The May Report: 2/9/2011: Another consultant hired by Affluence.org comes forward to say that he too was not paid a dime for months of work; The UIC story looks like it may end up being a big one but I can’t say much right now; ADT’s UNCD bearings selected by Merck-Millipore; Tarkus Murphy, Bill Price, Don Samuelson and more…

The May Report February 9th, 2011

Editor and publisher: ron@themayreport.com, ronaldmay@aol.com, www.themayreport.com , 773-525-3944.

Assistant editor: Melanie Adcock, iPHONE: 312-259-0610, melanie_adcock@msn.com

If you missed an article, go here: www.tmronline.com/A55951/tmrarticles.nsf/vwFullNewsletter
_________________________
************************************************
Artificial Intelligence v. Human Intelligence
February 15, 5:00 – 8:00 pm

It’s debate night at MIT Enterprise Forum Chicago

First it was John Henry against the steam engine, and then it was Big Blue vs. Jeopardy. Now it’s our own version of AI vs. HI.

Machines seem to get smarter more every day. But if the technology driving this is dependant upon humans, who is really smarter?

Our Debaters
* Kris Hammond, Professor of Electrical Engineering and Computer Science at the McCormick School of Engineering at Northwestern University

* Valerie Pajak, Senior Manager, Business Intelligence & Analytics at APP Pharmaceuticals

They will try to convince the audience one way or the other. In the end, we will let the audience decide who presented the best argument.

bit.ly/hDr9Gi

When
Tuesday February 15
5:00 – 6:15 pm Networking
6:30 – 8:00 pm Program
Where
Hosted by our event sponsor, Ungaretti & Harris
70 W. Madison St., Chicago
4th Floor Conference Center

Cost
Free to members.
$35 advance payment for guests. $40 day of the event.

bit.ly/hDr9Gi

*******************************************************
_________________________________
TABLE OF CONTENTS

The Scoop section:

– Editor’s note, by Ron May
– Andy Hardin: Entrepreneur Mentor program
– TechAmerica Congressional briefing tomorrow on Cyber-101 and Reception to welcome new members of Congress
– Dan Nordquist TTE
– About the 20 reserved tix for SEO workshop
– Thursday, February 24: midVentures DESIGN+DEVELOP
– Tuesday, March 8: LES Chicago Chapter: From Research to Innovation & Invention – Perspectives from Academia: SPEAKERS: Dr. Jim Mulshine Associate Provost for Research and Vice President, Rush University; Dr. Richard Kennedy, Sr. Assoc. Dean of Research, Loyola University; Dr. Alan Landay, Professor and Chairman, Department of Immunology/Microbiology, Rush University; Dr. Natacha Depaola, Professor of Biomedical Engineering Carol and Ed Kaplan Armour Dean of Engineering, Illinois Institute of Technology
– Chicago Payments Information Exchange (CPIX) Group Forms on Built in Chicago Community
– Advanced Diamond Technologies’ UNCD Bearings Selected by Merck-Millipore
– Tuesday, Feb. 15: ACG Chicago: New Panelist & Great Line-up Chicago: The Risk Management Capital
– Tuesday, Feb. 22: ASP-Chicago Presents Bosch Power Tools Platform, Local Strategy
– This can’t be for real: Linda Dao: Per Jerry Roper, President/CEO, of the Chicagoland Chamber of Commerce
– Bob Geras: Dawn’s email has been hit by spam: WHAT IS GOING ON HERE ?Fwd: It’s Urgent, Please Respond
– Tarkus Murphy: USDA: Funding To Increase Educational and Health Care Access in Rural Communities
– Clearwire Partners with IL Center for Economic Progress
– Randy Shipley: Fair Use – Copyrights
– Correspondence from Don Samuelson
– Bill Price takes great notes: Midwest Business Brokers and Intermediaries 2011 Annual Conference
__________________________
**************************************
Online SEO training workshop with top SEO experts!

A unique, 9 weeks, 100% online SEO Training workshop starting February 11.

This SEO workshop will be trained by some of search industry’s best and brightest trainers like Shari Thurow, Eric Enge, Christine Churchill, Carolyn Shelby, & Bob Tripathi.

www.instantetraining.com/online-marketing-workshop

Here is the workshop agenda:

Week 1 – February 11, 2011: Successful Website Architecture

Week 2 – February 18, 2011: Search Friendly Web Design

Week 3 – February 25, 2011: Advanced Keyword Research

Week 4 – March 4, 2011: Site SEO – Must have on-page SEO

Week 5 – March 11, 2011: Technical Site SEO

Week 6 – March 18, 2011: Link Building through Blogs, Feeds, RSS

Week 7 – March 25, 2011: Link Building through Social Media

Week 8 – April 1, 2011: Creating SEO Dashboard & SEO Tools

Week 9 – April 8, 2011: Live Site Clinic Session

In addition to access to some of industry’s best known names each attendee will also get:

* Free 90 Access to our library of SEO training videos

* Unlimited 90 Days access to recorded training workshops

* Specially signed certification at the end of the program

Learn more about SEO Training workshop – www.instantetraining.com/online-marketing-workshop

**************************************
_________________________
The Scoop section:
_______________________
Editor’s note, by Ron May

* Look, I have to go because I have a deposition in my case. And then at 5pm, Len Bland and the BNC Venture Capital Group.

