Exhibit 2.1
STOCK PURCHASE AGREEMENT
This Agreement is entered into this 19th day of June, 2001 by and
between Tidalwave Holdings Inc. hereinafter known as "Tidalwave"
and/or "Buyer"; and
Xxxxxx Xxxxx, hereinafter "Xxxxx" as President and authorized agent
for the shareholders of Nationwide Foundation of Lenders, Inc.,
hereinafter "NFL" hereinafter "Company and/or "NFL"; and
National Federation of Lenders, a Florida corporation hereinafter
referred to as "NFL".
For good and valuable consideration, as outlined herein, the above
parties enter into this Agreement under the laws of the State of
Florida and subject to the following terms and conditions:
WHEREAS Tidalwave is a publicly traded company (Symbol:"TDWV") that
owns and operates First American Mortgage Securities, Inc. of
Clearwater, Florida, and NFL is a company set up by Xxxxx to
establish retail branch offices throughout the United States on
behalf of other mortgage and banking companies, that currently has
"Preliminary Branch Applications" for 105 retail branch offices, and
preliminary employment resumes for 105 branch managers, and Tidalwave
having seen evidence of the success realized by Xxxxx in setting up
said offices and hiring said branch managers and other key employees,
Tidalwave, NFL and Xxxxx have determined that it is mutually
beneficial for Tidalwave to purchase NFL and to authorize NFL to
accept the 105 Preliminary Branch Applications, subject to completing
due diligence on the 105 potential branch manager employment
applications and accordingly authorize opening said 105 retail branch
mortgage origination offices as the retail division of First American
Mortgage Securities, Inc., and to further enter into an Agreement
with Xxxxx to manage said retail mortgage origination offices under
the terms of this agreement.
WHEREAS Tidalwave desires to purchase 100% of the issued and
outstanding shares of NFL, and Xxxxx, representing the shareholders
of NFL desires to sell 100% of the issued and outstanding shares of
NFL, with said acquisition to include the 105 preliminary retail
branch applications and employment of the 105 retail branch managers
under the following terms and conditions:
PURCHASE PRICE TO BE PAID
Tidalwave hereby agrees to purchase 100% of the issued and
outstanding shares of NFL, and Xxxxx on behalf of the shareholders of
NFL agrees to sell 100% of the issued and outstanding shares of NFL
for total consideration of up to $2,100,000.00 (Two Million - One
Hundred Thousand Dollars), subject to the terms outlined in this
Agreement, and subject to a binding management Agreement between the
branch managers and NFL, as a subsidiary of Tidalwave Holdings Inc..
1
The Purchase Price shall be based on a price of $20,000.00 per branch
office for the 105 offices, with said payment subject to the "Payment
Structure" and "Earn Out" described in this Agreement.
NAME OF OPERATING ENTITY
It is agreed upon completion of the acquisition of NFL a business
name (dba) "First American Residential Mortgage" ("FARM"), will be
filed/registered with the State of Florida by NFL and First American
Mortgage Securities, Inc..
Support services to the branch offices will be provided by NFL and
the branch offices will be "members" of "NFL", which will be operated
"For Profit" in a manner similar to an "Association", providing
benefits and services to the retail branch office network of
FARM/FAMS.
PAYMENT STRUCTURE
It is agreed that the potential $2,100,000.00 purchase price shall be
paid as follows:
PREFERRED STOCK: Tidalwave will issue NFL shareholders $2,100,000 in
Class R Preferred Stock; a new class of Preferred stock shall have a
par value of $5 per share. The Preferred shares will be eligible for
"Dividends", at a rate of 3% annually, and include a "PIK" provision
that will allow Tidalwave to pay the 3% dividend in Tidalwave shares,
or in cash, at Tidalwaves option. Issuance of these shares will take
place once the corporate charter has been modified to allow for said
issuance. In addition the issuance of these shares are subject to
the following "earn out"
"Earn out" of Preferred Stock would be at a rate of $20,000.00 per
branch office that has been established and earning income for a
period of 12 months. Dividends on the Preferred stock will be paid
each quarter on stock that has reached the "earn out" level.
COMMON STOCK: Tidalwave will issue Xxxxx (and/or assigns) 20,000
shares of Tidalwave Class A Common stock for each of the 105 branch
offices opened per this agreement, a total of 2,100,000 shares.
"Earn out" of Common Stock would be at a rate of 20,000 shares per
branch office that has been established and earning income for a
period of 12 months.
It is agreed that the common stock to be issued per this agreement
shall be issued subject to the following terms and conditions:
1. The "Earn Out" provision as described herein shall govern the
stock being "vested".
