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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934.
September 21, 1998
Date of Report (Date of earliest event reported)
CELTIC INVESTMENT, INC.
(Exact name of Registrant as specified in its charter)
Delaware 33-37436-C 36-3729989
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State of Commission File No. IRS Employer
Incorporation Identification No.
17W220 22nd Street, Suite 420
Oakbrook Terrace, IL 60181
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(Address of principal executive offices)
(630) 993-9010
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(Registrant's telephone number)
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Item 2. Acquisition or Disposition of Assets
General
Celtic Investment, Inc. (the "Company") is a financial services related
holding company engaged in the business of asset based lending (factoring) and
the real estate mortgage business.. On September 21, 1998, the Company's
wholly-owned subsidiary, U.S. Commercial Funding ("USCF") acquired all of the
issued and outstanding shares of Goodman Factors, Inc. ("Goodman"), a Dallas
based asset based lender. The acquisition of Goodman significantly increases the
size of the Company. As a result of the acquisition of Goodman, the unaudited,
consolidated assets of the Company on a proforma basis as of June 30, 1998
increased a total of 358% to approximnately $33,000,000 and consolidated
revenues increased a total of 221% to approximately $9,000,000
Terms of the Stock Purchase Agreement
The Stock Purchase Agreement was executed on May 19 and May 20, 1998, and
the stock purchase transaction (the "Acquisition") was closed on September 21,
1998. In connection with the Acquisition, all of the issued and outstanding
shares of Goodman owned by the two Goodman Shareholders, were purchased for
$11,750,000 in cash and notes. In addition to the payment of the purchase price,
USCF was required to provide Goodman with capital of $3,150,000 to allow it to
repay loans to its shareholders. USCF was also required to obtain sufficient
capital to repay Goodman's existing line of credit which was in the amount of
$6,750,000.
The total capital required to complete the Goodman transaction was
obtained from the following sources:
A $23,000,000 senior, secured line of credit facility with Capital
Business Credit, a division of Capital Factors, Inc. This is a combined
credit facility for U.S. Commercial Funding Corporation and Goodman
Factors to purchase accounts receivable from clients. Included in this
facility is a term loan in the amount of $3,000,000 for use as a part of
the purchase price of the Goodman Factors stock. It also provides a
revolving line of credit to fund asset based loans and machinery and
equipment loans to prospective clients.
An $1,500,000 subordinated debt-financing commitment from a private
investment firm.
$1,954,500 from the sale of the Company's Preferred Stock.
Seller Financing in the amount of $3,750,000.
Employment Agreements
As part of the Acquisition, the Company entered into Employment Agreements
with each of the Goodman Shareholders and with one key employee, copies of which
are attached hereto.
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Additional Information
The description contained herein of the Acquisition, the Stock Purchase
Agreement and other related Agreements is qualified in its entirety by reference
to the agreements attached hereto as exhibits.
Item 7. Financial Statements and Exhibits
(a) Financial Statements. As of the date of the filing of this Current
Report on Form 8-K, it is impractical for the Company to provide the financial
statements required by this Item 7(a). In accordance with Item 7(a)(4) of Form
8-K, such financial statements shall be filed by amendment to this Form 8-K no
later than 60 days after October 5, 1998.
(b) Pro Forma Financial Statements. As of the date of the filing of this
Current Report on Form 8-K, it is impractical for the Company to provide the pro
forma financial statements required by this Item 7(b). In accordance with Item
7(a)(4) of Form 8-K, such pro forma financial statements shall be filed by
amendment to this Form 8-K no later than 60 days after October 5, 1998
(c) Exhibits.
No. Description
2.1 Stock Purchase Agreement
10.1. Promissory Note - Harold Goodman
10.2. Promissory Note -Keith Reid
10.3. Pledge Agreement - Harold Goodman
10.4. Pledge Agreement -Keith Goodman
10.5 Employment Agreement - Harold Goodman.
10.6. Employment Agreement - Keith Reid
10.7. Employment Agreement - Bret M. Schuch
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: October 5, 1998 CELTIC INVESTMENT, INC.
By /s/ Douglas P. Morris
Douglas P. Morris
President
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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
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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
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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.
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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
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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.
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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
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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
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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.
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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;
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(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.
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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
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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);
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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
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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
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<PAGE>
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.
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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:
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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
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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
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(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.
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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
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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
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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
NON-NEGOTIABLE PROMISSORY NOTE
$1,875,000.00 September __, 1998
FOR VALUE RECEIVED, U.S. Commercial Funding Corporation.,an Illinois
corporation ("Maker"), promises to pay to Harold Goodman, an individual resident
in Texas ("Payee"), in lawful money of the United States of America, the
principal sum of One Million Eight Hundred Seventy Five Thousand Dollars
($1,875,000.00), together with interest in arrears on the unpaid principal
balance at an interest rate described below, in the manner provided below.
Interest shall be calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Stock Purchase Agreement, dated May 19 and
May 20, 1998, by and between Maker, Payee and Keith Reid, (the "Agreement"), and
is subject to the terms and conditions of the Agreement, which are, by this
reference, incorporated herein and made a part hereof. Capitalized terms used in
this Note without definition shall have the respective meanings set forth in the
Agreement.
1. Payments.
1.1 Principal And Interest. The principal amount of this Note shall be
due and payable in sixty (60) equal consecutive monthly installments commencing
on _______________, 1998, and on the ___ day of each month thereafter until paid
in full. Interest on the unpaid principal balance of this Note shall be due and
payable monthly, together with each payment of principal. The rate of interest
shall be that rate which is equal to the sum of the Prime Rate of NationsBank of
Texas, N.A. in effect on the date of this Note, subject to adjustment annually,
plus 200 basis points. The rate of interest payable hereunder shall change on
each anniversary date of this Note. Notwithstanding anything else contained in
this Note to the contrary, the entire unpaid principal balance of the Note,
together with accrued interest, shall be paid in full within one hundred and
twenty (120) days from the death of the Payee.
1.2 Manner of Payment. All payments of principal and interest on this
Note shall be made by check at _______________________, ___________________,
__________________ or at such other place in the United States of America as
Payee shall designate to Maker in writing. If any payment of principal or
interest on this Note is due on a day which is not a Business Day, such payment
shall be due on the next succeeding Business Day, and such extension of time
shall be taken into account in calculating the amount of interest payable under
this Note. "Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of Texas.
1.3 Prepayment. Maker may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid calculated to the date of
such prepayment. Any partial prepayments shall be applied to installments of
principal in inverse order of their maturity.
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Notwithstanding anything else contained in this Note to the contrary,
in the event the Employment Agreement dated _______, 1998 by and between Goodman
Factors, Inc. and Payee (the "Employment Agreement") is Terminated Without Cause
as defined in Section 1.8 of the Employment Agreement, the entire unpaid
principal balance of this Note, and all accrued interest, shall be due and
payable in full within fifteen (15) days from the date of such Termination
Without Cause.
In the event the Employment Agreement is Terminated for Good Cause, as
defined in Section 1.7 of the Employment Agreement, this Note shall continue to
be payable according to the terms set forth in paragraph 1.1 above, provided
however, that if Payee commences arbitration proceedings pursuant to Section 7.3
of the Employment Agreement and the arbitrator(s) determines that the
termination of Payee's employment was not For Good Cause, then in such event,
the entire unpaid principal balance of this Note, and all accrued interest,
shall be due and payable in full within fifteen (15) days from the date of such
determination by the arbitrator.
1.4. Offset of Note for Damages. In the event Payee's employment is
terminated under the Employment Agreement and such termination is determined, in
arbitration proceedings under Section 7.3 of the Employment Agreement, to be a
Termination for Good Cause, as defined in Section 1.7 of the Employment
Agreement, and if such arbitrator(s) determines that Goodman Factors, Inc. has
suffered financial damages as a result of Payee's action which gives rise to
such Termination for Cause, then this Note shall be reduced pursuant to Section
1.4. The amount of such reduction shall be that amount which the arbitrator(s)
has determined to be the amount of financial damages suffered by Goodman Factors
as a result of Payee's actions.
1.5 Security. This Note is secured by a grant of a security interest in
certain shares of Goodman Factors, Inc. which were acquired on the date of this
Note by Maker. The security interest is fully described in a Pledge Agreement
entered into between Maker and Payee on the date of this Note.
2. Defaults
2.1 Events of Default. The occurrence of any one or more of the
following events with respect to Maker shall constitute an event of default
hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of
principal or interest on this Note and such failure continues for
fifteen (15) days after Payee notifies Maker therein writing.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law") (i) Maker shall
commence a voluntary case or proceeding; (ii) an involuntary case shall
commence and such case is not dismissed within sixty (60) days from the
date of such commencement; ; (iii) consent to the appointment of a
trustee, receiver, assignee, liquidator or similar official; (iv) make
an assignment for the benefit of its creditors; or (v) admit in writing
its inability to pay its debts as they become due.
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2.2 Notice by Maker. Maker shall notify Payee in writing within five
days after the occurrence of any Event of Default of which Maker acquires
knowledge.
2.3 Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured or waived by Payee), Payee may, at
his option, (i) by written notice to Maker, declare the entire unpaid principal
balance of this Note, together with all accrued interest thereon, immediately
due and payable regardless of any prior forbearance, and (ii) exercise any and
all rights and remedies available to him under applicable law, including,
without limitation, the right to collect from Maker all sums due under this
Note. Maker shall pay all reasonable costs and expenses incurred by or on behalf
of Payee in connection with Payee's exercise of any or all of his rights and
remedies under this Note, including, without limitation, reasonable attorneys'
fees. Upon the occurrence of an event of default, Payee may institute
appropriate legal proceedings against Maker to obtain judgement on the Note
and/or otherwise exercise his rights and remedies under the Security Agreement
or applicable law. In the event Maker breaches this Note, and such breach is not
cured within the terms hereof, the restrictions set forth in Article X of the
Stock Purchase Agreement and paragraph 6.1 and 6.3 of the Employment Agreement
entered into this day by Maker and Payee, shall be of no further force or
effect.
3. Miscellaneous
3.1 Waiver. The rights and remedies of Payee under this Note shall be
cumulative and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee. Neither the
failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note. Maker hereby waives
presentment, demand, protest and notice of dishonor and protest.
3.2 Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 12.1 of the Agreement.
3.3 Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
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3.4 Parties in Interest. This Note shall bind Maker and its successors
and assigns. This Note shall not be assigned or transferred by Payee without the
express prior written consent of Maker, except by will or, in default thereof,
by operation of law.
3.5 Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
3.6. Governing Law and Jurisdiction. The provisions of this Note shall
be construed according to the laws of the State of Texas. Any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Note shall be brought in the federal or state courts of Dallas
County, Texas.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
U.S. Commercial Funding Corporation,
an Illinois corporation
By__________________________
Larry Meek, President
4
NON-NEGOTIABLE PROMISSORY NOTE
$1,875,000.00 September __, 1998
FOR VALUE RECEIVED, U.S. Commercial Funding Corporation.,an Illinois
corporation ("Maker"), promises to pay to Keith Reid, an individual resident in
Texas ("Payee"), in lawful money of the United States of America, the principal
sum of One Million Eight Hundred Seventy Five Thousand Dollars ($1,875,000.00),
together with interest in arrears on the unpaid principal balance at an interest
rate described below, in the manner provided below. Interest shall be calculated
on the basis of a year of 365 or 366 days, as applicable, and charged for the
actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Stock Purchase Agreement, dated May 19 and
May 20, 1998, by and between Maker, Payee and Harold Goodman, (the "Agreement"),
and is subject to the terms and conditions of the Agreement, which are, by this
reference, incorporated herein and made a part hereof. Capitalized terms used in
this Note without definition shall have the respective meanings set forth in the
Agreement.
1. Payments.
1.1 Principal And Interest. The principal amount of this Note shall be
due and payable in sixty (60) equal consecutive monthly installments commencing
on _______________, 1998, and on the ___ day of each month thereafter until paid
in full. Interest on the unpaid principal balance of this Note shall be due and
payable monthly, together with each payment of principal. The rate of interest
shall be that rate which is equal to the sum of the Prime Rate of NationsBank of
Texas, N.A. in effect on the date of this Note, subject to adjustment annually,
plus 200 basis points. The rate of interest payable hereunder shall change on
each anniversary date of this Note. Notwithstanding anything else contained in
this Note to the contrary, the entire unpaid principal balance of the Note,
together with accrued interest, shall be paid in full within one hundred and
twenty (120) days from the death of the Payee.
1.2 Manner of Payment. All payments of principal and interest on this
Note shall be made by check at _______________________, ___________________,
__________________ or at such other place in the United States of America as
Payee shall designate to Maker in writing. If any payment of principal or
interest on this Note is due on a day which is not a Business Day, such payment
shall be due on the next succeeding Business Day, and such extension of time
shall be taken into account in calculating the amount of interest payable under
this Note. "Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of Texas.
1.3 Prepayment. Maker may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid calculated to the date of
such prepayment. Any partial prepayments shall be applied to installments of
principal in inverse order of their maturity.
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Notwithstanding anything else contained in this Note to the contrary,
in the event the Employment Agreement dated _______, 1998 by and between Goodman
Factors, Inc. and Payee (the "Employment Agreement") is Terminated Without Cause
as defined in Section 1.8 of the Employment Agreement, the entire unpaid
principal balance of this Note, and all accrued interest, shall be due and
payable in full within fifteen (15) days from the date of such Termination
Without Cause.
In the event the Employment Agreement is Terminated for Good Cause, as
defined in Section 1.7 of the Employment Agreement, this Note shall continue to
be payable according to the terms set forth in paragraph 1.1 above, provided
however, that if Payee commences arbitration proceedings pursuant to Section 7.3
of the Employment Agreement and the arbitrator(s) determines that the
termination of Payee's employment was not For Good Cause, then in such event,
the entire unpaid principal balance of this Note, and all accrued interest,
shall be due and payable in full within fifteen (15) days from the date of such
determination by the arbitrator.
