{THE FOLLOWING IS THE AUTHENTIC TRANSCRIPT AS TRANSCRIBED

BY LYNN KREIDER OF FMG, Ltd., ON OR ABOUT MAY 10, 1987.}

The purpose of this document is to recollect all activities that I've
been involved within Financial Planning and the formation of Financial
Management Group, to verify and document some of the activities
that I've been involved in to date.
I'm afraid that as we go further and further there will be a need for
such information especially with what has happened this past week with
our corporate officers and board. First I would like to begin back in the
very beginning so that the full scope of our activities seem to fit into
one place and also so that some of the issues that have come up
are tied into what has happened up to this point.
First of all, I started in the Financial Planning Industry back in 1982.
After getting out of the contracting business I took six weeks and
traveled across the country and came back and decided to get into
the financial services industry. Being that several relatives have had
dealings with IDS, Investors Diversified Services, I called the local
branch in Rohrerstown upon finding the manager named Robert
Kauffman. Bob spent some time with me, decided he wished to hire
me, and that began the process.
I was actually licensed in 1982 for securities and life and was put
under the management of Bob Kauffman. Shortly thereafter, I would say
probably in June or July, Bob was promoted and took a division in
Tampa, Florida. Myself and three or four other individuals who were
under management decided that we wanted to form a group
together so we talked to another district manager, Steven H. and decided
that, if he would allow, we would like to put an office together with him.
At this time we did not have an office and he was working out of a
small office in Millersville. The people who were with me was myself, Mike
Hartlett and Alan Loss.
The three of us were very, very large producers, especially Mike and
Alan. The three of us were probably larger than Steve's district at
that time, so at that point we located an office at 255 Butler Avenue, we
walked under Steven H. district which increased his income by at
least 30% to 40% upon that transaction.
After being involved in the business I decided that financial planning
should be more objective and fee based, so I became one of the
larger fee producers using fees as well as commission income. At about
the same time, I became involved in the International Association of
Financial Planners. At that time the local chapter was just being
formed and I volunteered my services to help on the board. Members of the
board, at that time, was just being formed and headed by John

Herr.
I became executive vice president and virtually helped run the
chapter and helped build it to its largest membership. That gave me the
opportunity to meet other people, broaden my horizons and
education as far as the financial planning industry and just
how the independent planners fit into the stream of the industry. I
had quite a bit of activity and did a lot for the local chapter and became
very involved.
Over the next several years I made a very good living. I was never
a very big producer, although one of the bigger ones in the Harrisburg
division. But I was not the biggest, but the premier fee producer for
the division and was one of the leading in the country at that time.
I shortly became knowledgeable of the other products available in
the financial services industry and learned very quickly that it was
virtually impossible to have one company manufacture and produce
competitive products across the line. At this time I was setting up
a dinner meeting for the IAFP that was going to showcase Alexandria
Armstrong who was one of the premier planners in the country. She
was very visible and very widely known.
I set up a dinner meeting for her which attracted close of one
hundred professionals and other people to attend. This was four or
five times larger that any other meeting the chapter had ever had.
After the meeting I was involved in a discussion with Alex regarding the
financial planning industry and my aspirations of what was outside of a
propriety environment. I told her that I was thinking of making a move
and asked her if she had any suggestions of who to speak to. At this
point in time, we were all in Butler Avenue and Bob Kauffman was in
Georgia, running a division of IDS back there. He, at this time, had
become one of the largest divisional managers and had shown very high
productive recruiting skills. He was running one the largest shops in
the South East and was becoming very profitable for IDS.
Alex suggested that I call a gentlemen by the name of John Keeble
who was then president of Financial Services Corp. a broker/dealer
based in Atlanta, Georgia. At this time Bob Kauffman was probably, as
unfamiliar if not more unfamiliar, of the independent environment
available to the Financial Services Industry. Specifically Financial
Planners.
I phoned Bob and told him that I was going to look and see what
else was "out there." Before this time, a couple months prior, I attended
a career conference in Florida with IDS. At one point I was in a room
with Bob Kauffman and Tom Turner, who was the biggest
divisional manager at this time with IDS. I began to discuss my