2
2. Upon execution of this Agreement, and as soon as shares can be
issued by the transfer agent, 600,000 shares shall be issued per
the directions of "Xxxxx".
3. Each Quarter, beginning the first full quarter following the
execution of this Agreement, an additional 250,000 shares shall
be issued, for 6 consecutive quarters, to be issued with the
issuance of the firms 10Q (Quarterly SEC Report).
4. Transfer of the shares shall be restricted to the "Earn Out"
described herein, Rule 144 of the Securities Act of 1934, and an
Agreement that Xxxxx will not transfer or sale, except to
another officer of Tidalwave, more then 25% of Tidalwave shares
held, in any fiscal quarter. It is agreed that restricting the
transfer to 25% of Tidalwave shares in a fiscal quarter can be
waived by the Board of Directors, if it can be shown that
transfer of said shares will not effect the price of Tidalwave
shares in a negative manner.
ADDITIONAL COMPENSATION -STOCK OPTIONS: Tidalwave will grant the
current NFL shareholders the option to purchase up to 2,000,000
shares of Class A Common stock at 33% of the closing "Ask" price, as
quoted by the Tidalwave market maker whom is quoting the lowest "Ask"
price, the day following execution of the final agreement for the
transaction described in this "Letter of Intent". Any shares of this
option that are not exercised roll over and reprice based on the best
"Ask" prices on the first trading day of each month, for a period of
24 months. It is agreed that advice of counsel will be required to
finalize structure of the stock options, to insure that the company
is in compliance with all securities laws. However the stock options
must in fact be issued.
Tidalwave will grant the current NFL shareholders the option to
purchase up to 2,000,000 shares of Class A Common stock at 50% of the
closing "Ask" price, as quoted by the Tidalwave market maker whom is
quoting the lowest "Ask" price, the day following execution of the
final agreement for the transaction described in this "Letter of
Intent". Any shares of this option that are not exercised roll over
and reprice based on the best "Ask" prices on the first trading day
of each month, for a period of 24 months. It is agreed that advice
of counsel will be required to finalize structure of the stock
options, to insure that the company is in compliance with all
securities laws. However the stock options must in fact be issued.
Tidalwave will further grant the current NFL shareholders the option
to purchase up to 2,000,000 shares of Class A Common stock at 75% of
the closing "Ask" price, as quoted by the Tidalwave market maker whom
is quoting the lowest "Ask" price, the day following execution of the
final agreement for the transaction described in this "Letter of
Intent". Any shares of this option that are not exercised roll over
and reprice based on the best "Ask" prices on the first trading day
of each month, for a period of 24 months. It is agreed that advice
of counsel will be required to finalize structure of the stock
options, to insure that the company is in compliance with all
securities laws. However the stock options must in fact be issued.
3
AGREEMENT TO AMEND
It is agreed by and between the parties to this Agreement that the
parties hereto are entering into this Agreement with the desire to
complete a Tax Free Exchange of shares, wherein Tidalwave shares are
swapped for shares of "NFL", with complete control of "NFL" being
transferred to Tidalwave upon completion of this transaction.
Tidalwave further agrees to execute any documentation necessary to
insure that the deal described herein meets the requirements of a
"Tax Free Exchange" providing the execution of said documentation do
not adversely effect the interests if Tidal wave's shareholders.
It is agreed that each party bears responsibility to obtain legal and
accounting advice to represent and explain its interests relating to
this Agreement and the transaction described herein. No
representations or warranties are made or implied by either party
regarding the tax ramifications that may or may not apply per this
Agreement.
RETAIL ADMINISTRATION & MANAGEMENT
It is agreed that the "Management Agreement" executed by Tidalwave
and the officers of NFL, attached hereto as Exhibit A, shall be
deemed part of this Agreement. It is further agreed that revenue
shall be divided as outlined herein between Tidalwave/FAMS and NFL.
Upon finalizing this transaction with the execution of this Agreement
and Exhibits attached, it is agreed that the officers of NFL will
operate NFL as a Net Division", and after the revenues are divided
between Tidalwave/FAMS and NFL as outlined herein, the officers of
NFL will be permitted to retain profits above and beyond the overhead
for operating NFL.
It is agreed that the officers of NFL shall manage the operations of
NFL and shall not be removed without "cause" or mutual agreement.
For purposes of this Agreement "Cause" shall be defined as
performance or lack of performance or action that could have a
substantial negative impact on the companies operations and
profitability.
NFL / RETAIL ADMINISTRATION REVENUE SOURCES
1. 50% of revenue generated from operations. Revenue will be
$1500 per month retail branch fee.