1.4. Offset of Note for Damages. In the event Payee's employment is
terminated under the Employment Agreement and such termination is determined, in
arbitration proceedings under Section 7.3 of the Employment Agreement, to be a
Termination for Good Cause, as defined in Section 1.7 of the Employment
Agreement, and if such arbitrator(s) determines that Goodman Factors, Inc. has
suffered financial damages as a result of Payee's action which gives rise to
such Termination for Cause, then this Note shall be reduced pursuant to Section
1.4. The amount of such reduction shall be that amount which the arbitrator(s)
has determined to be the amount of financial damages suffered by Goodman Factors
as a result of Payee's actions.
1.5 Security. This Note is secured by a grant of a security interest in
certain shares of Goodman Factors, Inc. which were acquired on the date of this
Note by Maker. The security interest is fully described in a Pledge Agreement
entered into between Maker and Payee on the date of this Note.
2. Defaults
2.1 Events of Default. The occurrence of any one or more of the
following events with respect to Maker shall constitute an event of default
hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of
principal or interest on this Note and such failure continues for
fifteen (15) days after Payee notifies Maker therein writing.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to
insolvency or relief of debtors (a "Bankruptcy Law") (i) Maker shall
commence a voluntary case or proceeding; (ii) an involuntary case shall
commence and such case is not dismissed within sixty (60) days from the
date of such commencement; ; (iii) consent to the appointment of a
trustee, receiver, assignee, liquidator or similar official; (iv) make
an assignment for the benefit of its creditors; or (v) admit in writing
its inability to pay its debts as they become due.
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<PAGE>
2.2 Notice by Maker. Maker shall notify Payee in writing within five
days after the occurrence of any Event of Default of which Maker acquires
knowledge.
2.3 Remedies. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured or waived by Payee), Payee may, at
his option, (i) by written notice to Maker, declare the entire unpaid principal
balance of this Note, together with all accrued interest thereon, immediately
due and payable regardless of any prior forbearance, and (ii) exercise any and
all rights and remedies available to him under applicable law, including,
without limitation, the right to collect from Maker all sums due under this
Note. Maker shall pay all reasonable costs and expenses incurred by or on behalf
of Payee in connection with Payee's exercise of any or all of his rights and
remedies under this Note, including, without limitation, reasonable attorneys'
fees. Upon the occurrence of an event of default, Payee may institute
appropriate legal proceedings against Maker to obtain judgement on the Note
and/or otherwise exercise his rights and remedies under the Security Agreement
or applicable law. In the event Maker breaches this Note, and such breach is not
cured within the terms hereof, the restrictions set forth in Article X of the
Stock Purchase Agreement and paragraph 6.1 and 6.3 of the Employment Agreement
entered into this day by Maker and Payee, shall be of no further force or
effect.
3. Miscellaneous
3.1 Waiver. The rights and remedies of Payee under this Note shall be
cumulative and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee. Neither the
failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note. Maker hereby waives
presentment, demand, protest and notice of dishonor and protest.
3.2 Notices. Any notice required or permitted to be given hereunder
shall be given in accordance with Section 12.1 of the Agreement.
3.3 Severability. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
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3.4 Parties in Interest. This Note shall bind Maker and its successors
and assigns. This Note shall not be assigned or transferred by Payee without the
express prior written consent of Maker, except by will or, in default thereof,
by operation of law.
3.5 Section Headings, Construction. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
3.6. Governing Law and Jurisdiction. The provisions of this Note shall
be construed according to the laws of the State of Texas. Any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Note shall be brought in the federal or state courts of Dallas
County, Texas.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
U.S. Commercial Funding Corporation,
an Illinois corporation
By__________________________
Larry Meek, President
4
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Pledge Agreement"), dated as of September__,
1998 by and between U.S. Commercial Funding Corporation, an Illinois corporation
(the "Pledgor") and Harold Goodman (the "Secured Party").
RECITALS:
The Secured Party was previously the owner of 50,000 shares of common
stock of Goodman Factors, Inc., a Texas corporation (the "Goodman Shares").
Pursuant to the terms and conditions of a Stock Purchase Agreement (the "Stock
Purchase Agreement") entered into by and among the Pledgor, the Secured Party
and Keith Reid, the Pledgor purchased the Goodman Shares from Secured Party for
cash and for a Promissory Note (the "Note").
Approximately 69% of the purchase price for the Goodman Shares was paid
for in cash and the balance of the purchase price was paid for by delivery of
the Note. The parties desire to provide for 25% of the Goodman Shares (a total
of 12,500 shares") to be used as collateral for the Note. The remaining 37,500
Goodman Shares were released to Pledgor free and clear of any lien of the
Secured Party at the closing of the Stock Purchase Agreement.
In order to induce the Secured Party to enter into the Stock Purchase
Agreement, the Pledgor has agreed to grant a continuing security interest in and
to 12,500 Goodman Shares (the "Pledged Shares") to secure obligations of the
Pledgor under the Note.
The parties desire to provide for the release of the Pledged Shares
from this Pledge Agreement, and any security interest hereunder, upon the
payment of principal under the Note pursuant to Article V of this Pledge
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
1.1. Certain Terms. The following terms when used in this Pledge
Agreement shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Collateral" is defined in Section 2.1.
"Distributions" means all stock dividends, liquidating
dividends, shares of stock resulting from (or in connection with the exercise
of) stock splits, reclassifications, warrants, options, non-cash dividends,
mergers or consolidations, and all other distributions (whether similar or
dissimilar to the foregoing) on or with respect to any Pledged Shares or other
shares of capital stock constituting Collateral, but shall not include
Dividends.
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"Dividends" means cash dividends and cash distributions with
respect to any Pledged Shares.
"Event of Default" is defined in the Note.
"Pledged Shares" means 12,500 shares of Goodman Factors, Inc. common
- -------------- stock.
"Secured Obligations" means the obligation to pay the principal and
interest amount of the Note.
"U.C.C." means the Uniform Commercial Code as in effect in the
State of Texas or, as the context may require, in any other jurisdiction the
laws of which may apply to all or a portion of the Collateral in which a
security interest is granted hereunder.
1.2. U.C.C. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the U.C.C. are used
in this Pledge Agreement, including its preamble and recitals, with such
meanings.
ARTICLE II - PLEDGE
2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, mortgages, delivers, and transfers to the Secured Party
and hereby grants to the Secured Party, a continuing security interest in all of
its respective right, title and interest in and to (i) the Pledged Shares (the
"Collateral"); (ii) all Dividends and Distributions and other payments and
rights with respect to any Pledged Shares; and (iii) all proceeds of any of the
foregoing.
2.2. Security for Obligations. This Pledge Agreement and the Collateral
granted herewith, secure the payment and performance in full of the Secured
Obligations and all obligations of the Pledgor now or hereafter existing under
this Pledge Agreement, whether for principal, interest, costs, fees, expenses,
or otherwise.
2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing the Pledged Shares shall be delivered to and held by
the Secured Party pursuant hereto, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank, all inform and substance satisfactory to the
Secured Party.
2.4. Dividends on Pledged Shares. In the event that any Dividend is to
be paid on any Pledged Share at a time when no Event of Default has occurred and
is continuing, such Dividend shall be paid directly to the Pledgor. If any such
Event of Default has occurred and is continuing, then any such Dividend shall be
paid directly to the Secured Party.
2.5. Continuing Security Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall
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<PAGE>
(a) remain in full force and effect until payment in full of all Secured
Obligations;
(b) be binding upon the Pledgor and its successors, transferees and
assigns; and
(c) inure, together with the rights and remedies of the
Secured Party hereunder, to the benefit of the Secured Party.
2.6. Filing: Further Assurances.
2.6.1. The Pledgor agrees that it will, at its expense and in
such manner and form as the Secured Party may require, execute, deliver, file
and record any financing statement, specific assignment or other paper and take
any other action that may be necessary or desirable, or that the Secured Party
may request, in order to create, preserve, perfect or validate any Security
Interest or to enable the Secured Party to exercise and enforce its rights
hereunder with respect to any of the Collateral. To the extent permitted by
applicable law, the Pledgor hereby authorizes the Secured Party to execute and
file, in the name of the Pledgor or otherwise, Uniform Commercial Code financing
statements (which may be carbon, photographic, photostatic or other reproduction
of this Agreement or of a financing statement relating to this Agreement) which
the Secured Party in its sole discretion may deem necessary or appropriate to
further perfect the Security Interest.
2.6.2. The Pledgor agrees that it will not change (i) its
name, identity or corporate structure in any manner or (ii) the location of its
chief executive office unless it shall have given the Secured Party not less
than 30 days' prior notice thereof.
2.6.3. The obligations of the Pledgor hereunder shall not be
released, discharged or otherwise affected by: (i) any extension, renewal,
settlement, compromise, waiver or release in respect of any obligation of the
Pledgor under the Note by operation of law or otherwise; (ii) any renewal,
extension, modification, amendment or restatement of or supplement to the Note;
(iii) any change in the corporate existence, structure or ownership of the
Pledgor, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Pledgor or its assets; or (iv) any other act or
omission to act or delay of any kind by the Pledgor, the Secured Party, or any
other corporation or person or any other circumstance whatsoever which might,
but for the provisions of this Section, constitute a legal or equitable
discharge of the Pledgor's obligations hereunder.
2.7. Record Ownership of Pledged Stock. The Secured Party may at any
time or from time to time, in his sole discretion, cause any or all of the
Pledged Stock to be transferred of record into the name of the Secured Party.
The Pledgor will promptly give to the Secured Party copies of any notices or
other communications received by it with respect to Pledged Stock registered in
the name of the Pledgor and the Secured Party will promptly give to the Pledgor
copies of any notices and communications received by the Secured Party with
respect to Pledged Stock registered in the name of the Secured Party.
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2.8. Right to Vote Pledged Stock. Unless an Event of Default shall
have occurred and is continuing, the Pledgor shall have the right, from time to
time, to vote and to give consents, ratification and waivers with respect to the
Pledged Stock, and the Secured Party shall, upon receiving a written request
from the Pledgor accompanied by a certificate signed by its principal financial
officer stating that no Default has occurred and is continuing, deliver to the
Pledgor or as specified in such request such proxies, powers of attorney,
consents, ratification and waivers in respect of any of the pledged Stock which
is registered in the name of the Secured Party or his nominee as shall be
specified in such request and be in form and substance satisfactory to the
Secured Party.
If a Default shall have occurred and be continuing, the Secured Party
shall have the right to the extent permitted by law and the Pledgor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratification and waivers, and take any other
action with respect to any or all of the Pledged Stock with the same force and
effect as if the Secured Party were the absolute and sole owner thereof.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1. Warranties, etc. The Pledgor represents and warrants to the
Secured Party, as at the date of this Pledge Agreement:
3.1.1 . Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and valid title to (and has full right and
authority to pledge and assign) such Collateral, free and clear of all liens,
except the lien granted pursuant hereto in favor of the Secured Party.
3.1.2. Valid Security Interest. The delivery by the Pledgor of
the Collateral to the Secured Party is effective to create a valid, perfected,
first priority security interest in such Collateral and all proceeds thereof,
securing the Secured Obligations, and no filing or other action will be
necessary to perfect or protect such security interest.
3.1.3. Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice or filing with, any governmental
authority, regulatory body or any other person is required either:
(a) for the pledge by the Pledgor of any Collateral pursuant
to this Pledge Agreement or for the due execution, delivery and
performance of this Pledge Agreement by the Pledgor; or
(b) for the exercise by the Secured Party of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with a
disposition of such Pledged Shares by laws affecting the offering and
sale of securities generally, of the remedies in respect of the
Collateral pursuant to this Pledge Agreement.
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ARTICLE IV - COVENANTS
4.1. Protect Collateral; Further Assurances, etc. The Pledgor will not
sell, assign, transfer, pledge, or encumber in any other manner the Collateral
(except in favor of the Secured Party hereunder). The Pledgor will warrant and
defend the right and title herein granted unto the Secured Party in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Secured Party
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
4.2. Additional Undertakings. The Pledgor agrees that it will not,
without the prior written consent of the Secured Party, not to be unreasonably
withheld, take or omit to take any action the taking or the omission of which
would result in any impairment or alteration of any obligation of the maker of
any instrument constituting Collateral.
ARTICLE V- RELEASE OF COLLATERAL
The Note requires payment of the principal amount of the Note on a
monthly basis over a five year period. One and 67/100 Percent (1.67%) of the
principal amount of the Note, together with interest, shall be paid at the time
of each monthly payment. Accordingly, twenty percent of the principal amount of
the Note shall be paid each year (subject to the Pledgor's right to prepay the
Note). The parties hereby agree that the Pledged Shares shall be released each
and every time the Pledgor has paid the Secured Party twenty percent ($375,000)
of the principal amount of the Note together with accrued interest. For example:
if there is no prepayment of the Note during the first year, upon the twelfth
monthly payment, the Secured Party shall release twenty percent (2,500 ) of the
Pledge Shares to Pledgor free and clear of the lien and security interest
created hereby. If, on the thirteenth monthly payment, the Pledgor prepays a
portion of the Note so that the principal of the Note is reduced by a total of
an additional $375,000 at the time of the thirteenth monthly payment, an
additional 2,500 of the Pledged Shares shall be released by the Secured Party to
Pledgor free and clear of the lien and security interest created hereby.
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ARTICLE VI - REMEDIES
6.1. Certain Remedies. If any Event of Default shall have occurred and is
continuing:
6.1.1. The Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the U.C.C. and also may, with notice as specified below, sell the
Collateral or any part thereof at public or private sale, for cash upon such
other terms as the Secured Party may deem commercially reasonable.
6.1.2. The Secured Party may, to the extent permitted by
Section 9-504 of the U.C.C., be the purchaser of any of the Collateral so sold
and the obligations of the Pledgor to the Secured Party may be applied as a
credit against the purchase price. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days prior notice to the Pledgor
of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification.
