-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VIoCruIEHWWTT6Vb+C2286PE0GFqTZfeLCh6SkuTscg9VUrEBmparpu5TOXbhp8w bkXrH7X32KvJb5ykWzpe0w== 0001038838-98-000044.txt : 19980330 0001038838-98-000044.hdr.sgml : 19980330 ACCESSION NUMBER: 0001038838-98-000044 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971126 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001025707 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 860793960 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-16031 FILM NUMBER: 98576598 BUSINESS ADDRESS: STREET 1: 10670 NORTH CENTRAL EXPRESSWAY STE 235 CITY: DALLAS STATE: TX ZIP: 75231 BUSINESS PHONE: 214-750-1323, EXT.26 MAIL ADDRESS: STREET 1: 227 SOUTH NINTH AVENUE CITY: POCATELLO STATE: ID ZIP: 83201 FORMER COMPANY: FORMER CONFORMED NAME: LITIGATION ECONOMICS INC DATE OF NAME CHANGE: 19961022 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 26, 1997 EMPIRE COMMUNICATIONS CORPORATION, f/k/a/ LITIGATION ECONOMICS, INC. --------------------------------------------------------------------- Exact name of registrant as specified in its charter Nevada 333-16031 86-0793960 - ------------------------------------------------------------------------------- State or other jurisdiction Commission File No. IRS Employer ID # of incorporation 10670 North Central Expressway, Dallas, Texas 75231 ------------------------------------------------------- Address and zip code of principal executive offices 214-750-1323, Extension 26 ----------------------------------------- Registrant's telephone number Item 1. Changes in Control of Registrant On March 16, 1998, Empire Financial Investments LLC, a Texas limited liability company ("Empire"), purchased 2,350,000 shares of the Registrant's new Series A Convertible Preferred Stock. As of March 16, 1998, these shares and the common share votes associated with these Series A Preferred shares, constituted approximately 77.9% of total common share votes of the Company, and constituted approximately 54% of the total equity securities of the Company. The Company's executive offices were relocated to space provided by Empire at its offices in Dallas, Texas. Empire is a controlled subsidiary of Empire Financial Corporation ("EFC"), a Texas-based merchant banking and investment firm headquartered in Dallas, Texas. EFC is actively engaged in the acquisition and development of operating companies, focused on industrial production and commercial distribution businesses. EFC was originally incorporated by C. W. Murchison, Jr. and Louis A. Farris, Jr. for the purposes of private investment and merchant banking. Mr. Murchison is deceased and Mr. Farris is now the principal of EFC. Mr. Farris has been elected as Chairman and Chief Executive Officer of the Company as of March 13, 1998. Item 2. Acquisition or Disposition of Assets On March 13, 1998, the Board of Directors of the Company approved the assignment to the Company, and the Company's assumption of, Empire's agreement with Deluxe Corporation for the acquisition by Empire of two of Deluxe Corporation's operating businesses: specifically all of the equity securities of PaperDirect, Inc. and all of the assets of Current Social Expressions, Inc. The Company is obligated to pay Deluxe Corporation $80,000,000 for these businesses, and the Company intends to raise this money through a combination of leveraged acquisition debt, using the assets being acquired as collateral, and new equity funding, including the $1,500,000 capital infusion from Empire discussed under Item 1, above. The Company is currently developing a private offering of equity securities to complete the acquisition funding for the PaperDirect/Social Expressions transaction. The PaperDirect/Social Expressions transaction is expected to close on or before April 27, 1998. Also on March 13, 1998, the Shareholders and the Board of Directors of the Company approved the sale of all of the Company's interest in G.E.C., Inc. to Cornelius A. Hofman II, the former President and Chief Executive Officer of the Company. G.E.C., Inc. was the Company's sole operating subsidiary through which it conducted its historical economic consulting business. This sale was made for $130,000, being paid $10,000 in cash and $120,000 through the surrender by Mr. Hofman of 1,200,000 shares of common stock. The shares surrendered by Mr. Hofman are now held as treasury shares. Item 3. Bankruptcy or Receivership Not Applicable. Item 4. Changes in Registrant's Certifying Accountant Not Applicable. Item 5. Other Events On March 12, 1998, the Board of Directors of the Company declared a 2 for 1 forward split of the outstanding common stock, in the form of a 100% stock dividend distributed to shareholders of record on March 1, 1998, payable on March 13, 1998. As a result of this 2-for 1 forward stock split, the Company had 2,000,000 shares of common stock and 2,350,000 shares of Series A Convertible Preferred Stock issued and outstanding as of the date of this Report, after taking into account the 1,200,000 share surrendered by Mr. Hofman. Item 6. Resignation of Registrant's Directors In connection with Empire's investment in the Company, (see Item 1, above) Messrs. Louis A. Farris, Jr., Wilson A. Hanna, Jon H. Fleming, Ph.D., H. William Coogan, Jr., Lee A. Meyer and Kenneth C. Lowe were elected to the Company's Board of Directors by action of the existing Directors on March 13, 1998. Effective on March 14, 1998, Cornelius A. Hofman II, Stacey A. Hofman and Cornelius Hofman resigned as Executive Officers and Directors. Item 7. Financial Statement, Pro Forma Financial Information and Exhibits Not Applicable. Item 8. Changes in Fiscal Year Not Applicable. Item 9. Sales of equity securities pursuant to Regulation S Not Applicable. The following Exhibits are filed with the Report. Exhibit No. Description 2.1 Agreement of Sale, between Litigation Economics, Inc. and Cornelius A. Hofman II, dated March 13, 1998. 2.2 Stock Purchase Agreement between Litigation Economics, Inc. and Empire Financial Investments LLC, dated March 13, 1998. 3.1 Certificate of Amendment to Articles of Incorporation EMPIRE COMMUNICATIONS CORPORATION /s/ Louis A. Farris, Jr. ----------------------------------- Louis A. Farris, Jr., Chairman and Chief Executive Officer Dated: March 27, 1998 EX-2.1 2 SALE AGREEMENT AGREEMENT This AGREEMENT dated as of March 13, 1998 is by and between Cornelius A. Hofman II ("Purchaser") and Litigation Economics, Inc. ("Seller"). 1. Seller is the sole owner of all of the issued and outstanding stock ("the Shares") of G.E.C., Inc. ("GEC"), an Idaho corporation. 2. Purchaser is the current President and Chief Executive Officer of Seller, and is the principal manager and employee of GEC. 3. Seller desires to change its business focus and to enter into a transaction through Empire Financial Investment LLC for a major business acquisition. 4. Purchaser desires to continue the business of GEC, and to separate himself from the management of the Company and its new business focus. 5. Purchaser hereby agrees to purchase from Seller, and Seller hereby agrees to sell and transfer to Purchaser, the Shares. 6. Purchaser agrees to pay to Seller, and Seller acknowledges as fair and reasonable, the total purchase price for the Shares of $130,000, comprised of $10,000 in cash and $120,000 in shares of the Seller's common stock currently owned by Purchaser. 7. Purchaser and Seller hereby agree that 1,200,000 shares of the Seller's common stock are fully and fairly valued today at $120,000, and Seller accepts this amount of shares and the remaining $120,000 of the purchase price. 