STOCK PURCHASE AGREEMENT
BY AND AMONG
U. S. COMMERCIAL FUNDING CORPORATION
an Illinois Corporation
and
HAROLD GOODMAN and KEITH REID
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS..................................................................1
ARTICLE II
SALE AND TRANSFER OF SHARES; CLOSING.........................................5
2.1. Basic Transaction................................................5
2.2. Purchase Price...................................................5
2.3. Closing..........................................................6
2.4. Closing Obligations..............................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
SELLERS RELATING TO TRANSACTION..............................................7
3.1. Authorization of Transaction.....................................7
3.2. Noncontravention.................................................7
3.3. Brokers' Fees....................................................7
3.4. The Shares.......................................................7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SELLERS RELATING TO THE COMPANY..............................................8
4.1. Organization...................................................8
4.2. Capitalization.................................................8
4.3. Noncontravention...............................................9
4.4. Articles of Incorporation and By-Laws..........................9
4.5. Financial Statements...........................................9
4.6. No Undisclosed Material Liabilities............................9
4.7. Absence of Certain Changes or Events..........................10
4.8. Litigation and Proceedings....................................11
4.9. Compliance with Laws, Rules and Regulations...................11
4.10. Contracts......................................................11
4.11. Material Contract Defaults.....................................11
4.12. Taxes and Tax Returns..........................................11
4.13. No Subsidiaries................................................12
4.14. Title and Related Matters......................................13
4.15. Intellectual Property..........................................13
4.16. Real Property Leaseholds.......................................13
4.17. Notes and Accounts Receivables.................................13
4.18. Insurance......................................................13
4.19. Environmental, Health, and Safety Matters......................13
4.20. Employees......................................................15
4.21. Certain Payments...............................................15
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4.22. Relationships with Related Persons.............................15
4.23. The Disclosure Schedules.......................................16
4.24. Information....................................................16
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER.....................................16
5.1. Organization and Good Standing................................16
5.2. Authority; No Conflict........................................16
5.3. Certain Proceedings...........................................17
5.4. Brokers or Finders............................................17
ARTICLE VI
CONDUCT PRIOR TO CLOSING....................................................17
6.1. General.........................................................17
6.2. Operation of Business...........................................17
6.3. Preservation of Business........................................18
6.4. Full Access.....................................................18
6.5. Notice of Developments..........................................18
6.6. Exclusivity.....................................................19
ARTICLE VII
POST-CLOSING COVENANTS......................................................19
7.1. General.......................................................19
7.2. Litigation Support............................................19
7.3. Transition....................................................19
ARTICLE VIII
CONDITIONS OF THE SELLERS...................................................20
8.1. Representations...............................................20
8.2. Compliance....................................................20
8.3. Certificate of Buyer..........................................20
8.4. No Litigation.................................................20
8.5. Employment Agreements.........................................20
8.6. Repayment of Loans to Sellers.................................20
8.7. Repayment or Renegotiation of Bank Debt ......................20
8.8. Completion of All Actions.....................................20
ARTICLE IX
CONDITIONS OF BUYER.........................................................21
9.1. Representations...............................................21
9.2. Compliance....................................................21
9.3. No Material Adverse Change....................................21
9.4. Certificate of the Sellers....................................21
9.5. Absence of Litigation.........................................21
9.6. Good Standing.................................................22
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9.7. Financial Statements..........................................22
9.8. Resignations..................................................22
9.9. Employment Agreements.........................................22
9.10. Financing.....................................................22
9.11. Completion of All Actions.....................................22
ARTICLE X
NON-COMPETITION.............................................................22
10.1. Non-Competition...............................................22
10.2. Definition of Competition.....................................23
10.3. Enforcement...................................................23
10.4 Additional Consideration for Stock Purchase...................23
10.5 Exception to Non-Competition Covenant.........................24
ARTICLE XI
INDEMNIFICATION, SURVIVAL, TERMINATION AND EXPENSES.........................24
11.1. Nature and Survival of Representations.........................24
11.2. Indemnification................................................24
11.3. Other Remedies.................................................25
11.4 Termination....................................................25
11.5 Effect of Termination..........................................25
ARTICLE XII
MISCELLANEOUS...............................................................25
12.1. Notices.......................................................25
12.2. Entire Agreement..............................................26
12.3. Effect; Assignment............................................26
12.4 Amendments; Waivers...........................................26
12.5 Further Assurances............................................27
12.6 Headings......................................................27
12.7 Counterparts..................................................27
12.8 Severability..................................................27
12.9. Legal Fees and Expenses........................................27
12.10. Nature of Certain Obligations.................................27
12.11. Construction..................................................27
12.12. Incorporation of Exhibits, Annexes, and Schedules.............28
12.13. Specific Performance..........................................28
12.14. Texas Law ................................................28
12.15. Mediation and Arbitration ................................28
12.16. Additional Condition to Closing...............................28
SIGNATURES..................................................................29
Attachments
Exhibit "A" - Buyer's Notes and Security Agreements
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Exhibit "B" - Employment Agreement of Harold Goodman
Exhibit "C" - Employment Agreement of Keith Reid
Exhibit "D" - Non-Disclosure Agreement
Schedules
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of _________, 1998,
by U.S. Commercial Funding Corporation, an Illinois corporation ("Buyer"),
Harold Goodman, an individual resident in Texas ("Goodman"), and Keith Reid, an
individual resident in Texas ("Reid" and, collectively with Goodman, "Sellers").
Recitals
Sellers desire to sell Buyer, and Buyer desires to purchase from Sellers,
all of the issued and outstanding shares (the "Shares") of capital stock of
Goodman Factors, Inc. , a Texas corporation (the "Company"), for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
In consideration of the mutual agreements, representations, warranties and
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
Article I
Definitions
For purposes of this Agreement, the following terms have the meanings
specified in this Article 1:
"Affiliate" -- has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Best Efforts"--the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible.
"Breach"-- a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision which is
Material.
"Competing Entity" -- "Competing Entity" shall mean any Entity that is
engaged, or intends to engage, directly or indirectly, in the Business in
competition with the Company within the Territory defined in Article X of this
Agreement.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
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"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Promissory Note,
the Employment Agreements, and the Noncompetition Agreements;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise of
control over the Acquired Companies.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Environmental, Health, and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and as now or
hereafter in effect.
"GAAP"--generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 4.5 were prepared.
"Governmental Authorization"--any approval, consent, license, permit,
waiver, or other authorization issued, granted or given by or under the
authority of any Governmental Body or pursuant to any Legal Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
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(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of
a particular fact or other matter if any individual who is serving, or who has
at any time served, as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or other matter.