dissatisfaction with the company and the way that they operate and
I suggested to them that it probably would not be too difficult to
duplicate an organization instead of being built around a proprietary
system built solely around a non-proprietary product. At the time they
both looked at me and I don't remember if they laughed, but the idea
really didn't really interest them, and it just rolled off their shoulders.
Right after this meeting is when I had the dinner meeting with Alex and I
set up the meeting in Atlanta. As I usually did, I always looked at Bob
Kauffman as my mentor.
He virtually took me off the streets and showed me a way to
produce money in a way that I never dreamed I could produce. I always
respected Bob as a very good salesman, seeming to have a very
high financial intellect and I looked up to him as he taught me a lot. So
I got on the phone and told him I was going to visit an independent
planner in Atlanta. At this time, Bob was becoming dissatisfied with the
management of IDS and was not very happy with the way they were
using him to build areas. When the areas would become profitable
to him they would move him to another distressed area to be built up.
So he was doing all the work and IDS was making all the money
because they would put in a manager for less money and so on and
so forth.
Bob then told me that he may be willing to go into the meeting with
me under the assumption that I did not tell them who he was or who he
was with. I called John Keeble and told him I wanted to come down
and visit him, being referred by Alex and he was very nice over the
phone, giving me a cordial invitation to come down and actually had
me set up the meeting with Ray Smith who was one of the sales
managers. I set up a two day meeting with myself and this
anonymous person, Bob Kauffman. We spent two days at FSC and what
essentially happened is that they became infatuated with Bob's recruiting
skills. On the spot they offered Bob a position within the company as far
as recruiting and head of sales management of FSC. I resigned from
IDS January 1985. Bob remained at IDS and from October to March was
negotiating his position and pay and his compensation with FSC.
By March he actually decided to resign from IDS and he was absorbed
into the corporate structure of FSC. January 1st I resigned from IDS.
I was upstairs with Mike Hartlett, sharing an office space
and the rest of district with Alan Loss was still downstairs.
At this time, I began to build my independent practice of Financial
Planning. Basically I took 95% of my clients from IDS and began
working with them. Bob began working in the national recruiting for
FSC and started attracting IDS people to FSC.
By the Fall of 1985 I had became disappointed with my business life,

not learning enough, lonely being independent and I became

frustrated. I knew that no one in Lancaster was doing a very high quality
service regarding Financial Planning and Financial Services. To me,
Lancaster seemed to be a highly attractive market with a lot of wealth
being spread out among a lot of different players. No one was being
creative regarding their efforts it was just three or four brokerage
houses, insurance agents, banks and independent planners but no
one had a very strong position or dominance in the financial services
industry.
I visited with Bob Kauffman in the Fall of 1985 as I usually did every
couple months and told him I wished to do something else. At that
time he asked me if I wanted to come down to Atlanta and help him
work on the concept of company owned shops. When I was down
there, he mentioned several positions in the corporation that I may
be interested in and he set up a meeting with me and Steve Franklin.
Steve apparently needed someone to manage his national sales
office so being down there I spoke to him, just to verify what was
available.
At this meeting, Steve Franklin more of less indicated that I was a
"burned out salesman" who was just looking for a place to go.
Nothing ever happened and I left the meeting with very little respect for
Steve Franklin.
Bob offered me a position within his company owned store, writing
cases doing plans, doing some other things. That was early
October. For the next three or four weeks I prepared myself, reluctantly,
for the transition and moved to Atlanta and tried to maintain clients up
here as well, and pursue whatever Bob was doing down in Atlanta. As
time went on I felt I really didn't wish to move away from the area and
that maybe the opportunity down there wasn't what I thought it was, or
wasn't what Bob said it was.
On November 27 or 28 of 1985, I had a meeting with Bob Kauffman and
Mike Hartlett at Morton's Restaurant on the Rohrerstown Road,
Lancaster, PA. The purpose of the meeting was to find out if we
could collectively put together something in Lancaster with regards to
financial planning. I would say that meeting was more of an effort on
my part than anyone especially Mike Hartlett. Mike was, at this time,
also independent, left IDS and followed me to FSC along with Bob.
The meeting was on the morning at 9:00 a.m. and we discussed
what options we had as far as putting something together in
Lancaster.
I guess the basic reason for the meeting was to see if Mike Hartlett