8. The parties make no warranties to one another and make no covenants to one another other than as expressed in this Agreement. 9. Closing of this Agreement shall take place on March 13, 1998 at the offices of Ray Quinney & Nebeker, legal counsel to the Seller, in Salt Lake City, Utah, at the hour of 10:00 AM Mountain Time, at which time Purchaser shall deliver the cash and stock to the Seller, and the Seller will endorse and deliver all of the common stock of GEC to Purchaser. /s/ Cornelius A. Hofman II /s/ Stacey A. Hofman -------------------------- --------------------------------------- Cornelius A. Hofman II, Litigation Economics, Inc. (Seller) (Purchaser) By Stacey A. Hofman, Authorized Officer EX-2.2 3 STOCK PURCHASE AGREEMENT LITIGATION ECONOMICS INC. SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT is made as of March 16, 1998, by and between Litigation Economics, Inc., a Nevada corporation (the "Company"), and the persons listed on Exhibit 1 who are signatories to this Agreement (the "Investors"). The Parties Hereby Agree as Follows: 1. Purchase and Sale. 1.1 Sale and Issuance of Series A Preferred Stock. Subject to the terms and conditions of this Agreement, each of the Investors agrees to purchase at the Closing, and the Company agrees to sell and issue to each of the investors at the Closing, severally and not jointly, against cash payment, cancellation of indebtedness or cancellation of interest owed, the number of shares of Series A Preferred Stock (the "Series A Shares") of the Company set forth opposite each Investor's name in Exhibit 1 to this Agreement at a purchase price of $0.64 per share. 1.2 Closing. The purchase and sale of the Series A Shares being purchased by the Investors shall take place at the offices of Company Counsel, Ray Quinney & Nebeker, 7th Floor, 79 South Main Street, Salt Lake City, Utah 84111, at 10:00 o'clock a.m. on March 16, 1998, or at such other time and place as the Company and the Investors mutually agree upon (which time and place are designated the "Closing"). At the Closing, the Company shall deliver to each of the Investors a certificate representing the number of Series A Shares which each such Investor is purchasing against delivery to the Company by each such Investor of cash or a certified bank cashier's or other instrument reasonably acceptable to the Company. The Company may not issue additional Series A Shares or warrants, options or other rights to acquire Series A Shares without the prior written approval of holders of at least two-thirds of the outstanding Series A Shares purchased under this Agreement. 1.3 Use of Proceeds. The Company agrees to use the proceeds from the sale of the Series A Shares for the planned PaperDirect and Current Social Expressions acquisition and for working capital purposes. 2. Representations and Warranties of the Company. Except as set forth on Exhibit 2, the Company hereby represents and warrants to the Investors that: 2.1 Incorporation. The Company and each of the Subsidiaries (as defined in paragraph 2.3) is a corporation duly organized and validly existing, is in good standing under the laws of the state or other place of its incorporation, has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted, and the Company and each of the Subsidiaries is qualified as a foreign corporation in each jurisdiction where the failure so to qualify would have a material adverse effect on its business or operations. True and accurate copies of the Company's Articles of Incorporation, all amendments thereto, and Bylaws as presently in effect are attached hereto as Exhibit 2.1. 2.2 Capitalization. The authorized capital of the Company consists of 50,000,000 shares of Common Stock, of which at Closing not more than 2,000,000 shares will be issued and outstanding, and 5,000,000 shares of Preferred Stock (the "Preferred Shares"). Of the Preferred Shares, 2,350,000 shares have been designated Series A Preferred Stock (the "Series A Preferred"), none of which are issued and outstanding as of the Closing. Immediately prior to the Closing, 2,350,000 shares of Common Stock will be reserved for issuance upon conversion of the Series A Preferred (subject to adjustment as a result of this transaction). 2.3 Subsidiaries. Except as set forth on Exhibit 2 attached hereto, the Company does not presently control, directly or indirectly, any other corporation, association or business entity. The entities listed on Exhibit 2 are referred to herein as the "Subsidiaries." Each of the Subsidiaries is wholly owned by the Company. 2.4 Authorization. All corporate action on the part of the Company, its officers and directors necessary for the authorization, execution, delivery and performance of all obligations of the Company under this Agreement and for the authorization, issuance and delivery of the Series A Shares being sold hereunder has been or shall be taken prior to the Closing, and this Agreement, when executed and delivered, shall constitute a valid and legally binding obligation of the Company. Issuance of the Series A Shares is not, and issuance of the Common Stock issuable upon conversion of the Series A Shares will not be subject to preemptive rights or other preferential rights of any present or future stockholders in the Company. 2.5 Validity of Securities. The Series A Shares to be purchased and sold pursuant to this Agreement, when issued, sold and delivered in accordance with its terms for the consideration expressed herein, shall be duly and validly issued. The Common Stock issuable upon conversion of the Series A Shares has been duly and validly reserved and upon issuance will be duly and validly issued, fully paid and nonassessable. 2.6 Governmental Consents. All consents, approvals, orders, authorizations or registration, qualification, designation and declaration or filing with and federal or state governmental authority on the part of the Company and the Subsidiaries required in connection with the consummation of the transactions contemplated herein shall have been obtained prior to, and be effective as of, the Closing or will be timely filed thereafter. 2.7 Compliance With Other Instruments. The Company and each of the Subsidiaries is not in violation of any provisions of its respective Articles of Incorporation, its Bylaws, any material mortgage, indenture, lease, agreement or other instrument to which it is a party, or of any provision of any federal or state judgment, writ, decree, order, statute, rule or governmental regulation applicable to the Company or the Subsidiaries. The execution, delivery and performance of this Agreement will not result in any such violation or be in conflict with or constitute a default under any such provision. 2.8 Litigation. There are no actions, proceedings or investigations pending, or to the knowledge of the Company or the Subsidiaries threatened, which question the validity of this Agreement or which might result, either individually or in the aggregate, in any material adverse change in the assets, conditions, affairs or prospects of the Company or the Subsidiaries, nor, to the knowledge of the Company and the Subsidiaries, has there occurred any event or does there exist any condition which might properly be the basis therefor. 