"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Material" - an out-of-pocket expense or item in excess of $25,000.
"Ordinary Course of Business"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) [and is not required to be specifically authorized by
the parent company (if any) of such Person]; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or
by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general
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partnership; (c) the limited partnership agreement and the certificate of
limited partnership of a limited partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (e) any amendment to any of the foregoing.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding"--any action, arbitration, audit, hearing, investigation (to
the extent known by the Person) , litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
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For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) the individuals
children or parents, and (iv) any other natural Person who resides with such
individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Tax" -- means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing).
Article II
Sale and Transfer of Shares; Closing
2.1. Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from each of the Sellers, and each of
the Sellers agrees to sell to the Buyer, all of his Shares for the consideration
specified below in this Article 2. The parties acknowledge that the Company is
indebted to Goodman in the amount of $2,500,000 and to Reid in the Amount of
$650,000. Each of such loans is evidenced by the Company's promissory note. As
part of the basic transaction, the Company will repay each of such loans in full
at Closing.
2.2. Purchase Price. The Buyer agrees to pay to the Sellers at the
Closing, Eleven Million Seven Hundred and Fifty Thousand Dollars ($11,750,000)
(the "Purchase Price") by delivery of (i) its promissory notes (the "Buyer
Notes") in the form of Exhibit A attached hereto in the aggregate principal
amount of $2,750,000 and (ii) cash for the balance of the Purchase Price
($9,000,000) payable by wire transfer or delivery of other immediately available
funds. The Purchase Price shall be allocated among the Sellers in proportion to
their respective holdings of the Shares as follows:
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Seller Buyer Note Cash
Harold Goodman $1,375,000 $4,500,000
Keith Reid $1,375,000 $4,500,000
2.3. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Goodman Factors in
Dallas, Texas, commencing at 9:00 a.m. local time on the second business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Buyer and the Sellers may mutually
determine (the "Closing Date").
2.4. Closing Obligations. At the Closing:
(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers);
(ii) employment agreements in the form of Exhibits B and C,
executed by Sellers (collectively, "Employment Agreements"); and
(iii) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and
warranties in this Agreement was accurate in all respects as of the
date of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date (giving full effect to
any supplements to the Disclosure Schedules that were delivered by
Sellers to Buyer prior to the Closing Date); and
(b) Buyer will deliver to Sellers:
(i) the following amounts by bank cashier's or certified check
payable to the order of or by wire transfer to accounts specified by
Goodman and Reid, respectively:
$4,500,000 to Goodman and $4,500,000 to Reid;
(ii) promissory notes payable to Goodman and Reid in the
respective principal amounts of $1,375,000 and $1,375,000 in the
form of Exhibit A;
(iii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date; and
(iv) the Employment Agreements, executed by Buyer.
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(c) At Closing, the Company will repay an outstanding loan to
Goodman in the principal amount of $2,500,000 and an outstanding loan to
Reid in the principal amount of $650,000. All accrued interest on such
loans shall be repaid by the Company at Closing. At the Closing, the Buyer
shall provide the Company additional debt or equity funding in an amount
necessary to repay the entire principal and interest of the Goodman and
Reid loans.
Article III
Representations and Warranties of Sellers Relating to Transaction
Each of the Sellers represents and warrants to the Buyer, with respect to
himself, that the statements contained in this Article 3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article 3).
3.1. Authorization of Transaction. The Seller has full power and authority
to execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Seller, enforceable in accordance with its terms and conditions. The Seller need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the Contemplated Transactions.
3.2. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the Contemplated Transactions, will (A)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by which he
is bound or to which any of his assets is subject. The parties acknowledge that
NationsBank of Texas has a first lien on the Company's accounts receivable which
must be repaid or renegotiated in connection with the Closing.
3.3. Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.4. The Shares. Goodman and Reid are currently parties to a Buy-Sell
Agreement relating to the Shares. Such Agreement will be terminated by Goodman
and Reid prior to the Closing. At the Closing, the Seller shall hold of record
and shall own beneficially 50,000 Shares, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), taxes, security interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. The Seller is not a party
to any option, warrant, purchase right, or other contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any capital
stock of the Company (other than this Agreement). The Seller is not a party to
any voting trust, proxy, or
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other agreement or understanding with respect to the voting of any capital stock
of the Company. Notwithstanding anything else contained herein to the contrary,
the Buyer acknowledges that the Reid is indebted to Goodman in the approximate
amount of $472,000, which debt is secured by 20,000 shares of the Company owned
by Reid. At the Closing of this Stock Purchase Agreement, Reid shall pay such
debt to Goodman and the Reid Shares shall be released from Goodman's lien and
shall be transferred to Buyer free and clear of all liens and encumbrances.
Article IV
Representations and Warranties of Sellers Relating to The Company
The Sellers represent and warrant to the Buyer that the statements
contained in this Article 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article 4), except as set forth in the disclosure
schedule delivered by the Sellers to the Buyer on the date hereof and initialed
by the Parties (the "Disclosure Schedule"). Nothing in the Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein, however, unless the Disclosure Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article 4.
4.1. Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
requisite licenses, qualifications, corporate power and authority to own, lease
and operate its assets and to carry on its business as now being conducted,
except where the failure to be so existing and in good standing or to have such
qualifications, licenses, power and authority would not in the aggregate have a
material adverse effect on the business, operations or financial condition of
the Company. The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or jurisdiction
which requires such qualification except where the failure to be in good
standing or to have such qualifications would not in the aggregate have a
material adverse effect on the business, operations or financial condition of
the Company. The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Company are correct and complete.
4.2. Capitalization. The entire authorized capital stock of the Company
consists of 100,000 shares of common stock having $2.50 par value, of
which100,000 shares are currently issued and outstanding and of which not more
than 100,000 will be issued and outstanding at the Closing Date.
All of such shares are owned, and at the Closing will be owned, by the Sellers.
There are no outstanding convertible securities, warrants, options, or
commitments of any nature which may cause authorized but unissued shares of the
Company's Common Stock to be issued to any Person. At the Closing all issued and
outstanding shares of the Company will have been duly authorized, legally
8
issued, fully paid, and non-assessable, and not issued in violation of the
pre-emptive or other right of any Person. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Company. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of the
Company.
4.3. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the Contemplated Transactions, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of the charter or bylaws of the Company or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Company is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any security
interest upon any of its assets). The Company need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
Contemplated Transactions. The parties acknowledge that NationsBank of Texas has
a first lien on the Company's accounts receivable which must be repaid or
renegotiated in connection with the Closing.
