-----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, OZt2l3Dh5268RLlhPLbzBJo5LrwdJxtDgkzaUX4+dEs3vL+Mi8i4THwvKtwJ85BX SZxyVNomP+BbjI3A+q+DyQ== 0001270076-04-000010.txt : 20040816 0001270076-04-000010.hdr.sgml : 20040816 20040816165510 ACCESSION NUMBER: 0001270076-04-000010 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOGISTICS MANAGEMENT RESOURCES INC CENTRAL INDEX KEY: 0000820408 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 680133692 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-16417-LA FILM NUMBER: 04979510 BUSINESS ADDRESS: STREET 1: 10602 TIMBERWOOD CIRCLE CITY: LEXINGTON STATE: KY ZIP: 40223 BUSINESS PHONE: 8439722055 MAIL ADDRESS: STREET 1: 10602 TIMBERWOOD CIRCLE CITY: LEXINGTON STATE: KY ZIP: 40223 FORMER COMPANY: FORMER CONFORMED NAME: U S TRUCKING INC DATE OF NAME CHANGE: 19980923 FORMER COMPANY: FORMER CONFORMED NAME: NORTHERN DANCER CORP DATE OF NAME CHANGE: 19930723 10QSB 1 abc10qsb063004.txt FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-QSB (Mark One) [X] Quarterly report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended: June 30, 2004 [ ] Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from__________________ to ______________________. Commission File No: 33-9640-LA AMERICAN BUSINESS CORPORATION (Name of Small Business in its Charter) Colorado 68-0133692 (State or Other Jurisdiction of Incorporation) (IRS Employer Id. No.) 477 Madison Avenue, 12th Floor New York, NY 10022 (Address of Principal Office including Zip Code) Issuer's telephone Number: (212) 308-8700 (formerly) Logistics Management Resources, Inc. (Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report) Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Common Stock, par value $.001 per share, 71,870,517 shares at June 30, 2003 Transitional Small Business Disclosure Format (Check one): Yes [ ] NO [ ]. AMERICAN BUSINESS CORPORATION FORM 10-QSB - QUARTER ENDED JUNE 30, 2004 INDEX Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements........................................2 Condensed Balance Sheets at June 30, 2004 and December 31, 2003.....................................3 Condensed Statements of Operations for the Six Months and Three Ended June 30, 2004 and June 30, 2003...........4 Condensed Statement of Shareholders' Impairment for the Period January 1, 2003 through June 30, 2004..............5 Condensed Statements of Cash Flows for the Six Months Ended June 30, 2004 and June 30, 2003.....................6 Notes to the Condensed Financial Statements.................7 Item 2. Management's Discussion and Analysis.......................10 Item 3. Controls and Procedures....................................12 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders........12 Item 5. Other Information..........................................12 Item 6. Exhibits and Reports on Form 8-K...........................13 SIGNATURES Signatures.................................................14 Exhibits...................................................15 - ---------------------- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The unaudited condensed balance sheet of the Registrant as of June 30, 2004, the audited balance sheet at December 31, 2003, and the unaudited condensed statements of operations, shareholders' impairment, and cash flows for the six and three month periods ended June 30, 2004 and June 30, 2003 follow. The condensed financial statements reflect all adjustments that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. 2 AMERICAN BUSINESS CORPORATION CONDENSED BALANCE SHEETS
June 30, 2004 December 31, Assets [unaudited] 2003 ------------- ------------ Current assets - Cash $ 69,665 $ -- Deposit on acquisition of Hybrid-Systems.com, Inc. 150,000 -- ------------- ------------ Total current assets 219,665 -- Deferred compensation, net 147,500 -- ------------- ------------ Total Assets $ 357,165 $ -- ============= ============ Liabilities and Shareholders' Impairment Current Liabilities Accrued expenses $ 335,564 320,343 Accrued interest 3,273,268 3,273,268 Due to related parties 3,330,588 2,996,460 Loans payable 2,518,000 2,518,000 Convertible debentures 3,793,460 3,793,460 Net liabilities of discontinued operations 4,440,657 4,440,657 ------------- ------------ Total Current Liabilities 17,691,537 17,342,188 ------------- ------------ Commitments and contingencies Shareholders' Impairment Preferred stock, no par value; (10,000,000 shares authorized) Series A (99,000 and 999,000 shares issued and outstanding, respectively) 76 762 Series B (2,000 shares issued and outstanding) 2,000,000 2,000,000 Series C (450,000 shares issued and outstanding) 135,000 135,000 Series D (950 shares issued and outstanding) 950,000 950,000 Series E (2,300 shares issued and outstanding) 2,300,000 2,300,000 Common stock, par value $.001 per share; 500,000,000 authorized, 76,870,517 and 54,370,517 issued and outstanding, respectively 76,870 54,370 Additional paid-in capital 14,948,887 14,538,201 Accumulated deficit (37,736,205) (37,320,521) ------------ ----------- Total Shareholders' Impairment (17,324,372) (17,342,188) ------------- ------------ Total Liabilities and Shareholders' Impairment $ 357,165 $ -- ============= ============
See notes to condensed financial statements. 3 AMERICAN BUSINESS CORPORATION CONDENSED STATEMENTS OF OPERATIONS [Unaudited]
Six Months Ended Three Months Ended June 30, June 30, 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Revenues $ -- $ -- $ -- $ -- Operating Expenses: Depreciation and amortization 2,500 1,273 2,500 637 Interest expense 58,147 54,406 29,290 27,591 Administrative expenses 354,037 153,213 262,975 152,685 ---------- ---------- ---------- ---------- Total operating expenses 414,684 208,892 294,765 180,913 ---------- ---------- ---------- ---------- Net loss $ (414,684) $ (208,892) $ (294,765) $ (180,913) ========== ========== ========== ========== Net loss per common share - basic and fully-diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00) ========== ========== ========== ========== Weighted average number of common shares outstanding 62,299,093 54,370,517 68,245,524 54,370,517 ========== ========== ========== ==========
See notes to condensed financial statements. 4 AMERICAN BUSINESS CORPORATION CONDENSED STATEMENT OF SHAREHOLDERS' IMPAIRMENT
Preferred Preferred Preferred Preferred Preffered Stock Stock Stock Stock Stock Series A Series B Series C Series D Series E Shs Amt Shs Amt Shs Amt Shs Amt Shs Amt ------- ------ ----- ---------- ------- -------- --- -------- ----- ---------- Balance, January 1, 2003 999,000 $ 762 2,000 $2,000,000 450,000 $135,000 950 $950,000 2,300 $2,300,000 Restatement for change in par value of common - - - - - - - - - - ------- ------ ----- ---------- ------- -------- --- -------- ----- ---------- January 1, 2003, restated 999,000 $ 762 2,000 $2,000,000 450,000 $135,000 950 $950,000 2,300 $2,300,000 Net income - - - - - - - - - - ------- ------ ----- ---------- ------- -------- --- -------- ----- ---------- Balance, December 31, 2003 999,000 $ 762 2,000 $2,000,000 450,000 $135,000 950 $950,000 2,300 $2,300,000 [2004 unaudited] Shares converted to shares (900,000) (686) - - - - - - - - Shares issued for services - - - - - - - - - - Shares issued as deposit - - - - - - - - - - Shares issued to officer - - - - - - - - - - Net loss - - - - - - - - - - ------- ------ ----- ---------- ------- -------- --- -------- ----- ---------- Balance, June 30, 2004 99,000 $ 76 2,000 $2,000,000 450,000 $135,000 950 $950,000 2,300 $2,300,000 ======= ====== ===== ========== ======= ======== === ======== ===== ==========
Common Stock Additional Paid- Accumulated Total Shareholders' Shs Amt In Capital Deficit Impairment ---------- ------- ---------------- ------------ ------------------- Balance, January 1, 2003 54,370,517 $ - $ 14,592,571 $(40,579,951) $ (20,601,130) Restatement for change in par value of common - 54,370 (54,370) - - ---------- ------- ---------------- ------------ ------------------- January 1, 2003, restated 54,370,517 54,370 $ 14,538,200 $(40,579,951) $ (20,601,130) Net income - - - 3,258,942 3,258,942 ---------- ------- ---------------- ------------ ------------------- Balance, December 31, 2003 54,370,517 $54,370 $ 14,538,200 $(37,320,521) $ (17,342,188) [2004 unaudited] Shares converted to shares 9,000,000 9,000 (8,314) - - Shares issued for services 3,500,000 3,500 129,000 - 132,500 Shares issued as deposit 5,000,000 5,000 145,000 - 150,000 Shares issued to officer 5,000,000 5,000 145,000 - 150,000 Net loss - - - (414,684) (414,684) ---------- ------- ---------------- ------------ ------------------- Balance, June 30, 2004 76,870,517 $76,870 $ 14,948,887 $(37,735,205 $ (17,324,372) ========== ======= ================ ============ ===================
See notes to the condensed financial statements. 5 AMERICAN BUSINESS CORPORATION CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, --------------------------- 2004 2003 ------------ ------------ [unaudited] [unaudited] Cash flows from operating activities - Net loss $ (414,684) $ (208,892) Adjustments to reconcile net loss to net cash used by operating activities Depreciation and amortization expense 2,500 1,273 Issuance of common shares for services 132,500 -- Increase in liabilities Accrued expenses 15,221 528 Accrued interest 58,147 54,406 ---------- ---------- Net cash used by operating activities (206,316) (152,685) ---------- ---------- Cash flows from financing activities - Net proceeds from related parties 275,981 152,685 ---------- ---------- Net cash provided by financing activities 275,981 152,685 ---------- ---------- Net change in cash 69,665 -- Cash at beginning of period -- -- ---------- ---------- Cash at end of period $ 69,665 $ -- ========== ========== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Accrued interest reclassified to Convertible Note due to related parties $ 58,147 $ 54,406 ========== ========== Increase in par value of Common Stock $ -- $ 54,370 ========== ========== Related decrease in Additional Paid-in Capital $ -- $ (54,370) ========== ==========
See notes to condensed financial statements. 6 AMERICAN BUSINESS CORPORATION NOTES TO THE CONDENSED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The interim financial statements included herein are presented in accordance with United States generally accepted accounting principles and have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Registrant believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. The Registrant's operating results for the six and three month periods ended June 30, 2004, and 2003 are not necessarily indicative of the results that may be or were expected for the years ended December 31, 2004, and 2003. It is suggested that these interim financial statements be read in conjunction with the audited financial statements and notes thereto of the Registrant included in its Form 10-KSB for the period ended December 31, 2003. Note 2 - Redirection of the Registrant's Activities At a Special Meeting of Shareholders held June 17, 2004 (the "Meeting"), a majority of the Registrant's shareholders approved amending the Registrant's Articles of Incorporation to change its name to American Business Corporation, increase the authorized Common Stock from 75,000,000 to 500,000,000 shares, and increase the par value of the Common Stock from no par value to $.001 per share. The increase in par value and the number of authorized shares of the Registrant's Common Stock has been reflected as a restatement of the related opening account balances. The actions taken at the Meeting were in anticipation of a planned reorganization of the Registrant's liabilities and shareholders' accounts and the election by the Registrant to be regulated as a business development company. Note 3 - Related Party Transactions As previously reported, and by virtue of (i) a 6% secured convertible promissory note due to Brentwood Capital Corp., an affiliated privately owned New York merchant banking corporation ("Brentwood"), dated September 27, 2002, in the aggregate principal amount of $1,981,961 and convertible into 198,196,143 shares of the Registrant's Common Stock, $.001 par value per share; and (ii) Brentwood's record 7 ownership of 1,435,000 shares of the Registrant's common stock, equaling 199,631,143 shares and equivalents or 52% of the Registrant's total capitalization, the Registrant may be deemed to be controlled by Brentwood. Similarly, and as previously reported, Midwest Merger Management, LLC, a Kentucky limited liability company and its affiliated entities ("Midwest") is the record owner of 3,459,800 shares of the Registrant's common stock, 9,990,000 