AMENDMENT TO AGREEMENT OF REORGANIZATION
This Amendment is made and entered into this 18th day of February, 1999, by
and among CANNON FINANCIAL COMPANY, a Kansas corporation ("Corporation"),
ADVANCED FINANCIAL, INC., a Delaware corporation ("AFI"), SEQUOIA COMPANY
("Sequoia") and LEE GREIF ("Greif").
W I T N E S S E T H:
WHEREAS, the parties hereto, as well as the other shareholders of
Corporation, Terrence P. Dunn and Mark P. Offill ("such parties"), did enter
into that certain Agreement of Reorganization dated February 5, 1999 ("Agreement
of Reorganization");
WHEREAS, Sequoia has represented to Corporation and AFI that it has
reviewed the contents of the Agreement of Reorganization with such parties, and
has the authorization of such parties to enter into this Amendment on behalf of
said parties;
WHEREAS, Greif has communicated with representatives of Corporation and
such parties as to this Amendment and matters set forth herein; and
WHEREAS, Sequoia and Greif, in order to secure this representation and
promise to Corporation and AFI, have agreed to indemnify Corporation and AFI
from any and all damages that may occur to either or both of them as a result of
any of such parties successfully arguing that Greif and Sequoia did not have
authority to enter into the Amendment on behalf of such parties.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the parties hereto agree as follows:
1. The first sentence of Paragraph 1.03(b) is hereby revised in its
entirety to read as follows:
Shareholders and AFI agree to cause Corporation, at AFI's expense, by no later
than sixty (60) days after the Closing Date, to prepare an audited balance
sheet and income statement of Corporation as of the end of business on
January 31, 1999 ("Closing Balance Sheet") to be prepared in accordance
with generally accepted accounting principles by the accounting firm of
Grant Thornton and in a manner agreeable to AFI and its accountants.
2. The parties hereto agree that the following shall be added to
Exhibit 2.02 of the Agreement of Reorganization:
An option in favor of William B. Morris to purchase 150,000 shares of the
common capital stock of AFI for a purchase price of $.25 per share, which
option may only be exercised on or after February 19, 2001 (if William B.
Morris is employed by AFI on February 19, 2001), and then only pursuant to
the following restrictions:
(a) Seventy-five thousand (75,000) shares may be purchased when AFI stock
has been traded for twenty (20) consecutive days on a public stock
exchange at a purchase price of One Dollar ($1.00) or more.
(b) The final seventy-five thousand (75,000) shares may be purchased only
when AFI common stock has been traded for twenty (20) consecutive days on
a publicly traded stock exchange at a purchase price of Two Dollars
($2.00) or more.
3. The parties hereto agree that the following table should be added
to Exhibit 2.02 of the Agreement of Reorganization to supplement the listing of
shares of capital stock of Corporation as of the Closing Date:
Percentage of
Shareholder Stock Owned No. of Shares
Sequoia Company 48.15% 6,500
Piper Jaffray, Inc., custodian for the benefit 14.81% 2,000
of Terrence P. Dunn
Larry and Constance Davis 7.41% 1,000
David Offill 7.41% 1,000
JMO Group 14.81% 2,000
Mark P. Offill, Trustee of the Jean Offill 7.41% 1,000
Grandchildren's Irrevocable Trust ______ ______
TOTAL 100% 13,500
4. In consideration for the agreement of AFI to go forward under the
Agreement of Reorganization without requiring that all shareholders of Cannon
sign this Amendment, Sequoia and Greif, jointly and severally, hereby agree to
indemnify and hold AFI, Corporation and William B. Morris, and each of them,
harmless from any and all losses, causes of actions, costs, claims, expenses and
damages whatsoever (including reasonable attorneys' fees) ("Damages") incurred
by AFI, Corporation or William B. Morris as a result of the allegations of any
shareholder of Corporation that they have been damaged as a result of their
failure to execute this Amendment.
Promptly upon receipt by AFI, Corporation or William B. Morris of a notice of a
claim which may give rise to a claim for Damages, AFI, Corporation or William B.
Morris shall give written notice thereof to Sequoia and Greif. No failure or
delay of AFI, Corporation or William B. Morris, in the performance of the
foregoing, shall relieve, reduce or otherwise affect Sequoia and Greif's
obligations and liability to indemnify AFI, Corporation or William B. Morris,
pursuant to this Amendment. Sequoia and Greif may, at their sole expense,
undertake the defense against such claim and may contest or settle such claim on
such terms, at such time and in such manner as Sequoia and Greif, in their sole
discretion, shall elect and AFI, Corporation or William B. Morris shall execute
such documents and take such steps as may be reasonably necessary in the opinion
of counsel for Sequoia and Greif to enable Sequoia and Greif to conduct the
defense of such claim for Damages. If Sequoia and Greif fail or refuse to defend
any claim for Damages, Sequoia and Greif may nevertheless, at their own expense,
participate in the defense of such claim by AFI, Corporation or William B.
Morris, and in any and all settlement negotiations
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relating thereto. In any and all events, Sequoia and Greif shall have such
access to the records and files of AFI, Corporation or William B. Morris
relating to any claim for Damages as may be reasonably necessary to effectively
defend or participate in the defense thereof.
5. In all other respects, the aforementioned Agreement of
Reorganization shall remain in full force and effect as written.
IN WITNESS WHEREOF, the undersigned parties have executed this Amendment
on the day and year first above written.
AFI: ADVANCED FINANCIAL, INC.,
a Delaware corporation
By: ________________________________
Printed Name:_______________________
Title: _____________________________
CORPORATION: CANNON FINANCIAL COMPANY,
a Kansas corporation
By: _______________________________
Printed Name: _____________________
Title: ____________________________
SEQUOIA: SEQUOIA COMPANY
By: ______________________________
Printed Name: ____________________
Title: ___________________________
GREIF: __________________________________
Lee Greif
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