4.4. Articles of Incorporation and By-Laws. Attached hereto as Schedule
4.4, are true and correct copies of the Articles of Incorporation and Bylaws of
the Company. Such Articles of Incorporation and Bylaws are in full force and
effect and no amendments are pending. The Company is not in violation of any
provision of its Certificate of Incorporation or Bylaws. Schedule 4.4 also
contains copies of all Board of Director minutes and resolutions and all
Shareholder minutes and resolutions of the Company since January 1, 1994.
4.5. Financial Statements. Attached hereto as Schedule 4.5, are the
following financial statements of the Company (collectively the "Financial
Statements"): (i) audited consolidated and unaudited consolidating balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal years ended December 31, 1997, and December 31, 1996
(the "Most Recent Fiscal Year End") for the Company; and (ii) unaudited
consolidated and consolidating balance sheets and statements of income, changes
in stockholders' equity, and cash flow (the "Most Recent Financial Statements")
as of and for the three (3) months ended March 31, 1998 (the "Most Recent Fiscal
Month End") for the Company. The Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of the Company as of such dates and the results of operations of the
Company for such periods, are correct and complete, and are consistent with the
books and records of the Company (which books and records are correct and
complete); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material individually
or in the aggregate) and lack footnotes and other presentation items.
4.6. No Undisclosed Material Liabilities. The Company is not subject to any
material liability ($25,000 or more) of any kind whatsoever (whether accrued,
absolute, contingent, or
9
otherwise) that are, individually or in the aggregate, material to the Company
taken as a whole other than:
(a) liabilities disclosed or provided for in the Most Recent Financial
Statements;
(b) liabilities incurred in the ordinary course of business since
the date of the Most Recent Financial Statements consistent with past
practice;
(c) liabilities contemplated by and arising under this Agreement;
and
(d) liabilities described in Schedule 4.6 attached hereto.
To the knowledge of the Sellers, no circumstances exist which would result
in the imposition of any other liabilities.
4.7. Absence of Certain Changes or Events. Except as contemplated by this
Agreement or disclosed in Schedule 4.7, or except in the Ordinary Course of
Business consistent with its past practices, since the Most Recent Fiscal Year
End, the Company has not: (i) suffered any change in its business, operations,
properties, condition (financial or otherwise), or prospects which has had or,
to the knowledge of Sellers, would likely have, individually or in the
aggregate, a material adverse effect on the business, properties, assets or
operations of the Company; (ii) suffered any damage, destruction or loss
(whether or not covered by insurance) with respect to any property or asset of
the Company and which has had, or to the knowledge of Sellers, would likely have
individually or in the aggregate, a material adverse effect on the business,
properties, assets or operations of the Company; (iii) incurred any liability or
obligation (absolute, accrued, contingent or otherwise), or suffered any
material bad debt or contingency in an amount in excess of $25,000; (iv) changed
accounting methods, principles or practices; (v) revalued any asset, other than
due to depreciation and amortization, (vi) paid, discharged or satisfied any
claims, liabilities or obligations in an amount in excess of $25,000; (vii)
entered into any commitment or transaction material to The Company taken as a
whole in an amount in excess of $25,000; (viii) declared, set aside or paid any
dividend or distribution in respect of any capital stock, or redeemed, purchased
or otherwise acquired any of these securities or modified its capitalization;
(ix) increased or established any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or otherwise changed the compensation payable or to
become payable to any officer or key employees of The Company, (x) canceled any
debts or waived any claims in an amount in excess of $25,000; (xi) transferred
any assets in an amount in excess of $25,000; (xii) made capital expenditures
and commitments in an amount in excess of $25,000; and (xiii) paid, loaned or
abandoned (other than payment of salaries or benefits or reimbursement of
expenses) any amount to, or sold, transferred or leased any properties or assets
to, or entered into any contract with, any of its officers or directors, or any
affiliate or associate of any of its officers or directors.
10
4.8. Litigation and Proceedings. Except as set forth in the Schedule 4.8,
there is no claim or Proceeding pending or, to the Knowledge of the Sellers,
threatened by or against the Company or a Seller, or any property or asset of
the Company, by any Person or any Governmental Authority which (i) is reasonably
likely to have, individually and in the aggregate, a material adverse effect on
the business, assets or operations of the Company or (ii) seeks to delay or
prevent the consummation of the transactions contemplated by this Agreement. As
of the date hereof, neither the Company nor any property or asset of the Company
is subject to any order, writ, judgment, injunction, decree, determination or
award. Any and all litigation or Proceeding in which the Company or a Seller,
their assets or properties are parties, are threatened to be parties is set
forth on Schedule 4.8.
4.9. Compliance with Laws, Rules and Regulations. Schedule 4.9 sets forth
all material governmental licenses, permits and other Governmental Authorization
(or requests or applications therefor) pursuant to which the Company carries on
its business. To the knowledge of the Sellers, the Company complies with all
applicable federal laws, rules and regulations and all applicable state and
local laws, rules and regulations relating to the operation of its business,
except to the extent that non-compliance would not materially and adversely
affect the business, operations, properties, assets or condition of the Company
or except to the extent that non-compliance would not result in the occurrence
of any material liability for the Company.
4.10. Contracts. Schedule 4.10 sets forth a complete and correct list of
all leases and all material Contracts to which the Company is a party or by
which any of its properties or assets are bound. The Company is not a party to
any other material Contract. To the knowledge of the Sellers, and subject to the
laws of bankruptcy, insolvency, general creditor's rights, and equitable
principles, all Contracts to which the Company is a party or by which its
properties or assets are bound and which are material to its operations taken as
a whole, are valid and enforceable in all material respects. For purposes of
this Agreement, a "Material" agreement is an agreement which can reasonably be
expected to involve more than $25,000. The Company is not a party to or bound
by, and the assets of the Company are not subject to, any Material Contract or
instrument; any charter restriction; or any judgment, order, writ, injunction or
decree which materially and adversely affects, or in the future is likely to (as
far as the Sellers can now foresee) materially and adversely affect, the
business, operations, properties, assets or condition of the Company.
4.11. Material Contract Defaults. To the Knowledge of the Sellers, the
Company is not in default in any material respect under the terms of any
outstanding contract, agreement, promissory notes, license, lease, or other
commitment which is material to the business, operations, assets, or condition
of the Company, and there is no event of default or other event which, with
notice or lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which the Company has not taken adequate steps to prevent such a
default from occurring.