common shares issuable upon conversion of outstanding shares of Series A preferred stock and 45,000,000 common shares issuable upon conversion of outstanding shares of Series C preferred stock or 18% of the Registrant's common stock and equivalents. Accordingly, the Registrant may be deemed to be controlled by Midwest. During the period covered by this Quarterly Report, and in connection with its ongoing support of the Registrant, Midwest contributed an aggregate of $181,905 to the Registrant to fund its activities. At June 30, 2004, the aggregate indebtedness to related parties was $3,330,588. The Registrant intends to settle its aggregate obligations to Midwest and Brentwood in the course of its planned reorganization to a business development company. Note 4 - Per Share Results The common share equivalents associated with the Registrant's issued and outstanding convertible notes and Preferred Stock were not included in computing per share results as their effects were anti-dilutive. Note 5 - Income Taxes (Benefits) At December 31, 2002, the Registrant had available approximately $23,000,000 of net operating loss carry-forward, which expires between December 31, 2008 and December 31, 2021, that may be used to reduce future taxable income. As utilization of this carry-forward is less than certain, its potential tax benefit to the Registrant of approximately $8,000,000 is fully reserved. Note 6 - Going Concern The Registrant's condensed consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Registrant had negative working capital at June 30, 2004, of $17,471,872. In addition, the Registrant has 8 incurred an accumulated deficit of $(37,732,705) through June 30, 2004. The Registrant is dependent upon the efforts of Midwest and Brentwood to raise proceeds for its continued survival. The Registrant's ability to continue to receive this level of support from Midwest and Brentwood is uncertain. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Registrant is unable to continue as a going concern. Note 6 - Material Transactions A. Hybrid-Systems.com, Inc. On May 28, 2004, and as previously reported in the Registrant's Form 8-K filed on June 3, 2004, the Registrant executed a Stock Exchange Agreement (the "Exchange Agreement") with Hybrid-Systems.com, Inc., a Florida corporation engaged in the assembly, marketing and sale of computer components and systems ("Hybrid"). The Agreement called for the Registrant to acquire all of the issued and outstanding capital stock of Hybrid from its shareholders in exchange for 5,000,000 newly-issued and restricted shares of the Registrant's common stock, par value $.001 per share (the "Exchange Shares"). The Agreement is subject to the Exchange Shares: (i) being held in escrow pending an audit of Hybrid's financial statements to be delivered on or before July 1, 2004; and (ii) being reduced by 500,000 Exchange Shares for each $10,000 that Hybrid's total assets are less than $100,000 and 500,000 Exchange Shares for each $30,000 that net sales are less than $480,000. On July 26, 2004, the Registrant received Hybrid's audited financial statements which reflected $25,000 in assets and sales of $6,000. Pursuant to the refund provisions of the Exchange Agreement, the required reduction to the number of Exchange Shares would exceed the number of Exchange Shares due to Hybrid. Accordingly, the Registrant abandoned the transaction with Hybrid and initiated the cancellation of the Exchange Shares and restoration thereof to authorized but unissued status. B. Y2 Ultra Filters, Inc. On May 21, 2004, and as previously reported in the Registrant's Form 8-K filed on July 21 2004, the Registrant and Y2 Ultra-Filters, Inc., a privately owned Wyoming corporation ("Y2") agreed upon the terms and conditions of a form of Purchase and Contribution Agreement to be effective on April 28, 2004, wherein the Registrant agreed to purchase the exclusive worldwide rights to market and sell Y2's filtration system technology known as U2-Ultra FilterTM for applications within the worldwide gaming industry for the life of the technology (the "License"). The U2-Ultra FilterTM technology is the subject of four United States patents which rights were also applied for in the European Community , Australia, Canada and Taiwan. 9 Pursuant to an amendment to the original agreement effective June 30, 2004 (the "Amendment"), the parties changed the Purchase and Contribution Agreement to a License and Joint Venture Agreement and provided for the formation of A.I.R. Filters, LLC, a Delaware limited liability company (the "LLC") as a joint venture to commercialize the U2-Ultra FilterTM technology within the worldwide gaming industry. The LLC, which was formed on June 4, 2004, has been created to execute the party's marketing and sales efforts in which Y2 as chief operating member and the Registrant as chief executive member will each have a 50% interest. In consideration for the License, the Registrant agreed to originally issue 27,000,000 restricted shares of its common stock to Y2 and, subject to certain performance milestones, granted to Y2 a five year option to purchase an additional 39,000,000 restricted shares (19,000,000 at $.10 and 20,000,000 at 100% of fair market value when earned). Note 7 - Commitments On July 12, 2004, and pursuant to a Loan Agreement and annexed 10% promissory note of even date therewith among the Registrant as lender, Clayton, Dunning & Company Inc., a Florida corporation and registered broker dealer ("CDC") as borrower, and Robert C. Lau and Patricia D. Lau, as co-makers, the Registrant lent $125,000 (the "Loan") to CDC. The terms and conditions of the Loan are described in Item 5 of this Quarterly Report on page 13. Item 2. Management's Discussion and Analysis The following discussion contains forward-looking statements regarding the Registrant, its business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause the Registrant's actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation, the Registrant's ability to resolve the affairs of its creditors and other investors; or to locate and thereafter negotiate and consummate a business combination with a profitable privately owned company. When used in this discussion, words such as "believes," "anticipates," "expects," "intends," and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Registrant undertakes no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports filed with the SEC that attempt to advise interested parties of the risks and factors that may affect the Registrant's business. 10 Six Month Periods Ended June 30, 2004 and 2003: Revenues. - As a direct result of the Registrant's inability to continue its failing freight transportation services beyond November 2000, the Registrant had no revenues during either the six month period ended June 30, 2004 ("6M04") or the six month period ended June 30, 2003 ("6M03"). The Registrant continues working through the restructure of its debt and the mitigation of outstanding litigation. Expenses and Income Taxes - General and administrative expenses for 6M04 were $414,684 compared to $208,892 for 6M03. This increase is consistent with the Registrant's strategy of redirecting its focus toward becoming a candidate to acquire or merge with a profitable, privately-held business operation. Accordingly, the Registrant's recurring administrative expenses include: (i) professional fees (legal and accounting) associated with the resolution of the Registrant's affairs with its former creditors and investors, and the maintenance of its reporting requirements and good standing, (ii) interest on its outstanding convertible note due to Brentwood (commencing on October 1, 2003), (iii) other ancillary expenses, and (iv) the payment of minimum franchise taxes. Net Income (Loss) - Accordingly, the Registrant experienced a net loss of $414,684 for 6M04 compared to a net loss of $208,892 for 6M03. When related to the weighted average number of common shares outstanding during 6M04 and 6M03 per share loss results were $0.00 and $0.00, respectively. Quarters Ended June 30, 2004 and 2003: Revenue - As a direct result of the Registrant's inability to continue its failing freight transportation services beyond November 2000, the Registrant had no revenues during either the second quarter June 30, 2004 ("2Q04") or the second quarter ended June 30, 2003 ("2Q03"). The Registrant continues working through the restructure of its debt and the mitigation of outstanding litigation. Expenses and Income Taxes - General and administrative expenses for 2Q04 were $294,765 compared to $180,913 for 2Q03. This increase is consistent with the Registrant's strategy of redirecting its focus toward becoming a candidate to acquire or merge with a profitable, privately-held business operation. Accordingly, the Registrant's recurring administrative expenses include: (i) professional fees (legal and accounting) associated with the resolution of the Registrant's affairs with its former creditors and investors, and the maintenance of its reporting requirements and good standing, (ii) interest on its outstanding convertible note due to Brentwood (commencing on October 1, 2003), (iii) other ancillary expenses, and (iv) the payment of minimum franchise taxes. 11 Net Income (Loss) - Accordingly, the Registrant experienced a net loss of $294,765 for 2Q04 compared to a net loss of $180,913 for 2Q03. When related to the weighted average common shares outstanding during each period, per share results were $0.00 and $0.00, for 2Q04 and 2Q03, respectively. Liquidity and Capital Resources. The Registrant does not have any permanent capital resources. Consistent with the inability to continue its failing freight transportation services business beyond November 2000, and its subsequent disposition in connection with arranging the funding of the GE Credit Corp. settlement in September 2002, the Registrant's principal activity has been centered in resolving the claims of its former creditors so it may seek a business combination. In this connection, Midwest and Brentwood have agreed to provide Registrant with reasonable legal, accounting and administrative resources to resolve its affairs and conduct its search for a business combination candidate. Accordingly, the Registrant is entirely dependent upon: (i) Midwest providing the Registrant with certain advisory services in connection with the resolution of its affairs on favorable terms; (ii) the willingness of Brentwood to provide the Registrant with certain office and administrative facilities and to fund virtually all of the Registrant's settlements with its creditors; and (iii) the Registrant's successfully implementing a business combination with a profitable operating company. There can be no assurances that Midwest will be successful in resolving all or substantially all of Registrant's affairs, that Brentwood will fund any further settlements, or that the combined efforts of Midwest and Brentwood will lead to a successful business combination. Item 3. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures The Registrant maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Registrant files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive and Chief Financial officers of the Registrant concluded that the Registrant's disclosure controls and procedures were adequate. (b) Changes in Internal Controls 12 The Registrant made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the Chief Executive and Chief Financial officers. PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At a Special Meeting of Shareholders held June 17, 2004 (the "Meeting"), a majority of the Registrant's shareholders approved the following three matters: (i) amending the Registrant's Certificate of Incorporation to change its name to American Business Corporation ("Item 1"); increase the number of shares of Common Stock the Registrant is authorized to issue from 75,000,000 shares to 500,000,000 shares ("Item2"); and (iii) increasing the par value of the Registrant's Common Stock from no par value to $.001 per share ("Item3"). The actions taken at the Meeting were in anticipation of a proposed reorganization of the Registrant into a business development company. The votes cast for, against and abstained from each matter were as follows: Shares Entitled Voted Voted Matter to Vote For Against Abstained - ------ --------------- ---------- -------- ---------- Item 1 106,860,517 62,215,823 4 7 Item 2 106,860,517 62,183,268 19,553 13,013 Item 3 106,860,517 61,789,101 426,703 0 Item 5. Other Information A. Employment Arrangement Effective June 1, 2004, Anthony R. Russo, became the Registrant's President, Chief Executive and Chief Financial Officer. The terms and conditions of Mr. Russo's five year written employment agreement with the Registrant, which have yet to be finalized, will include 5,000,000 shares of the Registrant's common stock written off over the term of the agreement. B. Loan Agreement On July 12, 2004, and pursuant to a Loan Agreement and annexed 10% promissory note of even date (the "Loan Agreement") among the Registrant as lender, Clayton, Dunning & Company Inc., a Florida corporation and registered broker dealer ("CDC") as borrower, and Robert C. Lau and Patricia D. Lau, as co-makers (the Co-Makers"), the Registrant lent $125,000 (the "Loan") to CDC. The Loan, which was made in 13 contemplation of a long term relationship with CDC as described below in Paragraph B.,is due and payable in 13 months or within ten days after an event of default. The Loan is secured by the Registrant's first lien and security interest in 800 issued and outstanding shares of CDC's common stock owned by the Co-Makers, representing an 80% equity interest in CDC and held in escrow by the Co-Maker's attorney. In addition to the customary representations and warranties, and default provisions, the Loan Agreement provides that only in the event the Co-Makers' deliver 350 issued and outstanding shares of CDC's common stock to the Registrant prior to the due date of the Loan, the obligation of CDC to repay the Loan shall be forgiven by the Registrant and the Note shall be and be deemed to be paid in full. C. Letter of Intent On July 12, 2004, the Registrant entered into a letter of intent (the "Letter") with the Co-Makers, the individual owners of 800 issued and outstanding shares of common stock of CDC representing 80% of CDC. The Letter sets forth the principal terms pursuant to which the Registrant and three present employees of CDC (collectively the "Buyers") propose to acquire all 1,000 issued and outstanding shares of common stock of CDC in a stepped transaction. The Letter also sets forth the terms and conditions pursuant to which the Registrant shall make a short term loan available to CDC of up to a maximum of $125,000, and a $125,000 capital contribution to CDC. In addition, the Letter sets forth the terms and conditions pursuant to which the Co-Makers shall grant to the Buyers the exclusive and irrevocable right to nominate and appoint such number of directors to CDC's Board of Directors as shall equal 65% thereof, covenant and agree to vote their shares of CDC's common stock in favor of the Buyers' nominees; and grant to the Registrant a security interest in the Shares as collateral for the Registrant's $125,000 short term loan. The Registrant's obligations under the Letter are subject to and conditioned upon: the negotiation, execution and delivery of (i) a definitive stock purchase agreement, option agreement, shareholders' agreement, and escrow agreement on or before August 31, 2004; (ii) the execution of the certain employment agreements and a consulting agreement; (iii) CDC's satisfactory resolution of any obligation it may have under an agreement with Eric M. Westbury including the exchange of general releases and the return of Mr. Westbury's shares of CDC's common stock representing a 20% equity interest in CDC; (iv) the approval of the Transaction by the NASD; and (vi) the other conditions precedent enumerated in the Letter. D. Registration Statement on Form S-8 On July 26, 2004, the Registrant filed a Registration Statement on Form S-8 wherein (the "S-8") the Registrant registered an aggregate of 50,000,000 shares of its Common Stock, $.001 par value per share, for issuance under the Registrant's 2004 Long Term 14 Incentive Plan. As of the date of this Quarterly Report, no shares registered under the S-8 have been issued by the Registrant. Item 6. Exhibits and Reports on Form 8-K 10(b) - Loan Agreement dated July 12, 2004 10(c) - Letter of Intent dated July 12, 2004 31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2003 32.2 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2003 Reports on Form 8-K: During the three months covered by this Quarterly Report, the Registrant filed the following three Current Reports on Form 8-K: Date Items Reported Financial Statements Filed June 3, 2004 2 and 7 None June 28, 2004 5 None July 21, 2004 2 and 7 None SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. American Business Corporation By: /s/ Anthony R. Russo - --------------------------------------------- Chief Executive Officer, and Director By: /s/ Anthony R. Russo - --------------------------------------------- Chief Financial Officer Dated: August 16, 2004 15 EX-10 2 abc-10qsb_063004exhibit10b.txt LOAN AGREEMENT DATED JULY 12, 2004 EXHIBIT 10(b) LOAN AGREEMENT (the "Agreement") made this 12th day of July, 2004 by and among American Business Corporation f/k/a Logistics Management Resources, Inc., a publicly owned and traded Colorado corporation with offices at 477 Madison Avenue, 12th Floor, New York, NY 10022 (the "Lender"), Clayton, Dunning & Company Inc., a privately owned Florida corporation and registered broker dealer with an office at 477 Madison Avenue, 12th Floor, New York, NY 10022 (the "Borrower") and Robert C. Lau and Patricia D. Lau, as tenants by the entirety, residing at 2901 South Bayshore Drive, #1E, Miami, Florida 33133 (the "Co-Makers"). The Lender, the Borrower and the Co-Makers are sometimes hereinafter individually referred to as a "Party" or collectively as the "Parties". W I T N E S S E T H: WHEREAS, the Borrower desires to borrow an aggregate of $125,000 from the Lender; and WHEREAS, the Co-Makers are willing to assume joint and several responsibility for the obligation of the Borrower to the Lender; and WHEREAS, the Lender is willing to lend $125,000 (the "Loan Amount") to the Borrower on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements herein contained, the receipt and adequacy of which is hereby acknowledged and accepted, the Parties hereby jointly and severally agree as follows: 1. TERMS OF THE LOAN. 1.1 The Loan. The Lender hereby covenants and agrees to lend to the Borrower and the Borrower hereby accepts the Loan Amount from the Lender. The Loan Amount shall be paid in two tranches as hereinafter described. The Loan Amount shall be due and payable on the earlier of (i) 13 months from the date of this Agreement; or (ii) 10 (ten) days after an Event of Default as that term is hereinafter defined in Section 5 of this Agreement (the "Due Date"). The Loan Amount shall be evidenced by a Promissory Note bearing interest at the rate of 10% per annum payable on the Due Date, in the form annexed hereto as Exhibit A (and hereby incorporated by reference) duly executed by the Borrower, and delivered to the Lender simultaneously with the Borrower's receipt of the Loan Amount (the "Note"). 1.2 Alternative to Repayment. Only in the event that: (i) prior to the Due Date the Lender shall have received delivery, in transferable form (i.e., endorsed in blank with Medallion signature guaranteed) of a certificate or certificates representing 350 issued and outstanding shares of the Borrower's common stock, $.001 par value per share, owned of record by the Co-Makers and representing approximately 35% percent of the Borrower's total issued and outstanding common stock capitalization as of the date of this Agreement, the obligation of the Borrower to repay the Loan Amount shall be forgiven by the Lender and the Note shall be and be deemed to be paid in full. Notwithstanding the foregoing, the forgiveness of debt referenced in this Section 1.2 shall not impact the terms and conditions of the attached Escrow Agreement which shall remain in full force and effect despite the Loan Amount being forgiven. 1.3 Closing. The closing of the transaction memorialized by this Agreement shall take place at the offices of the Lender simultaneously with: (i) the execution and delivery of this Agreement and the Note; (ii) the execution of the Escrow Agreement annexed hereto as Exhibit A and the delivery of the shares required thereunder; and (iii) Lender's delivery of the Loan Amount proceeds of $50,000 on June 28, 2004 and $75,000 on July 2, 2004 via Federal wire transfer or such other manner as shall be mutually agreed upon between the Borrower and the Lender (the "Closing"). 1.4 Collateral Security. As collateral security for the Lender tendering the Loan Amount to the Borrower, the Co-Makers hereby pledge to the Lender and grant to the Lender and the Lender hereby accepts, a continuing first lien and security interest (the "First Lien") in and to an aggregate of 800 issued and outstanding shares of the Borrower's common stock, $.001 par value per share, owned of record by the Co-Makers and representing approximately 80% percent of the Borrower's total issued and outstanding common stock capitalization as of the date of this Agreement (the "Collateral Shares"). At the Closing, the Co- Makers shall deliver a certificate or certificates representing the Collateral Shares in transferable form, endorsed in blank with Medallion signature guaranteed to the Escrowee defined in the Escrow Agreement annexed hereto as Exhibit B and hereby incorporated herein by reference (the "Escrowee"). The Collateral Shares shall be disposed of by the escrowee in accordance with the terms and conditions of the Escrow Agreement, which shall become the governing instrument with respect thereto. 1.5 Limitation of Liability. The Lender hereby acknowledges and accepts that the liability of the Co-Makers shall be limited to the Lender's rights under the New York Uniform Commercial Code to the Collateral Shares and not to the repayment of the Loan Amount. 1.6 Security Documents. At the Lender's request, the Co-Makers shall execute and deliver to the Escrowee a UCC-1 financing statement evidencing the Lender's First Lien security interest in the Collateral Shares. In addition, the Co-Makers hereby specifically agree and consent that a photostatic or other reproduction of this Agreement shall be and be deemed to be the legal equivalent of a financing statement and may be filed with any county clerk as evidence of the Lender's security interest in the Collateral Shares. 2. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby represents and warrants to the Lender as follows: 2.1 Authority. The Borrower has taken all corporate action necessary to enter into this Agreement and to carry out the transactions contemplated hereby. When executed and delivered to the Lender, this Agreement will be a binding obligation of the Borrower enforceable in accordance with its terms; 2.2 No Violation. The execution and delivery of this Agreement by the Borrower will not conflict with any instrument or agreement pertaining to the transaction contemplated herein; and will not conflict in, result in a breach of, or constitute a default under any instrument to which the Borrower is a party; 2.3 Due Incorporation. The Borrower is a corporation duly formed and in good standing under the laws of the State of Florida with full power and authority to conduct its business as presently contemplated; 2.4 Reporting Status. As of the date of this Agreement, the Borrower is current in its reporting and other obligation to and with the National Association of Securities Dealers, Inc (the "NASD"); 2.5 Due issuance. The Collateral Shares are duly and validly issued, fully paid and non-assessable with no personal liability attaching to the ownership thereof; and 2.6 Capitalization. The Borrower has an authorized capitalization comprised of 1,000 shares of Common Stock, $.001 par value per share (the "Shares"), of which an aggregate of 800 Shares are issued and outstanding and owned beneficially and of record by the Co-Makers. The Collateral Shares represent 80% of the outstanding Shares as of the date of this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF THE CO-MAKERS. The Co-Makers hereby represent and warrant to the Lender and the Borrower as follows: 3.1 Authority. The Co-Makers have the full power and authority to enter this Agreement and to otherwise perform this Agreement in the time and manner contemplated; 3.2 No Violation. The Co-Makers' compliance with the terms and conditions of this Agreement in the time and manner contemplated herein will not conflict with any instrument or agreement pertaining to the transaction contemplated herein or the Collateral Shares; and will not conflict in, result in a breach of, or constitute a default under any instrument to which either the Co-Makers are a party or the Collateral Shares may be the subject; and 3.3 Ownership of the Collateral Shares. The Co-Makers are the sole record and beneficial owners of the Collateral Shares and have not pledged or otherwise hypothecated the Collateral Shares. Other than the First Lien, the Co-Makers own the Collateral Shares free and clear of any and all liens, claims or encumbrances of any nature or description. 