1. The UIC story is getting bigger and bigger and I have to hold off for a week or so before printing the letter I got. I will put out a special report, I hope by tomorrow, on many of the things Brenda Russell, David Gulley and Mary Dicig and I talked about but this is just the tip of the iceberg.

2. I got an email from a former consultant for Affluence.org who also never got paid. I have been looking for it and can’t find it right now, but if you are that person, please send the note to ronaldmay@aol.com

3. Frank Gruber, please contact me to let me know if you were selected to head a panel at SXSW. I am hearing contradictory things.

4. Ron Kirschner has so many friends in this town. I wanted a snarky headline to go along with the fact that he left money on the table — quite literally — Monday night. I was there for an hour after the copyright panel ended chatting with Bill Anthony and stuffing my face with blue cheese and crackers — you know, the sesame ones — and we noticed a metal box sitting on one of the tables. Well, Kirschner had left the cash box and it contained $280 in cash and $210 in checks!

Lundin did not want to help with a snide headline because he likes the guy and Bill Anthony did not want to work on it for the same reason and I argued that I like him too, but what does that have to do with taking advantage of a chance to stick it to someone?

Ron Kirschner told me that he keeps his word and tries to be an honorable guy and that is why his reputation is and has been quite good. I would add that he is not a self-promoter. And he does not insist on being the star of the show. To that I would add that he is authentic.

More on the panel when I get a chance.

Let me get out of here.
_______________________________________
Andy Hardin: Entrepreneur Mentor program

From: Andy Hardin
Subject: Entrepreneur Mentor Program
Date: Wed, 9 Feb 2011 08:03:24 -0600
To: “ron@themayreport.com”

Ron,

Here is a program that your readers may be interested in. In a nutshell, the program has been developed by the Allied First Bank and our Business Community to identify and support entrepreneurs in creating and enhancing their business. The goal of the program is to help these businesses reach the next level in their ladder of success, which will in turn create jobs in our community. As a part of the program, we will choose one business to mentor and that business will receive office space free-of-charge, business services at no cost, and guidance and consulting during its first year.

This is great for someone that is currently looking for a position, or has a great idea and is concerned about the barriers preventing them from taking the next step. It is open to anyone in the Chicagoland area, but the space is located in Oswego.

Here is a link to our local Patch site with some more information.

oswego.patch.com/articles/if-youve-got-a-business-idea-allied-first-bank-could-help

Please don’t hesitate to contact me with any questions.

Andy Hardin

Vice President of Operations & Marketing
Allied First Bank
3201 Orchard Rd
Oswego IL 60543
Voice: 630-383-0108
Fax: 630-383-0208
___________________________________
TechAmerica Congressional briefing tomorrow on Cyber-101 and Reception to welcome new members of Congress

Subject: TechAmerica Congressional briefing tomorrow on Cyber-101 and Reception to welcome new members of Congress
Date: 2/8/2011 4:09:00 P.M. Central Standard Time
From: ed.longanecker@techamerica.org
To: ronaldmay@aol.com, melanie_adcock@msn.com

TechAmerica members:

As a reminder, TechAmerica will be hosting a Cyber 101 briefing on Capitol Hill tomorrow at 4pm. The event will take place in the Cannon Caucus Room which is located on the 3rd floor of the Cannon House Office Building. Immediately following the briefing, TechAmerica will be hosting a reception to welcome the new Members of Congress. The reception will also be held in the Cannon Caucus Room. To register online please click here. www.techamerica.org/cyber101 We look forward to seeing you tomorrow!

Best regards,

Ed Longanecker

Executive Director, Regional Vice President
TechAmerica
630-282-4332
ed.longanecker@techamerica.org
www.techamerica.org

AeA & ITAA have merged to form TechAmerica

Where the future begins
___________________________________
Dan Nordquist TTE

Subject: Dan Nordquist TTE -second attempt here
Date: 2/8/2011 1:32:40 P.M. Central Standard Time
From: klarkashton@gmail.com
To: ronaldmay@aol.com

Ron –

Here is a copy of the original message, sent on 1/26.

“Hi Ron –

Sorry I’ve been a bit slow to get this blurb off to you about TTE. Terry had a family tragedy and we’re still playing catch-up. I haven’t had a chance, therefore, to craft something ( with her approval ) that’s specifically targeted to your audience, but this brief description is the gist of what we are, and the last sentence of it is something that I wrote with you in mind.