4.12. Taxes and Tax Returns.
4.12.1. Except as described in Schedule 4.12, the Company has filed all Tax
Returns that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes
11
owed by the Company(whether or not shown on any Tax Return) have been paid. The
Company is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no security interests on any
of the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
4.12.2. The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
4.12.3. No Seller or director or officer (or employee responsible
for Tax matters) of the Company expects any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax Liability of the Company either (A) claimed or
raised by any authority in writing or (B) as to which any of the Sellers and the
directors and officers (and employees responsible for Tax matters) of the
Company has Knowledge based upon personal contact with any agent of such
authority. Schedule 4. 12 lists all federal, state, local, and foreign income
Tax Returns filed with respect to the Company for taxable periods ended on or
after December 31, 1993, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit. The Sellers
have delivered to the Buyer correct and complete copies of all federal income
Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company since December 31, 1993.
4.12.4. The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
4.12.5. The Company has not filed a consent under Code ss.341(f)
concerning collapsible corporations. The Company has not made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code ss.280G. The Company is not a party to any Tax allocation
or sharing agreement. The Company (A) has not been a member of an Affiliated
Group filing a consolidated federal income Tax Return or (B) has any Liability
for the Taxes of any Person as a transferee or successor, by contract, or
otherwise.
4.12.6. The unpaid Taxes of the Company (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company in filing its Tax Returns.
4.13. No Subsidiaries. The Company has no subsidiaries and does not own
any capital stock, security, partnership interest, or other interest of any kind
in any corporation, partnership, joint venture, association, or other entity.
12
4.14. Title and Related Matters. The Company has good and marketable title
to all of its inventory, interests in properties and other assets which are
reflected in the Most Recent Financial Statements or acquired after that date
(except properties, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business), free and clear
of all mortgages, liens, pledges, charges or encumbrances, except (i) statutory
liens or claims not yet delinquent; (ii) such imperfections of title and
easements as do not and will not materially detract from or interfere with the
present or proposed use of the assets or properties subject thereto or affected
thereby or otherwise materially impair present business operations on such
properties or in connection with such assets; and (iii) such liens as are
described in the Most Recent Financial Statements or in the Disclosure
Schedules. The offices and equipment of the Company that are necessary or used
in the operations of its business are in good operating condition and repair,
normal wear and tear excepted.
4.15. Intellectual Property. Schedule 4.15 hereto contains a complete list
and description of all the Company's United States and foreign (a) patents and
patent applications; (b) trademark registrations and applications for trademark
registrations; (c) copyright registrations and applications for copyright
registrations; and (d) unregistered trademarks, trade names, service marks and
copyrights. The Company wholly owns the exclusive rights to all of the
above-described intellectual property and there are no known threatened claims
of any third party challenging the ownership, scope or validity of any of the
said intellectual property; to the Knowledge of the Sellers, there is no
infringing use by any Person or entity of any of said intellectual property; and
to the Knowledge of Sellers, there has been no disclosure of any of its trade
secrets to any Person other than Persons who have executed
confidentiality/non-competition agreements.
4.16. Real Property Leaseholds. The Company leases its facilities pursuant
to the leases identified in the attached Schedule 4.16. The Company is not bound
by any other real property leases, and the Company does not own any real
property.
4.17. Notes and Accounts Receivables. All of the Company's notes and
accounts receivable arose in the Ordinary Course of Business, are "arms length"
and bona fide, and are correctly reflected in The Company's books and records.
Except as described in Schedule 4.17, to the Knowledge of Sellers, all of the
Company's accounts receivable (net of reserves for doubtful accounts set forth
on the Financial Statements) are collectible in accordance with their terms. To
the Knowledge of the Sellers, none of the Company's notes or accounts receivable
or contracts is subject to any set off, counterclaim or adjustment by reason of
any product liability, breach of warranty, contract, accounting error or other
claim.
4.18. Insurance. The Company maintains insurance policies as described on
the attached Schedule 4.18.
4.19. Environmental, Health, and Safety Matters.
4.19.1. The Company, and each of its predecessors and Affiliates,
have complied and is in compliance with all Environmental, Health, and Safety
Requirements.
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4.19.2. Without limiting the generality of the foregoing, the
Company and its predecessor and Affiliates have obtained and complied with, and
is in compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its business; a list of all
such permits, licenses and other authorizations is set forth on Schedule 4.19.
4.19.3. Neither the Company, nor its predecessors or Affiliates has
received any written or oral notice, report or other information regarding any
actual or alleged violation of Environmental, Health, and Safety Requirements,
or any liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
4.19.4. None of the following exists at any property or facility
owned or operated by the Company: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials or
equipment containing polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.
4.19.5. None of the Company, or its predecessors or Affiliates has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental, Health, and Safety Requirements.
4.19.6. Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
4.19.7. Neither the Company, nor any of its predecessors or
Affiliates has, either expressly or by operation of law, assumed or undertaken
any liability, including without limitation any obligation for corrective or
remedial action, of any other Person relating to Environmental, Health, and
Safety Requirements.
4.19.8. No facts, events or conditions relating to the past or
present facilities, properties or operations of the Company, or any of its
predecessors or Affiliates will prevent, hinder or limit continued compliance
with Environmental, Health, and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health, and Safety Requirements, or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated
14
or otherwise) pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to onsite or offsite releases or
threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.
4.20 Employees.
4.20.1. Schedule 4.20 contains a complete and accurate list of the
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status: (i) name; (ii) job title;
(iii) current compensation paid or payable by the Company and any change in
compensation since December 31, 1995; (iv) vacation accrued; and (v) service
credited for purposes of vesting and eligibility to participate under any
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
4.20.2. No employee or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or is likely to adversely affect (i) the performance of his
duties as an employee or director of the Company, or (ii) the ability of the
Company to conduct its business. To Sellers' Knowledge, no director, officer, or
other key employee of the Company intends to terminate his employment with the
Company.
4.21. Certain Payments. Since its inception, neither the Company nor any
director, officer, agent, or employee of the Company or any other Person
associated with or acting for or on behalf of the Company has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions or for special concessions
already obtained, for or in respect of the Company or any affiliate of the
Company, in violation of any Legal Requirement; or (b) established or maintained
any fund or asset that has not been recorded in the books and records of the
Company.
4.22. Relationships with Related Persons. Except as set forth on Schedule
4.22, neither Seller nor any Related Person of a Seller has, or since the
inception of the Company has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Company. Neither Seller or any Related Person of a Seller is, or since the
inception of the Company has owned (of record or as a beneficial owner) an
equity interest or any other financial or profit interest in, a Person that has
(i) had business dealings or a material financial interest in any transaction
with the Company, other than business dealings or transactions conducted in the
Ordinary Course of Business at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with the
Company with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served
15
by the Company. Except as set forth in Schedule 4.22, neither Seller, nor any
Related Person of a Seller, is a party to any Contract with, or has any claim or
right against, the Company.