wished to do something together with us. At this time I was

operating my practice, Mike was operating his practice, and the only thing
we had in common was a reception room adjoining our offices. At
this time Bob saw that if we could put something together in Lancaster
he could probably fulfill some of his recruiting requirements, giving him
a place to actually recruit people to rather than using FSC in Atlanta.
So that began the process of putting together a shop in Lancaster
and Central PA. I began to recruit from that point forward into our
so called planning firm. At this time the planning firm was going to be
comprised of financial planners. Some of the first people that
I talked to was Mona Rishel, Dick Sherbahn, and Bob Long. I spoke
to other planners about joining our firm and then I got the idea of
adding other professionals mainly legal, accounting,
real estate and maybe insurance. It was then that I got the idea for
the one stop financial firm. To me it seemed apparent that it was
important to have all the individuals working together collectively to
manage one financial affairs. It didn't seem that difficult to
accomplish that if you had the right individuals willing to take the
risk of attempting such a project and who had the clientele where they
didn't have to rely on attracting new clientele.
Well, one thing led to another and we soon began to recruit and
attract new and sizable group of individuals. I probably was responsible
for recruiting 90% of the local people and outside people, Mike was
working with Rick Volpe in Philadelphia who he worked with at IDS,
and a host of others. The initial core was myself, Mike, Mona, Dick
Sherbahn. At this time I ran into Scott Robertson at the Three Mile
House who was working with Asset Management. I expressed the
idea to him and he became interested and became one of our
people. I also talked to Carolyn Royer who was with Pru Bache and
she was interested in joining. By February we had a fairly large
group of people who were willing to commit. First thing we had to do was
find facilities and Mike found the place available at the Oregon Pike
location which was just under construction. At first we were looking
for 2,000 square feet to house four or five individuals. At this time I
talked to Tim Lanza, people at -----------the legal firm, and Danny
Berger as far as doing something with real estate. It was supposed to be
an operation financed and supported by FSC. From December until
May FSC was promising fund to finance the operation. We needed
start up funds for furniture, computer systems, salaries for myself
and Mike for managing the operation. What happened during this time
was that FSC was constantly promising us financing and we had yet
to receive any actual money and the invoices submitted were never
paid by FSC.
Bob Kauffman was the liaison and apparently was being directed by

Steve Franklin and John Keeble. From what I have learned over the
past several years was that they never really intended to finance the
operation but they were stringing us along and using us to recruit
other people to the operation. After we recruited ten or more people
it became apparent that Mike or myself did not have the managing
skills required to manage such an operation. We also learned we lost
our financial backing, so we had to figure out what to do with
financing.
At this time we decided to raise the capital ourselves, finance the
operation ourselves with equity we raised through the planners. And
essentially we learned that no one in the industry, or very few
actually own their own business but are only a distribution for a
financial product.
We all have seen broker/dealers being bought and sold for very
sizable amounts of money, usually in the vicinity of $l of equity for
$l of gross commission income. We began to see that we were seeing
anywhere from $l million of gross commission income per year with the
group that we had. In the group was Ken Ray and some very creative and
talented people.
Throughout our meetings and discussions which were very long,
durable and tiresome. From December to May I probably spent
every other evening with Bob in Atlanta trying to put this deal together.
Let me go over a couple of other things that had happened up to
that time that I'd like mentioned in this document, before I forget. Back
in the summer of l985, I was contacted by John Philips from Blue Ball
National Bank. Because of my visibility with the local chapter of the
IAFP John wanted to call me and look at the options of Blue Ball
National Bank become involved in Financial Planning. John called a
meeting with me and I believe he was looking for someone to head a
Financial department with inside Blue Ball National Bank or contract
with someone outside. I had l-l/2 hour with John and his
subordinate, whom I can't remember his name, I believe it was Joe. He
was the vice president of the trust department, I believe. Anyway after
the meeting they did not have the faith or the confidence that I was the
right person or they didn't believe that this was really what they
wanted to do. But I have never heard from them since.
Fall of l985, before our initial meeting, after I decided that I was not
going g to relocate in Atlanta, I began to look for other options in
Lancaster. One of those were that a couple people put me in touch
with several banks. One was Joe S. with Commonwealth National
Bank and another was Meridian Bank. Both of those individuals
received phone calls from people I did business with stating that I was
looking for something and asking that they give me an interview. None of