4. REPRESENTATIONS AND WARRANTIES OF THE LENDER The Lender hereby represents and warrants to the Borrower and the Co-Makers as follows: 4.1 No Breach. The Lender has the full power and authority to enter into this Agreement and to carry out the transactions contemplated hereby. When executed and delivered by the Lender, this Agreement will be a binding obligation of the Lender enforceable in accordance with its terms. 4.2 Access to Records. The Lender and its representatives have had an opportunity to examine and make copies of such books and records of the Borrower (including the Borrower's filings with the NASD), and to ask questions of the Borrower's, executive officers and directors, as the Lender deems necessary to satisfy the Lender's due diligence obligations with respect to the value of the Collateral Shares. 4.3 No Inducement. The Lender has not relied upon or been induced by any statements, representations or warranties (whether expressed, implied in fact or implied by law) of any kind, nature or description, concerning the chances or probability of the Collateral Shares to either increase or decrease in value made by the Co-Makers and/or the Borrower or their or its agents, representatives, servants or employees; and has entered into this Agreement and is agreeing to lend the Loan Amount to the Borrower based solely upon the Lender's own independent findings and conclusions concerning the Borrower and its financial condition and not upon any representations, statements or warranties of the Borrower or any of its representatives. 5. DEFAULT: RIGHTS AND REMEDIES ON DEFAULT 5.1 Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default; A. The Lender's failure to advance the Loan Amount as provided in this Agreement; or B. The Co-Makers failure to deliver the Collateral Shares to the Escrowee and/or execute the Escrow Agreement as provided in the Agreement; or C. The Borrower's failure to enter into five year written employment agreements with Kenneth E. Sidler, Ara Proudian, and Chris Messalas containing non-competition restrictions (the "Employment Agreements"); D. The Borrower's failure to enter into five year written consulting agreement in form and substance reasonably satisfactory to the Buyers with Robert C. Lau as the Firm's Chairman, Chief Executive Officer and Director of Investment Banking; E. The Borrower's failure to have caused Eric M. Westbury and/or Charleston Capital, LLC to surrender to the Firm a certificate or certificates representing an aggregate of 200 issued and outstanding shares of the Firm's common stock, $.001 par value per share on or before September 30, 2004; F. A petition in bankruptcy is filed against the Borrower or the Co- Borrowers; the Borrower or the Co-Makers make an authorized assignment for the benefit of its or their creditors; a receiver, receiver-manager or trustee for the Borrower is appointed; any case or proceeding is filed by or against the Borrower or the Co-Makers for its dissolution, liquidation, or termination; the Borrower ceases to conduct its business as now conducted or is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business affairs and no stay has been issued within 45 days from the date of the original filing; or G. A notice of lien, levy or assessment is filed of record with respect to all or any substantial portion of the Borrower's or the Co-Makers assets by the United States, or by any state, county, municipal, provincial, federal or other government agency, or any taxes or debts owing to any of the foregoing become a lien or encumbrance upon the Borrower's or the Co-Makers assets and such lien or encumbrance is not released within forty five (45) days after its creation; or H. Judgment is rendered against the Borrower or the Co-Makers on an uninsured claim of $50,000 or more and the Borrower or the Co-Makers fail to commence an appeal of such judgment within the applicable appeal period; or I. Any of the representations and warranties of the Borrower or the Co-Makers contained in this Agreement shall have been materially incorrect as and when made. 5.2 Rights and Remedies on Default. Upon the occurrence of an Event of Default, the Borrower shall be deemed to have defaulted under this Agreement as well as the Note and the Holder may, on written notice to the Borrower, accelerate all payments due under this Note and seize and retain the Collateral Shares. In the event the Holder takes possession of the Collateral Shares from the Escrowee, the Holder's rights to seek repayment of the Loan Amount shall be limited to $60,000 or the difference between the Loan Amount and the Parties estimate of the fair market value of the Firm as a non-operating entity, which estimate is hereby agreed upon as fair and reasonable. In seeking redress against the Loan Amount, the Borrower shall pay to the Holder, on demand, each cost and expense (including, without limitation, reasonable attorneys' fees and all costs of suit) incurred by the Holder in (a) collecting any of the outstanding principal of the Loan Amount, any interest owing pursuant to this Agreement and/or the Note and remaining unpaid, or any other amount owing by the Borrower to the Holder pursuant to this Agreement and/or the Note and remaining unpaid or (b) preserving or exercising any right or remedy of the Holder pursuant to this Agreement and/or the Note. Failure or delay by the Holder in exercising, or a single or partial exercise of any power or right hereunder, shall not operate as a waiver thereof or of any other power or right or preclude any future exercise of that or any other power or right. A waiver of any power or right hereunder shall be in writing, shall be limited to the specific instance, and shall not be deemed a waiver of such power or right in the future, or a waiver of any other power or right. 6. CONDITIONS TO CLOSING 6.1 Conditions to the Obligations of the Lender . The obligation of the Lender to advance the Loan Amount shall be subject to the satisfaction of the following conditions which the Borrower and the Co-Makers hereby covenant to perform on or prior to the Closing: A. The execution of the Note by the Borrower and the delivery thereof to the Lender; and B. The execution of this Agreement by the Borrower and the Co-Makers and the delivery thereof to the Lender; and C. The delivery to the Escrowee of the Collateral Shares and a duly executed Escrow Agreement. 6.2 Conditions to the Obligations of the Borrower and the Co-Makers. The obligation of the Borrower and the Co-Makers to execute and perform this Agreement, to issue and deliver the Note, this Agreement, the Escrow Agreement and to deliver the Collateral Shares to the Lender at the Closing shall be subject to the satisfaction of the following condition: A. The receipt of the Loan Amount payable by Federal wire transfer, certified, cashier's or bank check to the order of the Borrower. 7. TERMINATION 7.1 Termination. This Agreement may be terminated: A. At any time prior to the Closing by mutual agreement in writing of the Borrower, the Co-Makers and the Lender; and/or B. At any time after July 15, 2004, by either Party if the Closing has not previously taken place; or C. Upon the Default of any Party, the non-defaulting Party may terminate this Agreement. 7.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 7.1, this Agreement shall thereafter become void and have no effect, and no Party hereto shall have any liability to any other Party hereto in respect thereof, except that nothing herein will relieve any Party from liability for any default or breach of any of its representations, warranties, covenants or agreements contained in this Agreement prior to such termination. 8. MISCELLANEOUS 8.1 Expenses. Regardless of whether or not the transaction contemplated herein is consummated, each Party shall promptly pay and be responsible for its own costs, fees and expenses incurred by it or them in connection with this Agreement and the transaction contemplated hereby. 8.2 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties hereto. 8.3 Waiver. The Parties hereto may mutually: (i) extend the time for the performance of any Party; (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto; and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement providing for an extension or waiver shall be valid if set forth in an instrument in writing signed by the Parties. The failure of any Party to insist upon strict performance of any of the provisions of this Agreement shall not be construed as a waiver of any subsequent default of the same or similar nature or of any of provision, term, condition, warranty or representation contained herein. 8.4 Binding Effect. All of the terms and provisions of the Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the respective heirs, representatives, executors, administrators, successors and assigns of the Parties. 8.5 Entire Agreement. Each of the Parties hereby covenants that this Agreement is intended to and does contain and embody herein all of the understandings and Agreements, both written or oral, of the Parties hereby with respect to the subject matter of this Agreement, and that there exists no oral agreement or understanding, express or implied liability, whereby the absolute, final and unconditional character and nature of this Agreement shall be in any way invalidated, empowered or affected. There are no representations, warranties or covenants other than those set forth herein. 8.6 Governing Law. This Agreement shall be governed by and interpreted under and construed in all respects in accordance with the laws of the State of New York irrespective of the place of domicile or residence of any Party. 8.7 Arbitration. The Parties agree that in the event of a controversy arising out of the interpretation, construction, performance or breach of the Agreement, any and all claims arising out of or relating to this Agreement other than the right of the Lender to retain the Collateral Shares in lieu of or in addition to seeking repayment of the Loan Amount, shall be settled by arbitration according to the Commercial Arbitration Rules of the American Arbitration Association located in the City of New York before a single arbitrator. The decision of the arbitrator will be enforceable in any court of competent jurisdiction. The Parties agree and consent that service of process in any such arbitration proceeding outside the City of New York shall be tantamount to service in person within City of New York and shall confer personal jurisdiction on the American Arbitration Association. In resolving all disputes between the Parties, the arbitrator will apply the law of the State of New York. The arbitrator is, by this Agreement, directed to conduct the arbitration hearing no later than three (3) months from the service of the statement of claim and demand for arbitration unless good cause is shown establishing that the hearing cannot fairly and practically be so convened. The arbitrator will resolve any discovery disputes by such pre-hearing conferences as may be needed. All Parties hereby agree and consent that the arbitrator and any counsel of record to the proceeding will have the power of subpoena process as provided by law. Notwithstanding the foregoing, if a dispute arises out of or related to this Agreement, or the breach thereof, before resorting to arbitration the Parties agree first to try in good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association. 8.8 Originals. This Agreement may be executed in counterparts each of which so executed shall be deemed an original and constitute one and the same agreement. 8.9 Addresses of the Parties. Each Party shall at all times keep the other Parties informed of its or their residence or principal place of business if different from that stated herein, and promptly notify the other of any change, giving the address for that Party. 8.10 Public Announcements. Each Party hereto agrees that it will not disseminate any press release or public announcement concerning the transactions contemplated hereby without the other Party's prior written consent which shall not be unreasonably withheld; except that the Borrower will in any event have the right (without the Lender's consent) to issue any such reports, statements or releases upon advice of its counsel that such issuance is required in order to comply with the requirements of the Federal securities laws or the Securities and Exchange Commission. Each Party agrees to cause any of its advisors, whether financial, accounting, legal or otherwise, not to disseminate any of such information to any other party without the subject Party's prior written consent which shall not be unreasonably withheld. 