6.1.3. The Secured Party shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
6.1.4. Upon any such sale, the Secured Party shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser (including the Secured Party) at any such sale shall hold
the Collateral so sold absolutely free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor, and the
Pledgor hereby specifically waives, to the extent it may lawfully do so, all
rights of redemption, stay or appraisal which it has or may have under any rule
of law or statute now existing or hereafter adopted.
6.1.5. The Secured Party may enforce collection of any of the
Collateral by suit or otherwise, and surrender, release or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any obligations of any nature of any party with
respect thereto.
6.2. Application of Collateral Proceeds. If any Event of Default shall
have occurred and be continuing, all cash proceeds received by the Secured Party
in respect of any sale of, collection from, or other realization upon, all or
any part of the Collateral may, in the discretion of the Secured Party, be held
by the Secured Party as additional collateral security for (after payment of any
amounts payable to the Secured Party pursuant to Section 6.3) all or any part of
the Secured Obligations. Any surplus of such cash or cash proceeds held by the
Secured Party and remaining after payment in full of all the Secured
Obligations, shall be paid over to the Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
6.3. Indemnity and Expenses. The Pledgor hereby indemnifies and holds
harmless the Secured Party from and against any and all claims, losses, and
liabilities arising out of or resulting
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from this Pledge Agreement (including enforcement of this Pledge Agreement),
except claims, losses, or liabilities resulting from the Secured Party's gross
negligence or willful misconduct. Upon demand, the Pledgor will pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts which the
Secured Party may incur in connection with:
(a) this Pledge Agreement, the Note or any instrument or document relating
thereto;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Secured Party
hereunder;
(d) the failure by the Pledgor to perform or observe any of the provisions
hereof; or
(e) the advancing of any funds pursuant to Section 7.2 hereof.
ARTICLE VII - MISCELLANEOUS PROVISIONS
7.1. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor here from
shall in any event be effective unless the same shall be in writing and signed
by the Secured Party, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it is given.
7.2. Protection of Collateral. The Secured Party may from time to time,
at its option, perform any act which the Pledgor agrees hereunder to perform and
which the Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of any Event of Default) and the Secured
Party may from time to time take any other action which the Secured Party
reasonable deems necessary for the maintenance, preservation or protection of
any of the collateral or of its security interest therein, it being understood
and agreed that in each such case all costs and expenses incurred by the Secured
Party in connection therewith shall be payable by the Pledgor pursuant to
Section 6.3.
7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing or by facsimile and mailed or
delivered to the Pledgor or the Secured Party at their respective addresses or
facsimile numbers specified in the Note and Purchase Agreement or, with respect
to the Pledgor or the Secured Party, at such other address or facsimile number
as shall be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. Any notice, if mailed
and properly addressed with postage prepaid, or if properly addressed and sent
by prepaid courier service, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when the confirmation of
transmission is received by the transmitter.
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7.4. Section Captions. Section captions used in this pledge agreement
are for convenience of reference only, and shall not affect the construction of
this pledge agreement.
7.5. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
7.6. 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.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Pledge Agreement as of the day and year first above written.
Pledgor:
U.S. COMMERCIAL FUNDING CORPORATION,
an Illinois corporation
By:_________________________________
Larry Meek, President
Secured Party:
-----------------------------------
Harold Goodman
8
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Pledge Agreement"), dated as of September __,
1998 by and between U.S. Commercial Funding Corporation, an Illinois corporation
(the "Pledgor") and Keith Reid (the "Secured Party").
RECITALS:
The Secured Party was previously the owner of 50,000 shares of common
stock of Goodman Factors, Inc., a Texas corporation (the "Goodman Shares").
Pursuant to the terms and conditions of a Stock Purchase Agreement (the "Stock
Purchase Agreement") entered into by and among the Pledgor, the Secured Party
and Harold Goodman, the Pledgor purchased the Goodman Shares from Secured Party
for cash and for a Promissory Note (the "Note").
Approximately 69% of the purchase price for the Goodman Shares was paid
for in cash and the balance of the purchase price was paid for by delivery of
the Note. The parties desire to provide for 25% of the Goodman Shares (a total
of 12,500 shares") to be used as collateral for the Note. The remaining 37,500
Goodman Shares were released to Pledgor free and clear of any lien of the
Secured Party at the closing of the Stock Purchase Agreement.
In order to induce the Secured Party to enter into the Stock Purchase
Agreement, the Pledgor has agreed to grant a continuing security interest in and
to 12,500 Goodman Shares (the "Pledged Shares") to secure obligations of the
Pledgor under the Note.
The parties desire to provide for the release of the Pledged Shares
from this Pledge Agreement, and any security interest hereunder, upon the
payment of principal under the Note pursuant to Article V of this Pledge
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
1.1. Certain Terms. The following terms when used in this Pledge
Agreement shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Collateral" is defined in Section 2.1.
"Distributions" means all stock dividends, liquidating
dividends, shares of stock resulting from (or in connection with the exercise
of) stock splits, reclassifications, warrants, options, non-cash dividends,
mergers or consolidations, and all other distributions (whether similar or
dissimilar to the foregoing) on or with respect to any Pledged Shares or other
shares of capital stock constituting Collateral, but shall not include
Dividends.
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"Dividends" means cash dividends and cash distributions with
respect to any Pledged Shares.
"Event of Default" is defined in the Note.
"Pledged Shares" means 12,500 shares of Goodman Factors, Inc. common
- -------------- stock.
"Secured Obligations" means the obligation to pay the principal and
interest amount of the Note.
"U.C.C." means the Uniform Commercial Code as in effect in the
State of Texas or, as the context may require, in any other jurisdiction the
laws of which may apply to all or a portion of the Collateral in which a
security interest is granted hereunder.
1.2. U.C.C. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the U.C.C. are used
in this Pledge Agreement, including its preamble and recitals, with such
meanings.
ARTICLE II - PLEDGE
2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, mortgages, delivers, and transfers to the Secured Party
and hereby grants to the Secured Party, a continuing security interest in all of
its respective right, title and interest in and to (i) the Pledged Shares (the
"Collateral"); (ii) all Dividends and Distributions and other payments and
rights with respect to any Pledged Shares; and (iii) all proceeds of any of the
foregoing.
2.2. Security for Obligations. This Pledge Agreement and the Collateral
granted herewith, secure the payment and performance in full of the Secured
Obligations and all obligations of the Pledgor now or hereafter existing under
this Pledge Agreement, whether for principal, interest, costs, fees, expenses,
or otherwise.
2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing the Pledged Shares shall be delivered to and held by
the Secured Party pursuant hereto, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank, all inform and substance satisfactory to the
Secured Party.
2.4. Dividends on Pledged Shares. In the event that any Dividend is to
be paid on any Pledged Share at a time when no Event of Default has occurred and
is continuing, such Dividend shall be paid directly to the Pledgor. If any such
Event of Default has occurred and is continuing, then any such Dividend shall be
paid directly to the Secured Party.
2.5. Continuing Security Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall
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(a) remain in full force and effect until payment in full of all Secured
Obligations;
(b) be binding upon the Pledgor and its successors, transferees and
assigns; and
(c) inure, together with the rights and remedies of the Secured Party
hereunder, to the benefit of the Secured Party.
2.6. Filing: Further Assurances.
2.6.1. The Pledgor agrees that it will, at its expense and in
such manner and form as the Secured Party may require, execute, deliver, file
and record any financing statement, specific assignment or other paper and take
any other action that may be necessary or desirable, or that the Secured Party
may request, in order to create, preserve, perfect or validate any Security
Interest or to enable the Secured Party to exercise and enforce its rights
hereunder with respect to any of the Collateral. To the extent permitted by
applicable law, the Pledgor hereby authorizes the Secured Party to execute and
file, in the name of the Pledgor or otherwise, Uniform Commercial Code financing
statements (which may be carbon, photographic, photostatic or other reproduction
of this Agreement or of a financing statement relating to this Agreement) which
the Secured Party in its sole discretion may deem necessary or appropriate to
further perfect the Security Interest.
2.6.2. The Pledgor agrees that it will not change (i) its
name, identity or corporate structure in any manner or (ii) the location of its
chief executive office unless it shall have given the Secured Party not less
than 30 days' prior notice thereof.
2.6.3. The obligations of the Pledgor hereunder shall not be
released, discharged or otherwise affected by: (i) any extension, renewal,
settlement, compromise, waiver or release in respect of any obligation of the
Pledgor under the Note by operation of law or otherwise; (ii) any renewal,
extension, modification, amendment or restatement of or supplement to the Note;
(iii) any change in the corporate existence, structure or ownership of the
Pledgor, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Pledgor or its assets; or (iv) any other act or
omission to act or delay of any kind by the Pledgor, the Secured Party, or any
other corporation or person or any other circumstance whatsoever which might,
but for the provisions of this Section, constitute a legal or equitable
discharge of the Pledgor's obligations hereunder.
2.7. Record Ownership of Pledged Stock. The Secured Party may at any
time or from time to time, in his sole discretion, cause any or all of the
Pledged Stock to be transferred of record into the name of the Secured Party.
The Pledgor will promptly give to the Secured Party copies of any notices or
other communications received by it with respect to Pledged Stock registered in
the name of the Pledgor and the Secured Party will promptly give to the Pledgor
copies of any notices and communications received by the Secured Party with
respect to Pledged Stock registered in the name of the Secured Party.
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2.8. Right to Vote Pledged Stock. Unless an Event of Default shall
have occurred and is continuing, the Pledgor shall have the right, from time to
time, to vote and to give consents, ratification and waivers with respect to the
Pledged Stock, and the Secured Party shall, upon receiving a written request
from the Pledgor accompanied by a certificate signed by its principal financial
officer stating that no Default has occurred and is continuing, deliver to the
Pledgor or as specified in such request such proxies, powers of attorney,
consents, ratification and waivers in respect of any of the pledged Stock which
is registered in the name of the Secured Party or his nominee as shall be
specified in such request and be in form and substance satisfactory to the
Secured Party.
If a Default shall have occurred and be continuing, the Secured Party
shall have the right to the extent permitted by law and the Pledgor shall take
all such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratification and waivers, and take any other
action with respect to any or all of the Pledged Stock with the same force and
effect as if the Secured Party were the absolute and sole owner thereof.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
3.1. Warranties, etc. The Pledgor represents and warrants to the
Secured Party, as at the date of this Pledge Agreement:
3.1.1 . Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and valid title to (and has full right and
authority to pledge and assign) such Collateral, free and clear of all liens,
except the lien granted pursuant hereto in favor of the Secured Party.
3.1.2. Valid Security Interest. The delivery by the Pledgor of
the Collateral to the Secured Party is effective to create a valid, perfected,
first priority security interest in such Collateral and all proceeds thereof,
securing the Secured Obligations, and no filing or other action will be
necessary to perfect or protect such security interest.
3.1.3. Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice or filing with, any governmental
authority, regulatory body or any other person is required either:
(a) for the pledge by the Pledgor of any Collateral pursuant
to this Pledge Agreement or for the due execution, delivery and
performance of this Pledge Agreement by the Pledgor; or
(b) for the exercise by the Secured Party of the voting or
other rights provided for in this Pledge Agreement, or, except with
respect to any Pledged Shares, as may be required in connection with a
disposition of such Pledged Shares by laws affecting the offering and
sale of securities generally, of the remedies in respect of the
Collateral pursuant to this Pledge Agreement.
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ARTICLE IV - COVENANTS
4.1. Protect Collateral; Further Assurances, etc. The Pledgor will not
sell, assign, transfer, pledge, or encumber in any other manner the Collateral
(except in favor of the Secured Party hereunder). The Pledgor will warrant and
defend the right and title herein granted unto the Secured Party in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Secured Party
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
4.2. Additional Undertakings. The Pledgor agrees that it will not,
without the prior written consent of the Secured Party, not to be unreasonably
withheld, take or omit to take any action the taking or the omission of which
would result in any impairment or alteration of any obligation of the maker of
any instrument constituting Collateral.
ARTICLE V- RELEASE OF COLLATERAL
The initial amount of the Note is $1,875,000. The Note requires payment
of the principal amount of the Note on a monthly basis over a five year period.
One and 67/100 Percent (1.67%) of the principal amount of the Note, together
with interest, shall be paid at the time of each monthly payment. From and after
the time the principal balance of the Note has been reduced to $1,375,000,
twenty percent of the Pledged Shares shall be released by the Secured Party to
the Pledgor for each $275,000 of principal amount of the Note thereafter paid to
the Secured Party. There shall be no release of Pledged Shares attributed to the
first $500,000 of the principal amount of the Note.
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ARTICLE VI - REMEDIES
6.1. Certain Remedies. If any Event of Default shall have occurred and is
continuing:
6.1.1. The Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the U.C.C. and also may, with notice as specified below, sell the
Collateral or any part thereof at public or private sale, for cash upon such
other terms as the Secured Party may deem commercially reasonable.
6.1.2. The Secured Party may, to the extent permitted by
Section 9-504 of the U.C.C., be the purchaser of any of the Collateral so sold
and the obligations of the Pledgor to the Secured Party may be applied as a
credit against the purchase price. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days prior notice to the Pledgor
of the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification.
6.1.3. The Secured Party shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The Secured
Party may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
6.1.4. Upon any such sale, the Secured Party shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser (including the Secured Party) at any such sale shall hold
the Collateral so sold absolutely free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor, and the
Pledgor hereby specifically waives, to the extent it may lawfully do so, all
rights of redemption, stay or appraisal which it has or may have under any rule
of law or statute now existing or hereafter adopted.
6.1.5. The Secured Party may enforce collection of any of the
Collateral by suit or otherwise, and surrender, release or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any obligations of any nature of any party with
respect thereto.