2.9 Financial Statements. The Company has previously furnished true and complete copies of Statements of financial condition as of December 31, 1997 and December 31, 1996 and the related statements of operations and statements of changes in financial position for the years then ended, all certified by Jones, Jensen & Co., independent accountants All such financial statements have been prepared in conformity with generally accepted accounting principles applied on a basis consistent with prior periods (except for the omission of notes to the unaudited financial statements), fairly present the consolidated financial condition of the Company and the Subsidiaries as of dates thereof, and the consolidated results of operations of the Company and the Subsidiaries for the periods indicated, and, in the case of unaudited statements, subject to normal and recurring year-end adjustments. Specifically, without limitation, such financial statements reflect, as of their respective dates, all material accrued liabilities and adequate reserves for all material unaccrued liabilities and for all reasonably anticipated material losses of the Company and the Subsidiaries. The books of account of the Company and the Subsidiaries fully and fairly reflect all of the transactions of such companies and are complete and accurate. Neither the Company nor any of the Subsidiaries is subject to any undisclosed material liability not (i) reflected in its December 31, 1997 audited financial statements referred to above or in the notes thereto, or (iii) incurred in the ordinary course of business since December 31, 1997. For purposes of this Agreement, all financial statements of the Company shall be deemed to include any notes to such financial statements. 2.10 Absence of Certain Changes. Except as set forth on Exhibit 2 attached to this Agreement, since December 31, 1997, whether or not in the ordinary course of business, there has not occurred or arisen (a) any material adverse change in the financial condition, operations, business or prospects of the Company or the Subsidiaries considered as a whole, or (b) any event, condition or state of facts of any character which materially or adversely affects, or may materially or adversely affect, the financial condition, operations, business or prospects of the Company and the Subsidiaries considered as a whole. 2.11 Tax Returns and Reports. All federal income tax and state franchise tax returns and tax reports required to be filed by the Company and the Subsidiaries have been filed with the appropriate governmental agencies in all jurisdictions in which such returns or reports are required to be filed. All such returns and reports constitute complete and accurate representations, in all material respects, of the tax liabilities of the Company and the Subsidiaries. All federal income tax and state franchise and other taxes (including interest and penalties) due from the Company and the Subsidiaries have been fully paid or adequately provided for on the books and financial statements of the Company or the Subsidiaries. None of the federal income tax returns of the Company have been audited by the Internal Revenue Service. The Company knows of no additional assessments or adjustments pending or threatened for any period, nor of any basis for any such assessment or adjustment. The Company and the Subsidiaries and their affiliates have not entered into any agreements with federal and state taxing authorities extending the statute of limitations with respect to the assessment of federal and state taxes for any period. 2.12 Properties. The Company and the Subsidiaries have good and marketable title to their respective real and personal properties and assets and valid leasehold interests in their respective leased properties as and to the extent carried on its books, including those reflected on the audited statements of financial condition as of December 31, 1997 referred to in paragraph 2.9 above, except properties and assets disposed of in the ordinary course of business since December 31, 1997 or referred to on Exhibit 2 attached hereto, and none of such properties or assets is subject to any mortgage, pledge, charge, lien, security interest, encumbrance of joint ownership interest, except (a) liens for taxes, assessments, or governmental charges or levies if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings, or (b) as shown on Exhibit 2 attached hereto. The use of any property of the Company or the Subsidiaries for the purpose for which it was acquired is not now, and, based upon the laws, regulations and ordinances in effect on the date of Closing, in the future will not be, curtailed to a material degree by any violations prior to the Closing by the Company or any of the Subsidiaries of any law, regulation or ordinance (including, without limitation, laws, regulations or ordinances relating to zoning, environmental protection, city planning, or similar matters). The Company and the Subsidiaries enjoy peaceful and undisturbed possession under all leases under which they are operating, and all said lease are valid and subsisting and in full force and effect. 2.13 Agreements. Except as set forth in Exhibit 2, neither the Company nor any of the Subsidiaries has breached, nor has any such entity received oral or written notice of any claim or threatened claim that the Company or any of the Subsidiaries has breached, any of the terms or conditions of any agreement, contract, lease, commitment or understanding, whether oral or written, the breach or breaches of which singly or in the aggregate could materially or adversely affect the financial condition, operations, business or prospects of the Company and the Subsidiaries considered as a whole. 2.14 Pension Benefit Plan. The Company does not have or make contributions to any pension, defined benefit or defined contribution plans which are subject to the Federal Employee Retirement Income Security Act of 1974, as amended ("ERISA"). 2.15 Registration Rights. Except as set forth in this Agreement, no person or entity has demand or other rights to cause the Company to file any registration statement under the Securities Act of 1933, as amended (the "Act") relating to any securities of the Company or any right to participate in any such registration statement. 2.16 Disclosure. To the best of the Company's knowledge and belief, neither this Agreement, the financial statements referred in paragraph 2.09, nor any other agreement, document, certificate or written statement furnished to the Purchasers or their special counsel by or on behalf of the Company in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. Most of the Company's executive officers have only been employed by the Company for a very short period of time. To the best knowledge of the Company's executive officers, but without having made any independent investigation, there is no fact within the special knowledge of any of the executive officers of the Company which has not been disclosed herein or in writing by them to the Investors and which materially adversely affects, or in the future in their opinion may, insofar as they can now foresee, materially adversely affect the business, properties, assets or condition, financial or other, of the Company and the Subsidiaries. Without limiting the foregoing, the Company has no knowledge or belief that there exists, or there is pending or planned, any patent, invention, device, application or principle or any statute, rule, law, regulation, standard or code which would materially adversely affect the condition, financial or other, or the operations of the Company and the Subsidiaries. 