Attached files
| file | filename |
|---|---|
| EX-10.1 - SECURITIES PURCHASE AGREEMENT - FUND.COM INC. | f8k110209ex10i_fund.htm |
| EX-10.5 - STOCK PURCHASE AGREEMENT - FUND.COM INC. | f8k110209ex10v_fund.htm |
| EX-10.4 - FORM OF CONTENT AGREEMENT - FUND.COM INC. | f8k110209ex10iv_fund.htm |
| EX-10.3 - FORM OF STOCKHOLDERS AGREEMENT - FUND.COM INC. | f8k110209ex10iii_fund.htm |
| EX-10.2 - RESTATED ARTICLES OF INCORPORATION - FUND.COM INC. | f8k110209ex10ii_fund.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date of
Report: November 2,
2009
(Date of
Earliest Event Reported)
FUND.COM
INC.
(Exact
name of Registrant as specified in its charter)
|
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
001-34027
(Commission
File Number)
|
30-0284778
(I.R.S.
EmployerIdentification
No.)
|
14
Wall Street, Suite 20
New
York, New York, 10005
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (212) 618-1633
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
oSoliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
oPre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
oPre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry into a Material Definitive
Agreement.
Background
and Business Strategy.
In order
to facilitate the implementation of its strategic business plan of being an
online content provider and investment product platform for the consumer savings
and retirement market, Fund.com Inc. (the “Company”) has entered
into agreements to make two strategic investments. Subject to
fulfillment of certain closing conditions, the investments consist of the
acquisition of 100% of the capital stock of Whyte Lyon Socratic Inc., d/b/a
“The
Institute of Modern Economy,” a Delaware corporation (“Whyte Lyon”) and a
minority investment in the equity of Vensure Employer Services, Inc., an Arizona
corporation (“Vensure”). Both
transactions were consummated on November 2, 2009, but were deemed to have been
effective as of September 29, 2009. The terms of such investments are
outlined below.
Whyte
Lyon is a development stage online provider of financial literacy content
delivered over the Internet. Sometimes referred to as distance learning, such
remote educational content is designed to assist on-line students
to:
· develop
the necessary skills to understand financial transactions and financial
markets;
· develop
money management skills to help them manage their income and wealth;
and
· reach
particular goals, including homeownership, debt reconciliation, or improved
credit reports.
The National Council on Economic
Education reported that thirty-three percent (33%) of employees increased their
contributions to their retirement savings plan after having received
financial education.
Vensure
is a professional employer organization, or PEO, located in Mesa, Arizona.
Vensure provides a broad range of services to small and medium-sized businesses,
including benefits and payroll administration, health and workers’ compensation
insurance programs, personnel records management, employer liability management,
employee recruiting and selection, employee performance management, employee
training and development services and retirement obligations, including a
retirement services product line that offers a variety of options to clients
like 401(k) plans, 401(k) plans with safe harbor provisions, profit sharing, and
money purchase plans.
According
to information furnished by Vensure, as of September 25, 2009, Vensure directly
employed or acted as co-employer for approximately 4,000 employees provided to
approximately 269 business clients, up from approximately 2,100 employees and
182 clients as of January 1, 2009.
In
connection with its proposed investment in Vensure, the Company and Whyte Lyon
have entered into a Content Agreement with Vensure pursuant to which online
educational content will be supplied to Vensure employees and the Company,
through its Whyte Lyon subsidiary, will be paid content licensing fees, as
described below. The online content will include a range of financial education
content, including content on savings and retirement planning designed to
enhance the business of Fund.com.
Through
its AdvisorShares subsidiary, Fund.com offers investment products through
actively managed exchange traded funds (“ETFs”). AdvisorShares
sponsored ETFs are designed to provide individual investors with an opportunity
to participate in sophisticated trading and investment strategies managed by top
registered investment advisors and money managers, that were previously only
available to institutional investors. The Company believes that these
ETFs may also benefit Vensure employees for their 401(K) plans and related
savings and retirement objectives.
-2-
The
Transactions
Investment
in Vensure
On
September 24, 2009, the Company and Vensure entered into a securities purchase
agreement (the “Venture Purchase
Agreement”).