8.11 Notices. Unless otherwise specifically provided for elsewhere in this Agreement, any notices and other communications required to be given pursuant to this Agreement shall be in writing and shall be effective when delivered by hand or upon receipt if sent by mail (registered or certified mail, postage prepaid, return receipt requested) or overnight package delivery service or upon transmission if sent by telex or facsimile (with request for confirmation of receipt in a manner customary for communications of such respective type), except that if notice is received by telex or facsimile after 5:00 P.M. local time on a business day at the place of receipt, it shall be effective as of the following business day. 8.12 Broker and Investment Banking Fees. The Parties represent and warrant that they have not engaged the services of any broker, finder, or other person of similar kind who might be due compensation as a result of the transactions contemplated herein. The Parties agree to hold and indemnify each other harmless from and against claims by any third party due compensation as a broker or finder. IN WITNESS WHEREOF, each of the Parties has executed this Agreement on the date first written above. American Business Corporation BY: /s/ Anthony R. Russo, President - ------------------------------------ Anthony R. Russo, President Clayton, Dunning & Company Inc. By: /s/ Robert C. Lau - ------------------------------------ Robert C. Lau, Chairman and Chief Executive Officer /s/ Robert C. Lau - ------------------------------------ Robert C. Lau /s/ Patricia D. Lau - ------------------------------------ Patricia D. Lau EXHIBIT A PROMISSORY NOTE July 12, 2004 $125,000 FOR VALUE RECEIVED, Clayton, Dunning & Company Inc., a privately owned Florida corporation and registered broker dealer with an office at 477 Madison Avenue, 12th Floor, New York, NY 10022 (hereinafter referred to as the "Maker") promises to pay to the order of American Business Corporation f/k/a Logistics Management Resources, Inc., a publicly owned and traded Colorado corporation with an office at 477 Madison Avenue, 12th Floor, New York, NY 10022 (hereinafter referred to as the "Holder"), in lawful money of the United States, the principal sum of One Hundred and Twenty Five Thousand ($125,000) Dollars in a single payment on the Due Date (as hereinafter defined) with interest on the unpaid principal amount at the rate of ten (10%) percent per annum and payable in a single payment on the Due Date (the "Loan Amount"). The full Loan Amount shall be due and payable at the offices of the Holder on the earlier of (i) 13 months from the date of this Agreement; or (ii) 10 (ten) days after an Event of Default as that term is defined in Section 5 of the Loan Agreement between the Maker and the Holder to which this note (the "Note") is attached as an exhibit (the "Loan Agreement"). The date on which the Loan Amount is due is hereinafter referred to as the "Due Date". 1. Prepayment. The Maker shall have the right, without penalty, to repay the Loan Amount due hereunder at any time in whole or in part with interest to the date of prepayment provided that any prepayment of principal must be in increments of $10,000. 2. Collateral Security. As collateral security for the Co-Makers' obligations under the Loan Agreement, as a material inducement for the Holder's advancing the Loan Amount to the Maker, and simultaneously with the execution of this Note, Robert C. Lau and Patricia D. Lau (the "Co-Makers") hereby grants to the Maker and the Maker hereby accepts, a continuing First Lien and security interest in and to an aggregate of 800 issued and outstanding shares of the Maker's common stock, $.001 par value per share, owned of record by the Co-Makers (the "Collateral Shares"). At the Closing, the Co-Makers shall deliver a certificate representing the Collateral Shares (in transferable form, endorsed in blank with Medallion signature guaranteed) to the Escrowee defined in the Escrow Agreement annexed as Exhibit B to a Loan Agreement of even date herewith among the Maker, the Holder and the Co-Makers to which this Note is annexed as Exhibit A. 3. Events of Default. This Note is made pursuant to the Loan Agreement. Any default of any obligation by Maker under this Note shall constitute an Event of Default of the obligations of Maker under the Loan Agreement, and any Event of Default under the Loan Agreement shall constitute an Event of Default under this Note. Maker and the Holder acknowledge that the Note is enforceable, valid and binding upon and by the parties hereto. If for any reason, any court authority or governmental entity declares this Note invalid, unlawful or against public policy, then, the parties hereto acknowledge that neither the obligation of the Maker to repay the Note, nor any of the covenants, obligations or representations of the parties contained within the Loan Agreement shall be affected by such declaration. Upon the occurrence of an Event of Default, as that term is defined in Section 5 of the Loan Agreement, then and in such event, the Maker will be deemed to have defaulted under this Note and Holder may, on written notice, accelerate all payments due under this Note and seize and retain the Collateral Shares in accordance with the terms and condition of Section 5.2 of the Loan Agreement. 4. Waiver of Presentment, Etc. Maker hereby waives presentment for payment, demand, notice of non-payment and dishonor, protest and notice of protest and waives trial by jury in any action or proceeding arising on, out of, under or by reason of this Note. The rights and remedies of Holder shall be deemed cumulative and the exercise of any right or remedy shall not be regarded as barring any other remedy or remedies. The institution of any action or recovery any portion of the indebtedness evidenced by this Note shall not be deemed a waiver of any other right of Holder. 5. Notices. Any notice required or contemplated by this Note shall be deemed sufficiently given when delivered in person or sent by registered or certified mail or priority overnight package delivery service to the principal office of the party entitled to notice or at such other address as the same may designate in a notice for that purpose. All notices shall be deemed to have been made upon receipt, in the case of mail or personal delivery, or on the next business day, in the case of priority overnight package delivery service. 6. Non-Assignability. This Note may not be sold, assigned, pledged or hypothecated by the Maker without the written consent of the Holder, or transferred by the Holder without the consent of the Maker, neither which consents shall be unreasonably withheld. 7. Headings. The headings in this Note are solely for convenience of reference and shall not affect its interpretation. 8. Laws of the State of New York. This Note shall be deemed to be made, executed and delivered in, governed by and interpreted under and construed in all respects in accordance with the laws of the State of New York, irrespective of the place of domicile or residence of any Holder. In the event of controversy arising out of the interpretation, construction, performance or breach of this Note shall be settled in accordance with the arbitration provision of Section 8.7 of a Loan Agreement of even date between the Maker and Holder to which this Note is annexed as an exhibit (the "Loan Agreement"). 9. Entire Agreement. This Note has been executed as part of a transaction embodied in the Loan Agreement. Except as otherwise provided in this Note, each of the parties hereby covenants that this Note is intended to and does contain and embody herein all of the understandings and agreements, both written or oral, of the parties hereby with respect to the subject matter of this Note. Clayton, Dunning & Company Inc. By: /s/ Robert C. Lau - ------------------------------------- Robert C. Lau, Chairman and Chief Executive Officer /s/ Robert C. Lau - ------------------------------------- Robert C. Lau /s/ Patricia D. Lau - ------------------------------------- Patricia D. Lau EXHIBIT B ESCROW AGREEMENT (the "Escrow Agreement") made this 12th day of July 2004 among Robert C. Lau and Patricia D. Lau, as tenants by the entirety residing at 2901 South Bayshore Drive, #1E, Miami, Florida 33133 (hereinafter referred to as the "Co-Makers"), Clayton, Dunning & Company Inc., a privately owned Florida corporation and registered broker dealer with an office at 477 Madison Avenue, 12th Floor, New York, NY 10022 (the "Maker") and Snow Becker Krauss, Esqs., with offices at 605 Third Avenue, New York, NY (the "Escrowee"). The Co-Makers, the Lender and the Escrowee are sometimes hereinafter individually referred to as a "Party" or collectively as the "Parties". W I T N E S S E T H: WHEREAS, the Co-Makers are parties to a Loan Agreement of even date herewith among the Co-Makers, the Maker and American Business Corporation f/k/a Logistics Management Resources, Inc., a publicly owned and traded Colorado corporation with an office at 477 Madison Avenue, 12th Floor, New York, NY 10022 (the "Lender"), to which this Escrow Agreement is annexed as an exhibit (the "Loan Agreement"); and WHEREAS, the capitalized terms shall have the meaning ascribed thereto in the Loan Agreement; and WHEREAS, the Loan Agreement provides for an aggregate of 800 shares of Common Stock, $.001 par value per share, of the Maker owned by the Co-Makers (the "Collateral Shares"), to be pledged in escrow as collateral security for the guaranty of the Maker's obligation; and WHEREAS, the Parties desire to set forth the terms and conditions governing the delivery of the Collateral Shares to the Lender or the return thereof to the Co-Makers. NOW, THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the Parties hereby incorporate the foregoing recitals into this Agreement and agree as follows: 1. Creation of Escrow. By virtue of the execution of this Agreement and the delivery of a certificate or certificates representing the Collateral Shares to the Escrowee, the Co-Makers hereby create the escrow made the subject of this Escrow Agreement and hereby authorize the Escrowee to deliver the Collateral Shares as hereinafter provided. 2. Deposit into Escrow. The following terms shall apply: A. Stock. Simultaneously with the execution of this Escrow Agreement, the Co-Makers shall deliver to the Escrowee a certificate or certificates registered in the name of the Co-Makers and representing the Collateral Shares; B. Stock Power. Simultaneously with the execution of this Escrow Agreement, the Co-Makers shall deliver to the Escrowee stock powers, endorsed in blank with Medallion signature guaranteed, to allow the Escrowee to transfer the Collateral Shares pursuant to the terms hereof (the "Powers"); and C. UCC-1. Simultaneously with the execution of this Escrow Agreement, the Co-Makers shall deliver to the Escrowee duly executed Form UCC-1 Financing Statements evidencing the Lender's First Lien in the Collateral Shares (the "UCC-1"). 