3. Representations and Warranties of the Investors. Each of the Investors represents and warrants to the Company as follows: 3.1 Authorization. When executed and delivered by such Investor, this Agreement will constitute the valid and legally binding obligation of such Investor. 3.2 Accredited Investor. Such investor (other than those identified in writing to counsel for the Company prior to the Closing) is an "accredited investor" as that term is defined in Rule 501 promulgated under the Act. 4. Securities Act of 1933. 4.1 Investment Representation. (a) This Agreement is made with each of the Investors in reliance upon their respective representations to the Company, which by its acceptance hereof each of the Investors hereby confirms, that the Series A Shares to be received will be acquired for investment for an indefinite period for its own account and not with a view to the sale or distribution of any part thereof, and that it has no present intention of selling or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of its property shall at all times be within its control. By executing this Agreement, each of the Investors further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell or transfer to such person any of the Series A Shares or any Common Stock acquired on conversion of the Series A Shares (all of such securities are hereinafter collectively referred to as the "Securities"). (b) Each of the Investors understands that the Securities are not and may never be registered under the Act on the ground that the sale provided for in this Agreement and the issuance of securities is exempt pursuant to Section 4(2) of the Act and Rule 506 of Regulation D thereunder, and that the Company's reliance on such exemption is predicated on its representations set forth herein. (c) Each of the Investors agrees that in no event will it make a disposition of any of the Securities, unless the Securities shall have been registered under the Act, unless and until (i) it shall have notified the Company with a statement of the circumstances surrounding the proposed disposition and (ii) it shall have furnished the Company with an opinion of counsel reasonably satisfactory to the Company to the effect that (A) such disposition will not require registration of such securities under the Act, and (B) that appropriate action necessary for compliance with the Act has been taken. Notwithstanding the foregoing, each Investor may distribute any of the Securities to the owners of its equity. (d) Each of the Investors represents that it is able to fend for itself in the transactions contemplated by this Agreement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, has the ability to bear the economic risks of its investment and has been furnished with and has had access to such information as would be made available in the form of a registration statement together with such additional information as is necessary to verify the accuracy of the information supplied and to have all questions which have been asked by the Investors answered by the Company. (e) Each of the investors understands that if a registration statement covering the Securities under the Act is not in effect when it desires to sell any of the Securities, it may be required to hold such Securities for an indeterminate period. Each of the Investors also acknowledges that it understands that any sale of the Securities which might be made by it in reliance upon Rule 144 under the Act may be made only in limited amounts in accordance with the terms and conditions of that Rule. 4.2 Legends. All certificates for the Securities shall bear substantially the following legend: "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED BY THE ISSUEE FOR INVESTMENT PURPOSES. SAID SHARES MAY NOT BE SOLD OR TRANSFERRED UNLESS (A) THEY HAVE BEEN REGISTERED UNDER SAID ACT, OR (B) THE TRANSFER AGENT (OR THE COMPANY IF THEN ACTING AS ITS TRANSFER AGENT) IS PRESENTED WITH EITHER A WRITTEN OPINION SATISFACTORY TO COUNSEL FOR THE COMPANY OR A "NO-ACTION' OR INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE CIRCUMSTANCES OF SUCH SALE OR TRANSFER." 4.3 Rule 144. The Company covenants and agrees that: (i) at all times while it is subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 it will use its best efforts to comply with the current public information requirements of Rule 144(c)(1) under the Act; and (ii) it will furnish the Investors upon request with all information about the Company required for the preparation and filing of Form 144. 5. Conditions to Investors' Obligations at Closing. The obligations of the Investors under paragraphs 1.1 and 1.2 of this Agreement are subject to the fulfillment at or before the Closing of each of the following conditions: 5.1 Representations and Warranties. The representations and warranties contained in paragraph 2 hereof, subject to the disclosures contained in Exhibit 2, shall be true on and as of the Closing. 5.2 Performance. The Company shall have performed and complied with all agreements and conditions contained herein required to be performed or complied with by it on or before the Closing. 5.3 Reservation of Shares. The Company shall have reserved 2,350,000 shares of its Common Stock for issuance upon the conversation of the Series A Shares. 5.4 State Securities Laws. The Company will have complied with all requirements under all applicable state securities laws with respect to the offer and sale of the Series A Shares and the Common Stock to be issued upon the conversion thereto. 5.5 Compliance Certificate. There shall have been delivered to each of the Investors a certificate, dated the Closing Date, signed by the Company's president, certifying that the conditions specified in paragraphs 5.1, 5.2, 5.3, 5.4, and 5.8 have been fulfilled. 5.6 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing hereby and all documents and instruments incident to such transactions will be reasonably satisfactory in substance and form to the Investors and their counsel, and the Investors and their counsel will have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. 5.7 Adopted Certificate of Determination of Preferences. An adopted Certificate of Designation in substantially the form attached hereto as an Exhibit shall have been adopted by the Board of Directors of the Company, been filed with the State of Nevada, and shall have become effective. 6. Conditions of the Company's Obligations at Closing. The obligations of the Company under paragraphs 1.1 and 1.2 of this Agreement are subject to the fulfillment at or before the Closing of each of the following conditions: 6.1 Warranties True on the Closing Date. The representations and warranties of each of the Investors contained in paragraphs 3 and 4 hereof shall be true on and as of the Closing with the same effect as though said representations and warranties had been made on and as of the Closing. 7. Registration Rights. There are no registration rights connected to the Series A Shares. 8. Covenants. 8.1 Financial Statements. The Company promptly shall deliver to each holder of Series A Shares annual and quarterly financial statements. 8.2 Reservation of Shares. The Company shall reserve sufficient additional shares of Common Stock for issuance upon conversion of all Series A Shares then outstanding. 