6.2. Application of Collateral Proceeds. If any Event of Default shall
have occurred and be continuing, all cash proceeds received by the Secured Party
in respect of any sale of, collection from, or other realization upon, all or
any part of the Collateral may, in the discretion of the Secured Party, be held
by the Secured Party as additional collateral security for (after payment of any
amounts payable to the Secured Party pursuant to Section 6.3) all or any part of
the Secured Obligations. Any surplus of such cash or cash proceeds held by the
Secured Party and remaining after payment in full of all the Secured
Obligations, shall be paid over to the Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
6.3. Indemnity and Expenses. The Pledgor hereby indemnifies and holds
harmless the Secured Party from and against any and all claims, losses, and
liabilities arising out of or resulting
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from this Pledge Agreement (including enforcement of this Pledge Agreement),
except claims, losses, or liabilities resulting from the Secured Party's gross
negligence or willful misconduct. Upon demand, the Pledgor will pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts which the
Secured Party may incur in connection with:
(a) this Pledge Agreement, the Note or any instrument or document relating
thereto;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Secured Party
hereunder;
(d) the failure by the Pledgor to perform or observe any of the provisions
hereof; or
(e) the advancing of any funds pursuant to Section 7.2 hereof.
ARTICLE VII - MISCELLANEOUS PROVISIONS
7.1. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor here from
shall in any event be effective unless the same shall be in writing and signed
by the Secured Party, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it is given.
7.2. Protection of Collateral. The Secured Party may from time to time,
at its option, perform any act which the Pledgor agrees hereunder to perform and
which the Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of any Event of Default) and the Secured
Party may from time to time take any other action which the Secured Party
reasonable deems necessary for the maintenance, preservation or protection of
any of the collateral or of its security interest therein, it being understood
and agreed that in each such case all costs and expenses incurred by the Secured
Party in connection therewith shall be payable by the Pledgor pursuant to
Section 6.3.
7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing or by facsimile and mailed or
delivered to the Pledgor or the Secured Party at their respective addresses or
facsimile numbers specified in the Note and Purchase Agreement or, with respect
to the Pledgor or the Secured Party, at such other address or facsimile number
as shall be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. Any notice, if mailed
and properly addressed with postage prepaid, or if properly addressed and sent
by prepaid courier service, shall be deemed given when received; any notice, if
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transmitted by facsimile, shall be deemed given when the confirmation of
transmission is received by the transmitter.
7.4. Section Captions. Section captions used in this pledge agreement
are for convenience of reference only, and shall not affect the construction of
this pledge agreement.
7.5. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
7.6. 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.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Pledge Agreement as of the day and year first above written.
Pledgor:
U.S. COMMERCIAL FUNDING CORPORATION,
an Illinois corporation
By:__________________________________
Larry Meek, President
Secured Party:
----------------------------------
Keith Reid
8
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into in
Dallas, Texas, as of the ____ day of August, 1998 (the "Effective Date"), by and
between Goodman Factors, Inc., a Texas corporation, (the "Company") and Harold
Goodman, an individual ("Employee").
Background
The Company is engaged in the factoring, asset based lending and
financial services business (the "Business"). The Employee was formerly a
principal owner of the Company and, on the date of this Agreement, sold his
shares of the Company's common stock to U.S. Commercial Funding Corporation, an
Illinois corporation.
The Employee desires to be employed by the Company and the Company
desires to employ the Employee on a part time basis during the term of this
Agreement.
As a result of Employee's employment with the Company, Employee will
have access to, become familiar with and gain intimate knowledge of all or part
of the Company's Proprietary Information and of the intricacies of the Company's
business. All Proprietary Information is provided or revealed to Employee in
trust and confidence for Employee's use solely in connection with Employee's
obligations to the Company under this Agreement and Employee shall not at any
time acquire any right, title or interest in or to any Proprietary Information.
The Company desires to protect its business and goodwill and all of its present
and future Proprietary Information; to prevent competitors from acquiring,
appropriating or discovering its Proprietary Information; and to maintain and
protect its competitive advantage in the factoring and financial services
business and industry. To provide this protection, Employee has agreed as
hereinafter set forth to keep strictly confidential all, and not disclose any,
Proprietary Information and to not compete with the Company for a limited period
following the term of this Agreement.
Agreement
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following definitions:
1.1 Client. "Client" or "Customers" shall mean (i) any Entity to whom the
Company has provided factoring, asset based lending and financial services ;
(ii) to whom the Company shall provide factoring or other financial services
prior to the Termination Date; (iii) and/or to whom the Company or Employee has
actively pursued prior to the Termination Date to provide factoring, asset based
lending or other financial services.
1.2 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.
1.3 Covenant Period. "Covenant Period" shall mean the period beginning on
the Effective Date of employment and continuing for five (5) years after the
Termination Date.
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1.4 Entity. "Entity" shall mean an individual, proprietorship,
corporation, partnership (whether general or limited), limited liability
company, association, business trust, and any other enterprise (for profit, not
for profit or non-profit), and shall include all subsidiaries and affiliates of
any of the foregoing. For these purposes, a subsidiary shall mean any Entity,
incorporated or unincorporated, which is controlled directly or indirectly by
the owner, shareholders, partners, associates, beneficiaries, or the like, as
the case may be, of any of the foregoing; and "control" shall mean the ownership
directly or indirectly of any equity interest equal to or greater than ten
percent (10%) in an Entity. Notwithstanding anything else contained herein to
the contrary, the Employee may continue his current ownership in Rediscounters,
Inc. in accordance with Section 6.5 of this Agreement.
1.5 Proprietary Information. "Proprietary Information" shall mean any
and all information and compilations of information relating to the Company's
factoring and financial services business provided or available to Employee, or
to which Employee has access or which he prepares or compiles, while employed
with the Company or after the Termination Date, which information or
compilations or information are deemed, expressly or impliedly, by the Company
to be confidential, proprietary, and/or unique, are not generally known to the
public, may give the Company a competitive advantage, and specifically enhance
the Company's goodwill, including, without limitation:
(a) the Company's pending or awarded patents, copyrights,
trade secrets, trade names, trademarks, service marks, business
techniques, formulas, production methods, technology, equipment,
computer programs and software, source materials, manuals, Client,
Customer and key supplier lists, lists of potential customers, Customer
prospect information, methods of business operations, publications and
other products;
(b) financial reports and information regarding the Company;
(c) personnel data relating to the Company's shareholders,
directors, employees and independent contractors, including
compensation agreements of such employees and independent contractors
with the Company;
(d) internal plans, practices and procedures of the Company,
including business plans, marketing and sales plans, strategic plans,
budgets and forecasts; and
(e) the terms and provisions of any agreement between the
Company and any third party.
1.6 Termination Date. "Termination Date" shall mean the day that Employee's
employment with the Company terminates or ends for any reason whatsoever.
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1.7. Termination for Good Cause. "Termination For Good Cause" shall
mean termination by Company of Employee's employment by the Company by reason of
Employee's gross incompetence, willful dishonesty towards, fraud upon, or
deliberate injury or attempted injury to Company, or by reason of Employee's
willful material breach of this Employment Agreement which has resulted in
material injury to the Company. Termination for Good Cause shall also mean
termination by the Company of Employee's employment by the Company by reason of
Employee's conviction of a felony, whether related to the Company or to any
other matter, or by reason of Employee's conviction of a misdemeanor relating to
Employee's dishonest conduct, whether related to the Company or to any other
matter.
1.8. Termination Without Cause. "Termination Without Cause" shall mean any
termination of employee's employment by Company other than for Cause, by Reason
of Disability or by Reason of Death.
1.9 Territory. "Territory" shall mean the 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.
1.10. Voluntary Termination. "Voluntary Termination" shall mean termination
by Employee of Employee's employment by Company other than termination by reason
of Employee's death or disability as described in paragraphs 4.3. and 4.4.
2. EMPLOYMENT AND DUTIES OF EMPLOYEE.
2.1 Employment. The Company agrees to employ Employee, and Employee agrees
to accept employment with the Company on the terms and conditions set forth
herein. The term of employment of Employee by the Company under this Employment
Agreement shall be for a period of five (5) years beginning on ________, 1998
(the "Effective Date"), unless terminated earlier.
Notwithstanding any Termination of Employee's employment:
(a) any provisions of this Agreement calling for performance by any
party after the Termination Date shall continue in full force and effect;
and
(b) the representations of the parties set forth herein shall
survive and continue in full force and effect.
2.2 Scope of Duties. Except as specifically set forth herein, Employee
shall render services for the benefit, and on behalf, of the Company as directed
by the President and the Board of Directors of the Company. The President of the
Company, in consultation with the Company's Board of Directors, shall have the
power to determine the general and specific duties to be performed by Employee
and the means and manner by which those duties shall be performed. The services
and duties to be performed by Employee, and the means and manner by which those
duties shall be performed, shall be similar to those performed by the Employee
during the previous year. Employee shall devote not less than twenty (20) hours
per normal work week to the business affairs
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of the Company. Employee's title shall be Corporate Financial Officer of
the Company. Employee shall report to, and be responsible to, the President of
the Company.
2.3 Professional Standards. Recognizing and acknowledging that it is
essential for the protection and enhancement of the name and business of the
Company and the immense goodwill pertaining thereto, Employee shall perform his
employment duties professionally and in accordance with the standards
established by the President and Board of Directors of the Company from time to
time; and Employee shall not act, and shall refrain from acting, in any manner
that could tarnish the name, business or income of the Company or the immense
goodwill of the Company.
3. COMPENSATION. As his entire compensation for all services rendered to
the Company during the term of this Agreement, in whatever capacity rendered,
the Employee shall be paid, subject to withholding and other applicable
employment taxes, as follows;
3.1. Base Salary. Employee shall be paid a base salary of $130,000 per
year commencing on the Effective Date. Such base salary shall be payable in
twenty-six (26) bi-weekly installments, provided however, if the first month of
employment is less than a full calendar month, the first payment shall be
prorated for the number of days worked in the first calendar month of
employment.
3.2. Vacation. Employee shall be entitled to twenty (20) days of vacation
during the first twelve (12) months of employment, and twenty (20) days of
vacation for each subsequent twelve (12) month period during the term of this
Agreement and any extensions thereof, prorated for partial years.
3.3. Reimbursement for Expenses. During the term of this Agreement, the
Company shall reimburse Employee for reasonable and properly documented
out-of-pocket business incurred by Employee in connection with his duties under
this Agreement.
3.4. Automobile Allowance. The Company shall provide Employee with a $500
per month automobile allowance during the term of this Agreement. In addition to
the $500 per month automobile allowance, Employer shall, during each year of
this Agreement, pay the first $2,500 of the operating costs of such automobile.
For purposes of this paragraph 3.4, operating costs, shall include, but are not
limited to, fuel, oil, normal service, repairs, tires and insurance.
3.5. Additional Benefits. The Company shall provide the Employee with
health insurance during the term of this Agreement. At such time as Employee is
eligible for social security, the Company shall provide him will health
insurance necessary to supplement Medicare coverage. The Employee shall be
entitled to participate in such benefit and compensation plans as are now
generally available or later made generally available to the employees of the
Company. If the Employee is required to travel on behalf of the Company, he
shall be entitled to first class air plane tickets purchased in accordance with
the Company's policies. Employee may, at his option dress in casual, but
tasteful, clothing when providing services to the Company hereunder.
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3.6. Life Insurance. The Company currently has a $5,000,000 key man life
insurance policy on Employee. Such key man life insurance policy shall be
retained by the Company or replaced with another policy. Except as specifically
set forth herein, the entire death benefit of such policy shall be paid to the
Company upon the death of Employee. The Company is owned by U.S. Commercial
Funding Corporation ("USCF"), an Illinois corporation. USCF is indebted to
Employee in connection with the sale of the Company's stock by Employee to USCF.
Upon the death of Employee, the death benefit from the key man insurance policy
shall be paid to the estate of the Employee to the extent of the then
outstanding principal and interest of amount of such Note and such Note shall,
after such payment, be paid in full.
4. TERMINATION MATTERS.
4.1. Termination For Good Cause. Termination for Good Cause may be
effected immediately by the Company during the term of this Agreement by written
notification to Employee. Upon Termination For Good Cause, the following shall
promptly occur:
(a) the Company shall pay Employee all accrued salary earned at the
date of Termination for Good Cause;
(b) the Company shall pay Employee all vacation pay which is accrued
at the date of Termination for Good Cause;
(c) the Company shall pay all business expenses incurred by Employee
in connection with his duties hereunder which are unpaid at the date of
Termination for Good Cause;
(d) the Company shall pay to Employee all compensation or benefits
due to Employee at the date of Termination for Good Cause under any
agreement or plans mutually agreed to in writing by both parties.
4.2. Termination Without Cause. The Company may terminate Employee's
employment for any reason and without cause at any time upon thirty (30) days
written notice to Employee. Upon Termination without Cause, the following shall
promptly occur:
(a) the Company shall pay Employee all salary compensation for a
period of thirty (30) days from the date of Termination Without Cause.
(b) the Company shall pay Employee all vacation pay which is accrued
at the date of Termination without Cause;
(c) the Company shall pay all business expenses incurred by Employee
in the connection with his duties hereunder which are unpaid at the date
of Termination without Cause;
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(d) the Company shall pay to Employee all compensation or benefits
due to Employee at the date of Termination Without Cause under any
agreement or plans mutually agreed to in writing by both parties.
4.3. Termination by Reason of Disability. If, during the term of this
Agreement, Employee, in the reasonable judgment of the Board of Directors of the
Company has failed to perform his duties under this Agreement on account of
illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than three (3) consecutive months, the Company
shall have the right to terminate Employee's employment hereunder by twenty (20)
days written notification to Employee. In the event of termination by reason of
disability, Employee shall pay Employee all cash and other compensation which
would be due and owing to Employee under paragraph 4.1. of this Employment
Agreement if Employee's employment had been Terminated for Good Cause by Company
rather than as a result of the Disability of Employee. The Company shall
maintain disability insurance coverage to cover Employee. From and after the
time Employee commences receiving disability payments under such disability
insurance coverage, he shall be entitled to no further compensation from the
Company hereunder.