2. 50% of wholesale mortgage revenues. Wholesale mortgage revenues
shall be arrived at, as agreed between Tidalwave/FAMS and NFL,
but will include deducting all "loan specific" hard costs
associated with doing each loan. Items that shall be deducted
from gross revenues to determine Net revenue include but are not
limited to the following loan specific hard costs: Flood Cert
fees, warehouse fees, delivery fees, Tax service fees, appraisal
fees, quality control fees, $100 servicing set up fee for
4
conforming current coupon loans, 1% Securitization fee for MBS
pools to Loan Servicing Center, loan level add on (example: non
owner 90% LTV = 2.5 point delivery fee to FNMA), and credit
report fees.
TIDALWAVE/FAMS CORPORATE REVENUE SOURCES
Corporate will retain the additional 50% of revenues from operations
after the above fees have been deducted form revenues generated by
the NFL/FARM operation.
MANAGEMENT AGREEMENT & PROFITS TO BE RETAINED
Under the terms of this Agreement the current officers of NFL will
operate the Retail Division, and retain profits generated by the
Retail Division (NFL/FARM), which shall be defined as revenues
remaining from the Retail Divisions 50% of revenues minus the Retail
Divisions overhead.
OPERATING ENTITY - IMMEDIATE LAUNCH OF BUSINESS
Upon execution of the closing documents for this transaction it is
agreed that NFL will file the necessary fictious business statements
and begin operating under the license of First American Mortgage
Securities, Inc., and/or First American Residential Mortgage, "FARM".
It is agreed that the NFL / FARM Retail Division will operate under
the management of a five person Executive Committee, which shall
includes Xxxxx, 1 assignee of Xxxxx, Xxxxx Xxxxx, L. Xxxxxx Xxxxx,
Xx., 1 assignee of Bache.
It is further agreed that FARM shall have use the licenses approvals
and warehouse lines of FAMS in order to immediately get the business
up and running, and will file DBA's in each state that will allow
FAMS to operate as FARM so that their will be no name change once
everything is finalized for FARM.
COMPENSATION FOR OFFICES ABOVE 105
Upon establishing the initial 105 retail branch offices the agreement
that we execute can be set to renew for an additional 100 offices,
with new additional stock issued.
5
FARM CAPITALIZATION
NFL (FARM) shall be recapitalized by Tidalwave and NFL as follows:
1. Tidalwave will contribute $300,000 in Class A Common stock -
Stock swap.
2. Tidalwave will contribute $1,000,000 in Class R Preferred Shares
- stock swap.
3. Tidalwave will purchase a web site for the use of NFL/FARM
wholesale division, to be built to the specifications of the
Executive Committee, and shall pay for said site by the issuance
of $750,000 in Tidalwave stock.
4. Xxxxxx Xxxxx will contribute (Capital Contribution) the $75,000
in office furniture, fixtures and computers currently on site at
the new FARM office.
5. Tidalwave will provide an additional state of the art web site
that will provide fully automated services to the FARM branch
network. The system and software will be built by IMXT and
intelcoT and licensed by Tidalwave. The cost to develop the
software being licensed, per IMX, was $71 Million. The site will
provide automated pre-qualifying of buyers, loan locks and
pipeline tracking, access to Xxxxxx Mae's Desktop Originator and
Desktop Underwriter, Indy Mac's e-mits, FAMS's EZ Score Automated
Underwriter and Novastars automated system. Tidalwave will absorb
the costs associated with developing and launching the web site in
exchange for FARM Preferred stock in the amount of $1,500,000.00.
6. Tidalwave/FAMS will supply all required warehouse lines of
credit and any haircut funds required above fees charged at
close by the company. Example - $100,000 loan, 2% haircut, junk
fees charged by NFL/FARM of $900, Tidalwave will provide $1100
at closing.
SERVICES PROVIDED BY TIDALWAVE TO ASSIST FARM GROWTH
Tidalwave will provide the following services to assist FARM's growth
and marketability:
1. Tidalwave will provide the Internet Portal, to be used
exclusively for our retail branch network, which will be built
by IMXT and intelcoT and which will provide a firm bid for any
loan submitted by the branch, immediately. The broker will have
the ability to export data directly from "Point", "Contour" or
other major LOS systems into our web based underwriting and
trading system, wherein they will receive a firm bid for any
loan submitted, and have the ability to lock the loan in real
time. Our offices will have full access to Xxxxxx Mae's DO/DU
to underwrite their conforming and government (FHA/VA/Farmers)
loans, and our proprietary system for sub prime and jumbo loans.
2. Tidalwave will provide an area on the web site where branch
offices can get live quotes, guidelines and operation manuals for
all FARM programs, plus live bond market and MBS market quotes and
news.