8.3 Adoption of Certificate of Determination of Preferences. The Company covenants to use its best efforts to adopt and file a Certificate of Determination of Preferences on or prior to March 16, 1998, the authorized number of shares of Series A Preferred to be a number equal to the number of Series A Shares sold pursuant to this Agreement and the Investors hereby authorize, approve and consent to all actions taken or to be taken by the Company in connection with the adoption and filing of such Certificate of Determination of Preferences. 9. Miscellaneous. 9.1 Agreement is Entire Contract. Except as specifically referenced herein, this Agreement constitutes the entire contract between the parties hereto concerning the subject matter hereof and no party shall be liable or bound to the other in any manner by any warranties, representations or covenants except as specifically set forth herein. Any previous agreement among the parties related to the transactions described herein is superseded hereby. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties hereto. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided herein. 9.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Nevada. 9.3 Counterparts. This Agreement may be executed 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. 9.4 Title and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are for convenience and are not to be considered in construing this Agreement. 9.5 Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, addressed to a party at its address hereinafter shown below its signature or at such other address as such party may designate by ten (10) days advance written notice to the other party. 9.6 Finder's Fee. Each party hereto represents that it is not, and will not be, obligated for any finder's fee or commission payable in cash in connection with this transaction. Each of the Investors hereby agrees to indemnity and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder's fee ( and the costs and expenses of defending against such liability or asserted liability) for which any such Investor or any of its employees or representatives is responsible). The Company agrees to indemnify and hold harmless the Investors from any liability for any commission and compensation in the nature of a finder's fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 9.7 Survival of Warranties. The warranties and representations of the Company contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing hereunder. 9.8 Amendment of Agreement. Except as expressly provided herein, any provision of this Agreement may be amended or waived on behalf of all Investors by a written instrument signed by the Company and by Investors holding at least a majority of the aggregate of the shares of Common Stock issuable and issued upon conversion of the Series A Shares. In Witness Whereof, the undersigned have executed this Agreement on March 13, 1998, effective as of the day and year first written above. Litigation Economics, Inc. Empire Financial Investments LLC By: /s/ Cornelius A. Hofman II By: /s/ Louis A. Farris, Jr. ----------------------------- --------------------------- Authorized Officer Managing Member Managing Member Exhibit 1 LIST OF PURCHASERS Empire Financial Investments LLC 2,350,000 shares $1,500,000 10670 North Central Expressway Suite 235 Dallas, Texas 75231 Exhibit 2 Disclosures NONE Exhibit 3 Certificate of Designation of Series A Preferred Stock CERTIFICATE OF DESIGNATION OF SERIES A PREFERRED STOCK OF LITIGATION ECONOMICS, INC. The undersigned President of LITIGATION ECONOMICS, INC., a corporation duly organized and existing under the laws of the State of Nevada, does hereby certify that complete and proper Board of Directors action has taken place to create and designate a new series of preferred stock, as permitted by the Corporation's Articles of Incorporation, as follows: Number of Shares. The series of preferred stock created hereby shall comprise 2,350,000 shares designated as Series A Convertible Preferred Stock ("Series A Stock"). The Series A Stock has a stated value of $0.50 per share. The number of authorized shares of the Series A Stock may be reduced by further resolution duly adopted by or pursuant to authority conferred by the Board of Directors of the Company and by the filing of a Certificate Of Designations pursuant to the provisions of the Act stating that such reduction has been so authorized, but (i) the number of authorized shares of the Series A Stock shall not be increased; and (ii) the number of shares of Series A Stock may not be reduced below that number of shares which are issued and outstanding at the time. Liquidation Rights. a. Payment Upon Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the holders of outstanding shares of the Series A Stock shall be entitled, before any payment or distribution shall be made on the Common Stock or any other class of stock ranking junior to the Series A Stock upon liquidation, to be paid in full an amount equal to $0.50 per share. After payment of the full amount of such liquidation distribution, the holders of the Series A Stock shall not be entitled to any further participation in any distribution of assets of the Company. b. Insufficient Assets. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the shares of the Series A Stock and the holders of shares of all other stock of the Company ranking, as to liquidation, dissolution or winding up, on a parity with the Series A Stock, shall be insufficient to pay in full the preferential amount set forth in Section (a) and liquidating payments on all such other stock ranking, as to liquidation, dissolution or winding up, on a parity with the Series A Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of the Series A Stock and all such other stock ratably in accordance with the respective amounts which would be payable on such shares of the Series A Stock and any such other stock if all amounts payable thereon were paid in full. c. Payments on Stock Ranking Junior. In the event of any such liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, unless and until payment in full is made to the holders of all outstanding shares of the Series A Stock -2- of the liquidation distribution to which they are entitled pursuant to Section (a), no dividend or other distribution shall be made to the holders of the Common Stock or any other class of stock ranking upon liquidation junior to the shares of the Series A Stock and no purchase, redemption or other acquisition for any consideration by the Company shall be made in respect of the shares of the Common Stock or such other class of stock. d. Definition. Neither the consolidation nor merger of the Company into or with another corporation or corporations shall be deemed to be a liquidation, dissolution or winding up of the Company within the meaning of this resolution. Voting Rights. a. Generally. Holders of the Series A Stock shall not have any voting rights except as hereinafter provided or as otherwise from time required by law. Notwithstanding the foregoing, at any duly called meeting of the shareholders of the Company or upon any vote validly taken by consent as permitted by the Act or the Company's Articles of Incorporation, each share of Series A Stock shall have three (3) common share votes in any vote of common shareholders, and shall have one (1) preferred share vote in any vote of preferred shareholders. b. Ranking. So long as any shares of Series A Stock remain outstanding, the Company shall not, without the affirmative vote or consent -3- of the holders of at least a majority of the shares of Series A Stock outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), (i) authorize, create or issue, or increase the authorized or