“TTE transcriptions ( www.ttetranscripts.com ) is a service that can convert all of your important conversations into hard copy. It can be difficult to focus on a webinar, interview, conference call, presentation, etc. if you are busy scribbling notes. TTE provides a hard copy for your reference later. Some conversations are recorded for legal or other official and formal purposes ( exit interviews, police interrogations, stockholder reports, dialogues with expert witnesses, medical patient feedback and records, etc. ) and therefore they depend on accuracy. The industry average for accuracy is 98 percent. TTE is 99.5 percent. Let Dan Nordquist and TTE know if we can be of help to you re: these kind of needs, or any others that you may wish to explore, such as tech conference and convention proceedings and broadcast coverage, from the POV of conference organizers or from host perspectives, such as hotels and other third or fourth party coordinators.”

On a completely different track – I was intrigued when you mentioned that you knew the format of TMR could be changed. Are you considering doing so ? I was watching a favorite TV show the other night ( Anthony Bourdain www.travelchannel.com/TV_Shows/Anthony_Bourdain ) and I remembered seeing a locally produced TV show where wine was discussed and rated, and which I may have discovered on your report. Why not a TMR show ? ( A website “magazine” was probably what you were getting at when you brought it up, I realize. ) Yours could be more of a “gourmand of the intellect” or even a mix of culture and intellect. Why not ? There seems to be a demand for visual channels vs. pure text these days. ( OK, I have no idea how much it costs to create these kinds of episodes. )

Dan Nordquist
( 630 ) 351-1790″
_________________________________
About the 20 reserved tix for SEO workshop

From: Joseph Harvey
Subject: About the 20 reserved tix for SEO workshop
Date: Mon, 7 Feb 2011 16:32:58 -0600
To: ron@themayreport.com

Hello, i regularly read your newsletter and we have actually met on a few occasions. I am wondering if the reserved tickets are at a discounted rate?

Joseph Harvey

i.c.stars I*
212 w. superior ste 300
chicago, il 60610
o: 312.772.3831
icstars.org
I’m LinkedIn: www.linkedin.com/in/joecstars
_________________________________
Thursday, February 24: midVentures DESIGN+DEVELOP

From: Meagan Adele Lopez
Sender: meaglo@gmail.com
Subject: midVentures DESIGN+DEVELOP
Date: Mon, 7 Feb 2011 16:19:18 -0600
To: ronaldmay@aol.com, ron@themayreport.com
Cc: melanie_adcock@msn.com

Hi Ron,

Hope you’re well.
Here’s hoping we see you at this month’s workshop! Please find the information below.

User Experience (UX): Planning for Success

February 24, 2011, 3:30 pm ? 6:00 pm
Sync Technology Center
322 S. Green St., Suite 300, Chicago, IL

Workshops

3:30 PM: Design is Not Design
What is great design? Hint: it?s not look and feel. This workshop will challenge your view on what successful design is in a web application and what you should be focusing on for your next project.
John Roa
Head Wizard
AKTA Web Studio

4:45 PM: Incorporating UXD into an Agile Project Inception
The starting period of a project, called inception, sets the tone for the rest of the project ? so it is critical to nail it. This workshop will explain through real world stories about what happens when inception goes awry. He will talk how effective user experience design is necessary and how to measure the inception phase to ensure it is on track. Michael will provide tips, tricks and tools on how to keep your inception phase going well and what to do if it is floundering.
Michael Walkden
VP of Product Delivery
Pathfinder Development

6:00 PM: Please join us after the workshops for open networking & refreshments!

February 24, 2011, 3:30 pm ? 6:00 pm
Sync Technology Center
322 S. Green St., Suite 300, Chicago, IL

–
Best regards,

Meagan
Meagan Lopez | Social Media Director |
@theladylunches

midVentures | 333 N Michigan Ave, Suite 1022 | Chicago, IL 60601 | p 443.540.5562
www.midventures.com | @midventures
____________________________________
Tuesday, March 8: LES Chicago Chapter: From Research to Innovation & Invention – Perspectives from Academia: SPEAKERS: Dr. Jim Mulshine Associate Provost for Research and Vice President, Rush University; Dr. Richard Kennedy, Sr. Assoc. Dean of Research, Loyola University; Dr. Alan Landay, Professor and Chairman, Department of Immunology/Microbiology, Rush University; Dr. Natacha Depaola, Professor of Biomedical Engineering Carol and Ed Kaplan Armour Dean of Engineering, Illinois Institute of Technology

From: “LES Chicago Chapter”
Sender: “LES Chicago Chapter”
Subject: March 8 Meeting: From Research to Innovation & Invention – Perspectives from Academia
Date: Mon, 7 Feb 2011 18:05:14 -0500
To: “Ron”

LES (USA & Canada) Chicago Chapter

LES Chicago Chapter Meeting
DATE & TIME
Tuesday, March 8, 2011
11:45 AM

TITLE
From Research to Innovation & Invention – Perspectives from Academia

SPEAKERS
Dr. Jim Mulshine
Associate Provost for Research and Vice President
Rush University

Dr. Richard Kennedy
Sr. Assoc. Dean of Research
Loyola University

Dr. Alan Landay
Professor and Chairman
Department of Immunology/Microbiology
Rush University