4.23. The Disclosure Schedules. Within twenty (20) days from the date
hereof, the Sellers shall deliver to Buyer the Disclosure Schedules which
consist of separate schedules dated as of the date of execution of this
Agreement and instruments and data as of such date, all certified by the Sellers
as true and correct.
4.24. Information. The information concerning the Company set forth in
this Agreement and in the Disclosure Schedules is complete and accurate in all
material respects and does not contain any untrue statement of material fact or
omit to state a material fact required to make the statements made in light of
the circumstances under which they were made, not misleading.
Article V
Representations and Warranties of Buyer
Buyer represents and warrants to Sellers as follows:
5.1. Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Illinois.
5.2. Authority; No Conflict.
5.2.1. This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Employment Agreements and the
Buyer's Notes (collectively, the "Buyer's Closing Documents"), the Buyer's
Closing Documents will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and the Buyer's Closing Documents and to perform its
obligations under this Agreement and the Buyer's Closing Documents.
5.2.2. Except as set forth in Schedule 5.2, neither the execution
and delivery of this Agreement by Buyer nor the consummation or performance of
any of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement to which Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be
bound.
16
Except as set forth in Schedule 5.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
5.3. Certain Proceedings. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
5.4. Brokers or Finders. Buyer has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Sellers harmless from any such payment alleged to be due by
or through Buyer as a result of the action of Buyer.
Article VI
Conduct Prior to Closing
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing, the covenants contained in this
Article 6 shall be applicable.
6.1. General. Each of the Parties will use his or its Best Efforts to take
all action and to do all things necessary in order to consummate and make
effective the Contemplated Transactions (including satisfaction, but not waiver,
of the closing conditions)
6.2. Operation of Business. The Sellers will not cause or permit the
Company to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Sellers will not cause or permit the Company
to:
(a) declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase, or otherwise
acquire any of its capital stock,
(b) make any change in its Articles of Incorporation or Bylaws;
(c) make any change in the authorized or issued shares except as
contemplated by this Agreement;
(d) make any payment or distribution to shareholders or purchase or
redeem any shares of capital stock;
(e) mortgage, pledge, or subject to lien or encumbrance any of its
assets, tangible or intangible;
(f) cancel any debts or claims or waive any rights of value;
17
(g) incur any indebtedness or guarantees or enter into any
commitment or make any material capital expenditures or investments;
(h) make any loan, accrual or arrangement for or payment of bonuses
or special compensation of any kind or any severance or termination pay to
any of its present or former officers or employees;
(i) make any material change in its method of management, operation,
or accounting;
(j) except in the Ordinary Course of Business, enter into any other
material transactions;
(k) hire any Person as an employee except in the Ordinary Course of
Business;
(l) adopt any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment,
or arrangement made to, for, or with its officers, directors, or
employees.
(m) grant or agree to grant any options, warrants, or other rights
for its stocks, bonds, or other corporate securities calling for the
issuance thereof ;
(n) sell or transfer, or agree to sell or transfer, any of its
assets, property, or rights or cancel or agree to cancel, any debts or
claims; or
(o) make or permit any amendment or termination of any material
contract, agreement, or license to which it is a party.
6.3. Preservation of Business. The Sellers will cause the Company to keep
its business and assets substantially intact, including its present operations,
physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.
6.4. Full Access. Each of the Sellers will permit, and the Sellers will
cause the Company to permit, representatives of the Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Company.
6.5. Notice of Developments. The Sellers will give prompt written notice
to the Buyer of any material adverse development causing a Breach of any of the
representations and warranties in Article 3 and 4 above. No disclosure by any
Party pursuant to this Section 6.5, however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
Breach of warranty, or breach of covenant.
18
6.6. Exclusivity. Neither of the Sellers will (and the Sellers will not
cause or permit the Company to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets of the Company (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. Neither of the Sellers will vote
their Shares in favor of any such acquisition structured as a merger,
consolidation, or share exchange. The Sellers will notify the Buyer immediately
if any Person makes any proposal or offer with respect to any of the foregoing.
Article VII
Post-Closing Covenants.
The Parties agree, with respect to the period following the Closing, that
the covenants contained in this Article VII shall be applicable.
7.1. General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification under Article 11 below). The
Sellers acknowledge and agree that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company.
7.2. Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Article 11 below).
7.3. Transition. Neither of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, lender,
borrow, seller, licensor, customer, supplier, or other business associate of the
Company from maintaining the same business relationships with the Company after
the Closing as it maintained with the Company prior to the Closing. Each of the
Sellers will refer all customer inquiries relating to the businesses of the
Seller to the Buyer from and after the Closing.
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Article VIII
Conditions of The Sellers
The obligation of the Sellers to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
8.1. Representations. The representations and warranties by or on behalf
of Buyer contained in this Agreement or in any certificate or documents
delivered to Sellers pursuant to the provisions hereof shall be true in all
material respects at the Closing as though such representations and warranties
were made at and as of such time.
8.2. Compliance. Buyer shall have performed and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
8.3. Certificate of Buyer. Buyer shall have delivered to the Sellers a
certificate of Buyer, dated as of the date of Closing, and signed by its
President and Secretary to the effect that (i) each of the representations and
warranties of the Buyer contained herein is true and correct and (ii) Buyer has
performed all obligations and complied with all covenants required by this
Agreement to be performed and complied with by it prior to the Closing.
8.4. No Litigation. No action, suit, or Proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
8.5. Employment Agreements. The Company, at the Buyer's Direction, shall,
effective at Closing, enter into Employment Agreements with Sellers in the form
of Exhibits B and C attached hereto. Such Employment Agreements shall be in lieu
of and shall supersede and replace in total, any and all written or oral
employment agreements, understandings, relationships or course of dealing
between the Company and Seller relating to employment or shareholder
distributions.
8.6. Repayment of Loans to Sellers. The Company shall have repaid its
outstanding debt to Goodman in the principal amount of $2,500,000 and its
outstanding debt to Reid in the principal amount of $650,000.
8.7. Repayment or Renegotiation of Bank Debt. The Buyer shall have repaid
or renegotiated the NationsBank debt of the Company and in connection therewith
shall have eliminated Reid's guarantee of such debt and Goodman's subordination
obligation to such debt.
8.8. Completion of All Actions. All actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and
20
other documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Sellers.
The Sellers may waive any condition specified in this Article 8 if they
execute a writing so stating at or prior to the Closing.
Article IX
Conditions of Buyer
The obligation of the Buyer to consummate the transactions to be performed
by it in connection with the Closing is subject to satisfaction of the following
conditions:
9.1. Representations. The representations and warranties by or on behalf
of the Sellers contained in this Agreement or in any certificate or documents
delivered pursuant to the provisions hereof shall be true in all material
respects at the Closing as though such representations and warranties were made
at and as of such time.