them would even give me an interview. I received a letter from

Commonwealth stating that they had no positions open at this time,
but they would keep my name on file. From Meridian, I don't believe I
even received a letter.
This is one of the reasons that I don't have very much respect for
banks, or people who work in banks. I don't wish to dwell into this
subject, but because of several of these episodes I just don't have
much respect for bankers, or banks what so ever.
During this time that I was looking for something to do, I had a
meeting with Owen K. Owen K. was looking for someone to raise his equity
for his rehab projects and his syndications. I had one meeting with
Owen and one with Ed Pontius and apparently they hired someone who
essentially what happened is that Owen ran into a lot of trouble and
a few months ago I was given Owen's name and he wanted me to
raise both debt and equity for him. Whereas one year ago he wouldn't
even continue any conversations with me. I believe this gives you an
indication that a lot of the people in this community are very close
minded and narrow minded and unless you are a member of the
Country Club or the Hamilton Club, or unless you come from a
family of wealth, you don't receive very much attention or consideration
and you are really just another person on the street. Most of the people
in this community whom I am referring to do not have the business
savvy to be able to detect opportunity when they see it.
I would like to talk about the division of labor between me, Mike and
Bob before I get to far into this. First of all, I was probably the
mediator or negotiator with putting the deal together. I was the
middle man. I was in touch with Bob and Mike and those two were not in
very close communication with each other. I was also giving Bob the
conceptional outline for the project and he was in Atlanta finding the
details, such as financial planning software. What I soon learned
was that because of Bob's management capabilities and because he has
been in management for so very long he really didn't have the
technological expertise about the business. His expertise came from
other people so it was always second and third hand and essentially
what happened with a lot of the issues I had to go back and retrace
and research myself trying to get the accurate information as it was
second and third hand before it got to Bob Kauffman's hands.
The division of labor was that Bob was to be the president of the
organization - he was to be the manager. Mike was going to be the
chief financial officer, and help with a little recruiting and help with
the staff. I was going to help negotiate, recruit - I guess I was intended
to be a lot of things. However, I can't remember precisely what at this
time, but I virtually had my hands in all area. One of the things that