Dr. Natacha Depaola
Professor of Biomedical Engineering Carol and Ed Kaplan Armour Dean of Engineering
Illinois Institute of Technology

Moderator
Connie M. Cleary, DPM, CLP
LES Chicago Chapter Co-Chair
Associate Director, Intellectual Property
Rush University

DESCRIPTION
The impact of academic research is far reaching and extends deeply into our economy. Highlights from the Association of University Technology Managers FY2009 report includes the following statistics: $53.9 billion in total sponsored research expenditures, 20,309 disclosures, $2.3 billion total licensing income, 18,214 total U.S. patent applications and 3,417 issued U.S. patents. Hear from leading academic leaders from IIT, Loyola, and Rush address the subject of academic research from four different perspectives.

LOCATION
Maggiano’s Little Italy
(Banquet Facilities)
111 W. Grand Avenue
Chicago, Illinois
(312) 644-7700

Click here for detailed information and online registration
_________________________________
Chicago Payments Information Exchange (CPIX) Group Forms on Built in Chicago Community

Subject: Chicago Payments Information Exchange (CPIX) Group Forms on Built in Chicago Community
Date: 2/8/2011 4:34:48 P.M. Central Standard Time
From: collin@canrightcommunications.com
To: ronaldmay@aol.com

The Chicago Payments Information Exchange (CPIX) is live on the Built in Chicago. The group’s purpose is to build on Chicago’s history of innovation in payments and create greater visibility for this financial technology market.

In addition to providing a good overview of treasury management and payments in 2010, they are also good examples of my financial writing–the kind of solid content companies can use in bylines articles, white papers, blogs, and like.

Built in Chicago is fast-growing community that serves as a “resource for “digital professionals” working to build great web and mobile businesses and mind blowing user experiences. ” For details, read this interview with founder Matt Moog: bit.ly/fWrnlp (links to Crain’s Chicago Business’ Enterprise City blog).

CPIX is moderated by long-time payments, banking, and payments writer and communications consultant Collin Canright. The group is intended to build a network of financial institutions, payments processors, software firms, and consultants will strengthen this niche in Chicago’s technology community through collaborative communication and help propel its future success.

To join Built in Chicago, visit: www.builtinchicago.org

To view CPIX group content, visit www.builtinchicago.org/group/payments

For more information, contact:

Collin Canright
Principal
Canright Communications
www.canrightcommunications.com

773 248-8935 ext. 9404 (office)
773 426-7000 (mobile)

Market, Sell, Educate & Inspire
_________________________________
Advanced Diamond Technologies’ UNCD Bearings Selected by Merck-Millipore

Subject: Advanced Diamond Technologies’ UNCD Bearings Selected by Merck-Millipore
Date: 2/8/2011 6:05:15 A.M. Central Standard Time
From: jill@calyxconsulting.com
Reply To: nkane@thindiamond.com
To: ronaldmay@aol.com

Advanced Diamond Technologies’ UNCD® Bearings™ Selected by Merck-Millipore

Romeoville, IL-February 8, 2011- Advanced Diamond Technologies (ADT) announces that Merck-Millipore has selected UNCD® Bearings™ to improve the reliability and dry-running capability of its NovAseptic® line of mixers. NovAseptic mixers are widely used in the pharmaceutical and biotech industries by customers who require aseptic mixing processes for the manufacture of pharmaceutical and food-grade chemicals.

Upon loss of lubrication, a mixer’s bearings commonly fail within 30 seconds. When this occurs, they must be repaired, cleaned, and re-certified; a cumbersome and expensive process. UNCD Bearings extend the reliability of the magnetically-coupled mixing heads in NovAseptic mixers because UNCD, a thin-film form of nanocrystalline diamond, is bonded to the bearing surface. Because UNCD has the durability of diamond, the world’s hardest material, and a coefficient of friction similar to Teflon®, tests show that UNCD Bearings can extend the mean-time-to-failure upon loss of lubrication to over 5 hours-an improvement of 600 times.

UNCD Bearings are part of ADT’s award-winning UNCD Components™ product family which includes faces for mechanical seals for fluid pumping applications. UNCD is certified as USP Class VI compliant-an internationally accepted benchmark for material compatibility in biomedical and pharmaceutical applications.
“We looked all over the world for a material both durable and smooth enough to extend the reliability of the bearings used in NovAseptic’s mixers without risking the introduction of contaminants into the process. With UNCD Bearings our customers can avoid the costly and irritating unplanned maintenance that occurs when the bearings lose lubrication. This translates directly into increased uptime and greater product throughput which has a direct bottom-line benefit for our customers,” said NovAseptic’s product manager, Tom Dennen.

“UNCD’s amazing properties benefit end-users who are concerned about friction and wear. Supplying the complete bearings to Millipore validates ADT’s business model as a producer of high-value products uniquely enabled by or improved with diamond,” said ADT’s president Neil Kane.

UNCD Bearings are immediately available from Merck-Millipore and can be fitted to existing NovAseptic mixers.