9.2. Compliance. The Sellers shall have performed and complied with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by them prior to or at the Closing.
9.3. No Material Adverse Change. There shall not have occurred (i) any
material adverse change since March 31, 1998 in the business, properties,
results of operations or financial condition of the Company; or (ii) any loss or
damage to any of the properties of or assets of the Company which will
materially affect or impair its ability to conduct after the Merger the business
now being conducted by it.
9.4. Certificate of the Sellers. The Sellers shall have delivered to Buyer
a certificate of The Company, dated the Closing Date, and signed by each of the
Sellers to the effect that (i) each of the representations and warranties of the
Sellers contained herein and in the Disclosure Schedules is true and complete in
accordance with the terms thereof as of the Closing Date; and (ii) the Sellers
have performed all obligations and complied with all covenants required by this
Agreement to be performed and complied with by it prior to the Closing Date.
9.5. Absence of Litigation. No action, suit, or Proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Buyer to own the
Shares and to control the Company, or (D) affect adversely the right of the
Company to own its assets and to operate its businesses (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
21
9.6. Good Standing. The Company will be in good standing in the State of
Texas at the Closing Date and the Sellers shall deliver a Certificate of Good
Standing to Buyer at the Closing.
9.7. Financial Statements. The closing of the stock purchase is
conditioned upon the availability, at the Closing, of such audited and other
financial statements as are required to be included in a Form 8-K required to be
filed by Buyer in connection with the purchase of the Company. Such financial
statements shall include audited financial statements for the last two fiscal
years of the Company and unaudited interim financial statements up through the
most recent fiscal quarter.
9.8. Resignations. The Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company other
than those whom the Buyer shall have specified in writing at least five business
days prior to the Closing;
9.9. Employment Agreements. The Company, at the Buyer's Direction, shall,
effective at Closing, enter into Employment Agreements with Sellers in the form
of Exhibits B and C attached hereto. Such Employment Agreements shall be in lieu
of and shall supersede and replace in total, any and all written or oral
employment agreements, understandings, relationships or course of dealing
between the Company and Seller relating to employment or shareholder
distributions, except for the balance of shareholder distributions due to date
of closing.
9.10. Financing. The Buyer shall have obtained, within ninety (90) days
from the later of the date of execution hereof or the deliver of the Sellers'
Schedules required hereunder, on terms and conditions reasonably satisfactory to
it the financing it needs in order to consummate the Contemplated Transactions
and to fund the working capital requirements of the Company after the Closing.
If Buyer is unable to obtain financing under this Section 9.10 of this
Agreement, the Buyer shall pay each Seller a fee of $25,000 and in such event,
this Agreement shall be terminated and shall be of no further force or effect
and no party shall have any further rights or obligations under this Agreement
except for the payment of such fee. Such $25,000 fees shall be paid not later
than ten days from the expiration of such ninetieth (90th)day.
9.11. Completion of All Actions. All actions to be taken by the Sellers in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and substance to
the Buyer.
The Buyer may waive any condition specified in this Article 9 if it
executes a writing so stating at or prior to the Closing.
ARTICLE X
NON-COMPETITION
10.1. Non-Competition. The non-competition provisions of this Article X
shall apply to Goodman and Reid. During the period commencing on the Closing
Date and ending at the later of
22
five years from the Closing Date or five years from the termination of their
Employment with the Company (the "Termination Date"), neither Goodman nor Reid
will directly or indirectly compete with the Company in the factoring, asset
based lending and financial services business (the "Business"). The restriction
from competition agreed to herein shall be limited to States of Texas,
California, New York, Illinois, Colorado, Oklahoma, Florida, Mississippi, New
Jersey, Ohio, Michigan and Louisiana, or any other state within which the
Company has done business prior to the Termination Date (the "Territory").
During such period (the "Covenant Period") neither Goodman nor Reid shall,
directly or indirectly, either individually or on behalf of any Competing
Entity:
(i) compete with the Company or engage in any aspect of the
Company's Business anywhere within the Territory;
(ii) undertake to plan or organize any Competing Entity within the
Territory, nor shall either Goodman or Reid consult or discuss the
possibility of employment or other relationship with any Competing
Entity within the Territory; (notwithstanding anything else
contained herein to the contrary, during the last six months of the
Covenant Period, Keith Reid may plan, but not take action, for his
post Covenant Period activities); and/or
(iii) become associated or connected in any way with, participate
in, be employed by, render services to, or consult with, any
Competing Entity within the Territory.
10.2. Definition of Competition. The term "compete" as used herein means
to engage, directly or indirectly, either as a proprietor, partner, employee,
agent, consultant, director, officer, controlling stockholder or in any other
capacity or manner whatsoever. The phrase "interfere with" includes, but is not
limited to, soliciting or selling any service or product offered by the Company
in its operation of the Business in the Territory. The provisions of this
Section shall not be construed as preventing either Goodman or Reid from
investing assets in securities of any corporation provided that such purchases
shall not result in either of them owning beneficially at any time 10% or more
of the equity securities of any corporation engaged in a business competitive to
that of the Business of the Company or otherwise being able to control or
actively participate in the policy decisions of such competing business.
10.3. Enforcement. It is the desire and intent of the parties that the
provisions of this Section shall be enforced to the fullest extent permissible
under the laws and public policies applied to each jurisdiction in which
enforcement is sought. If any particular provision or portion of this Section is
breached by either Goodman or Reid, the Buyer and the Company shall be entitled
to an injunction restraining such party from such breach. Nothing herein shall
be construed as prohibiting the Buyer or the Company from pursuing any other
remedies for such breach or threatened breach.
10.4. Additional Consideration for Stock Purchase. The undertakings and
covenants of Goodman and Reid contained in this Section are an integral part of
the transactions set forth in this Agreement, and the purchase price paid and to
be paid by Buyer pursuant to this Agreement shall be
23
consideration not only for the Shares but also for the undertakings and
covenants of Goodman and Reid set forth herein.