3. Terms of Escrow. The following terms shall apply: A. Duties of the Escrowee under the Note and Loan Agreement. The Parties hereby agree that the Escrowee shall accept delivery of and hold the Collateral Shares until either January 30, 2005 (the "Expiration Date") or the closing of the Change of Control, whichever sooner occurs. In the event that: (i) the Change of Control shall not have closed on or before 5:00 pm Eastern Daylight Time on the Expiration Date, and unless extended by the written agreement of the Co-Makers and the Lender a copy of which shall be sent to the Escrowee; or (ii) the Loan Amount shall have been repaid in full on or before the Expiration Date and notice thereof sent to the Escrowee and confirmed in writing by the Lender, the Escrowee shall deliver the Collateral Shares to the Lender who shall be entitled to dispose of the same in its sole and unfettered discretion. Thereafter this Escrow Agreement shall automatically terminate and the Escrowee shall be discharged without further action on behalf of any Party and without further notice to the Co-Makers, the Lender or the Maker. In the event the Loan Amount shall have been repaid to the Lender on or before the Expiration Date, and provided the Escrowee receives due notice thereof and written confirmation from the Lender, the Escrowee shall deliver the Collateral Shares back to the Co-Makers who shall be entitled to dispose of the same in their sole and unfettered discretion. Thereafter this Escrow Agreement shall automatically terminate and the Escrowee shall be discharged without further action on behalf of any Party and without further notice to the Co-Makers, the Lender or the Maker. B. Compensation. The Escrowee shall receive a reasonable flat fee and the reimbursement for necessary and accountable out-of-pocket disbursements incurred in fulfilling his obligation pursuant to this Escrow Agreement in an amount to be agreed upon between the Escrowee and the Co-Makers. Unless otherwise agreed upon in writing by the Maker, such fee and expenses shall not exceed $1,000 in the aggregate. The Co-Makers agree to cause the Maker to pay the agreed upon fee and disbursements to the Escrowee. C. Notice of Default or Dispute. If the Escrowee shall received written notice that a dispute has occurred between the Parties, the Escrowee may, at his sole discretion, notify the Parties and cease his activities as Escrowee and deposit the Escrowed Material being held pursuant to this Escrow Agreement with the American Arbitration Association, with offices at 140 West 51st Street, New York, New York 10020 in New York City. Upon such deposit or the delivery of the Escrowed Material pursuant to this Paragraph 2(c), and except as hereinafter set forth in the following sentence, the Escrowee shall automatically be relieved and fully discharged of all further obligations and responsibilities hereunder. The Parties acknowledge that the Escrowee is acting solely in his capacity as Escrowee at their request and for their convenience, that the Escrowee shall not be deemed to be the agent of either of the Parties nor shall he be liable for any act or omission on his part unless taken or suffered in bad faith, in willful disregard of this Escrow Agreement or involving gross negligence. The Co-Makers hereby agree to indemnify and hold the Escrowee harmless from and against all costs, claims and expenses, including reasonable attorney's fees, incurred in connection with the performance of the Escrowee' duties hereunder, except with respect to actions or omissions taken or suffered by the Escrowee in bad faith, in willful disregard of this Escrow Agreement or involving gross negligence or willful misconduct on the part of the Escrowee. The Parties hereby further agree that the arbitration provisions of this Escrow Agreement shall supersede and control the jurisdiction and venue provisions of the Loan Agreement; D. Reliance. The Escrowee shall be protected in acting upon any written notice, request, consent, certificate, receipt, authorization or other paper or document which the Escrowee believes to be genuine and what it purports to be; E. Counsel. The Escrowee may confer with legal counsel in the event of any dispute or question as to the construction of any of the provisions hereof, or his duties hereunder, and he shall incur no liability and he shall be fully protected in acting in accordance with the opinions and instructions of such counsel. Any and all reasonable and necessary expenses and legal fees in this regard are payable from the Escrowed Material unless paid by the Parties. F. Remedies of Escrowee. The Escrowee is hereby authorized in the event of any doubt as to the course of action he should take under this Escrow Agreement, to petition the American Arbitration Association in New York City only, for instructions or to interplead the Escrowed Material. The Parties agree to the jurisdiction of the American Arbitration Association over their persons as well as the Escrowed Material held by the Escrowee, waive personal service of process, and agree that service of process by certified mail, return receipt requested, to the address set forth herein shall constitute adequate notice of service hereunder and shall confer personal jurisdiction on the American Arbitration Association in New York City. The Co-Makers hereby agree to indemnify and hold the Escrowee harmless from any liability or losses occasioned thereby and to pay any and all of his cost, expense and attorneys' fees incurred in any such action and agree that on such petition or interpleader action that the Escrowee or his employees will be relieved of further liability. The Escrowee is hereby given a lien upon, and security interest in the Escrowed Material deposited pursuant to this Escrow Agreement to secure the Escrowee's rights to payment or reimbursement. G. Resignation. The Escrowee may resign for any reason, upon thirty (30) days written notice to the Co-Makers and the Lender. Upon the expiration of such thirty (30) day period, the Escrowee may deliver the Escrowed Material in his possession under this Escrow Agreement to any successor Escrowee appointed by the Co-Makers, or if no successor Escrowee has been appointed, to the American Arbitration Association in New York City. Upon either such delivery, the Escrowee shall automatically be released from any and all liability under this Escrow Agreement except for any liability occasioned by an act or omission on his part taken or suffered in bad faith, in willful disregard of this Escrow Agreement or involving gross negligence. Termination under this Paragraph shall in no way change the terms of this Escrow Agreement concerning reimbursement of expenses, indemnity and pro rata fees of the Escrowee. 4. Representations and Warranties of the Co-Makers. The Co-Makers hereby represent and warrant to the Escrowee that all of the representations, warranties and covenants contained in the Loan Agreement are true and correct and the same are hereby incorporated herein by this reference. 5. Expenses. The Co-Makers hereby agrees to cause the Maker pay and be solely responsible for his own legal fees incurred by them in connection with the transaction contemplated in this Escrow Agreement as well as the fees of the Escrowee as provided in Section 3(b). 6. Dividends. So long as the Collateral Shares remain in escrow, all dividends upon the Collateral Shares shall belong to the Co-Makers. However, the Escrowee shall hold any and all dividends in escrow for disbursement in accordance with the terms of Paragraph 2. of this Escrow Agreement. 7. Voting. So long as the Collateral Shares remain in escrow, the Co-Makers shall vote the Collateral Shares. In order to implement this provision, and in light of the fact that the Co-Makers is the President and Chief Executive Officer of the Maker, the Co-Makers will furnish the Escrowee and the Escrowee shall accept any written proxy utilized by the Co-Makers to vote the Collateral Shares during the term of this Escrow Agreement. 8. Assignments and Successors. This Escrow Agreement shall not be assigned by the Co-Makers without the prior written consent of the Lender. All of the terms and provisions of this Escrow Agreement shall be binding upon and inure to the benefit of and be enforceable by and against the heirs, executors, administrators, successors and assigns of the Co-Makers. 9. Additional Instruments. Each of the Parties shall from time to time, at the request of the others, execute, acknowledge and deliver to the other any and all further instruments that may be reasonably required to give full effect and force to the provisions of this Escrow Agreement. 10. Entire Agreement. Each of the Parties hereby covenants that this Escrow Agreement is intended to and does contain and embody herein all of the understandings and agreements both written or oral, of the Parties hereto with respect to the subject matter of this Escrow Agreement, and that there exists no oral agreement or understanding, express or implied liability, whereby the absolute, final and unconditional character and nature of this Escrow Agreement shall be in any way invalidated, empowered or affected. There are no representations, warranties or covenants other than those set forth herein. 11. Laws of the State of New York. This Escrow Agreement shall be governed by and interpreted under and construed in all respects in accordance with the laws of the State of New York, irrespective of the place of domicile or residence of the Parties. In the event of controversy arising out of the interpretation, construction, performance or breach of this Escrow Agreement, the same shall be settled in accordance with the arbitration provision of Section 8.7 of a Loan Agreement of even date between the Maker and certain lenders to which this escrow Agreement is annexed as an exhibit. 12. Originals. This Escrow Agreement may be executed in counterparts each of which so executed shall be deemed an original and constitute one and the same agreement. 13. Address of Parties. Each Party shall at all times keep informed of its principal place of residence or business if different from that stated herein, and shall promptly notify the other of any change, giving the address of the new principal place of business or residence. 14. Notices. All notices that are required to be or may be sent pursuant to the provision of this Escrow Agreement shall be sent by certified mail, return receipt requested, or via overnight courier, to each of the Parties at the address appearing herein, and shall count from the date of mailing or the airbill. 15. Modification and Waiver. A modification or waiver of any of the provisions of this Escrow Agreement shall be effective only if made in writing and executed with the same formality as this Escrow Agreement. The failure of any Party to insist upon strict performance of any of the provisions of this Escrow Agreement shall not be construed as a waiver of any subsequent default of the same or similar nature or of any other nature or kind. IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as of the day and year first above written. /s/ Robert C. Lau, Co-Maker - -------------------------------- Robert C. Lau, Co-Maker /s/ Patricia D. Lau, Co-Maker - -------------------------------- Patricia D. Lau, Co-Maker Snow Becker Krauss As Escrowee Only By: /s/ Charles Snow, Esq. - -------------------------------- Charles Snow, Esq. EX-10 3 abc-10qsb_063004exhibit10c.txt LETTER OF INTENT DATED JULY 12, 2004 EXHIBIT 10(c) American Business Corporation - ------------------------------------------------------------------------- 477 Madison Avenue, 12th Floor New York, NY 10022 (212) 308-8700 (212) 308-3997 fax July 12, 2004 Robert C. and Patricia D. Lau 160 East 83rd Street New York, NY 10028 Re: Letter of Intent for Acquisition of Clayton, Dunning and Company, Inc. Dear Mr. and Mrs. Lau: This letter of intent (the "Letter") sets forth the principal terms pursuant to which American Business Corporation f/k/a Logistics Management Resources, Inc., a publicly owned and traded Colorado corporation ("AMBC"), Kenneth E. Sidler, residing at 149 Linden Avenue, Emerson, NJ 07630 ("Sidler"), Ara Proudian, residing at 93 Berian Road, New Rochelle, NY 10804 ("Proudian") and Chris Messalas residing at 20 Carlton Place, Staten Island, NY 10301 ("Messalas") propose to acquire control of Clayton, Dunning and Company, Inc., a Florida corporation (the "Firm") and a broker dealer registered with the National Association of Securities Dealers, Inc. ("NASD"). AMBC, Sidler, Proudian and Messalas are hereinafter collectively referred to as the "Buyers". In a step transaction, the Buyers shall purchase an aggregate of 1,000 issued and outstanding shares of the Firm's common stock, $.001 par value per share, (the "Shares") from Robert C. Lau and Patricia D. Lau, as Tenants by the Entirety (collectively the "Sellers"). In addition, AMBC shall: (i) make available to the Firm a short term loan of a maximum of $125,000 (the "Pre-Closing Facility"); and (ii) make a $125,000 capital contribution to the Firm (the "Contribution"). The Sellers shall: (i) grant to the Buyers the exclusive and irrevocable right to nominate and appoint such number of directors to the Firm's Board of Directors as shall equal 65% thereof; (ii) covenant and agree to vote their shares of the Firm's common stock in favor of the Buyers' nominees; and grant to AMBC a security interest in the Shares as collateral for the Pre-Closing Facility. The foregoing matters are hereinafter collectively referred to as the "Transaction." This Letter will serve to confirm our current mutual understanding regarding the principal business points of the Transaction. The definitive terms of the Transaction will be set forth in the Definitive Agreements (as that term is defined in Section 4 of this Letter). The initial drafts of the Definitive Agreements will be prepared by AMBC and will contain the following provisions: 1. Purchases of the Shares and the Put Shares. Pursuant to the terms and conditions set forth