About Advanced Diamond Technologies, Inc.

ADT is the world leader in the development of diamond for industrial, electronics, energy, and medical applications. ADT is a World Economic Forum Technology Pioneer and an R&D 100 Award winner for mechanical seal faces for fluid pumps. For more information about ADT, visit www.thindiamond.com.

About Merck-Millipore

Millipore is a member of the Merck-Millipore group and is a leading supplier of magnetically coupled mixers used in the pharmaceutical industry. For more information about the NovAseptic product family, visit www.millipore.com/catalogue/module/C10728.

Calyx Consulting
Jill Jackson
Email: jill@calyxconsulting.com
Phone: 312.231.9870
______________________________________
Tuesday, Feb. 15: ACG Chicago: New Panelist & Great Line-up Chicago: The Risk Management Capital

From: ACG Chicago
Sender: ACG Chicago
Subject: New Panelist & Great Line-up Feb 15- Chicago: The Risk Management Capital
Date: Tue, 8 Feb 2011 17:07:10 -0500 (EST)
To: ron@themayreport.com

An amazing collection of the world’s leaders in risk!
Join Us Next Tuesday!
ACG Chicago Corporate Meeting Announcement

Chicago:

The Risk Management Capital of the World

February 15, 2011

11:30 am – 1:15 pm, The Standard Club

How did Chicago become the risk management capital of the world?

ï»¿ï»¿ Chicago Risk PanelPanelists

Bernard W. Dan

President, Sun Holdings, LLC

(former CEO of the Chicago Board of Trade, MF Global, and Cargill Investor Services)

Richard DuFour,

Executive Vice President, Chicago Board Options Exchange

David S. Goone

Senior Vice President & CSO, IntercontinentalExchange

John Lothian

President & CEO, John J. Lothian & Company, Inc.

Rick Redding

Managing Director, Products & Services, CME Group Erka cropped

Moderator

Erika S. Olson, author of “Zero-Sum Game: The Rise of the World’s Largest Derivatives Exchange”

The exponential growth of the derivatives industry has clearly impacted global financial markets, and now the role of U.S. exchanges is front and center after the passage of the Dodd-Frank financial reform legislation.

Join us to hear a nationally recognized panel of experts for a timely discussion including:

* A brief overview of the exchange industry
* Industry demutualization, consolidation and future trends
* The function of exchange-traded derivatives
* Dodd-Frank legislation and over-the-counter derivatives market reform

zero cover shot

Reserve your copy of Erika S. Olson’s book on the registration form for $20. They will be available from the author at this event.

Mark Your Calendar &

Click Here to Register Today

Chicago: The Risk Management
Capital of the World
Feb. 15, 2011
11:30 am – 1:15 am
The Standard Club, Chicago

Prices:

ACG Members
$40 registered by 2/11, $50 registered after 2/11

Non-ACG Members
$55 registered by 2/11, $65 registered after 2/11
_______________________________
Tuesday, Feb. 22: ASP-Chicago Presents Bosch Power Tools Platform, Local Strategy

From: “ASP-Chicago Chapter”
Subject: ASP-Chicago Presents Bosch Power Tools Platform, Local Strategy — February 22nd
Date: Wed, 02 Feb 2011 13:14:13 -0600
To: ron@themayreport.com

If you’re having trouble viewing this email, you may see it online.
Share This:

ASP – Chicago
Presents

“Bosch Power Tools Platform, Local Strategy Frank Carroll, President, Bosch Power Tools North America”
with Frank Carroll

Dear Colleague,

On behalf of ASP – Chicago, we extend a special invitation to join us for what we know will be an interesting presentation and conversation with Frank Carroll of Bosch Power Tools North America.

Thank you. We look forward to meeting you on Tuesday, February 22nd 2011.

Rick Kaufmann, President

ASP Chicago is delighted to host a presentation by Frank Carroll, President of Bosch Power Tools North America.

Bosch Power Tools is one of three remaining global power tool manufacturers. In addition to the Bosch Power Tool brand, Robert Bosch Power Tools also manufactures and markets Skil Power Tools, Dremel Rotary Tools, RotoZip Tools, and a wide range of accessories.

Frank will talk about how Bosch Power Tools North America capitalizes on the substantial advantages the corporation’s global platform provides relative to sourcing, manufacturing, innovation and deep financial resources. He will highlight pointed examples of how Bosch has crafted winning local and regional strategies that leverage that global strength. He will also highlight cases in which local innovation and local strategy helped to transform and inspire the global corporation’s strategy.
Registration

Advanced Registration Registration Onsite
Member $55.00 $65.00
Non-member $75.00 $85.00
Student $25.00 $35.00
Agenda
05:15 PM to 06:00 PM Registration and Networking
06:00 PM to 06:45 PM Program
06:45 PM to 07:00 PM Q&A/Adjournment

• Advanced registration ends at midnight Monday, February 21.

