to this Agreement also acknowledge that RJ, Inc. may
make one or more distributions to the holders of the 12% Unsecured Subordinated
Promissory Notes if, in the reasonable judgment of RJ, Inc., such distributions
are necessary to assist in the defrayal of any possible Federal income tax
liability that a holder of a 12% Unsecured Subordinated Promissory Note may
have incurred by reason of the conversion of LLC to corporate form.
3
The undersigned Member hereby accepts such 12% Unsecured Subordinated
Promissory Note in principal amount of $____________ as the undersigned's
interest in RJ, Inc. and in complete replacement of the undersigned's
membership interest in LLC.
Dated at Sarasota, Florida as of the date and year first above
written.
R & J WAREHOUSE LENDING, LLC
By R & J ONE OF SARASOTA, INC., its
Managing Member
By
---------------------------------
Ronald R. Shenkin, President
R J LENDING, INC.
By
---------------------------------
Ronald R. Shenkin, President
ATTEST:
- ----------------------------------
Secretary
-----------------------------------
Signature of Member
-----------------------------------
Please Print Name
4
$ , 2002
------------------- ---------------
R J LENDING, INC.
12% UNSECURED SUBORDINATED PROMISSORY NOTE
IN AGGREGATE PRINCIPAL AMOUNT OF $500,000
The undersigned, R J LENDING, INC., a corporation organized and
existing pursuant to the laws of the State of Florida and having its principal
place of business at Sarasota, Florida (the "Company") hereby promises to pay to
the order of ________________________________________________________________
(the "Payee") the principal sum of $__________________, together with interest
thereon calculated at the annual rate of twelve percent (12%) (based upon a 365
day year) until the principal amount of this Note is paid or fully converted
into the Common Stock of the Company as hereinafter provided. The foregoing
interest amount is subsequently referred to in this Note as the "Note Rate".
The principal amount of this Note, $_________________, will be due and
payable on a date which is 12 years from the date of the Note, together with any
accrued interest unpaid on such date of principal repayment, unless the
principal amount of this Note has been fully converted into the Common Stock of
the Company as hereinafter provided.
Interest at the Note Rate shall be paid to the Payee by the Company not
less frequently and at the conclusion of each calendar quarter commencing on
March 31, 2002. Such interest payment made on March 31, 2002 may involve an
amount of interest less than an entire quarter as a result of the effective date
of this Note as indicated above. The Payee shall also be entitled to the
additional interest as provided for and described below.
The principal obligation of this Note may not be prepaid by the Company
except upon the receipt of the express written consent thereto by the Payee.
The Company and the Payee acknowledge that this Note is being issued
and delivered by the Company to the Payee in connection with the purchase by the
Company of all of the assets and business of that Limited Liability Company
known as R & J Warehouse Lending, L.L.C. and this Note is fully representative
and given in full exchange for the Payee's membership interest in such limited
liability company. R & J Warehouse Lending, L.L.C. has terminated its business
activities and is in the process of terminating its existence.