4.4. Death. In the event of Employee's death during the term of this
Agreement, Employee's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs and the Company shall pay to
his estate or such beneficiaries as Employee may from time to time designate, to
the date of Employee's death all cash and other compensation which would be due
and owing to Employee under paragraph 4.1 of this Employment Agreement if
Employee's employment had been Terminated for Good Cause by the Company rather
than by as a result of the Death of Employee.
4.5. Voluntary Termination. In the event of a Voluntary Termination, the
Company shall pay to Employee all cash and other compensation which would be due
and owing to Employee under paragraph 4.1 of this Employment Agreement if
Employee's employment had been Terminated for Good Cause by the Company rather
than by the Voluntary Termination by Employee.
5. RECORDS AND FILES. Upon the Termination Date under this Agreement, or
upon an earlier request of the Board of Directors of the Company, Employee shall
have no right to keep or use any, and shall promptly return to the Company all:
(a) Proprietary Information and all documents, records, procedures,
books, notebooks and all other documentation (and all memoranda and copies
thereof) containing any Proprietary Information (including, without
limitation and in particular, all financial statements, manufacturing or
marketing information) then in Employee's possession or control
irrespective of whether such documentation was prepared or compiled by
Employee, the Company, the Company's employees or independent contractors,
or other Entity; and
(b) equipment and tangible personal property of the Company
entrusted to Employee by the Company or otherwise in Employee's possession
or control. Employee acknowledges that all such documentation, equipment
and tangible personal property is
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confidential, is not readily accessible to the Company's competitors, and
is and shall remain the sole and exclusive property of the Company, free
and clear of any and all claims of Employee. Employee shall be deemed to
be the bailee thereof for the use and benefit of the Company and shall not
at any time acquire any right, title or interest in or to such
documentation, equipment or tangible personal property and shall safely
keep and preserve the same, except as may be consumed in the Company's
normal business operations.
6. COVENANTS OF EMPLOYEE. As a material term and condition of this
Agreement and in order to protect the Company's investment in training and
education, the goodwill, Proprietary Information and the business and trade
secrets of the Company, Employee covenants and agrees that, unless otherwise
agreed to in writing by the Company:
6.1 Employees and Independent Contractors. During the Covenant Period,
Employee shall not attempt to persuade employees and independent contractors of
the Company to terminate or significantly alter their relationships or
association with the Company.
6.2 Preservation of Business. During the Employee's employment by the
Company, Employee shall use his best efforts to preserve the Company's business
organization intact, to keep available to the Company the services of the
Company's employees and independent contractors, and to preserve for the Company
its relationships with its Clients, Customers, suppliers, distributors, brokers,
lessees and others having business relationships with the Company.
6.3 Covenants of Confidentiality and Not to Compete. Employee shall
strictly comply with the following:
(a) Nondisclosure. Employee acknowledges that in the course of his
performance of services under this Agreement he has had, and will have,
access to, become acquainted and familiar with, or gain intimate knowledge
of, all or part of the intimacies of the Company's business and the
Company's Proprietary Information. Employee therefore agrees that he shall
not under any circumstance whatsoever (except as may be specifically
directed by the Board of Directors of the Company and then solely in the
performance of Employee's duties on behalf of the Company):
(i) directly or indirectly, intentionally or unintentionally,
reveal, disclose, furnish, publish, make accessible, or disseminate
to any Entity who is not employed, associated with or engaged by the
Company any Proprietary Information or other matters concerning the
business affairs of the Company, unless already generally known to
and available for use by the public (other than as a result of
Employee's acts or omissions to act); or
(ii) use or exploit any Proprietary Information for the financial
gain of Employee or any Entity or for any other purpose. Provided,
however, that if required, Employee may disclose such Proprietary
Information as mandated by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction. In such
latter
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event, Employee will promptly notify the Company of such order or
subpoena in order to provide the Company the opportunity to protect
its interests in such Proprietary Information.
(b) Restricting Solicitation. Employee agrees that, during the
Covenant Period, Employee shall not, either individually or on behalf of
any Entity other than the Company:
(i) solicit or otherwise deal with any Client or Customer of the
Company in any manner designed to (or that could) take business away
from or otherwise damage the Company in any way; and/or
(ii) solicit or otherwise induce any employee or independent
contractor of the Company to terminate their employment or
association as employees, distributors or independent contractors
with the Company.
(c) Against Competition. Employee agrees that during the Covenant
Period, Employee shall not, 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 Employee consult or discuss the possibility of
employment or other relationship with any Competing Entity within
the Territory; 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.
(d) Cooperation. During the Covenant Period, Employee agrees that,
upon the Company's reasonable request, Employee in good faith and using
diligent efforts shall cooperate and assist the Company in any dispute,
controversy or litigation in which the Company may be involved, including
without limitation, Employee's participation in any court or arbitration
proceedings, the giving of testimony, the signing of affidavits or such
other personal cooperation as counsel for the Company may reasonably
request. Such cooperation shall not be unreasonably burdensome or without
reasonable compensation.
6.4 Reformation. The Company intends to restrict the activities of
Employee under this Section 6 only to the extent necessary for the protection of
the legitimate business interests of the Company. It is the intention and
agreement of the parties that all the terms and conditions hereof be enforced to
the fullest extent permitted by law. In the event the provisions of this Section
6 should ever be deemed or adjudged by a court of competent jurisdiction to
exceed the time or geographical limitation permitted by applicable law, then the
parties intend such provisions shall nevertheless be valid and enforceable to
the extent necessary for such protection as determined by
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such court, and such provisions shall be reformed to the maximum time or
geographic limitations as permitted by applicable law and determined by such
court.
6.5. Exception to Non-Competition Covenant. Notwithstanding the
restrictions set forth in paragraph 6.3 above, the Company and the Employee
agree that for purposes of this Agreement, Employee 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
Employee is terminated Without Cause, the restrictions set forth in paragraph
6.1 and 6.3 above, shall not be applicable to Employee. In the event the Company
breaches the Company's Promissory Note to Employee dated this date, and such
breach is not cured within the terms of such Note, the restrictions set forth in
paragraph 6.1 and 6.3 of this Agreement and Article X of the Stock Purchase
Agreement dated this date between the Company and Employee and Keith Reid, shall
be of no further force or effect.
7. REMEDIES.
7.1 Injunction. In the event of Employee's actual or threatened breach of
any one or more provisions of Section 6 above, Employee specifically
acknowledges that the Company will incur incalculable and irreparable damage and
that the Company has no adequate remedy at law for such threatened and
continuing breach. Therefore, the Company shall be entitled to injunctive relief
immediately and permanently restraining Employee from such continuing or
threatened breach, in addition to all other remedies available to the Company at
law or in equity (including without limitation, a temporary restraining order,
preliminary or permanent injunction, specific performance and money damages).
Employee expressly agrees that a temporary restraining order may be granted
without prior notice to Employee and Employee hereby expressly waives any and
all right to such prior notice.
7.2 Non-Exclusive of Remedies. Except as specifically provided herein, the
rights and remedies of the parties hereto shall not be mutually exclusive, and
the exercise of one or more of the provisions of this Agreement shall not
preclude the exercise of any other provision. Each of the parties confirms that
damages at law may be an inadequate remedy for a breach or threatened breach of
any provisions hereof. The respective rights and obligations hereunder shall be
enforceable by specific performance, injunction, or other equitable remedy, but
nothing herein contained (except as provided in Section 7.3 below) is intended
to or shall limit or affect any rights at law or by statute or otherwise of any
party hereto as against the other party for a breach or threatened breach of any
provision hereof, it being the intention of this Section 7.2 to make clear the
agreement of the parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at law and
otherwise.
7.3 Mediation and Arbitration.
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7.3.1. 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.
7.3.2.Arbitration. With the exception of the Company's right to a
temporary restraining order, a preliminary injunction or a permanent injunction
under 7.1 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
the Company may be entitled to, and have entered, a Temporary Restraining Order,
a Preliminary Injunction or a Permanent Injunction, under 7.1 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.
8. MISCELLANEOUS.
8.1 Attorney's Fees. If a legal action or other proceeding is brought by
the Company or by the Employee for enforcement of this Agreement or for judgment
on an arbitration award under this Agreement, the party that prevails shall be
entitled to recover reasonable attorney's fees, costs and expenses incurred in
addition to any other relief to which that party may be entitled.
8.2 Entire Agreement. This Agreement constitutes the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes, supplants, and replaces all prior agreements, understandings,
arrangements, negotiations, representations, discussions and preliminary
agreements between the parties hereto relating to the subject matter hereof.
8.3 Successors. Except as otherwise expressly provided herein, this
Employment Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns, and upon the Employee, his administrators,
executors, legatees, heirs and assigns.
8.4 Governing Law. This Employment Agreement shall be construed and
enforced under and in accordance with the laws of the State of Texas. 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.
8.5 Waiver. Any waiver by any party hereto of any breach of any kind or
character whatsoever by any other party, whether such waiver be direct or
implied, shall not be construed as a continuing waiver or consent to any
subsequent breach of this Agreement on the part of the other party or parties.
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8.6 Severability. The provisions of this Agreement are severable and
should any provision hereof be void, voidable or unenforceable under any
applicable law, such void, voidable or unenforceable provision shall not affect
or invalidate any other provision of this Agreement, which shall continue to
govern the relative rights and duties of the parties as though void, voidable or
unenforceable provision were not a part hereof. In addition, it is the intention
and agreement of the parties that all of the terms and conditions hereof be
enforced to the fullest extent permitted by law.
8.7. Modification. This Agreement may not be modified except by a written
instrument signed by all the parties hereto.
8.8 Headings. The headings of sections and subsection used in this
Agreement are for convenience only and are not part of its operative language.
They shall not be used to affect the construction of any provision hereof.
8.9 Acknowledgment. Employee specifically acknowledges that: Employee has
read and understands all of the terms of this Agreement; in executing this
Agreement, Employee does not rely on any inducements, agreements, promises or
representations of the Company, other than the terms or conditions specifically
set forth in this Agreement; the Clients and Customers of the Company comprise a
substantial part of the goodwill of the Company; the Company's offer of
employment constitutes adequate consideration for Employee's entering into this
Agreement, including the covenants set forth in Section 6 above, the Company
will incur a significant investment in the Employee; during his employment,
Employee will render services to the Company that contribute to and enhance the
goodwill of the Company; Employee has had an opportunity to consult with
independent counsel with respect to the advisability of executing this
Agreement; and Employee has made such investigation of the facts pertaining to
this Agreement and all of the matters pertaining hereto as he deems necessary.
In addition, Employee represents to the Company that Employee has not and will
not enter into any agreement inconsistent with this Agreement.
8.10 Separate Counsel. The parties acknowledge that the Company and the
Employee have been represented by separate legal counsel in this transaction and
that Employee has not been represented by the Company's counsel.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
Goodman Factors, Inc. Employee
By: ___________________________ _______________________________
Larry Meek, President Harold Goodman
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into in
Dallas, Texas, as of the ____ day of August, 1998 (the "Effective Date"), by and
between Goodman Factors, Inc., a Texas corporation, (the "Company") and Keith
Reid, an individual ("Employee").
Background
The Company is engaged in the factoring, asset based lending and financial
services business (the "Business"). The Employee was formerly a principal owner
of the Company and, on the date of this Agreement, sold his shares of the
Company's common stock to U.S. Commercial Funding Corporation, an Illinois
corporation.
The Employee desires to be employed by the Company and the Company desires
to employ the Employee during the term of this Agreement.
As a result of Employee's employment with the Company, Employee will have
access to, become familiar with and gain intimate knowledge of all or part of
the Company's Proprietary Information and of the intricacies of the Company's
business. All Proprietary Information is provided or revealed to Employee in
trust and confidence for Employee's use solely in connection with Employee's
obligations to the Company under this Agreement and Employee shall not at any
time acquire any right, title or interest in or to any Proprietary Information.
The Company desires to protect its business and goodwill and all of its present
and future Proprietary Information; to prevent competitors from acquiring,
appropriating or discovering its Proprietary Information; and to maintain and
protect its competitive advantage in the factoring and financial services
business and industry. To provide this protection, Employee has agreed as
hereinafter set forth to keep strictly confidential all, and not disclose any,
Proprietary Information and to not compete with the Company for a limited period
following the term of this Agreement.
Agreement
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following definitions:
1.1 Client. "Client" or "Customers" shall mean (i) any Entity to whom the
Company has provided factoring, asset based lending and financial services ;
(ii) to whom the Company shall provide factoring or other financial services
prior to the Termination Date; (iii) and/or to whom the Company or Employee has
actively pursued prior to the Termination Date to provide factoring, asset based
lending or other financial services.
1.2 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.
1.3 Covenant Period. "Covenant Period" shall mean the period beginning on
the Effective Date of employment and continuing for five (5) years after the
Termination Date.
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1.4 Entity. "Entity" shall mean an individual, proprietorship,
corporation, partnership (whether general or limited), limited liability
company, association, business trust, and any other enterprise (for profit, not
for profit or non-profit), and shall include all subsidiaries and affiliates of
any of the foregoing. For these purposes, a subsidiary shall mean any Entity,
incorporated or unincorporated, which is controlled directly or indirectly by
the owner, shareholders, partners, associates, beneficiaries, or the like, as
the case may be, of any of the foregoing; and "control" shall mean the ownership
directly or indirectly of any equity interest equal to or greater than ten
percent (10%) in an Entity. Notwithstanding anything else contained herein to
the contrary, the Employee may continue his current ownership in Rediscounters,
Inc. in accordance with Section 6.5 of this Agreement.