• For more information contact: Christine Glatz – 815-806-4908

“Bosch Power Tools Platform, Local Strategy Frank Carroll, President, Bosch Power Tools North America”

Tuesday, February 22nd 2011
5:15 pm to 7:00 pm

The Metropolitan Club
233 S. Wacker
Chicago, IL 60606
312.993.2500

Sincerely,

Event Services
Association for Strategic Planning – Chicago

Think Plan Act
Email: cglatz@managementservices.org
Phone: 815-806-4908
Web: www.strategyplus.org/
________________________________________
This can’t be for real: Linda Dao: Per Jerry Roper, President/CEO, of the Chicagoland Chamber of Commerce

From: “Dao, Linda”
Subject: Per Jerry Roper, President/CEO, of the Chicagoland Chamber of Commerce
Date: Wed, 2 Feb 2011 12:10:22 -0800
To: “ron@themayreport.com”

Dear Ron:

Our President/CEO, Jerry Roper, suggested that I reach out to you regarding membership at the Chicagoland Chamber of Commerce. As a leading pro-business organization, the Chamber’s mission is to make Chicagoland the most business-friendly region in America. With more than 2,600 members, we are one of the largest business connecting organizations in the country.

We feel that companies and businesses like The May Report tell a story about doing business in the Region; about innovation, creating jobs, growth and success. In addition, your company contributes to both the economic vitality of Chicagoland and a sense that this is the business address in America where people can start and grow a successful business.

I welcome the opportunity to give you a better understanding of the Chamber. Please let me know when you are available to chat, and feel free to peruse our website at www.chicagolandchamber.org. I look forward to our partnership, and taking your organization to a market leadership position.

Regards,

Linda Dao

Member Investment Manager
Chicagoland Chamber of Commerce
Aon Center | 200 E. Randolph, Ste 2200 | Chicago, IL 60601
Direct: 312.494.6715 | Cell: 312.775.2229 | Fax: 312.861.0660
ldao@chicagolandchamber.org
________________________________________
Bob Geras: Dawn’s email list has been hit by spam: WHAT IS GOING ON HERE ?Fwd: It’s Urgent, Please Respond

Subject: Re: WHAT IS GOING ON HERE ?Fwd: It’s Urgent, Please Respond
Date: 2/7/2011 11:13:48 A.M. Central Standard Time
From: vcmaven@gmail.com
To: Sulphone@aol.com
CC: hidawng@gmail.com, RONALDMAY@aol.com, Mike@MicroBlade.us, sglickson@mcguirewoods.com, scott@scottsamuel.net, nrokop@iit.edu

Looks like someone in the UK hijacked Dawn’s address book and is spamming everyone with this phony email. I’m getting a lot of phone calls and emails in response. Sorry!!

Problem is that she can’t even access her own gmail account to send out an alert to her entire address book, because whoever hacked her account changed her password.
Bob

On Mon, Feb 7, 2011 at 9:36 AM, wrote:

In a message dated 2/7/11 7:42:43 A.M. Central Standard Time, hidawng@gmail.com writes:
It’s me, Dawn. I really don’t mean to inconvenience you right now, I made a little trip to UK and I misplaced my luggage that contains my passport and credit cards, I know this may sound odd, but it all happened very fast. I need to get a new passport and a ticket, but I’m short of funds to pay for my ticket and other miscellaneous expense. Please, can you lend me some funds to get a ticket? I’ll be willing to pay back as soon as I get home.

Please respond as soon as you get this message, so I can forward you my details to send the funds to me, OR you can drop a message via the hotel’s desk phone if you can. The numbers are, +447045733705.

I await your response
Dawn Geras

———- Forwarded message ———-
From: Dawn Geras
To: undisclosed-recipients:;
Date: Mon, 7 Feb 2011 14:42:08 +0100
Subject: It’s Urgent, Please Respond

It’s me, Dawn. I really don’t mean to inconvenience you right now, I made a little trip to UK and I misplaced my luggage that contains my passport and credit cards, I know this may sound odd, but it all happened very fast. I need to get a new passport and a ticket, but I’m short of funds to pay for my ticket and other miscellaneous expense. Please, can you lend me some funds to get a ticket? I’ll be willing to pay back as soon as I get home.

I await your response
Dawn Geras
–
Bob Geras
LASALLE INVESTMENTS
Venturing Since 1968
+++++++++++++++++++++++++++++
From: “Dawn Geras ”
Subject: It’s Urgent, Please Respond
Date: Mon, 7 Feb 2011 15:12:11 +0100
To: “Dawn Geras ”

I await your response

Dawn Geras
_________________________________
Tarkus Murphy: USDA: Funding To Increase Educational and Health Care Access in Rural Communities

Subject: Repeat?: USDA: Funding To Increase Educational and Health Care Access in Rural Communities
Date: 2/3/2011 5:42:41 A.M. Central Standard Time
From: tarkus@ripco.com
To: melanie_adcock@msn.com, ron@themayreport.com, RONALDMAY@aol.com

Ron & Melanie,

The original, below, (sent, 1/25/11) may be in your queue for publication. If not, it is still news that is relevant to urban supporters of rural / exceptionally rural projects in Illinois (and elsewhere).