I recognized early on was the necessity to have Bob Kauffman

actually come here and manage. When we started, Bob was supposed to
stay in Atlanta but when we started to get into substantial size, I would
not or could manage and I don't believe Mike could. The only way I
would do the deal is if Bob came up here and managed. Bob was going
to be president and in the negotiations it was very difficult because
both Bob and Mike didn't want the other getting more than
themselves.
I was always in the middle always giving more than getting and what
ended up is for Bob to come up here he had to have more; he had
to be president. With three people involved, I agreed on this because
to get three people to agree on issues is almost impossible. You need
one person to make decisions, and we decided to allow Bob to have
this capability.
Bob was going to receive 60,000 shares, I was to receive 40,000 shares
and Mike was to receive 40,000. Also, Mike and I were to receive
$3,000 per month and Bob $5,000 per month. Bob and I had a deal
as I did not believe he should have more of the company than
I because I put it together. We had an agreement whereby I could
buy 10,000 shares of his 20,000 at anytime at cost so we would both
have 50,000 shares. I had papers drawn up to that, however, when we
began to have problems, I left things drop by the wayside.
Back in February 1986, I became good friends with Mary Lynn
DiPaolo, Kevin's sister and Mike's wife. We were always good friends,
but back then when Kevin left, we became very close because I spent a
lot of time with them. Mary Lynn was at the time, 30 years old with
three children, and she was always very tied down with the kids,
basically a housewife. She never really had a job, never worked. It was
hard for her because most of her other friends were out working and had
careers. I asked her if she would like to help me out for a few hours
a week doing general clerical and typing. She was very excited. I
thought it was a chance for me to get some things done and I liked
Mary Lynn a lot and we got along and I thought it was a chance for
me to get a few extra things done.
I took her on in February and before too long she was working 30
hours a week. She had a babysitter lined up for the kids, and it was
very encouraging for me to see her do this because it gave her the
confidence for the first time that she could do something other than
just have children. She was having a great time and I was having a
great time and we enjoyed working with each other. At that
time, Bob invited Mike and I down to the annual conference in
Tucson, Arizona and with the conference arrangements we were allowed to
take someone, such as your spouse. I asked Mary Lynn if she wanted to

go and I don't believe she was ever on a plane before and she
asked Mike and he said it would be good for her to meet some of these
people and get involved with a career. We ended up down at Tucson
and that was in April 2 and we spent four or five days there.
Upon meeting Bob I told him I was bringing Mary Lynn out and I
knew from the start that this was a sore spot. First of all she was
married and he couldn't understand what she was doing out there
with me. Second of all he didn't appreciate the whole situation when he
met her he said something to the effect that she looked very young.
After the second day we were all good friends and she was getting
along very well with Bob and Pam. In fact, Pam confided things in her
that I know Pam never told anyone. It looked as though they liked,
or at least pretended to like Mary Lynn and so anyway we all had a
good time. Bob, myself, and Mike spent most of our time in individual
private meetings trying to put this deal together and work out the
details especially with FSC. I think it was back at this time we
realized that Bob was probably going to resign from management and
commit and come up to Lancaster. I think one of the reasons why Mary
Lynn and I became very close was that she reminded me so much of my
mother in the way that she handled her kids, family and I became
infatuated with that. I liked her a lot. What happened was that Mike
and Bob resented the fact that we had so much fun while we
worked. We got work done, but we went out to lunch for an hour or
so and we really enjoyed things. To them that had no place in
business. For me, as long as I got my work done, I felt
better about my work and it worked out for the best. This was a
problem and will come up later.
During the Spring of 1986 when we were putting this together I had
the opportunity to move across the hall and get additional space from
another tenant. I was going to sub-let. I did this so it would give
Mike and I additional space and give operations more space so we could
get additional people before the people was done. I moved into 12 by
18 office with reception room and I had 3 or 4 additional offices.
Nancy was working for the tenant that I was subletting and she didn't
have a job and she asked me if there was anything she could do.
Mike wanted to hire her and I said let's just try it part time with no
commitments on either side to do anything permanent when we
move in and she began part time. So we now had Mary Lynn, Nancy and
Nancy A. That was the beginning of the staff problems. The staff
was always going to have staff problems in the beginning and I can't
exaggerate the problems that we had. We had so many different
personalities, three different principals, trying to give their input.
So far as the staff was concerned, mine never counted at all. Its funny,
they always considered my input for everything else, but when it came to
staff - no way, hands off. I resented this because first