Under the
terms of the Venture Purchase Agreement, the Company agreed to sell and assign
to Vensure, the Company’s right to receive payments under a 5% certificate of
deposit in original $20.0 million amount issued by Global Bank of Commerce
(“GBC”) in
November 2007 (the “Certificate of
Deposit”) in exchange for consideration consisting of (a) 218,883.33
shares of Series A participating preferred stock of Vensure (the “Series A Preferred
Stock”), and (b) a seven year content agreement among Vensure, Vensure
Retirement, Inc, a whole owned subsidiary of Vensure, the Company and Whyte Lyon
(the “Content
Agreement”). With accrued interest, the Certificate of Deposit was
$21,888,333 in principal amount as of September 30, 2009. The Company
assigned its rights to receive payments under the Certificate of Deposit to
Vensure, effective as of September 29, 2009. In October 2009,
GBC advised the Company of its intention to exercise its
contractual rights to exchange the Certificate of Deposit for a 10 year 6.5%
annuity contract issued by a third party, and on November 2, 2009 Vensure agreed
to accept such annuity contract in lieu of the Certificate of
Deposit.
The
Series A Preferred Stock to be issued by Vensure to the Company under the
Vensure Purchase Agreement:
|
·
|
has
a liquidation value of $100 per share or $21,888,333 as to all 218,883.33
shares;
|
|
·
|
is
senior to all other capital stock of
Vensure;
|
|
·
|
pays
dividends as and when declared by the board of directors of Vensure on its
common stock;
|
|
·
|
on
a “sale of control” (as defined) of Vensure to any unaffiliated third
party, in addition to receipt of the first $21,888,333 of consideration
payable in respect of Vensure capital stock, participates with the holders
of the common stock to the extent of 25% of all additional consideration
paid or payable in excess of the maximum $21,888,333 liquidation value of
the Series A Preferred; and
|
|
·
|
is
convertible at any time after September 30, 2012 upon 61 days prior notice
to Vensure into either 25% of the common stock of Vensure; provided, that
the board of directors of Vensure may (subject to the Series A Preferred
stockholder’s right to rescind its conversion notice) require that the
shares of Series A Preferred Stock convert into a maximum of 49.5% of the
capital stock of Vensure Retirement Administration, a wholly-owned
subsidiary of Vensure.
|
Under the
terms of a related stockholders agreement among the Company, Vensure and the
Vensure stockholders, the Company is entitled to designate two members of the
board of directors of Vensure. The stockholders agreement also
contains customary buy/sell and related provisions in the event of sales of any
shares of Vensure. The Series A Preferred Stock also contains certain
protective provisions that requires the approval of the Company or its designees
on the board of directors of Vensure before Vensure may implement or commit to
certain actions, including:
|
·
|
the
issuance of securities senior to or on a par with the Series A Preferred
Stock;
|
|
·
|
the
issuance of any additional capital stock of
Vensure;
|
|
·
|
any
change it’s the fundamental nature of its
business;
|
|
·
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the
acquisition of the assets or securities of other parties;
or
|
|
·
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the
sale or pledge of substantial assets;
or
|
|
·
|
any
material changes in compensation of senior executive
officers.
|
-3-
In
addition to its receipt of the Series A Preferred Stock, the Company has
received the benefits of the Content Agreement. Under the terms of
the Content Agreement, the Company and Whyte Lyon will provide all existing and
future employees, co-employees and other associates (collectively, the “End Users”) of
Vensure, its subsidiaries and affiliates, as well as Vensure clients
(collectively, the “Venture Group”) with
access to on-line educational content to be streamed to such End-Users from the
website(s) of the Vensure Group. Such Content, to be designated and
branded as “Vensure
University,” “The Money
School” or other brand name acceptable to the parties to the Content
Agreement, will include up to 84 five to seven minute educational course
segments on personal finance management, financial products and other related
financial topics as are approved by Vensure and the Company. Course
segments may also include safety training, health care and other topics of
interest to workers and the work place.
In
consideration for providing the Content, the Vensure Group is required to pay
the Company and its Whyte Lyon subsidiary an access fee of $19.95 per month (the
“Monthly Access
Fee”) for each End-User who has access to the Content from the website(s)
of the Venture Group, whether or not such End-User actually clicks on such
website and views the Content. Based on the current Vensure
employment complement of 4,200 employees or co-employees, this represents
approximately $80,000 a month in anticipated revenues to the Company from such
Monthly Access Fee as soon as the initial Content is provided. The
Company and its subsidiary have agreed to deliver approximately three course
segments during each calendar quarter commencing with the quarter ending March
31, 2010 and ending December 31, 2016. Following October 2012, the $19.95
Monthly Access Fee is subject to renegotiation at the option of
Vensure.
Consummation
of the transactions contemplated by the Vensure Purchase Agreement occurred on
November 2, 2009; provided, that for all purposes the Closing Date and delivery
of all closing documents and instruments were deemed to have occurred effective
at 5:00 p.m. on September 29, 2009.