issued amount of, any class or series of stock ranking prior to the Series A Stock with respect to the distribution of assets on liquidation, or reclassify any authorized stock of the Company into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares; or (ii) amend, alter or repeal the provisions of the Company's Articles of Incorporation, as amended, or of the resolutions contained in the Certificate of Designations for Series A Stock, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of such Series A Stock or the holders thereof; provided, however, that any creation or issuance of other series of preferred stock, or any increase in the amount of authorized shares of such series or of any other series of Preferred Stock, in each case ranking on a parity with or junior to the Series A Stock shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. c. Applicability. The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which -4- such vote would otherwise be required shall be effected, all outstanding shares of the Series A Stock shall have converted or called for conversion. Conversion of Series A Stock a. Shares of Series A Stock may be converted by the registered holders thereof into shares of common stock on a one for one basis at any time after December 31, 2000, provided that presentation of Series A Stock takes place prior to a call for the redemption of the Series A Stock by the Company. b. As promptly as practicable after the conversion and cancellation of the Series A Stock as provided in (a), above, the Company shall deliver, or cause to be delivered to the former holders of the Series A Stock certificates representing the number of shares of common stock issuable upon such conversion, issued in such name or names as such holder shall direct. c. The conversion rate shall be subject to adjustment from time to time as follows: (i) In case the Company shall at any time (A) pay a dividend with or make a distribution of shares of its common stock (whether shares of common stock or of capital stock of any other class) other than the 2-for-1 forward split in the form of a 100% stock dividend paid to shareholders of record on March 1, 1998, (B) subdivide or reclassify its outstanding shares of common -5- stock into a greater number of securities (including shares of common stock), or (C) combine or reclassify its outstanding shares of common stock into a smaller number of shares (including shares of common stock), the conversion rate in effect immediately prior thereto shall be adjusted so that the holder of record of any shares of Series A Stock thereafter cancelled for conversion shall be entitled to receive the number of shares of the Company which he would have owned or have been entitled to receive after the happening of any of the events described above had such shares of Series A Stock been converted immediately prior to the happening of such event. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination. If, as a result of an adjustment made pursuant to this subparagraph (i), the holder of any Series A Stock thereafter converted shall become entitled to receive shares of two or more classes of capital stock of the Company, the Board of Directors of the Company (whose determination shall be conclusive) shall determine the allocation of the adjusted conversion rate between or among shares of such classes of capital stock. In the event that at any time, as a result of an adjustment made pursuant to this subparagraph (i), the holder of any Series A -6- stock thereafter converted shall become entitled to receive any shares or other securities of the Company other than shares of common stock, thereafter the number of such other shares so received upon conversion of any Series A Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of common stock contained in this Section 4(d), and other provisions of this Section 4 with respect to the shares of common stock shall apply on like term to any such other shares or other securities. (ii) In case the Company shall fix a record date for making a distribution to all holders of its common stock evidences of its indebtedness or assets (excluding regular quarterly or other periodic or recurring cash dividends or distributions and cash dividends or distributions paid from retained earnings) or rights or warrants to subscribe or purchase, then in each such case the conversion rate shall be adjusted so that the same shall equal the rate determined by multiplying the conversion rate in effect immediately prior to such record date by a fraction of which the numerator shall be the current market price (as defined in subparagraph (iv) below) per share of the common stock on such record date, and the denominator of which shall be such current market price per share of common stock, less the then fair market value (as determined in good faith by the -7- Board of directors, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such rights or warrants applicable to one share of common stock. Such adjustment shall be made successfully whenever such a record date is fixed and shall become effective immediately after such record date. Notwithstanding the foregoing, in the event that the Company shall distribute any rights or warrants to acquire capital stock ("Rights") pursuant to this subparagraph (ii), the distribution of separate certificates representing such Rights subsequent to their initial distribution (whether or not such distribution shall have occurred prior to the date of the issuance of such Series A Stock) shall be deemed to be the distribution of such Rights for purposes of this subparagraph (ii); provided that the Company may, in lieu of making any adjustment pursuant to this subparagraph (ii) upon a distribution of separate certificates representing such Rights, make proper provision so that each holder of such Series A Stock who converts such Series A Stock (or any portion thereof) (A) before the record date for such distribution of separate certificates shall be entitled to receive upon such conversion shares of common stock issued with Rights and (B) after such record date and prior to the expiration, redemption or termination of such Rights shall be entitled to receive upon such conversion, in addition to the shares of common stock that issuable upon -8- such conversion, the same number of such Rights as would a holder of the number of shares of common stock that such Series A Stock so converted would have entitled the holder thereof to purchase in accordance with the terms and provisions of and applicable to the Rights if such Series A Stock were converted immediately prior to the record date for such distribution. Common stock owned by or held for the account of the Company or any majority owned subsidiary shall not be deemed outstanding for the purpose of any adjustment required under this subparagraph (ii). (iii) For the purpose of any computation under subparagraph (ii), the current market price per share of common stock at any date shall be deemed to be the average of the daily Closing Prices for the thirty consecutive business days commencing forty-five business days before the day in question. The Closing Price for any day shall be the mean between the closing high bid and low asked quotations of common stock of the Company Electronic Bulletin Board in the National Association of Securities Dealers, Inc., Automated Quotation System, or any similar system or automated dissemination of quotations of securities prices then in common use. (iv) Nothing contained