of all I brought Mary Lynn in and second of all I think I had a better
vision as far as the people than Mike did and that will come out in the
future.
Mike wanted to hire Nancy M. as office manager and I didn't think she
had the qualities to do such a job and I wanted them to interview
Barbara Kinzer. Barbara was a teacher of mine back in high school,
teaching business, typing, clerical, later going on to work at Watt
and Shand in employee benefits. So it just seemed to be that she had
some of the qualities necessary to do a good job. They interviewed
her and they didn't like her because I brought her to the table. They
ended up employing Nancy as office manager. That is going to
have a lot of problems.
I believe Nancy could have been a good employee in the right
situation, but they apparently didn't see what they should have - that
they weren't organized enough to have an office manager. I suggested
early on that we not have one and that Mike do it himself rather than us
having an additional layer, not necessary. As far as the staff are
concerned, I wish to finish up the story on the staff all at one time.
It was understood that none of us were to have our own personal
secretaries which meant Mary Lynn was not going to work for me
and Nancy A. was not going to work for Mike. I didn't agree with that,
but they were dead set against having Mary Lynn involved. Part of this
was because Mary Lynn meant so much to me and they saw that as
competition in a certain way. Mary Lynn's personality is very
outgoing, a very verbal type person who is very personable and they
didn't like that.
It was to be understood that we were not to have our own girls.
We moved into the building, they would not allow Mary Lynn to be
back in my section, however, Nancy A.'s desk was right smack up
against Mike's door. This started all the problems with Mary Lynn.
She saw that and she wished to work for me, and they were not
tremendous impact on the relationship between me, Mike and Bob.
This was the straw that broke the camels back as far as our
relationship was concerned. Ever since that happened we stopped
communicating.
That was the first move in trying to rescind my input and my control
so far as the company was concerned. As far as the staff was
concerned they had a feeling that the staff should be treated as dirt
and made this understood many times to me - this is against all my
philosophy of life.
For months, because of this attitude, there were problems with the

staff. It was because of this that the staff didn't respect them, and
it was just a mess for months.
During June, July and August, Bob was still down in Atlanta and I
was doing most of the work in Lancaster. From January until January I
took one day off for Memorial Day, one day for July 4th, one day for
Labor Day and one day for Thanksgiving. Mike Hartlett took off two of
three weeks, leaving me to tend the shop. I was always the one doing
all the work, recruiting, stock offering,labor matters, drew up all the
contracts, drew up the offering memorandum with the help of the
attorney. It was funny that I was the only one raising the money probably 80% of the funds. I was the only one of the principals who
had outsiders investing in the company. The most they did; Bob
Kauffman raised $5,000 from his father in law, so not only did I put
my own money in I risked that of my clients. But they were willing to
accept that up front. A couple times it came down to either me
getting the money from my clients or us not having the financial ability
to pay off some of the capital resources that we had.
During September we began to have problems with Mary Lynn and the
staff and me. This was the beginning of them trying to reduce and
dilute my control of the company as far as input was concerned. It
was a very emotional and draining experience after all the work I did to
put this all together to find those two were trying to push me out. It
reached the point in October or November where they actually asked
me if I wanted to "get out." They indicated that I was not right for
management, management was not right for me, that I wasn't having
fun and all this and that. Most of that was due to their action as far
as their trying to dilute me and weaken my confidence. They
constantly made fun of me in front of all the other planners at meetings
and it was just ugly.
They also tried to interrupt my relationship with Mary Lynn
which was nothing more than a very personal, deep friendship.
No one knows this, but the trauma was so heavy that I went under
the care of a psychologist at St. Joseph Hospital, beginning November
and I was suffering a severe case of depression. Because of
schizophrenia being found in my family, I was not afraid to go seek
psychological counseling. I was on medication for three months. In
September they had it in their minds that they were going to get rid of
Mary Lynn. And they tried every opportunity, finally in November a week
before Thanksgiving, they fired Mary Lynn. Without cause, for no reason,
other than they just wanted her out and felt she was incapable of
whatever.
It actually reached the point where Bob and Mike went around
politicking the brokers to support them that Mary Lynn was not