below, AMBC will purchase 350 Shares from the Sellers for $35.00, Sidler, Proudian and Messalas (collectively the "Employees") shall collectively purchase 300 Shares from the Sellers for $30.00, and the Firm shall purchase the remaining 350 Shares (the "Put Shares") from the Sellers at their fair market value as hereinafter described. The Shares and the Put Shares shall collectively represent 100% of the issued and outstanding shares of voting, common stock of the Firm. 7 The purchase of the Shares shall take place at stepped closings (collectively the "Closing") at the offices of AMBC as follows: (i) within three days after the Firm's settlement with Eric M. Westbury as provided in Section 9.B, AMBC shall purchase 200 Shares by tendering $20.00 to the Sellers and the Employees shall purchase 300 Shares by tendering $30.00 to the Sellers; and (ii) within three days after the Transaction has been approved by the NASD, AMBC shall purchase 150 Shares by tendering $15.00 to the Sellers. The purchase of the Put Shares shall take place at the offices of AMBC on the earlier of: (i) the death or disability of Robert C. Lau ("Lau"); (ii) upon Lau's or his estate's written demand; or (iii) the expiration of five years from the date of this Letter by the furnishing of written notice (the "Put Exercise Notice"). The purchase price for the Put Shares shall be equal to the fair market value thereof as determined by a professional independent third party appraiser reasonably acceptable to AMBC, the Employees and the Sellers (the "Appraiser") whose determination shall be binding. The Put Exercise Notice shall set a closing date (the "Put Closing Date") not more than six months after the date of the Put Exercise Notice and shall set a time and date between ten and 30 days after the date of the Put Exercise Notice, when AMBC, the Employees and the Sellers shall meet to choose the Appraiser. In the event of the failure to agree upon the Appraiser, the selection of the Appraiser shall be submitted to and settled by binding arbitration in New York City as provided in Section14. At the Put Closing date, the Firm shall purchase the Put Shares from the Sellers via certified, cashier's check or Federal wire transfer. The purchases of the Shares and the Put Shares are and shall be explicitly conditioned upon:(i) the Firm's settlement with Eric M. Westbury as provided in Section 9.B; (ii) the execution of the Definitive Agreements as provided in Section 4.; and (iii) the execution of the Employment Agreements and the Consulting Agreement as provided in Section 9.A (the "Closing"). 2. The Escrow. The Shares and the Put Shares shall have been deposited in escrow with Snow Becker Krauss, Esqs., 605 Third Avenue, New York, NY (the "Escrowee"), pursuant to the terms of an Escrow Agreement among the Sellers, the Escrowee and the Firm, which is attached to a Loan Agreement dated July 12, 2004 among the Sellers, the Firm and AMBC. The Shares and the Put Shares shall be delivered to the respective recipients out of escrow by the Escrowee at the Closing and the Put Closing. 3. The Pre-Closing Facility. Simultaneously with the execution of this Letter, AMBC shall make the Pre-Closing Facility available to the Firm as follows: (i) $50,000 on the date this Letter is executed by all of the signatories hereto, and $75,000 on the second business day thereafter. The Pre-Closing Facility shall be represented by a written Loan Agreement among AMBC, the Firm and the Sellers as Co-Makers with an attached 10% secured promissory note and escrow agreement with the Sellers' counsel (collectively the "Loan Agreement"). The obligation of the Firm to repay the Pre-Closing Facility shall be secured by all of the Sellers' right, title and interest in the Shares and the Option Shares. 8 4. Definitive Agreement. As hereinafter enumerated in Section 8, the Transaction is subject to and conditioned upon: (i) the negotiation, execution and delivery of (i) a definitive stock purchase agreement, option agreement, and escrow agreement (collectively the "Definitive Agreements"); (ii) the Employees' and Lau's respective execution of the Employment Agreements and the Consulting Agreement defined in Section 9.N; (iii) Firm's satisfactory resolution of any obligation it may have under an agreement with Eric M. Westbury including the exchange of general releases and the return of Mr. Westbury's shares of the Firm's common stock representing a 20% equity interest in the Firm which shall be delivered into escrow with the Escrowee as additional collateral for the Pre-Closing Facility; (iv) the Firm's negotiation, execution and delivery of a definitive stockholders agreement among the Employees, AMBC and Lau; (v) the approval of the Transaction by the NASD; and (vi) the other conditions precedent enumerated in Section 9.N. The first five conditions precedent enumerated above are hereinafter collectively referred to as the "Major Conditions". The Definitive Agreements shall contain the basic terms and conditions set forth herein, together with such other representations, warranties, covenants, terms, indemnities, and conditions as would be usual and customary for transactions of the nature contemplated and which are mutually agreeable to the parties, including, without limitation, the making of all necessary filings and the obtaining of all necessary approvals or consents from third parties required to consummate the proposed Transaction. The execution and delivery of the Definitive Agreements by AMBC and the Firm shall be subject to the approval of their respective boards of directors. Furthermore, the closing of the Transaction shall be subject to the approval of and all regulatory authorities, including the NASD. In the event that the Definitive Agreements are not executed on or before August 31, 2004 (unless otherwise extended by the parties), this Letter shall be deemed terminated and of no further force and effect. The termination of this Letter shall not have any effect upon AMBC's rights under the Loan Agreement. In the event the NASD does not approve of the Transaction, AMBC and the Firm shall have the right and option of assigning their respective rights hereunder to a third party or parties reasonably acceptable to a majority of the Employees and Lau as a group. 5. The Contribution. The obligation of AMBC to make the Contribution shall be contingent upon the due execution and delivery of the Definitive Agreements and the full and faithful compliance by the relevant parties with the Major Conditions. The Contribution shall be made within three business days after: (i) the date that the Firm shall have settled with Eric M. Westbury as provided in Section 9.B (ii) the due execution and delivery of the Definitive Agreements; and (iii) the full and faithful compliance by the relevant parties with each of the other Major Conditions and AMBC's purchase of the 150 Shares. 6. Due Diligence Investigations. Both the Sellers and the Buyers shall have initiated, conducted and concluded, at their own expense, their respective due diligence investigations into the business, financial, and legal affairs of the other party prior to the execution of the Definitive Agreements. From the date hereof until the execution of Definitive Agreements, each party shall provide the other with reasonable access during ordinary business hours to its personnel, facilities and systems, in order to enable such party to examine and evaluate said products and services. Any party 9 undertaking such an evaluation shall use its best efforts to minimize any business disruption resulting there from. 7. Standstill. For a period of thirty (30) days commencing on the execution date of this Letter, the Buyers, the Sellers, and the Firm (and their officers, directors, shareholder, employees, registered representatives or affiliates) will not directly or indirectly, (i) solicit, initial or encourage submission of proposals or offers from any person relating to (x) any acquisition or purchase of all or a substantial portion of the assets of, or any equity interest in, the Firm, or any merger, consolidation, business combination or similar transaction with such parties, or (y) any other transaction incompatible with the proposed Transaction, or (ii) participate in any discussions or negotiations regarding, or furnish to any other person any confidential information with respect to, or otherwise cooperate in any way with, or participate in, facilitate or encourage, any effort or attempt by the Firm or any other person to do or seek any of the foregoing, and will promptly terminate any such pending discussions and will promptly notify AMBC if the Firm receives any indications of interest or offer or request for information with respect to any of the foregoing. 8. No Public Announcement. The Transaction contemplated in this Letter shall not be the subject of any press release or other public announcement unless and until the consent and timing of the same shall be approved by in writing by the Sellers and the Buyers. Except as otherwise required by law, such as by the rules and regulations of the NASD, no party shall issue or make any such public statement without the prior written consent of the other party. 9. Conditions Precedent to the Buyer's Obligation. The Buyers' obligation to proceed with the Transaction and to execute the Definitive Agreements is subject to the performance by the Sellers' and/or the Firm of the following conditions precedent: A. Employment Agreements and Consulting Agreement. Prior to the Closing, the Firm shall have entered into five year written employment agreements with the Employees containing non-competition restrictions (the "Employment Agreements"). In addition, and prior to the Closing, the Firm shall have entered into a five year written consulting agreement in form and substance reasonably satisfactory to the Buyers with Lau as the Firm's Chairman, Chief Executive Officer and Director of Investment Banking (the "Consulting Agreement"); B. Retirement of Outstanding Shares. As soon as possible following the execution of this Letter, and pursuant to an agreement that shall be deemed effective as of June 30, 2004, the Sellers' shall cause Eric M. Westbury 10 and/or Charleston Capital, LLC to surrender to the Firm a certificate or certificates representing an aggregate of 200 issued and outstanding shares of the Firm's common stock, $.001 par value per share and obtain a general release from Mr. Westbury. Such certificate(s) shall be in transferable form endorsed in blank with Medallion signature guaranteed or with irrevocable stock power attached and endorsed in blank with Medallion signature guaranteed. In the event the shares are owned of record by Charleston Capital, LLC, the certificate(s) shall be accompanied by certified resolutions of the Manager(s) of Charleston Capital, LLC; C. Focus Reports. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have prepared and shall have delivered to the Buyers a copy of all Focus Reports filed with the NASD since January 1, 2003 through the termination of this Letter or the Closing; D. Form BD. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have prepared and shall have delivered to the Buyers a copy of the Firm's Form BD as filed with the NASD, together with all amendments thereto through the termination of this Letter or the Closing; E. Membership Agreement. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have prepared and shall have delivered to the Buyers a copy of the Firm's Membership Agreement with the NASD, together with all amendments thereto through the termination of this Letter or the Closing; F. Clearing Agreement. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have prepared and shall have delivered to the Buyers a copy of the Firm's fully disclosed Clearing Agreement with The First Southwest Company, Inc.; G. Form U-4. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have prepared and shall have delivered to the Buyers a copy of the Form U-4 filed with the NASD by each registered individual employed by the Firm together with all amendments thereto through the termination of this Letter or the Closing; H. Financial Statements. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have prepared and shall have delivered to the Buyers a copy of: (i) the audited financial statements and notes thereto covering the three most recent fiscal years as filed with the NASD (the "Firm Audited Financial Statements"); and (ii) unaudited financial statements for the three months ended March 31, 2004 (the "Firm Unaudited Financial Statements"). The Firm Audited Financial Statements and the Firm Unaudited Financial Statements shall be prepared in accordance with generally accepted accounting principles consistently applied and the subject of an unqualified opinion of a recognized firm of independent certified public accountants 11 reasonably acceptable to the Buyers, and shall conform to all applicable requirements of the NASD; I. Government Correspondence. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have delivered to the Buyers a copy of any and all correspondence between the Firm, and/or the Sellers and the NASD or the Securities and Exchange Commission (the "SEC") through the termination of this Letter or the Closing; J. No Material Adverse Change. From the date of this Letter through the Closing, there shall have been no material adverse change to the financial affairs or business condition of the Firm; K. No Common Stock Equivalents. From the date of this Letter through the Closing, the Firm shall not have any Common Stock Equivalents issued or outstanding. For the purposes of the foregoing, the phrase "Common Stock Equivalents" shall mean any subscriptions, warrants, options or other rights or commitments of any character to subscribe for or purchase from the Firm, or obligating the Firm to issue, any shares of common stock or any securities convertible into or exchangeable for such shares; L. No Additional Liabilities. From the date of this Letter through the Closing, the Firm will have no liabilities other than those incurred in the normal course of business and set forth in the Firm Audited or Unaudited Financial Statements, M. Third Party Consents. From the date of this Letter through the Closing, the Firm shall have obtained any third-party consents deemed necessary by the Buyers to effectuate the Transaction, including, without limitation, from government agencies, lenders, creditors, vendors, lessors and licensors. In this regard, and as soon as practicable following the execution of this Letter, the Firm shall notify the New York District Office of the NASD of the parameters of the Transaction and inquire whether the same constitutes a material event within the context of the Firm's Membership Agreement; N. Due Diligence. On the Closing, the Buyers shall have completed to their satisfaction a due diligence review and investigation into the business and affairs of the Firm, and the Sellers; O. Capitalization. From the date of this Letter through the Closing, the Firm shall have an authorized capitalization comprised of 1,000 shares of common stock, $.001 par value per share, of which all 1,000 shares shall be issued and outstanding. The Firm shall not have any other class of authorized or issued securities, nor shall it have any issued or outstanding Common Stock Equivalents. All issued and outstanding shares of the Firm shall be converted or exchanged for an equivalent interest in the limited liability company discussed in Subparagraph S. below; 12 P. Accounting. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have delivered to the Buyers an accounting of all monies contributed to the Firm and/or the Sellers by Eric M. Westbury, the use and application thereof by the Firm and/or the Sellers and all monies due and owing to Mr. Westbury. This accounting shall determine the financial parameters of the Firm's obligation to reacquire the Westbury Shares; Q. Licenses. Within five days from the execution of this Letter, the Sellers and/or the Firm shall have delivered to the Buyers copies of all NASD licenses held by the Firm's executive officers and principals, which licenses shall be in full force and effect on the Closing; R. Minimum Working Capital. Between the date of this Letter and the Closing, the Sellers shall covenant and agree to maintain the Firm's working capital at 50% of the amount of the Pre-Closing Facility; S. No Material Changes. In the Definitive Agreements, the Sellers shall covenant and agree not to vote for or initiate any material change in the business and affairs of the Firm or the manner in which the Firm conducts business without the prior written consent of the Buyers, which consent shall not be unreasonably withheld. For the purposes of this Letter, the initiation of trading for its own behalf and the making of markets in securities shall be deemed to be material changes; T. Conversion to LLC. In the Definitive Agreements, the Sellers shall covenant and agree that as soon as practicable following the Firm's settlement with Eric M. Westbury, the Sellers shall cause the Firm to convert from an S Corporation to a limited liability company (the "LLC"). Each shareholder of the Firm shall become a member of the LLC and each member of the Firm's Board of Directors shall become a manager of the LLC; U. General Release. On the Closing, the Sellers shall cause Eric M. Westbury and/or Charleston Capital, LLC to have delivered a duly executed form of general release to the Firm and the Sellers in such form as shall be reasonably acceptable to counsel for the Buyers. 10. Conditions Precedent to the Seller's Obligation. The obligation of the Sellers to proceed with the Transaction and to execute the Definitive Agreements is subject to the performance by the Buyers with the following conditions precedent; A. Purchase Price. Upon the execution of this Letter, AMBC shall have paid the initial advance of $50,000 due as the Pre-Closing facility by cash, wire, or certified check; and shall thereafter timely complete the second advance of $75,000; B. Due Diligence. On the Closing, the Seller's shall have completed to their satisfaction a due diligence review and investigation into the business and affairs of the Buyers; and 13 C. Loan Agreement. Simultaneously with the execution of this Letter, the Sellers shall have executed the Loan Agreement, the annexed 10% secured promissory note, and delivered the Shares and the Put Shares to the Escrowee (as that term is defined in the Escrow Agreement annexed to the Loan Agreement as Exhibit B). 11. Confidentiality. The parties acknowledge that in the course of creating Definitive Agreements relating to the subject matter hereof, each party (for purposes hereof, the "Disclosing Party") may consider it necessary or appropriate to furnish to the other (the "Receiving Party") proprietary and/or non-public information regarding the business, affairs or operations of the Disclosing Party. All information and data so acquired by the Receiving Party under this letter agreement or in contemplation of the creation of the definitive agreements shall be and shall remain the exclusive property of the Disclosing Party. The Receiving Party shall keep, and shall use its best efforts to have its employees and agents keep, any and all such information and data confidential, and shall not copy or publish or disclose it to others, or authorize its employees, agents or anyone else to copy, publish or disclose it to others, without the Disclosing Party's prior written approval. The Receiving Party shall return all tangible confidential information to the Disclosing Party at the request of the Disclosing Party. The foregoing obligations of confidentiality shall not apply to information which (i) is received from a third party who is not subject to confidentiality obligations with respect to such information, (ii) is or becomes part of public or industry knowledge through no action or omission of the Receiving Party, or (iii) is required to be disclosed pursuant to law or judicial process. The obligations set forth in this Paragraph 9 shall survive until the later of (i) the second anniversary of the date of execution of this Letter or (ii) two years from the date of execution of the Definitive Agreements. 12. Expenses. Each of the Buyers, AMBC and the Sellers will bear their own expenses and fees for lawyers and other professionals related to the Transaction contemplated hereby. 13. Acceptance. This letter must be accepted by the Sellers by delivery to the Buyers and AMBC of a signed counterpart of this letter on or before 5:00 p.m., New York City time, on July 12, 2004. 14. Binding Arbitration. It is expressly agreed and understood that in the event AMBC, the Employees and Lau are unable to agree upon an Appraiser as enumerated in Section 1, the selection of the Appraiser shall be settled by binding arbitration according to the Commercial Arbitration Rules of the American Arbitration Association located in the City of New York before a single arbitrator. The decision of the arbitrator will be final and shall be enforceable in any court of competent jurisdiction. AMBC, the Employees and Lau agree and consent that service of process in any such arbitration proceeding outside the City of New York shall be tantamount to service in person within City of New York and shall confer personal jurisdiction on the American Arbitration Association. In resolving all disputes between AMBC, the Employees and Lau, the arbitrator will apply the law of the State of New York. The arbitrator is, by this 14 Agreement, directed to conduct the arbitration hearing no later than three (3) months from the service of the statement of claim and demand for arbitration unless good cause is shown establishing that the hearing cannot fairly and practically be so convened. The arbitrator will resolve any discovery disputes by such pre-hearing conferences as may be needed. AMBC, the Employees and Lau hereby agree and consent that the arbitrator and any counsel of record to the proceeding will have the power of subpoena process as provided by law. 15. Commitment. This Letter, while not a contract, nevertheless memorializes the negotiations and agreements of the Sellers', the Employees and AMBC as to all of the principal terms and conditions comprising the Definitive Agreements. Accordingly, no additional material term or condition shall be added to the definitive Agreements without the consent of all of the parties to this Letter. In addition, the provisions of the Sections 6, 7, 11 and 12 hereof shall constitute a binding agreement between the parties hereto. This Letter supersedes all prior negotiations, understandings and agreements, if any, whether written or oral, between the parties hereto with respect to the matters described herein. If the foregoing correctly sets forth our understanding and agreement, please indicate your acceptance by signing the enclosed copy of this Letter in the space indicated below and return the same to the undersigned at your earliest convenience. Very truly yours, Buyers: American Business Corporation BY: /s/ Anthony R. Russo, President - --------------------------------------------- Anthony R. Russo, President /s/ Kenneth E. Sidler - --------------------------------------------- Kenneth E. Sidler /s/ Chris Messalas - --------------------------------------------- Chris Messalas /s/ Ara Proudian - --------------------------------------------- Ara Proudian 15 AGREED TO AND ACCEPTED: Sellers: /s/ Robert C. Lau - --------------------------------------------- Robert C. Lau /s/ Patricia D. Lau - --------------------------------------------- Patricia D. Lau Clayton, Dunning & Company Inc. By: /s/ Robert C. Lau - --------------------------------------------- Robert C. Lau, Chairman and Chief Executive Officer 16 EX-31 4 abc-10qsb_063004exhibit31.txt CERTIFICATION EXHIBIT 31.1 AMERICAN BUSINESS CORPORATION CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2003 I, Anthony R. Russo, the Registrant's Chief Executive and Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of American Business Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report; and 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: a) Designed and recently commenced the implementation of such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this quarterly report is being prepared; and b) Evaluated the increasing effectiveness of the Registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation. Dated: August 16, 2004 /s/ Anthony R. Russo - ---------------------------- Chief Executive Officer and Chief Financial Officer EX-32 5 abc-10qsb_063004exhibit32.txt CERTIFICATION EXHIBIT 32.1 AMERICAN BUSINESS CORPORATION CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003 In connection with the Quarterly Report of American Business Corporation on Form 10-QSB for the quarterly period ended June 30, 2004, as filed with the Securities and Exchange Commission on August 16, 2004 (the "Report"), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003, that: (1) The Report fully complies with requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of e-Smart Technologies, Inc. Date: August 16, 2004 /s/ Anthony R. Russo - ---------------------------- Chief Executive Officer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----