10.5. Exception to Non-Competition Covenant. Notwithstanding the
restrictions set forth in this Article X, the Buyer and the Sellers agree that
for purposes of this Agreement, Goodman and Reid may continue to own and operate
a company known as Rediscounters, Inc., which is engaged in asset based accounts
receivable financing for a single factor located in Dallas, Texas and a single
factor located in Ft. Worth, Texas. Each of Goodman and Reid agrees that neither
they nor their Affiliates, will, as a group, provide Rediscounters, Inc., and/or
the factors mentioned above, with equity capital, debt capital and/or loan
guarantees in an aggregate amount exceeding $1,600,000. Furthermore,
Rediscounters, Inc. shall not increase its current customer base. Not
withstanding anything else contained herein to the contrary, in the event
Goodman or Reid is terminated Without Cause as an employee under the Employment
Agreement attached hereto as Exhibit "B" or "C ", the restrictions set forth in
this Article X, shall not be applicable to such terminated employee. In the
event Buyer breaches Buyer's Note to a Seller, and such breach is not cured
within the terms of such Buyer's Note, the restrictions set forth in this
Article X shall be of no further force or effect as to the Seller whose Buyer's
Note is so breached.
Article XI
Indemnification, Survival, Termination And Expenses
11.1. Nature and Survival of Representations. All representations,
warranties, and covenants made by any party to this Agreement shall survive the
Closing for three (3) years except for provisions which by their very terms are
not to be fully performed for a longer period of time, and those covenants shall
survive the Closing until fully performed. All of the parties hereto are
executing and carrying out the provisions of this Agreement in reliance solely
on the representations, warranties, and covenants and agreements contained in
this Agreement and not upon any investigation which it might have made or any
representations, warrants, agreement, promise, or information, written or oral,
made by another party or another Person other than as specifically set forth
herein.
11.2. Indemnification. Within the period provided in paragraph 11.1 and in
accordance with the terms of that paragraph, each Party to this Agreement shall
indemnify and hold harmless each other Party at all times after the date of this
Agreement against and in respect of any liability, damage, or deficiency, all
actions, suits, proceedings, demands, assessments, judgments, costs, and
expenses which exceed, in the aggregate, $25,000 exclusive of attorney's fees
incident to any of the foregoing, resulting from any misrepresentations, Breach
of covenant or warranty, or nonfulfillment of any agreement on the part of such
party under this Agreement or from any misrepresentation in or omission from any
certificate furnished or to be furnished to a Party hereunder. Subject to such
$25,000 limitation, and the terms of this Agreement, the defaulting party shall
reimburse the other party or parties on demand, for any reasonable payment made
by said Parties at any time after the Closing, in respect of any liability or
claim to which the foregoing indemnity relates, if such payment is made after
reasonable notice to the other party to defend or satisfy the same and such
party failed to defend or satisfy the same. No liability shall arise against a
party hereof regarding a settlement of any claim unless such settlement was
previously approved by such Party.
24
11.3. Other Remedies. The indemnification provisions set forth in Sections
11.2 are in addition to, and not in derogation of, any statutory, equitable or
common law remedy any party may have for Breach of any representation, warranty
or covenant.
11.4. Termination. This agreement may be terminated at any time prior to
the Closing:
(a) by the mutual consent of the Parties;
(b) by any party if the Closing has not occurred by the 90th day
after the delivery of Sellers' Schedules, or such other date, if any, as
the Parties may agree to in writing; and
(c) by a Party if any other Party refuses or fails to perform any
covenant or agreement required to be performed by it under this Agreement
or if any representation or warranty of any other party proves to have
been inaccurate or misleading in any material respect at the time it was
made or at the Closing and the other party refuses or fails after notice
to correct or make not misleading any such misrepresentation or warranty.
(d) by the Buyer for any reason within twenty (20) days after it has
received all of the Disclosure Schedules.
11.5. Effect of Termination. If this Agreement is terminated as permitted
by Section 11.4. of this Agreement, such termination will be without liability
of any party (or any shareholder, director, officer, employee, agent,
consultant, or representative of such party) to the other parties to this
Agreement; provided, that if such termination results from the failure of a
party to use its or his best efforts to fulfill a condition to the performance
of the obligations of the other parties or to perform a covenant of this
Agreement or from a breach by any party to this Agreement, such Sellers or Buyer
will be fully liable up to a maximum of $50,000.00 for any and all damages,
costs, and expenses (including, but not limited to, reasonable counsel fees)
sustained or incurred by the other parties as a result of such failure or
Breach. Furthermore, if Buyer is unable to obtain financing under Section 9.10
of this Agreement, the Buyer shall pay each Seller a fee of $25,000 and in such
event, this Agreement shall be terminated and shall be of no further force or
effect and no party shall have any further rights or obligations under this
Agreement.
Article XII
Miscellaneous
12.1. Notices. Any notice provided for by this Agreement and any other
notice, demand, or communication that any party may wish to send another will be
in writing and either delivered in Person, transmitted by telecopier with
receipt appropriately confirmed, or sent by registered or certified United
States mail, first class postage prepaid, return receipt requested, in a
properly sealed envelope, and addressed as follows:
25
Buyer
Douglas P. Morris
17 W 220 22nd Street, Suite 420
Oakbrook Terrace, IL 60181
The Sellers
Harold Goodman
Keith Reid
3003 LBJ Freeway, Suite 200
Dallas, TX 75234
The Parties to this Agreement may change their addresses for notice by
notice given in the manner provided above. Any notice, demand, or other
communication will be deemed given and effective as of the date of delivery in
Person or upon receipt as set forth on the return receipt. The inability to
deliver because of changed address of which no notice was given or the rejection
or other refusal to accept any notice, demand, or other communication, will be
deemed to be the receipt of the notice, demand, or other communication as of the
date of such inability to deliver or the rejection or refusal to accept.
12.2. Entire Agreement. This Agreement, together with all schedules and
exhibits attached to this Agreement or referenced herein, constitutes the entire
agreement between the parties pertaining to the subject matter of this Agreement
and supersedes all prior agreements, understandings, negotiations, and
discussions, whether oral or written, of the parties, including but not limited
to the Letter of Intent heretofore entered into by the parties and there are no
warranties, representations, or other agreements between the parties in
connection with the subject matter of this Agreement except as specifically set
forth in this Agreement and the Schedules and attachments hereto.
Notwithstanding anything else contained herein to the contrary, the
Non-Disclosure Agreement attached hereto as Exhibit "D" shall remain in full
force and effect until the Closing and if there is no Closing, it shall continue
hereafter in full force and effect.
12.3. Effect; Assignment. This Agreement and all of the provisions of this
Agreement will be binding and inure to the benefit of the parties to this
Agreement and their respective successors and permitted assigns, but, except as
expressly provided in this Agreement, neither this Agreement nor any of the
rights, interests, or obligations under this Agreement will be assigned by
operation of law or otherwise, by any party to this Agreement without the prior
written consent of the other party. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the parties to this
Agreement and their respective successors and permitted assigns, any rights,
remedies, or obligations under or by reason of this Agreement.