doing her job which was not true. She had the complete support of all
the brokers. Maybe at times there was a case where someone was
unhappy with her performance, but in general it was a ploy, a plot,
fabricated by Mike and Bob.
After their attempt to buy me out and get rid of me so far as my
control and my interest, I held out reluctantly often times wondering if
I were going to give in and by Christmas I decided I would stick it out.
There were not other alternatives, but the money they offered me to get
out was $2,50 a share which comes out to $100,0000. I wanted no parts
of it, so by January I decided to stay.
Bob had several conversations with Bob Long saying that he was
worried about my entrepreneurial efforts and that I was becoming
slack. The whole reason was that they were hammering me down and
beating me up in every way they could, destroying my confidence. After
I spent time and effort and I believed in so much of what I'd done, and
they were trying to take this away from me and get me out of the
picture.
Through November and December there were meetings between
myself, Scott Robertson, Alan Loss, Bob Long and Carolyn Royer
regarding the activities and the management styles of Mike and Bob.
They were very concerned, were not very trusting and I was always in
the middle between the management and financial planners. I had
relationships with everyone and I believe that this threatened Bob
and Mike and they tried to get me out of the picture, but the planners
would not allow this because the planners did not trust Bob and Mike
without having me to keep them on balance.
I raised most of the money, recruited most of the people, put the
offering memorandum together, put the computer system together,
worked with all the computer software, and actually came up with the
name Financial Management Group and the idea of having all the
subsidiaries doing different things. My involvement was very deep,
probably deeper than anyone in the organization.
When I was putting all this together, I was in Texas with Al Dannat. I
talked about having mortgage, banking a part of what I was doing.
Nothing ever happened between the two of us, but in January I
received a call from Al asking me to see if I could place any mortgages
in the east coast. He was willing to pay me roughly one half a point and
this was at a time, because of the activities of Bob and Mike, that I
thought I would give this a try to give me some security. Should
something fail in the company, I would have something to fall back on.
I involved Scott Robertson and Bob Long and I told them we would

form a three way partnership and we would work on a real estate

project on our own. The reason I told no one about this was that this
was my ace card in case Bob and Mike ever really threw me out. I was not
going to give them any relationships, and I just needed some security.
What we were really doing was looking for loans of 2 million dollars
and up to refinance or finance new and existing real estate projects.
We made a few calls, finding that our rates are very competitive. Al
was more of less letting me get plugged into the major Savings and
Loans and Insurance companies. We found out there were very few people
in the area, if any at all who could acquire the terms. We began
having a great deal of success and what we found was that almost
everyone was allowing us to bid on their project. We created a company
called Creative Finance Company so that we would not expose FMG to any
liabilities as far as our activities. We agreed from the beginning that
FMG would receive a percentage of our activities and we figured
15% was fair since we actually manufactured the product where FMG
when out and used other manufactured products. We didn't feel they were
entitled to a 20 - 30% split.
One of our contracts was with Tony Bongoivi in New York. He at one
time dated Scott's sister approximately ten years ago. Scott
maintained a loose relationship with Tony, calling him once in a while
regarding business matters and business activities. Scott called Tony
one day about a real estate project that he thought ---------------.
Tony said no, but he may have another project that we would be interested
in. Scott asked me to go up to New York with him to talk about the
project and I asked what it was. He indicated it was a movie. I was
very reluctant and hesitant to do this because movies to me, tax
shelters, scams, not very economic type investment. Me being very
conservative was not attracted, but I decided to go anyway just to
get out of town, more or less just to get away.
When I got up there I was totally amazed at the caliber and the
people who we were associating with. What I found out was that we were
working with the leading recording studio in the world. There
credentials, their accomplishments were phenomenal- they were just it.
I'm not going to spend a lot of time of this because just the bottom
line is what is important here. After seeing the project when I looked
at what Tony was doing, and from a business perspective there were
just so many elements in this project that were just truly amazing to me
so far as distribution and marketing and risk and everything else.
Bottom line was a product that was worth 15 to 20 million dollars being
made for 4 million with the ability to be one of the leading movie, video
projects of the years.
First of all you have the leading recording studio in the world working