1.5 Proprietary Information. "Proprietary Information" shall mean any and
all information and compilations of information relating to the Company's
factoring and financial services business provided or available to Employee, or
to which Employee has access or which he prepares or compiles, while employed
with the Company or after the Termination Date, which information or
compilations or information are deemed, expressly or impliedly, by the Company
to be confidential, proprietary, and/or unique, are not generally known to the
public, may give the Company a competitive advantage, and specifically enhance
the Company's goodwill, including, without limitation:
(a) the Company's pending or awarded patents, copyrights, trade
secrets, trade names, trademarks, service marks, business techniques,
formulas, production methods, technology, equipment, computer programs and
software, source materials, manuals, Client, Customer and key supplier
lists, lists of potential customers, Customer prospect information,
methods of business operations, publications and other products;
(b) financial reports and information regarding the Company;
(c) personnel data relating to the Company's shareholders,
directors, employees and independent contractors, including compensation
agreements of such employees and independent contractors with the Company;
(d) internal plans, practices and procedures of the Company,
including business plans, marketing and sales plans, strategic plans,
budgets and forecasts; and
(e) the terms and provisions of any agreement between the Company
and any third party.
1.6 Termination Date. "Termination Date" shall mean the day that Employee's
employment with the Company terminates or ends for any reason whatsoever.
1.7. Termination for Good Cause. "Termination For Good Cause" shall mean
termination by Company of Employee's employment by the Company by reason of
Employee's gross incompetence, willful dishonesty towards, fraud upon, or
deliberate injury or attempted injury to
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Company, or by reason of Employee's willful material breach of this Employment
Agreement which has resulted in material injury to the Company. Termination for
Good Cause shall also mean termination by the Company of Employee's employment
by the Company by reason of Employee's conviction of a felony, whether related
to the Company or to any other matter, or by reason of Employee's conviction of
a misdemeanor relating to Employee's dishonest conduct, whether related to the
Company or to any other matter.
1.8. Termination Without Cause. "Termination Without Cause" shall mean any
termination of employee's employment by Company other than for Cause, by Reason
of Disability or by Reason of Death.
1.9 Territory. "Territory" shall mean the 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.
1.10. Voluntary Termination. "Voluntary Termination" shall mean termination
by Employee of Employee's employment by Company other than termination by reason
of Employee's death or disability as described in paragraphs 4.3. and 4.4.
2. EMPLOYMENT AND DUTIES OF EMPLOYEE.
2.1 Employment. The Company agrees to employ Employee, and Employee agrees
to accept employment with the Company on the terms and conditions set forth
herein. The term of employment of Employee by the Company under this Employment
Agreement shall be for a period of five (5) years beginning on ________, 1998
(the "Effective Date"), unless terminated earlier.
Notwithstanding any Termination of Employee's employment:
(a) any provisions of this Agreement calling for performance by any
party after the Termination Date shall continue in full force and effect;
and
(b) the representations of the parties set forth herein shall
survive and continue in full force and effect.
2.2 Scope of Duties. Except as specifically set forth herein, Employee
shall render services for the benefit, and on behalf, of the Company as directed
by the President and the Board of Directors of the Company. The President of the
Company, in consultation with the Company's Board of Directors, shall have the
power to determine the general and specific duties to be performed by Employee
and the means and manner by which those duties shall be performed. The services
and duties to be performed by Employee, and the means and manner by which those
duties shall be performed, shall be similar to those performed by the Employee
during the previous year. Employee shall devote full time to the business
affairs of the Company. Employee's title shall be Corporate Operating Officer of
the Company. Employee shall report to, and be responsible to, the President of
the Company.
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2.3 Professional Standards. Recognizing and acknowledging that it is
essential for the protection and enhancement of the name and business of the
Company and the immense goodwill pertaining thereto, Employee shall perform his
employment duties professionally and in accordance with the standards
established by the President and Board of Directors of the Company from time to
time; and Employee shall not act, and shall refrain from acting, in any manner
that could tarnish the name, business or income of the Company or the immense
goodwill of the Company.
3. COMPENSATION. As his entire compensation for all services rendered to
the Company during the term of this Agreement, in whatever capacity rendered,
the Employee shall be paid, subject to withholding and other applicable
employment taxes, as follows;
3.1. Base Salary. Employee shall be paid a base salary of $130,000 per
year commencing on the Effective Date. Such base salary shall be payable in
twenty six (26) bi-weekly installments, provided however, if the first month of
employment is less than a full calendar month, the first payment shall be
prorated for the number of days worked in the first calendar month of
employment.
3.2. Vacation. Employee shall be entitled to twenty (20) days of vacation
during the first twelve (12) months of employment, and twenty (20) days of
vacation for each subsequent twelve (12) month period during the term of this
Agreement and any extensions thereof, prorated for partial years. If vacation
days are not taken by Employee he shall receive additional compensation
therefore based upon his base salary.
3.3. Reimbursement for Expenses. During the term of this Agreement, the
Company shall reimburse Employee for reasonable and properly documented
out-of-pocket business incurred by Employee in connection with his duties under
this Agreement.
3.4. Automobile Allowance. The Company shall provide Employee with a $500
per month automobile allowance during the term of this Agreement. In addition to
the $500 per month automobile allowance, Employer shall, during each year of
this Agreement, pay the first $2,500 of the operating costs of such automobile.
For purposes of this paragraph 3.4, operating costs, shall include, but are not
limited to, fuel, oil, normal service, repairs, tires and insurance.
3.5. Additional Benefits. The Company shall provide the Employee with
health insurance during the term of this Agreement. At such time as Employee is
eligible for social security, the Company shall provide him will health
insurance necessary to supplement Medicare coverage. The Employee shall be
entitled to participate in such benefit and compensation plans as are now
generally available or later made generally available to the employees of the
Company.
3.6. Life Insurance. The Company currently has a $2,000,000 key may life
insurance policy on Employee. Such key man life insurance policy shall be
retained by the Company or replaced with an equivalent policy. Except as
specifically set forth herein, the entire death benefit of such policy shall be
paid to the Company upon the death of Employee. The Company is owned by U.S.
Commercial Funding Corporation ("USCF"), an Illinois corporation. USCF is
indebted to Employee in connection with the sale of the Company's stock by
Employee to USCF. Upon the death of
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Employee, the death benefit from the key man insurance policy shall be paid to
the estate of the Employee to the extent of the then outstanding principal and
interest of amount of such Note and such Note shall, after such payment, be paid
in full.
3.7. Bonus. In the event the Company operates at a profit during each of
its fiscal years during the term of this Agreement, the Employee shall be
entitled to such bonus compensation as is provided for on Exhibit "A" attached
hereto and by this reference made a part hereof.
4. TERMINATION MATTERS.
4.1. Termination For Good Cause. Termination for Good Cause may be
effected immediately by the Company during the term of this Agreement by written
notification to Employee. Upon Termination For Good Cause, the following shall
promptly occur:
(a) the Company shall pay Employee all accrued salary earned at the
date of Termination for Good Cause;
(b) the Company shall pay Employee all vacation pay which is accrued
at the date of Termination for Good Cause;
(c) the Company shall pay all business expenses incurred by Employee
in connection with his duties hereunder which are unpaid at the date of
Termination for Good Cause;
(d) the Company shall pay to Employee all compensation or benefits
due to Employee at the date of Termination for Good Cause under any
agreement or plans mutually agreed to in writing by both parties.
4.2. Termination Without Cause. The Company may terminate Employee's
employment for any reason and without cause at any time upon thirty (30) days
written notice to Employee. Upon Termination without Cause, the following shall
promptly occur:
(a) the Company shall pay Employee all salary compensation for a
period of thirty (30) days from the date of Termination Without Cause.
(b) the Company shall pay Employee all vacation pay which is accrued
at the date of Termination without Cause;
(c) the Company shall pay all business expenses incurred by Employee
in the connection with his duties hereunder which are unpaid at the date
of Termination without Cause;
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(d) the Company shall pay to Employee all compensation or benefits
due to Employee at the date of Termination Without Cause under any
agreement or plans mutually agreed to in writing by both parties.
4.3. Termination by Reason of Disability. If, during the term of this
Agreement, Employee, in the reasonable judgment of the Board of Directors of the
Company has failed to perform his duties under this Agreement on account of
illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than three (3) consecutive months, the Company
shall have the right to terminate Employee's employment hereunder by twenty (20)
days written notification to Employee. In the event of termination by reason of
disability, Employee shall pay Employee all cash and other compensation which
would be due and owing to Employee under paragraph 4.1. of this Employment
Agreement if Employee's employment had been Terminated for Good Cause by Company
rather than as a result of the Disability of Employee. The Company shall
maintain disability insurance coverage to cover Employee. From and after the
time Employee commences receiving disability payments under such disability
insurance coverage, he shall be entitled to no further compensation from the
Company hereunder.
4.4. Death. In the event of Employee's death during the term of this
Agreement, Employee's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs and the Company shall pay to
his estate or such beneficiaries as Employee may from time to time designate, to
the date of Employee's death all cash and other compensation which would be due
and owing to Employee under paragraph 4.1 of this Employment Agreement if
Employee's employment had been Terminated for Good Cause by the Company rather
than by as a result of the Death of Employee.
4.5. Voluntary Termination. In the event of a Voluntary Termination, the
Company shall pay to Employee all cash and other compensation which would be due
and owing to Employee under paragraph 4.1 of this Employment Agreement if
Employee's employment had been Terminated for Good Cause by the Company rather
than by the Voluntary Termination by Employee.
5. RECORDS AND FILES. Upon the Termination Date under this Agreement, or
upon an earlier request of the Board of Directors of the Company, Employee shall
have no right to keep or use any, and shall promptly return to the Company all:
(a) Proprietary Information and all documents, records, procedures,
books, notebooks and all other documentation (and all memoranda and copies
thereof) containing any Proprietary Information (including, without
limitation and in particular, all financial statements, manufacturing or
marketing information) then in Employee's possession or control
irrespective of whether such documentation was prepared or compiled by
Employee, the Company, the Company's employees or independent contractors,
or other Entity; and
(b) equipment and tangible personal property of the Company
entrusted to Employee by the Company or otherwise in Employee's possession
or control. Employee acknowledges that all such documentation, equipment
and tangible personal property is
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confidential, is not readily accessible to the Company's competitors, and
is and shall remain the sole and exclusive property of the Company, free
and clear of any and all claims of Employee. Employee shall be deemed to
be the bailee thereof for the use and benefit of the Company and shall not
at any time acquire any right, title or interest in or to such
documentation, equipment or tangible personal property and shall safely
keep and preserve the same, except as may be consumed in the Company's
normal business operations.
6. COVENANTS OF EMPLOYEE. As a material term and condition of this
Agreement and in order to protect the Company's investment in training and
education, the goodwill, Proprietary Information and the business and trade
secrets of the Company, Employee covenants and agrees that, unless otherwise
agreed to in writing by the Company:
6.1 Employees and Independent Contractors. During the Covenant Period,
Employee shall not attempt to persuade employees and independent contractors of
the Company to terminate or significantly alter their relationships or
association with the Company.
6.2 Preservation of Business. During the Employee's employment by the
Company, Employee shall use his best efforts to preserve the Company's business
organization intact, to keep available to the Company the services of the
Company's employees and independent contractors, and to preserve for the Company
its relationships with its Clients, Customers, suppliers, distributors, brokers,
lessees and others having business relationships with the Company.
6.3 Covenants of Confidentiality and Not to Compete. Employee shall
strictly comply with the following:
(a) Nondisclosure. Employee acknowledges that in the course of his
performance of services under this Agreement he has had, and will have,
access to, become acquainted and familiar with, or gain intimate knowledge
of, all or part of the intimacies of the Company's business and the
Company's Proprietary Information. Employee therefore agrees that he shall
not under any circumstance whatsoever (except as may be specifically
directed by the Board of Directors of the Company and then solely in the
performance of Employee's duties on behalf of the Company):
(i) directly or indirectly, intentionally or unintentionally,
reveal, disclose, furnish, publish, make accessible, or disseminate
to any Entity who is not employed, associated with or engaged by the
Company any Proprietary Information or other matters concerning the
business affairs of the Company, unless already generally known to
and available for use by the public (other than as a result of
Employee's acts or omissions to act); or
(ii) use or exploit any Proprietary Information for the financial
gain of Employee or any Entity or for any other purpose. Provided,
however, that if required, Employee may disclose such Proprietary
Information as mandated by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction. In such
latter
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event, Employee will promptly notify the Company of such order or
subpoena in order to provide the Company the opportunity to protect
its interests in such Proprietary Information.
(b) Restricting Solicitation. Employee agrees that, during the
Covenant Period, Employee shall not, either individually or on behalf of
any Entity other than the Company:
(i) solicit or otherwise deal with any Client or Customer of the
Company in any manner designed to (or that could) take business away
from or otherwise damage the Company in any way; and/or
(ii) solicit or otherwise induce any employee or independent
contractor of the Company to terminate their employment or
association as employees, distributors or independent contractors
with the Company.
(c) Against Competition. Employee agrees that during the Covenant
Period, Employee shall not, 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 Employee 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, the
Employee 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.
(d) Cooperation. During the Covenant Period, Employee agrees that,
upon the Company's reasonable request, Employee in good faith and using
diligent efforts shall cooperate and assist the Company in any dispute,
controversy or litigation in which the Company may be involved, including
without limitation, Employee's participation in any court or arbitration
proceedings, the giving of testimony, the signing of affidavits or such
other personal cooperation as counsel for the Company may reasonably
request. Such cooperation shall not be unreasonably burdensome or without
reasonable compensation.
6.4 Reformation. The Company intends to restrict the activities of
Employee under this Section 6 only to the extent necessary for the protection of
the legitimate business interests of the Company. It is the intention and
agreement of the parties that all the terms and conditions hereof be enforced to
the fullest extent permitted by law. In the event the provisions of this Section
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should ever be deemed or adjudged by a court of competent jurisdiction to exceed
the time or geographical limitation permitted by applicable law, then the
parties intend such provisions shall nevertheless be valid and enforceable to
the extent necessary for such protection as determined by such court, and such
provisions shall be reformed to the maximum time or geographic limitations as
permitted by applicable law and determined by such court.