herein shall be construed to require an adjustment in the conversion rate as a result of the issuance of common stock pursuant to, or the granting or exercise of any rights under, -9- the Company's Long Term Equity-Based Incentive Plan or any other plans providing for the purchase of shares of common stock by the Company's shareholders or employees at a price not less than 90% of the "average market price" during the "pricing period" as such terms, or equivalent terms, are defined in, and as calculated pursuant to, such plans from time to time. (d) No fractional shares of stock shall be issued upon the conversion of any Series A Stock. Fractions of shares of common stock resulting from the conversion provisions hereof shall be rounded up to the next whole share. (e) In case any of the following shall occur while any Series A Stock is outstanding: (i) any reclassification or change of the outstanding shares of common stock deliverable upon conversion of the Series A Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination, but including any change in the shares of common stock into two or more classes or series of securities); or (ii) any consolidation or merger to which the Company is a party (other than a consolidation or a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or -10- combination) in, the outstanding shares of common stock issuable upon conversion of the Series A Stock); or (iii) any sale or conveyance to another corporation of the properties and assets of the Company as an entirety or substantially as an entirety; then the Company, or such successor or purchasing corporation, as the case may be, shall make appropriate provision in its charter or otherwise so that the holders of the Series A Stock then outstanding shall have the right to any time thereafter to convert such Series A Stock into the kind and amount of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number shares of common stock issuable upon conversion of such Series A Stock immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Such provision shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The above provisions of this paragraph (e) shall similarly apply to successive reclassification, changes, consolidations, mergers, sales or conveyances. (f) Following the issuance of the Series A Stockholder the Company will promptly take such actions as required to effect the Recapitalization pursuant to which a sufficient number of common shares shall be -11- created to effect the conversion of all outstanding Series A Stock. (g) Before taking any action which would cause an adjustment increasing the conversion rate so that the conversion price is below the then par value of the shares of common stock, the Company will take any corporation action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of common stock at the conversion rate as so adjusted. (h) The issuance of certificates for shares of common stock upon conversion of Series A Stock shall be made without charge to the converting stockholder for such certificates or for any tax in respect of the issuance of such certificates, and such certificates shall be issued in the name of, or in such name or names as may be directed by, the holder of the Series A Stock converted. However, if any such certificates is to be issued in a name other than that of the holder of the converted Series A Stock, the Company shall not be required to issue or deliver any stock certificate or certificates unless and until the holder has paid to the Company the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Company that such tax has been paid. -12- (i) Whenever the conversion rate then in effect is adjusted as herein provided, the Company shall mail to each holder of the Series A Stock at such holder's address as it shall appear on the books of the Company a statement setting forth the adjusted conversion rate, then and thereafter effective under the provisions hereof together with the facts, in reasonable detail, upon which such adjustment is based. (j) In case (i) the Company shall declare a dividend (or any other distribution) on its common stock other than in cash out of its current or retained earnings, or (ii) the Company shall authorize the granting to the holders of its common stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights or warrants, or (iii) of any reclassification or change of the common stock of the Company (other than a subdivision or combination of its outstanding shares of common stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required or the sale or transfer of all or substantially all of the assets of the Company, or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; the Company shall mail to each holder of Series A Stock at such holder's address as it shall appear on -13- the books of the Company, at least fifteen days prior to the applicable record date hereinafter specified, a notice stating (x) the record date for such dividend, distribution or rights, or, if a record is not to be taken, the date as of which the holders of common stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of common stock of record shall be entitled to exchange their shares of common stock for securities or other property deliverable upon such reclassification, consolidation, merger, dissolution, liquidation or winding up. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the legality or validity of any such transaction or any adjustment in the conversion rate or conversion price required by this Section. Redemption of Series A Stock. a. The Company may redeem Shares of Series A Stock at any time after December 31, 2000 at the redemption call price of $1.00 per share. b. The Company must provide written notice of its intent to redeem the Series A Stock at least 20 business days prior to the -14- designated redemption date, in order to give holders of shares of Series A Stock an opportunity to convert into common stock if they desire. c. Notice will be deemed adequate if mailed first class postage prepaid to the addresses of the registered holders appearing on the transfer records of the Company. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation this 12th day of March, 1998. LITIGATION ECONOMICS, INC /s/ Cornelius A. Hofman II ---------------------------- By: Cornelius A. Hofman II Its: President Attest: /s/ Stacey A. Hofman - --------------------- Stacey A. Hofman Secretary -15- EX-3.1 4 ARTICLES OF INCORPORATION CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF LITIGATION ECONOMICS, INC. The undersigned President of LITIGATION ECONOMICS, INC., a corporation duly organized and existing under the laws of the State of Nevada, does hereby certify that complete and proper shareholder action has taken place to amend the Corporation's Articles of Incorporation as follows: FIRST. The name of this corporation is LITIGATION ECONOMICS, INC. SECOND. The Board of Directors of the Corporation acted pursuant to unanimous written consent as of March 12, 1998 and approved all of the following amendments, and recommended the same to the shareholders. THIRD. The Articles of Incorporation are amended by deleting Article I, as currently in force and effect, in its entirety and inserting the following in lieu thereof: "ARTICLE I - NAME The name of the corporation is EMPIRE COMMUNICATIONS CORPORATION." FOURTH. The Articles of Incorporation are further amended by adding new Article X, as follows: "ARTICLE X - INDEMNIFICATION Each Director and Executive Officer of this Corporation