3. Management Employee Stock Ownership Program "MESOP" - Tidalwave
will establish an account at Morgan, Stanley, Xxxx Xxxxxx or
comparable firm or commercial bank, for each branch manager, and
match the $150 per month employee contribution with $350 from
6
Tidalwave, allowing each branch to build a $500 per month stock
position for $150 per month. The $150 will be used to purchase
free trading shares in the open market, as a support measure to
maintain a fluid trading market for the companies stock.
4. Branch Stock Options - Each branch manager that signs will receive
an option to purchase up to 100,000 shares of Tidalwave Class A
Common stock for 50% of the "Ask" price, as a signing bonus. The
option can be good for 6, 12, 24 or 36 months. We can customize
this to fit what you think will help you sign additional branch
offices.
5. Loan Originator Stock Options - We will work to establish a stock
option program for the branch offices to utilize to sign up loan
officers.
6. Employee Stock Ownership Program - Tidalwave will be working to
finalize an ESOP that will be for all Tidalwave employees and that
will match employee contributions at the maximum rate allowed by
law. All Tidalwave employees will be eligible for this. The ESOP
will be utilized to invest in Tidalwave shares exclusively.
7. SRP - Tidalwave will set up a program that compensates the branch
offices with stock for servicing rights to loans purchased by
Tidalwave from the branch offices. The rate will be competitive
with other wholesale conduits.
NOTICE & DISCLOSURES
This Agreement may contain forward-looking statements, assumptions
and/or estimates that may or may not be realized by the company or
its subsidiaries. The reader is advised to consult counsel before
accepting or counter offering this Agreement.
Furthermore, this Agreement may contain information that is highly
confidential and information that is not available to the general
public. The reader is advised not to trade in the securities of the
company utilizing this "inside" information, or divulges the
information or transaction described herein. Trading in securities
utilizing information that is not available to the public is a crime.
Tidalwave Holdings Inc. is an emerging growth public company that
trades over the counter on The Bulletin Board under the symbol
"TDWV". An investment in Tidalwave securities should be made only
after careful consideration of all of the facts and information filed
with the United States Securities Exchange Commission under the
Securities Act of 1934, and after performing complete due diligence
of the companies operations. The Investment Mortgage Banking
industry is a highly competitive market with many companies that are
capitalized better then Tidalwave Holdings Inc., and accordingly
there can be no assurance that Tidalwave can meet or exceed the goals
set by the firm. An investment in the firm's securities should be
made only by qualified individuals or institutions that have
experience in making investments in emerging growth companies.
7
Merging with an emerging growth public company has many risks, and no
assurances are made or implied that the company can realize its
business plan or that the business model that the company utilizes
will meet or exceed the company's goals for profitability. The
parties to this Agreement are advised to consult professional legal
and accounting advice before executing this Agreement.
Stock and Stock Options in an emerging Growth Public Company has
risks and should only be accepted as compensation by an individual
with experience and expertise in dealing with and analyzing such
companies and situations. There is no assurance that stock or
options received will ever realize the value planned or anticipated,
and acceptance of shares in an emerging growth company should only be
done with the knowledge that a complete loss of value is possible.
The shares of Tidalwave Holdings Inc. may have a limited or no market
acceptance when a shareholder seeks to sell shares.
The Preferred shares of the company do not currently have a market
and do not trade. No assurance can be made or given that the shares
will trade, and if they do trade no assurance can be given that
liquidity will develop for said shares.
Tidalwave Holdings Inc. is a fully reporting company under the
Securities Act of 1934 and potential investors or shareholders are
advised to review all of the filings available and to perform
complete due diligence on the company. Tidalwave and FAMS have
entered into various joint ventures and strategic alliances that may
or may not prove to be beneficial to the companies future, and are
subject to other companies performing per said agreements, there is
no assurance that said parties have the ability to perform as they
have represented, and accordingly the future performance of the
company may be effected by said lack of performance.
The parties to this Agreement hereby agree to the terms and
conditions as set forth herein and to any Exhibits attached hereto
and included by reference.
This Agreement is executed this 19th day of June 2001.
/s/ L. Xxxxxx Xxxxx, Xx. /s/ Xxxxxx Xxxxx
------------------------- ------------------------------------
L. Xxxxxx Xxxxx, Xx. Xxxxxx Xxxxx
Managing Director President
Tidalwave Holdings Inc. National Federation of Lenders, Inc.
8
/s/Xxxx Xxxxx /s/ Xxxxxx Xxxxx
------------------------ ------------------------------------
Xxxx Xxxxx Xxxxxx Xxxxx, an Individual
President Representing Majority Shareholders
Tidalwave Holdings Inc.
9