Neither the 2010 USDA DLT awards nor the 2011 program are on the USDA web site, yet ( www.rurdev.usda.gov/UTP_DLT.html ). The 2011 round may start in as early as a few weeks. The potential of the USDA DLT programs to reach areas that are (or will) be serviced by some of the new high speed networks (this grant funds equipment, but NOT connectivity), also means that more services can reach rural / exceptionally rural schools and/or hospitals.

All the best,

Tarkus

Ron,

One of my clients was awarded a 2010 USDA Distance Learning and Telemedicine Grant. I have attached the USDA news release (below) which contains a link to the list of all of the award winners. Many people have been anticipating the award announcement (usually released in September), so I thought the information may be of use for the people in Illinois who applied back in May of 2010.

The 2011 USDA DLT is about to come out for the next round. I know Polycom and Cisco (was Tandberg before the acquisition) usually offer presentations throughout the US. There should be separate presentations for Schools and hospitals by one or more vendors on the Grants Office ( www.grantsoffice.com ) website sometime in the Spring. There are some police and fire grant presentations coming up on the same site (see grantsofficeevents.webex.com/ ).

The USDA DLT grants are a good opportunity for our more fortunate urban areas to work with rural and exceptionally rural locations to bring interactive HD distance learning and telemedicine. Just a few years ago, these grants were all about getting the maximum value of a T-1, but the new infrastructure inititiatives like BIP/BTOP and the FCC’s Rural Health Care Pilot Program are allowing for a range of services. For example, Philip Wolford of the RTN (in Pennsylvania) has added programs in Telecardiology, TeleUrology, TeleOncology, TelePsychology, TeleBariatrics (just the meetings and consultations, not the surgery) without compromising the telecommunications quality of interactive and high definition TeleEducation (Distance Education for Medical Accreditation (CME)) and support group meetings for recovering patients.

The sea change has resulted from greater bandwidth. Remote rural locations like the Information Superglacier(TM) are, finally, getting access to high speed fiber optics that we have enjoyed in Chicago for decades. In many cases, exceptionally rural areas are making a quantum leap from dial up services straight into multigigabit networks. That has resulted in the improvement of communication and patient care. Within a few weeks, a patient who needs to have a diagnosis for stroke in a rural New York hospital can be treated locally as a specialist from a remote urban hospital can determine if the patient has suffering from symptoms of an ischemic stroke during the “Golden Hour” when life saving drugs can be administered prior to ambulance or Medivac transport.

Bandwidth allows both the medical treatment (telemedicine) and the education (distance learning) to take place without either interfering with the quality of the other. Areas with slower speed connections will still continue to experience “jitter” which is irritating, case of education, and dangerous in the case of telemedicine (where the image or sound quality is detrimental to a diagnosis).

With all the work that I have done in telemedicine over the past few years, I have not applied for the USDA DLT program on the Information Superglacier(TM).

Maybe that will change, this year. I still can’t quite reach some of the networks in Pennsylvania and it would cost millions to duplicate the process, locally. However, he Axcess Ontario fiber ring is now complete and I see that there are already comments and articles starting to appear (see stopthecap.com/category/issues/municipal-networks/ it is the top one, for now). For the record, the network is run by the local development corporation, not the County, and the LDC does not have end user services. For some reason the LDC has become the darling of the “stop the cap” board, but (in reality) the LDC gets along with private companies, LECs, CLECs, cellular carriers, cable companies, etc. Open access really does mean open access.

Good luck to everyone on the next round. If the BIP/BTOP funds are available fast enough maybe some new Illinois locations will be eligible to participate.

Release No. 0030.11
Contact:
Office of Communications (202) 720-4623

Agriculture Secretary Vilsack Announces Funding To Increase Educational and Health Care Access in Rural Communities

WASHINGTON, Jan. 24, 2011 – Agriculture Secretary Tom Vilsack today announced that 106 projects in 38 states and one territory have been selected to receive more than $34.7 million in grants to fund educational projects and expand access to health care services in rural areas through USDA’s Distance Learning and Telemedicine Program.

“Too many rural areas cannot take full advantage of the opportunities afforded by broadband for improved education and health care. These funds will help communities enhance their educational and training programs and deliver improved health care services for their residents,” Vilsack said.

The Distance Learning and Telemedicine (DLT) Grant Program provides access to education, training and health care resources in rural areas. For example, an award of $350,232 to the Alaska Gateway School District Project in Tok will bring distance learning to 11 schools in rural villages in the interior of Alaska. These funds will allow the school district to expand class availability and to purchase computers, interactive videoconferencing equipment, and whiteboards.