may be indemnified by the Corporation with respect to actions taken or not taken by said Directors or Executive Officers in the course of their duties for the Corporation to fullest extent permitted by law. The specific terms of any such indemnification shall be provided in the bylaws of the Corporation." FIFTH. The Articles of Incorporation are further amended by adding Article XI as follows: "ARTICLE XI - FAIR PRICE A. Unless the conditions set forth in clauses 1 and 2 below are satisfied, there shall be no "Business Transaction," as defined below, between this corporation and a "Related Person", as defined below, except upon the affirmative vote of the holders of eighty percent (80%) of all the shares of stock of this corporation entitled to vote in elections of directors, considered for the purposes of this Article FIFTEENTH as one class. The approval of eighty percent (80%) of the holders of stock of this corporation shall not be required for those Business Transactions involving a Related Person if (1) the Business Transaction has been approved by two-thirds of the "Continuing Directors" of the corporation, as defined, or (2) all of the following conditions are satisfied: (a) the Business Transaction is a merger or consolidation of the corporation and the amount paid per share to the holders of common stock of the corporation is at least equal in value to the highest amount paid by the Related Person for a share of common stock of the corporation within two years prior to the date such person became a Related Person or in the transaction in which the Related Person became a Related Person (the "Highest Purchase Price"); (b) after becoming a Related Person and prior to such merger or consolidation, such Related Person did not acquire any additional shares of voting stock of the corporation; and (c) prior to consummation of the merger or consolidation, such Related Person did not receive any benefits from the corporation (except proportionately as a shareholder) or cause any material change in the corporation's business or equity capital structure. B. For purposes of this Article XI a "Business Transaction," shall mean one of the following transactions involving this corporation and a Related Person (other than where the Related Person is participating proportionately as a shareholder): (a) a merger or consolidation involving the corporation or any of its subsidiaries, (b) the sale, exchange or other disposition by the corporation or -2- any of its subsidiaries of assets onstituting more than twenty percent (20%) of the fair market value of the total assets of the entity involved, (c) the purchase or other acquisition by the corporation or any of its subsidiaries of more than twenty percent (20%) of the fair market value of the total assets of the entity involved, (d) the issuance, transfer or other disposition of any securities of the corporation or of any of its subsidiaries, (e) any recapitalization or reclassification of securities of the corporation or other transaction that would have the effect of increasing the voting power of a Related Person, (f) any liquidation, spin-off or other dissolution, of the corporation, and (g) any agreement or other arrangement providing for any of the transactions defined as a Business Transaction. A "Related Person" for purposes of this Article shall mean any person or entity which is the "beneficial owner" directly or indirectly of shares of stock of this corporation possessing more than ten percent (10%) of the votes of the outstanding shares of stock of this corporation entitled to vote in the election of directors, considered for the purposes of this Article XI as one class. For the purpose of this Article XI, and without limiting the definition of "beneficial owner" or "beneficially own," any corporation, person or other entity shall be deemed to be the "beneficial owner" of or to "beneficially own" any share of stock of the corporation (a) which it has the right to acquire either immediately or at some future date pursuant to any agreement, or upon exercise of conversion rights, warrants or options, otherwise, or (b) which is "beneficially owned," directly or indirectly (including shares deemed owned through application of the foregoing clause (a) of this paragraph), by any other corporation, person or other entity either with which it or its "affiliate" or "associate" has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of stock of the corporation, or which is its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934 as in effect from time to time or any successor provision. Also for purposes of this Article XI, the "outstanding" shares of any class of stock of the corporation shall include shares deemed owned through application of the foregoing clauses (a) and (b) of this paragraph, but shall not include any other shares which may be issuable either immediately or at some future date pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. For purposes of this Article XI, a "Continuing Director" shall mean a director who was elected by the public shareholders of the corporation prior to the time that the Related Person became a Related Person, or a Person elected to succeed a Continuing Director by a majority of the Continuing -3- Directors, so long as such Continuing Directors constitute a majority of the Board of Directors of the corporation both before and after the Business Transaction. C. This article X may not be amended, nor may it be revealed in whole or in part, until authorized by the favorable vote of not less than eighty percent (80%) of all of the votes entitled to be cast thereon by the holders of the issued and outstanding common stock of the corporation entitled to vote in elections of directors, considered for the purposes of this Article to be a Class, unless at the time any such proposed amendment or repeal is submitted to vote of the shareholders of the corporation entitled to vote there is no Related Person, as defined, in which event this Article XI may be so amended or repealed by the favorable vote of not less than such number of votes as shall otherwise be required by law at such time to effect such amendment or repeal. SIXTH. These Amendments were duly adopted by the Shareholders of the Corporation by written consent pursuant to Section 78.320, Nevada Revised Statutes on March 12, 1998. SEVENTH. The number of shares outstanding and the number of shares entitled to vote on the Amendments were as follows: Number of Shares Number of Shares Designation Outstanding Eligible to Vote ----------- ----------- ---------------- Common 1,600,000 shares 1,600,000 shares EIGHTH. The number of shares of each class voted for and against the Amendments were as follows: Shares Voted Shares Voted Class in Favor Against ----- -------- ------- Common 1,497,000 shares 0 shares -4- IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment this 12th day of March, 1998. LITIGATION ECONOMICS, INC /s/ Cornelius A. Hofman, II ---------------------------- By: Cornelius A. Hofman II Its: President Attest: /s/ Stacey A. Hofman - ---------------------- Stacey A. Hofman Secretary State of Idaho ) : ss. County of Shoshone ) On March 20, 1998, personally appeared before me, a Notary Public, Cornelius A. Hofman II and Stacey A. Hofman, who being the President and Secretary of Litigation Economics, Inc., respectively, acknowledged that they executed the above instrument. /s/ Jennifer Bowen ------------------- Notary Public [SEAL] -5- -----END PRIVACY-ENHANCED MESSAGE-----