12.4. Amendments; Waivers. No supplement, modification, or amendment of
this Agreement will be binding unless executed in writing by all parties to this
Agreement. No waiver of any of the provisions of this Agreement will be deemed
or will constitute a waiver of any other
26
provision of this Agreement (regardless of whether similar), nor will any such
waiver constitute a continuing waiver unless otherwise expressly provided.
12.5. Further Assurances. At any time and from time to time, after the
Effective Date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
12.6. Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.7. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.8. Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
12.9. Legal Fees and Expenses. The prevailing party in any proceeding
brought to enforce or interpret any provision of this Agreement shall be
entitled to recover its reasonable attorney's fees, costs and disbursements
incurred in connection with such proceeding, including, but not limited to the
costs of experts, accountants and consultants and all other costs and services
reasonably related to the proceeding, including those incurred in any bankruptcy
or appeal, from the non-prevailing party or parties.
12.10. Nature of Certain Obligations. The covenants of each of the Sellers
in Article 3 above concerning the sale of his or Shares to the Buyer and the
representations and warranties of each of the Sellers in Article 3 concerning
the transaction are several obligations. This means that the particular Seller
making the representation, warranty, or covenant will be solely responsible for
any Damages the Buyer may suffer as a result of any breach thereof. The
remainder of the representations, warranties, and covenants in this Agreement
are joint and several obligations. This means that each Seller will be
responsible for the entirety of any Damages the Buyer may suffer as a result of
any breach thereof.
12.11. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter
27
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
12.12. Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
12.13. Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court in Dallas County, Texas.
12.14. Texas Law. This Agreement shall be construed in accordance with and
governed by the laws of the state of Texas (without regard to principles of
conflicts of law). Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement shall be brought in the
federal or state courts of Dallas County, Texas.
12.15. Mediation and Arbitration.
12.15.1. Mediation. In the event a dispute arises between the
parties under this Agreement, other than a dispute entitling a party to
injunctive or equitable relief hereunder, the parties agree to jointly submit
the matter to non-binding mediation prior to seeking any further remedies.
12.15.2.Arbitration. With the exception of a party's right to a
temporary restraining order, a preliminary injunction or a permanent injunction
under Article X above, controversies under, or claims arising out of, or
relating to this Agreement, or any breach thereof, which are not otherwise
resolved through mediation, shall be resolved by arbitration in Dallas, Texas in
accordance with the rules of the American Arbitration Association in effect at
the time of arbitration. Judgment upon any Arbitration Award under this
Agreement may be entered in any court having jurisdiction thereof under the
Texas Arbitration Act. It is the intention of the parties that only the issue of
whether or not a party may be entitled to, and have entered, a Temporary
Restraining Order, a Preliminary Injunction or a Permanent Injunction, under
Article X above, shall not be subject to and not be required to be arbitrated
under this Agreement. In any arbitration proceeding under this Agreement, costs
including reasonable attorney's fees, shall be granted to the party prevailing
in such arbitration.
12.16. Additional Condition to Closing. Notwithstanding any provision
contained in this Agreement to the contrary, the parties acknowledge that the
final Exhibits and Schedules referred to in this Agreement have not been
delivered to the respective parties. The parties hereby acknowledge and agree
that the Closing of this Agreement is expressly subject to and conditioned upon
the completion of, and delivery of, such Exhibits and Schedules in final form
and in a form which is satisfactory to and approved by all parties hereto, and
that the Sellers will commence the termination of the Company's present profit
sharing plan.
28
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
U.S. COMMERCIAL FUNDING, INC.
an Illinois corporation
Dated: ____________ __, 1998 By /s/
----------------------------
Larry Meek
President
Dated: ____________ __, 1998 By /s/
----------------------------
Harold Goodman
Dated: ____________ __, 1998 By /s/
----------------------------
Keith Reid
29
AMENDMENT
TO STOCK PURCHASE AGREEMENT
This Amendment to Stock Purchase Agreement is entered into by is made as
of September __, 1998, by U.S. Commercial Funding Corporation, an Illinois
corporation ("Buyer"), Harold Goodman, an individual resident in Texas
("Goodman"), and Keith Reid, an individual resident in Texas ("Reid" and,
collectively with Goodman, "Sellers").
Recitals:
The Seller and Buyer entered into a Stock Purchase Agreement (the
"Agreement") on May 19 and May 20, 1998, for the sale and purchase of all of the
issued and outstanding shares of Goodman Factors, Inc., a Texas corporation. A
copy of the Agreement is attached hereto.
The Agreement is hereby amended, effective immediately, as set forth
below. The Amendments set forth below shall control over any inconsistent terms
of the Agreement. This Amendment shall be deemed part of and incorporated fully
in the Agreement and any references to the Agreement shall also refer to this
Amendment.
Amendment
1. Section 2.2. Section 2.2 of the Agreement shall be amended in its
entirety to read as follows:
2.2. Purchase Price. The Buyer agrees to pay to the Sellers at the
Closing, Eleven Million Seven Hundred and Fifty Thousand Dollars
($11,750,000) (the "Purchase Price") by delivery of (i) its promissory
notes (the "Buyer Notes") in the form of Exhibit A attached hereto in the
aggregate principal amount of $3,750,000 and (ii) cash for the balance of
the Purchase Price ($8,000,000) payable by wire transfer or delivery of
other immediately available funds. The Purchase Price shall be allocated
among the Sellers in proportion to their respective holdings of the Shares
as follows:
Seller Buyer Note Cash
Harold Goodman $1,875,000 $4,000,000
Keith Reid $1,875,000 $4,000,000
30
2. Section 2.4. Section 2.4 (b) (1) and (ii) are amended in their entirety
to read as follows:
(b) Buyer will deliver to Sellers:
(i) the following amounts by bank cashier's or certified check
payable to the order of or by wire transfer to accounts specified by
Goodman and Reid, respectively: $4,000,000 to Goodman and $4,000,000
to Reid;
(ii) promissory notes payable to Goodman and Reid in the
respective principal amounts of $1,875,000 and $1,875,000 in the
form of Exhibit A;
In Witness Thereof, the Sellers and Buyer have executed this Amendment to
the Agreement on the date and year set forth in the first paragraph of this
Amendment. All other terms and conditions of the Agreement shall remain in full
force and effect except as modified by this Amendment otherwise agreed to in
writing by the Seller and Buyer.
U.S. COMMERCIAL FUNDING, INC.
an Illinois corporation
Dated: September __, 1998 By /s/
----------------------------
Larry Meek, President
Dated: September__, 1998 By /s/
----------------------------
Harold Goodman
Dated: September__, 1998 By /s/
-----------------------------
Keith Reid
31