Acquisition
of Whyte Lyon
On
October 14, 2009, the Company entered into an agreement with the stockholders of
Whyte Lyon Socratic, Inc., a Delaware corporation, d/b/a “The Institute of
Modern Economy” (“Whyte Lyon”) to
acquire 100% of the capital stock of such corporation in exchange for 500,000
shares of the Company’s common stock, which the parties valued at $2.00 per
share. In addition, the Company will provide an additional $250,000
of working capital to Whyte Lyon. Closing of the acquisition of the
shares of Whyte Lyon occurred on November 2, 2009 following consummation of the
transactions contemplated by the Vensure Purchase Agreement. It is
anticipated that, upon completion of the Company’s acquisition of Whyte Lyon
Socratic, its principal stockholder, Joseph J. Bianco, will become Chairman of
the Board of Directors of the Company.
Joseph J.
Bianco purchased Lotus Performance Cars, Inc. in 1982, which he
subsequently sold to General Motors in 1987. In 1990 Mr. Bianco
founded and became Chief Executive Officer of Alliance Entertainment
Corporation. In 1996, Mr. Bianco sold control of NYSE-Listed Alliance,
then the leading independent distributor of CD music in the world, and
resumed his private investing activities. In 1998, an investor group
led by Mr. Bianco bought the first of several magazine distributors
that were consolidated into the Interlink Companies, of which Mr.
Bianco was Chairman. Interlink, a leading distributor of magazines to
booksellers and other retailers was sold in 2001 to the Source-Interlink
Companies. From 1997 to 2000 Mr. Bianco was also Chairman
of Cognitive Arts, Inc., a leading creator of educational software, which
was purchased from Northwestern University. Mr. Bianco also serves on the
Board of several other private corporations as well as two non-profit
organizations. Mr. Bianco graduated from Yale Law School in
1975, where he was an editor of the Yale Law Journal. He became
Associate Dean at Cardozo School of Law at Yeshiva University and is
the author of two books and various articles. In 1982, Mr. Bianco left
the academic world to acquire Lotus Performance Cars.
-4-
Item
2.04 Triggering Events That Accelerate or Increase Direct Financial
Obligations or an Obligation under an Off-Balance Sheet
Arrangement.
As
reported in the Company’s Form 8-K dated April 8, 2009, in April 2009, Global
Asset Fund Limited, a company organized under the laws of the British Virgin
Island (“GAF”)
made a $500,000 demand loan to the Company to provide it with funds to provide
initial financing to National Holdings Corporation. As collateral to
secure the loan, the Company pledged a $500,000 limited recourse convertible
note of National Holdings Corporation to GAF. On May 15, 2009,
pursuant to its terms, the National Holdings note was converted into 666,666
shares of the common stock of National Holdings which were pledged to
GAF. On November 3, 2009, GAF foreclosed on the pledged stock under
the Company’s $500,000 demand note and took legal and beneficial title to the
shares of National Holdings common stock. GAF has not, to date, taken
any other action in respect of the Company’s debt obligation to it.
About
Vensure
Vensure’s
target client market is composed of small and medium sized businesses in the
U.S. geographic market. The Company believes there are approximately
9.4 million employers in the U.S. geographic market. Of those, over
99% of employers have fewer than 100 employees, which employers are
Vensure’s primary target customers. Based on publicly available industry data,
Vensure estimates that all payroll processors combined serve approximately 15%
of the potential businesses in the target market, with much of the unpenetrated
market being composed of businesses with ten or fewer employees.
The $51
billion PEO industry is highly fragmented and is rapidly growing market.
According to The Harvard Business Review, the PEO industry was the fastest
growing business service in the United States during the 1990s. The
Company believes that its proposed investment in Vensure is timely, as the
increasing cost burdens of federal, state and local government regulations on
small and medium sized businesses is propelling and will continue to propel the
growth of PEO services. In addition, there is an increasing retirement savings
deficit for retirees from the U.S. workforce that require employer-sponsored
pension oriented products that a PEO is in a unique position to
provide. Accordingly, management of the Company believes that these
market dynamics represent a significant consolidation opportunity for
Vensure.
At
present, compared to many of its larger competitors, Vensure is a small regional
PEO that does not possess the infrastructure and capital resources of such
competitors. Accordingly, Vensure’s ability to grow internally and
achieve the consolidation of other small to mid-sized PEO’s will depend upon a
number of factors, including the Company’s ability to assist Vensure in
obtaining the capital required to enable Vensure to expand its business and
achieve its acquisition strategy. During past the two months, Vensure
has received commitments from unrelated third parties for up to $2.45 million of
debt financing, of which a total of $1.7 million has been funded to
date.