on the sound for the project that was going to include a follow up of
Tony's previous band who was Bon Jovi who was already one of the
hottest thing in music as far as album sales. Then you have the fact
that he was going to digitize the recording which was never done
before in the movie industry at a time when the video market is just
going bananas. Not only that, but the label that signed the band owns
MTV.
You put all this together and you've got a phenomenal business with
a lot of opportunity.
Seeing this, I committed myself to the project not knowing who,
where or how we were going to raise 4 million dollars but I believed in
the project so much. I guess because I saw a lot of the same elements
used in FMG in this project, and even more. I got instincts when I
raised money for FMG I was still very concerned with the risk
elements to my investors but when I looked at this project the risk was
even less. Less risk, more protection with this project so I believed
in this project.
We spent seven or eight weeks developing the packaging the product
for the investors, things have happened during that time that fell into
place perfectly - the article in Rolling Stone, the marketing. It is May
4th at 4:30 a.m. and there is no doubt in my mind with the articles
in Rolling Stone that we have the money for the movie. That project
in itself will probably put us in the forefront of the entertainment
industry within eight weeks. It is mind boggling as far as what can
come of this, but the project is done, we did something, we did not use
FMG, they will receive no split. I guess what I'm saying is that because
of the way Bob and Mike treated me or pushed me to go out and do
things, that did not involve FMG and I did not feel that they did not
deserve to become a part of these things. From the beginning I knew
FMG was going to get their piece.
Let me go back to an earlier development concerning the
Broker/Dealer. We of course thought in the beginning that we would
become our own broker/dealer. However, after long, hard
discussion, we were to the point of getting a license for broker/dealer,
we decided we did not have the administrative capacity to fulfill what
we would need to accomplish the broker/dealer. Back in November,
December, Bob started soliciting other broker/dealer, looking for three
things; service, high pay out, and equity. We knew that we had to own
our broker/dealer business. There were two players that we came across
one was Hibbard- Brown out of Washington DC and the other was
Financial Planners Group which really involves some of the premier
financial planners of the country, Bill Keogler, Wayne Webster, so on

and so forth.
The Keogler group was strong, large, young and they were doing
roughly 20 million dollars of gross commission income per year but
there were some people in the organization we did not feel
comfortable with. Hibbard Brown was a new start up, starting up when
we did, was a split from a previous broker/dealer in D.C., that involved
from a syndicator to a broker/dealer that no one knew anything about.
However, they really enticed us with a very attractive equity deal.
Bob maintained most of the communications and most of the research
involved in this project. It was brought to us in January which was
roughly 20% of their stock with 90% payout , territorial with override
for anything that we did.
One of the things I thought should be done is that someone should
be down there looking at their trading department, along with the
capability of FSC. I tried to get people down there several times and I
suggested Carolyn Royer because of what had happened to her. Finally
Peter Poneros and Ken Ray went down, and this was probably during March.
Anyway, this whole thing was done with very little communication as far
as me, Bob and Mike. More of less, Bob would go out and do
something and would feed back to us, but we really had very little
involvement with what we intended to do with Hibbard Brown. One
thing Bob indicated was that if we went down to Hibbard Brown we
would not find much, they were just starting up, they were new, they
had roughly 10,000 sq. foot of office space, a few staff people and the
system of operation. He did feel they were capable of fulfilling our
needs.
We began the transformation of licensing from FSC to Hibbard-Brown
and we probably had 60% to 70% of the in house people to FSC, Alan
Loss, Scott Robertson, Rich Braverman, Keith Waters, Todd Dellinger,
Harry Radcliffe, along with Barry Schuttler and some of the other
satelites. At this point Tom Turner was free and clear and he was
looking for some direction.
By the week of April l9th Tom was up visiting with Bob all week
seeking that direction and he was also visiting with Hibbard Brown so it
looked like Tom would also become involved.
I also negotiated the courtship of Tony Pascoti and got him involved.
From the period of April lst on, when we began transferring license,
one of the main ------------------------------- THE END!