6.5. Exception to Non-Competition Covenant. Notwithstanding the
restrictions set forth in paragraph 6.3 above, the Company and the Employee
agree that for purposes of this Agreement, Employee 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
Employee is terminated Without Cause, the restrictions set forth in paragraph
6.1 and 6.3 above, shall not be applicable to Employee. In the event the Company
breaches the Company's Promissory Note to Employee dated this date, and such
breach is not cured within the terms of such Note, the restrictions set forth in
paragraph 6.1 and 6.3 of this Agreement and Article X of the Stock Purchase
Agreement dated this date between the Company and Employee and Harold Goodman,
shall be of no further force or effect.
7. REMEDIES.
7.1 Injunction. In the event of Employee's actual or threatened breach of
any one or more provisions of Section 6 above, Employee specifically
acknowledges that the Company will incur incalculable and irreparable damage and
that the Company has no adequate remedy at law for such threatened and
continuing breach. Therefore, the Company shall be entitled to injunctive relief
immediately and permanently restraining Employee from such continuing or
threatened breach, in addition to all other remedies available to the Company at
law or in equity (including without limitation, a temporary restraining order,
preliminary or permanent injunction, specific performance and money damages).
Employee expressly agrees that a temporary restraining order may be granted
without prior notice to Employee and Employee hereby expressly waives any and
all right to such prior notice.
7.2 Non-Exclusive of Remedies. Except as specifically provided herein, the
rights and remedies of the parties hereto shall not be mutually exclusive, and
the exercise of one or more of the provisions of this Agreement shall not
preclude the exercise of any other provision. Each of the parties confirms that
damages at law may be an inadequate remedy for a breach or threatened breach of
any provisions hereof. The respective rights and obligations hereunder shall be
enforceable by specific performance, injunction, or other equitable remedy, but
nothing herein contained (except as provided in Section 7.3 below) is intended
to or shall limit or affect any rights at law or by statute or otherwise of any
party hereto as against the other party for a breach or threatened breach of any
provision hereof, it being the intention of this Section 7.2 to make clear the
agreement of the parties
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that the respective rights and obligations of the parties hereunder shall be
enforceable in equity as well as at law and otherwise.
7.3 Mediation and Arbitration.
7.3.1. 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.
7.3.2.Arbitration. With the exception of the Company's right to a
temporary restraining order, a preliminary injunction or a permanent injunction
under 7.1 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
the Company may be entitled to, and have entered, a Temporary Restraining Order,
a Preliminary Injunction or a Permanent Injunction, under 7.1 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.
8. MISCELLANEOUS.
8.1 Attorney's Fees. If a legal action or other proceeding is brought by
the Company or by the Employee for enforcement of this Agreement or for judgment
on an arbitration award under this Agreement, the party that prevails shall be
entitled to recover reasonable attorney's fees, costs and expenses incurred in
addition to any other relief to which that party may be entitled.
8.2 Entire Agreement. This Agreement constitutes the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes, supplants, and replaces all prior agreements, understandings,
arrangements, negotiations, representations, discussions and preliminary
agreements between the parties hereto relating to the subject matter hereof.
8.3 Successors. Except as otherwise expressly provided herein, this
Employment Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns, and upon the Employee, his administrators,
executors, legatees, heirs and assigns.
8.4 Governing Law. This Employment Agreement shall be construed and
enforced under and in accordance with the laws of the State of Texas. 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.
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8.5 Waiver. Any waiver by any party hereto of any breach of any kind or
character whatsoever by any other party, whether such waiver be direct or
implied, shall not be construed as a continuing waiver or consent to any
subsequent breach of this Agreement on the part of the other party or parties.
8.6 Severability. The provisions of this Agreement are severable and
should any provision hereof be void, voidable or unenforceable under any
applicable law, such void, voidable or unenforceable provision shall not affect
or invalidate any other provision of this Agreement, which shall continue to
govern the relative rights and duties of the parties as though void, voidable or
unenforceable provision were not a part hereof. In addition, it is the intention
and agreement of the parties that all of the terms and conditions hereof be
enforced to the fullest extent permitted by law.
8.7. Modification. This Agreement may not be modified except by a written
instrument signed by all the parties hereto.
8.8 Headings. The headings of sections and subsection used in this
Agreement are for convenience only and are not part of its operative language.
They shall not be used to affect the construction of any provision hereof.
8.9 Acknowledgment. Employee specifically acknowledges that: Employee has
read and understands all of the terms of this Agreement; in executing this
Agreement, Employee does not rely on any inducements, agreements, promises or
representations of the Company, other than the terms or conditions specifically
set forth in this Agreement; the Clients and Customers of the Company comprise a
substantial part of the goodwill of the Company; the Company's offer of
employment constitutes adequate consideration for Employee's entering into this
Agreement, including the covenants set forth in Section 6 above, the Company
will incur a significant investment in the Employee; during his employment,
Employee will render services to the Company that contribute to and enhance the
goodwill of the Company; Employee has had an opportunity to consult with
independent counsel with respect to the advisability of executing this
Agreement; and Employee has made such investigation of the facts pertaining to
this Agreement and all of the matters pertaining hereto as he deems necessary.
In addition, Employee represents to the Company that Employee has not and will
not enter into any agreement inconsistent with this Agreement.
8.10 Separate Counsel. The parties acknowledge that the Company and the
Employee have been represented by separate legal counsel in this transaction and
that Employee has not been represented by the Company's counsel.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
Goodman Factors, Inc. Employee
By: ___________________________ _______________________________
Larry Meek, President Keith Reid
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into in
Dallas, Texas, as of the ____ day of August, 1998 (the "Effective Date"), by and
between Goodman Factors, Inc., a Texas corporation, (the "Company") and Bret M.
Schuch, an individual ("Employee").
Background
The Employee desires to be employed by the Company and the Company desires
to employ the Employee during the term of this Agreement.
As a result of Employee's employment with the Company, Employee will have
access to, become familiar with and gain intimate knowledge of all or part of
the Company's Proprietary Information and of the intricacies of the Company's
business. All Proprietary Information is provided or revealed to Employee in
trust and confidence for Employee's use solely in connection with Employee's
obligations to the Company under this Agreement and Employee shall not at any
time acquire any right, title or interest in or to any Proprietary Information.
The Company desires to protect its business and goodwill and all of its present
and future Proprietary Information; to prevent competitors from acquiring,
appropriating or discovering its Proprietary Information; and to maintain and
protect its competitive advantage in the factoring and financial services
business and industry. To provide this protection, Employee has agreed as
hereinafter set forth to keep strictly confidential all, and not disclose any,
Proprietary Information and to not compete with the Company for a limited period
following the term of this Agreement.
Agreement
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following definitions:
1.1 Client. "Client" or "Customers" shall mean (i) any Entity to whom the
Company has provided factoring, asset based lending and financial services ;
(ii) to whom the Company shall provide factoring or other financial services
prior to the Termination Date; (iii) and/or to whom the Company or Employee has
actively pursued prior to the Termination Date to provide factoring, asset based
lending or other financial services.
1.2 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.
1.3 Covenant Period. "Covenant Period" shall mean the period beginning on
the Effective Date of employment and continuing for one (1) year after the
Termination Date.
1.4 Entity"Entity" shall mean an individual, proprietorship, corporation,
partnership (whether general or limited), limited liability company,
association, business trust, and any other enterprise (for profit, not for
profit or non-profit), and shall include all subsidiaries and affiliates of any
of the foregoing. For these purposes, a subsidiary shall mean any Entity,
incorporated or unincorporated, which is controlled directly or indirectly by
the owner, shareholders, partners,
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associates, beneficiaries, or the like, as the case may be, of any of the
foregoing; and "control" shall mean the ownership directly or indirectly of any
equity interest equal to or greater than ten percent (10%) in an Entity.
1.5 Proprietary Information. "Proprietary Information" shall mean any and
all information and compilations of information relating to the Company's
factoring and financial services business provided or available to Employee, or
to which Employee has access or which he prepares or compiles, while employed
with the Company or after the Termination Date, which information or
compilations or information are deemed, expressly or impliedly, by the Company
to be confidential, proprietary, and/or unique, are not generally known to the
public, may give the Company a competitive advantage, and specifically enhance
the Company's goodwill, including, without limitation:
(a) the Company's pending or awarded patents, copyrights, trade
secrets, trade names, trademarks, service marks, business techniques,
formulas, production methods, technology, equipment, computer programs and
software, source materials, manuals, Client, Customer and key supplier
lists, lists of potential customers, Customer prospect information,
methods of business operations, publications and other products;
(b) financial reports and information regarding the Company;
(c) personnel data relating to the Company's shareholders,
directors, employees and independent contractors, including compensation
agreements of such employees and independent contractors with the Company;
(d) internal plans, practices and procedures of the Company,
including business plans, marketing and sales plans, strategic plans,
budgets and forecasts; and
(e) the terms and provisions of any agreement between the Company
and any third party.
1.6 Termination Date. "Termination Date" shall mean the day that Employee's
employment with the Company terminates or ends for any reason whatsoever.
1.7. Termination for Good Cause. "Termination For Good Cause" shall mean
termination by Company of Employee's employment by the Company by reason of
Employee's gross incompetence, willful dishonesty towards, fraud upon, or
deliberate injury or attempted injury to Company, or by reason of Employee's
willful material breach of this Employment Agreement which has resulted in
material injury to the Company. Termination for Good Cause shall also mean
termination by the Company of Employee's employment by the Company by reason of
Employee's conviction of a felony, whether related to the Company or to any
other matter, or by reason of Employee's conviction of a misdemeanor relating to
Employee's dishonest conduct, whether related to the Company or to any other
matter.
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1.8. Termination Without Cause. "Termination Without Cause" shall mean any
termination of employee's employment by Company other than for Cause, by Reason
of Disability or by Reason of Death.
1.9 Territory. "Territory" shall mean the 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.
1.10. Voluntary Termination. "Voluntary Termination" shall mean termination
by Employee of Employee's employment by Company other than termination by reason
of Employee's death or disability as described in paragraphs 4.3. and 4.4.
2. EMPLOYMENT AND DUTIES OF EMPLOYEE.
2.1 Employment. The Company agrees to employ Employee, and Employee agrees
to accept employment with the Company on the terms and conditions set forth
herein. The term of employment of Employee by the Company under this Employment
Agreement shall be for a period of five (5) years beginning on ________, 1998
(the "Effective Date"), unless terminated earlier.
Notwithstanding any Termination of Employee's employment:
(a) any provisions of this Agreement calling for performance by any
party after the Termination Date shall continue in full force and effect;
and
(b) the representations of the parties set forth herein shall
survive and continue in full force and effect.
2.2 Scope of Duties. Except as specifically set forth herein, Employee
shall render services for the benefit, and on behalf, of the Company as directed
by the President and the Board of Directors of the Company. The President of the
Company, in consultation with the Company's Board of Directors, shall have the
power to determine the general and specific duties to be performed by Employee
and the means and manner by which those duties shall be performed. The services
and duties to be performed by Employee, and the means and manner by which those
duties shall be performed, shall be similar to those performed by the Employee
during the previous year. Employee shall devote full time to the business
affairs of the Company. Employee's title shall be Vice President of
Administration of the Company. Employee shall report to, and be responsible to,
the President of the Company. The parties acknowledge that Employee personally
provides purchase order financing for a limited number of the Company's clients
through Texas Trade Finance, a company owned by Employee. Employee shall
continue to have the right to provide purchase order financing to those clients
listed on Exhibit "A" attached hereto and by this reference made a part hereof.
Employee shall not provide purchase order financing for any other company unless
agreed to in advance in writing by the Company.
2.3 Professional Standards. Recognizing and acknowledging that it is
essential for the protection and enhancement of the name and business of the
Company and the immense goodwill pertaining thereto, Employee shall perform his
employment duties professionally and in accordance
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with the standards established by the President and Board of Directors of the
Company from time to time; and Employee shall not act, and shall refrain from
acting, in any manner that could tarnish the name, business or income of the
Company or the immense goodwill of the Company.
3. COMPENSATION. As his entire compensation for all services rendered to
the Company during the term of this Agreement, in whatever capacity rendered,
the Employee shall be paid, subject to withholding and other applicable
employment taxes, as follows;
3.1. Base Salary. Employee shall be paid a base salary of $100,000 per
year commencing on the Effective Date. Such base salary shall be payable in
twenty six (26) bi-weekly installments, provided however, if the first month of
employment is less than a full calendar month, the first payment shall be
prorated for the number of days worked in the first calendar month of
employment. The base salary shall be increased annually equal to the cumulative
cost-of-living increment as reported in the "Consumer Price Index, of the
Dallas-Fort Worth, All Items," published by the U.S. Department of Labor (using
January 1, 1995 as the base date for computation). Provided however, that the
base salary shall not increase by more than ten percent (10%) per year due to
increases in the Consumer Price Index. In no event shall the base salary be
reduced below $100,000 as a result of the reduction i n the Consumer Price
Index.
3.2. Commissions. Employee has been an employee of the Company prior to
the Effective Date of this Agreement. Employee was paid commissions for
financings of his clients (Employee's Clients") completed by the Company prior
to the Effective Date. From and after the Effective Date, Employee will continue
to be paid commissions for additional financings for Employee's Clients. The
amount of the commission to be paid to Employee hereunder shall be the same as
paid by the Company to the Employee prior to the Effective Date. Attached hereto
as Exhibit "B" and by this reference made a part hereof, is a list of all
Employee's Clients for which commissions will continue to be paid and a
description of the amount of the commission to be paid for each of such Client.
From and after the Effective Date, no commission shall be paid to Employee for
any company except for those specifically set forth on Exhibit "B".