The Payee and all other holders of Notes of this type and series shall
be entitled to receive additional interest ("Additional Interest"), which
Additional Interest shall be that cash determined available by the Board of
Directors of the Company and representative of the Company's net income for each
of its fiscal years (December 31 of each year) which results from the Company's
operations after provision for any corporate and other taxes
accrued and payable for such fiscal year and any then current absorption of any
operating loss carryforward allocable to such fiscal year, such representative
cash being distributed as a dividend to the holders of the Company's outstanding
Common Stock as of the end of any such fiscal year and to the Payee and other
holders of this series of Notes in accordance with the following formula:
Representative Cash
----------------------------- = Each Common Stock or Note
Number of Shares of Common holder's entitlement to shares
Stock outstanding as of the of Representative Cash (as-
Close of Each Fiscal Year as- suming that Notes were fully
suming the conversion of all converted at the close of such
of the outstanding principal fiscal year)
amount of the outstanding
12% Unsecured Promissory
Notes at the conclusion of
such fiscal year of the Com-
pany's Notes into Common
Stock
For a period of ten years from the date hereof, the Payee may convert
the principal of this Note, in whole or in part, into shares of the Common Stock
of the Company, $.01 par value (the "Common Stock" or the "Shares") at a
conversion rate providing for the issuance of one share for each $.6749
principal amount of this Note so converted. Such conversion right may not be
terminated by any action of the Company and shall be protected by anti-dilutive
provisions requiring that in the event that the number of shares of Common Stock
of the Company outstanding from time to time is increased or decreased, the
number of Shares issuable upon conversion of all or a portion of the principal
amount of this Note shall be adjusted upward or downward to take into account
such alteration in the number of shares of Common Stock of the Company
outstanding, which increase or decrease in outstanding Shares occurs by reason
of any stock split, stock dividend or reclassification or any business
combination transaction with respect to which the Company is a constituent and
the surviving entity. In the event that the Company is a constituent entity to
any business combination in which it is not the surviving entity, then the
conversion feature herein afforded to the holder shall extinguish on the
effective date of such business combination transaction or if later, the
termination date of the Company's existence.
The principal and interest obligation represented by this Note is
unsecured and is subordinate, junior and inferior to the obligation of the
Company represented by its Secured Promissory Notes - First Series which may be
outstanding from time to time, as well as any obligation of the Company
represented by the proceeds received and obligation arising from the receipt of
such proceeds and owing by the Company from time to time to any bank, deposit
institution or other credit provider. The principal obligation of each of the
Notes may also be utilized by the Company in initially and continually complying
with the "net capital requirements" imposed by the Rules of the Division of
Securities, Department of
2
Banking and Finance, State of Florida, which requirement relates to the
qualification by the Company to function as its own issuer-dealer pursuant to
the Florida Securities and Investor Protection Act and rules and regulations
promulgated thereunder in order that it may act as its own distributor of its
Secured Promissory Notes - First Series.
This Note and the shares of Common Stock issuable upon conversion of
all or a part of the principal amount of this Note have not been registered
pursuant to the provisions of the Securities Act of 1933, as amended (the "Act")
or any applicable state securities statute, including, without limitation, the
Florida Securities and Investor Protection Act. Accordingly, this Note and the
Shares issued upon conversion of all or a portion of the principal amount of
this Note constitute Restricted Securities as defined under the Act and rules
promulgated thereunder. This Note and Shares issued upon conversion of such Note
may only be sold in the event that this Note and such Shares issued upon
conversion become freely tradeable securities by reason of the registration
thereof under the Act or the receipt by the Company of an opinion of its counsel
that any proposed transfer of this Note or Shares issued upon all or a part of
the conversion of the principal amount hereof constitutes a transaction exempt
from the registration requirements of the Act.
At and subsequent to the time that fifty percent (50%) or more of the
aggregate initial principal amount of all Notes of this series has been
converted into Common Stock of the Company, which initial principal amount is
$500,000 and upon receipt by the Company of the written request of all of the
holders of such Shares issued upon such conversion, the Company shall cause to
be promptly prepared a Registration Statement covering such Shares issued upon
such conversion transactions and those Shares issuable upon conversion of the
remaining outstanding principal amount of Notes, which Registration Statement
shall be filed under the Act and processed to effectiveness by the Company at
its expense. Such Registration Statement shall contain a form of prospectus
which, when the Registration Statement becomes effective under the Act, may be
delivered by the holders of Notes receiving Shares in such conversion
transactions to be used by such holders in transactions relating to the sale of
such Shares to the public.
Dated at Sarasota, Florida this _____ day of _______________, 2002.
R J LENDING, INC.
By
-----------------------------------
Ronald Shenkin, President and Chief
Executive Officer
ATTEST:
- -------------------------------------
John Kurz, Secretary
3