-5-
About
Whyte Lyon
Currently
a development stage company, Whyte Lyon intends to provide on-line educational
content over the Internet to designated end users. Its content, to be
designated and branded as “The Money
School” or “The Institute of
Modern Economy”, will consist of five to seven minute educational course
segments on personal finance management, financial products and other related
financial topics. Whyte Lyon management believes that such content
will fill a need for a neutral, simple understanding of the complex financial
world. Although not intended to replace the need for outside
professional advisors, the course segments are intended to enable the average
consumer who takes the on-line course to:
|
·
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better
understand the financial world and his or her
options;
|
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·
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take
the initiative for their own financial goals,
and
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·
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make
better and more efficient use of outside
professionals.
|
Potential
revenue sources are: tuition for on-line and live classroom sessions, fees for
passive viewing of archive material (similar to the Learning Annex); lead
generation and referral income from affiliated websites and professionals; bulk
corporate or school sales through distributors; and sale of ancillary
materials.
The
Company believes that, faced with retraining 50 million American workers,
corporate America is using distance learning, both internally and externally,
for all aspects of training. The Company believes that many major corporations
save millions of dollars each year using distance learning to train employees
more effectively and more efficiently than with conventional methods. We believe
that adult learners are seeking accessible methods to gain the necessary skills
needed to understand financial transactions and financial markets; to develop
money management skills to help them manage their income and wealth; to help
them reach particular goals, including homeownership, debt reconciliation, or
improved credit reports. The National Council on Economic Education has reported
that approximately one third of employees increased their contributions to their
retirement savings plan after having received financial education.
The
Company believes that there is an increasing demand across every demographic and
geographic location for courses in essential finance principles, such as
investments, banking and money system, money and portfolio management,
international finance, interest rates in various markets, venture capital and
basic economics of business. The Company believes that there is a widely held
belief that more educated consumers would be less likely to voluntarily enter
into an improvident contract, and that financial literacy education will help
alleviate the current need to develop and enforce regulations that would curtail
bad market practices.
Forward-Looking
Safe Harbor Statement
Statements
in this Form 8-K regarding future financial and operating results, the potential
advantages of the above transactions to the Company, other opportunities for the
Company, and any other statements about future expectations, beliefs, goals,
plans, or prospects expressed constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Any
statements that are not statements of historical fact (including statements
containing the words "will," "believes," "plans," "anticipates," "expects,"
"estimates," and similar expressions) should also be considered to be
forward-looking statements. There are a number of important factors
that could cause actual results or events to differ materially from those
indicated by such forward-looking statements including: the Company’s limited
operating history, the need for future capital by both the Company and Vensure,
and economic conditions generally. Additional information on
potential factors that could affect results and other risks and uncertainties
are detailed from time to time in the Company's periodic reports, including
Forms 10-K, 10-Q, 8-K, and other forms filed with the Securities and Exchange
Commission ("SEC").
These
statements, and other forward-looking statements, are not guarantees of future
performance and involve substantial risks and uncertainties.
-6-
Item
9.01 Financial Statements and Exhibits.
(a) Financial statements of
businesses acquired.
Not
applicable.
(b) Pro forma financial
information.
Not
applicable.
(c)
Shell company
transactions.
Not
applicable.
(d) Exhibits.
|
Exhibit
Number
|
Description
|
|
10.1
|
Securities
Purchase Agreement dated September 24, 2009 by and among Fund.com Inc.,
Vensure Employer Services, Inc. and the stockholders of Vensure Employer
Services, Inc.
|
|
10.2
|
Restated
Articles of Incorporation of Vensure Employer Services, Inc.
|
|
10.3
|
Form
of Stockholders Agreement among Fund.com Inc., Vensure Employer Services,
Inc. and the stockholders of Vensure Employer Services, Inc.
|
|
10.4
|
Form
of Content Agreement between Fund.com Inc., Vensure Employer Services,
Inc., Whyte Lyon Socratic Inc. and Vensure Retirement Administration,
Inc.
|
|
10.5
|
Stock
Purchase Agreement among Joseph J. Bianco, Whyte Lyon Socratic Inc. and
Fund.com Inc.
|
-7-
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
FUND.COM,
INC.
(Registrant)
By: /s/ Gregory
Webster
Name: Gregory
Webster
Title: Chief
Executive Officer
Date: November
5, 2009
-8-