3.3. Bonus Pool. For each fiscal year, the Board of Directors of the
Company will establish a Bonus Pool from which cash bonuses will be paid to
employees of the Company. The total amount to be included in the Bonus Pool each
year will be within the discretion of the Company's Board of Directors. Employee
shall be entitled to receive a cash bonus of not less than 33% of the amount of
each year's Bonus Pool.
3.4. Vacation. Employee shall be entitled to ten (10) days of vacation
during the first twelve (12) months of employment, and ten (10) days of vacation
for each subsequent twelve (12) month period during the term of this Agreement
and any extensions thereof, prorated for partial years. If vacation days are not
taken by Employee he shall receive additional compensation therefore based upon
his base salary.
3.5. Reimbursement for Expenses. During the term of this Agreement, the
Company shall reimburse Employee for reasonable and properly documented
out-of-pocket business incurred by Employee in connection with his duties under
this Agreement.
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3.6. Additional Benefits. The Company shall provide the Employee with
health insurance during the term of this Agreement. At such time as Employee is
eligible for social security, the Company shall provide him will health
insurance necessary to supplement Medicare coverage. The Employee shall be
entitled to participate in such benefit and compensation plans as are now
generally available or later made generally available to the employees of the
Company.
3.7. Stock Options. The Employee shall be entitled to the stock options
described in Exhibit "A" attached hereto and by this reference made a part
hereof.
4. TERMINATION MATTERS.
4.1. Termination For Good Cause. Termination for Good Cause may be
effected immediately by the Company during the term of this Agreement by written
notification to Employee. Upon Termination For Good Cause, the following shall
promptly occur:
(a) the Company shall pay Employee all accrued salary earned at the
date of Termination for Good Cause;
(b) the Company shall pay Employee all vacation pay which is accrued
at the date of Termination for Good Cause;
(c) the Company shall pay all business expenses incurred by Employee
in connection with his duties hereunder which are unpaid at the date of
Termination for Good Cause;
(d) the Company shall pay to Employee all compensation or benefits
due to Employee at the date of Termination for Good Cause under any
agreement or plans mutually agreed to in writing by both parties.
4.2. Termination Without Cause. The Company may terminate Employee's
employment for any reason and without cause at any time upon thirty (30) days
written notice to Employee. Upon Termination without Cause, the following shall
promptly occur:
(a) the Company shall pay Employee all salary compensation for a
period of thirty (30) days from the date of Termination Without Cause.
(b) the Company shall pay Employee all vacation pay which is accrued
at the date of Termination without Cause;
(c) the Company shall pay all business expenses incurred by Employee
in the connection with his duties hereunder which are unpaid at the date
of Termination without Cause;
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(d) the Company shall pay to Employee all compensation or benefits
due to Employee at the date of Termination Without Cause under any
agreement or plans mutually agreed to in writing by both parties.
4.3. Termination by Reason of Disability. If, during the term of this
Agreement, Employee, in the reasonable judgment of the Board of Directors of the
Company has failed to perform his duties under this Agreement on account of
illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than three (3) consecutive months, the Company
shall have the right to terminate Employee's employment hereunder by twenty (20)
days written notification to Employee. In the event of termination by reason of
disability, Employee shall pay Employee all cash and other compensation which
would be due and owing to Employee under paragraph 4.1. of this Employment
Agreement if Employee's employment had been Terminated for Good Cause by Company
rather than as a result of the Disability of Employee. The Company shall
maintain disability insurance coverage to cover Employee. From and after the
time Employee commences receiving disability payments under such disability
insurance coverage, he shall be entitled to no further compensation from the
Company hereunder.
4.4. Death. In the event of Employee's death during the term of this
Agreement, Employee's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs and the Company shall pay to
his estate or such beneficiaries as Employee may from time to time designate, to
the date of Employee's death all cash and other compensation which would be due
and owing to Employee under paragraph 4.1 of this Employment Agreement if
Employee's employment had been Terminated for Good Cause by the Company rather
than by as a result of the Death of Employee.
4.5. Voluntary Termination. In the event of a Voluntary Termination, the
Company shall pay to Employee all cash and other compensation which would be due
and owing to Employee under paragraph 4.1 of this Employment Agreement if
Employee's employment had been Terminated for Good Cause by the Company rather
than by the Voluntary Termination by Employee.
5. RECORDS AND FILES. Upon the Termination Date under this Agreement, or
upon an earlier request of the Board of Directors of the Company, Employee shall
have no right to keep or use any, and shall promptly return to the Company all:
(a) Proprietary Information and all documents, records, procedures,
books, notebooks and all other documentation (and all memoranda and copies
thereof) containing any Proprietary Information (including, without
limitation and in particular, all financial statements, manufacturing or
marketing information) then in Employee's possession or control
irrespective of whether such documentation was prepared or compiled by
Employee, the Company, the Company's employees or independent contractors,
or other Entity; and
(b) equipment and tangible personal property of the Company
entrusted to Employee by the Company or otherwise in Employee's possession
or control. Employee acknowledges that all such documentation, equipment
and tangible personal property is confidential, is not readily accessible
to the Company's competitors, and is and shall remain
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the sole and exclusive property of the Company, free and clear of any and
all claims of Employee. Employee shall be deemed to be the bailee thereof
for the use and benefit of the Company and shall not at any time acquire
any right, title or interest in or to such documentation, equipment or
tangible personal property and shall safely keep and preserve the same,
except as may be consumed in the Company's normal business operations.
6. COVENANTS OF EMPLOYEE. As a material term and condition of this
Agreement and in order to protect the Company's investment in training and
education, the goodwill, Proprietary Information and the business and trade
secrets of the Company, Employee covenants and agrees that, unless otherwise
agreed to in writing by the Company:
6.1 Employees and Independent Contractors. During the Covenant Period,
Employee shall not attempt to persuade employees and independent contractors of
the Company to terminate or significantly alter their relationships or
association with the Company.
6.2 Preservation of Business. During the Employee's employment by the
Company, Employee shall use his best efforts to preserve the Company's business
organization intact, to keep available to the Company the services of the
Company's employees and independent contractors, and to preserve for the Company
its relationships with its Clients, Customers, suppliers, distributors, brokers,
lessees and others having business relationships with the Company.
6.3 Covenants of Confidentiality and Not to Compete. Employee shall
strictly comply with the following:
(a) Nondisclosure. Employee acknowledges that in the course of his
performance of services under this Agreement he has had, and will have,
access to, become acquainted and familiar with, or gain intimate knowledge
of, all or part of the intimacies of the Company's business and the
Company's Proprietary Information. Employee therefore agrees that he shall
not under any circumstance whatsoever (except as may be specifically
directed by the Board of Directors of the Company and then solely in the
performance of Employee's duties on behalf of the Company):
(i) directly or indirectly, intentionally or unintentionally,
reveal, disclose, furnish, publish, make accessible, or disseminate
to any Entity who is not employed, associated with or engaged by the
Company any Proprietary Information or other matters concerning the
business affairs of the Company, unless already generally known to
and available for use by the public (other than as a result of
Employee's acts or omissions to act); or
(ii) use or exploit any Proprietary Information for the financial
gain of Employee or any Entity or for any other purpose. Provided,
however, that if required, Employee may disclose such Proprietary
Information as mandated by a valid order or subpoena issued by a
court or administrative agency of competent jurisdiction. In such
latter event, Employee will promptly notify the Company of such
order or subpoena in
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order to provide the Company the opportunity to protect its
interests in such Proprietary Information.
(b) Restricting Solicitation. Employee agrees that, during the
Covenant Period, Employee shall not, either individually or on behalf of
any Entity other than the Company:
(i) solicit or otherwise deal with any Client or Customer of the
Company in any manner designed to (or that could) take business away
from or otherwise damage the Company in any way; and/or
(ii) solicit or otherwise induce any employee or independent
contractor of the Company to terminate their employment or
association as employees, distributors or independent contractors
with the Company.
(c) Against Competition. Employee agrees that during the Covenant
Period, Employee shall not, 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 Employee 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, the
Employee 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.
(d) Cooperation. During the Covenant Period, Employee agrees that,
upon the Company's reasonable request, Employee in good faith and using
diligent efforts shall cooperate and assist the Company in any dispute,
controversy or litigation in which the Company may be involved, including
without limitation, Employee's participation in any court or arbitration
proceedings, the giving of testimony, the signing of affidavits or such
other personal cooperation as counsel for the Company may reasonably
request. Such cooperation shall not be unreasonably burdensome or without
reasonable compensation.
6.4 Reformation. The Company intends to restrict the activities of
Employee under this Section 6 only to the extent necessary for the protection of
the legitimate business interests of the Company. It is the intention and
agreement of the parties that all the terms and conditions hereof be enforced to
the fullest extent permitted by law. In the event the provisions of this Section
6 should ever be deemed or adjudged by a court of competent jurisdiction to
exceed the time or geographical limitation permitted by applicable law, then the
parties intend such provisions shall
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nevertheless be valid and enforceable to the extent necessary for such
protection as determined by such court, and such provisions shall be reformed to
the maximum time or geographic limitations as permitted by applicable law and
determined by such court.
7. REMEDIES.
7.1 Injunction. In the event of Employee's actual or threatened breach of
any one or more provisions of Section 6 above, Employee specifically
acknowledges that the Company will incur incalculable and irreparable damage and
that the Company has no adequate remedy at law for such threatened and
continuing breach. Therefore, the Company shall be entitled to injunctive relief
immediately and permanently restraining Employee from such continuing or
threatened breach, in addition to all other remedies available to the Company at
law or in equity (including without limitation, a temporary restraining order,
preliminary or permanent injunction, specific performance and money damages).
Employee expressly agrees that a temporary restraining order may be granted
without prior notice to Employee and Employee hereby expressly waives any and
all right to such prior notice.
7.2 Non-Exclusive of Remedies. Except as specifically provided herein, the
rights and remedies of the parties hereto shall not be mutually exclusive, and
the exercise of one or more of the provisions of this Agreement shall not
preclude the exercise of any other provision. Each of the parties confirms that
damages at law may be an inadequate remedy for a breach or threatened breach of
any provisions hereof. The respective rights and obligations hereunder shall be
enforceable by specific performance, injunction, or other equitable remedy, but
nothing herein contained (except as provided in Section 7.3 below) is intended
to or shall limit or affect any rights at law or by statute or otherwise of any
party hereto as against the other party for a breach or threatened breach of any
provision hereof, it being the intention of this Section 7.2 to make clear the
agreement of the parties that the respective rights and obligations of the
parties hereunder shall be enforceable in equity as well as at law and
otherwise.
7.3 Mediation and Arbitration.
7.3.1. 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.
7.3.2.Arbitration. With the exception of the Company's right to a
temporary restraining order, a preliminary injunction or a permanent injunction
under 7.1 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
the Company may be entitled to, and have entered, a Temporary Restraining Order,
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a Preliminary Injunction or a Permanent Injunction, under 7.1 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.
8. MISCELLANEOUS.
8.1 Attorney's Fees. If a legal action or other proceeding is brought by
the Company or by the Employee for enforcement of this Agreement or for judgment
on an arbitration award under this Agreement, the party that prevails shall be
entitled to recover reasonable attorney's fees, costs and expenses incurred in
addition to any other relief to which that party may be entitled.
8.2 Entire Agreement. This Agreement constitutes the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes, supplants, and replaces all prior agreements, understandings,
arrangements, negotiations, representations, discussions and preliminary
agreements between the parties hereto relating to the subject matter hereof.
8.3 Successors. Except as otherwise expressly provided herein, this
Employment Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns, and upon the Employee, his administrators,
executors, legatees, heirs and assigns.
8.4 Governing Law. This Employment Agreement shall be construed and
enforced under and in accordance with the laws of the State of Texas. 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.
8.5 Waiver. Any waiver by any party hereto of any breach of any kind or
character whatsoever by any other party, whether such waiver be direct or
implied, shall not be construed as a continuing waiver or consent to any
subsequent breach of this Agreement on the part of the other party or parties.
8.6 Severability. The provisions of this Agreement are severable and
should any provision hereof be void, voidable or unenforceable under any
applicable law, such void, voidable or unenforceable provision shall not affect
or invalidate any other provision of this Agreement, which shall continue to
govern the relative rights and duties of the parties as though void, voidable or
unenforceable provision were not a part hereof. In addition, it is the intention
and agreement of the parties that all of the terms and conditions hereof be
enforced to the fullest extent permitted by law.
8.7. Modification. This Agreement may not be modified except by a written
instrument signed by all the parties hereto.
8.8 Headings. The headings of sections and subsection used in this
Agreement are for convenience only and are not part of its operative language.
They shall not be used to affect the construction of any provision hereof.
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8.9 Acknowledgment. Employee specifically acknowledges that: Employee has
read and understands all of the terms of this Agreement; in executing this
Agreement, Employee does not rely on any inducements, agreements, promises or
representations of the Company, other than the terms or conditions specifically
set forth in this Agreement; the Clients and Customers of the Company comprise a
substantial part of the goodwill of the Company; the Company's offer of
employment constitutes adequate consideration for Employee's entering into this
Agreement, including the covenants set forth in Section 6 above, the Company
will incur a significant investment in the Employee; during his employment,
Employee will render services to the Company that contribute to and enhance the
goodwill of the Company; Employee has had an opportunity to consult with
independent counsel with respect to the advisability of executing this
Agreement; and Employee has made such investigation of the facts pertaining to
this Agreement and all of the matters pertaining hereto as he deems necessary.
In addition, Employee represents to the Company that Employee has not and will
not enter into any agreement inconsistent with this Agreement.
8.10 Separate Counsel. The parties acknowledge that the Company and the
Employee have been represented by separate legal counsel in this transaction and
that Employee has not been represented by the Company's counsel.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
Goodman Factors, Inc. Employee
By: ___________________________ _______________________________
Larry Meek, President Bret M. Schuch
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