In Oklahoma, an award of $496,516 to INTEGRIS Health, Inc. will replace outdated systems with modern video teleconferencing equipment throughout this network of 20 rural schools, hospitals and health centers. Links to 11 resource hospitals and physicians offices will provide a variety of health and educational services, such as speech therapy and instruction to students, telestroke services that connect patients with physicians, continuing medical education for healthcare professionals at the hospital sites, and a stroke recognition program to train students to recognize the warning signs of stroke and help save lives in their communities.

Funding is contingent upon the recipient meeting the conditions of the grant agreement. For a complete list of the DLT projects announced today, please click www.rurdev.usda.gov/supportdocuments/ChartDLTAWARDSJan2011.pdf

USDA, through its Rural Development mission area, administers and manages more than 40 housing, business and community infrastructure and facility programs. These programs are designed to improve the economic stability of rural communities, businesses, residents, farmers and ranchers and improve the quality of life in rural America. Rural Development has an existing portfolio of nearly $142 billion in loans and loan guarantees.

USDA is an equal opportunity provider, employer and lender. To file a complaint of discrimination, write: USDA, Director, Office of Civil Rights, 1400 Independence Ave., S.W., Washington, D.C. 20250-9410 or call (800) 795-3272 (voice), or (202) 720-6382 (TDD).
________________________________
Clearwire Partners with IL Center for Economic Progress

From: Chris Comes
Subject: Clearwire Partners with IL Center for Economic Progress
Date: Tue, 08 Feb 2011 17:04:24 -0500
To: ron@themayreport.com

Clearwire Partners with Center for Economic Progress for Tax Season
Clearwire Provides $5,000 in CLEAR Service and Devices for Tax Preparation Centers

CHICAGO ? February 8, 2011 ? Clearwire (NASDAQ: CLWR), a leading provider of wireless broadband services and operator of the first 4G network in the country, today announced the donation of CLEAR® 4G take-it-with-you internet service to the Center for Economic Progress of Illinois. The technology donation, valued at more than $5,000 is aimed at providing Internet access for the mobile tax preparation centers which primarily serve Chicago?s low-income community.

?We are thrilled to help connect the underserved areas of Chicago, Illinois with high speed Internet service that will help individuals complete their 2010 tax returns,? said Jeannie Weaver, regional director of sales for CLEAR. ?CLEAR launched service in Illinois 13 months ago and is committed to making a difference in the communities we serve.?

?It?s no secret that times are tough, and hard-working, low-income families have been hit hardest,? said David Marzahl, president at the Center for Economic Progress. ?Thanks to Clearwire?s generous donation, CEP?s dedicated volunteer corps will be able to help return more than $50 million in refunds to 30,000 families and their communities during tax season.?

The Center for Economic Progress associates will use Clear USB 4G-enabled devices to connect its laptop computers to the Internet. The program started January 18 and will conclude on April 15, 2011. Chicago area centers are located in Maywood, Rogers Park, Albany Park, Pullman, Humboldt Park and Lawndale.

A CLEAR Difference
The CLEAR experience is similar to Wi-Fi but without the short-range limitations. CLEAR uses wireless 4G technology that differs from Wi-Fi because it provides service areas measured in miles, not feet. CLEAR also offers average mobile download speeds of 3 to 10 mbps.* Outside the CLEAR 4G service area, dual-mode 4G/3G modems keep users continually connected by leveraging Sprint?s 3G data network.

For more information about CLEAR, visit www.clear.com or The CLEAR Blog www.clear.com/blog. You can also follow CLEAR information on Twitter at @Clear. Information about Clearwire is available at www.clearwire.com. For press and broadcast: images, video and company logos are available from the Clearwire Newsroom at www.clearwire.com/newsroom. To subscribe to Clearwire’s RSS news feed, click here.

About Clearwire
Clearwire Corporation (NASDAQ: CLWR), through its operating subsidiaries, is a leading provider of wireless broadband services. Clearwire’s 4G network currently provides coverage in areas of the U.S. where more than 110 million people live. Clearwire’s open all-IP network, combined with significant spectrum holdings, provides an unprecedented combination of speed and mobility to deliver next generation broadband access. The company markets its 4G service through its own brand called CLEAR® as well as through its wholesale relationships with Sprint, Comcast and Time Warner Cable. Strategic investors include Intel Capital, Comcast, Sprint, Google, Time Warner Cable, and Bright House Networks. Clearwire is headquartered in Kirkland, Wash. Additional information is available at www.clearwire.com.

*Speed claims based on download speeds only. Actual performance may vary and is not guaranteed. CLEAR performance claim is based on average download user speeds achieved during tests performed on the CLEAR commercial network by CLEAR. Other carrier performance based on their advertised claims.

Unlimited plans subject to CLEAR?s Acceptable Use Policy, posted at www.clear.com/legal/aup.

Clearwire, CLEAR, and the CLEAR logo are trademarks or registered trademarks of Clearwire Communications LLC in the United States and/or other countries. All other company or product names are trademarks of their respective owners.

About the Center for Economic Progress
Founded in 1990, the Center for Economic Progress (CEP) is a nonprofit organization dedicated to helping hard-working, low-income families move from financial uncertainty to financial security. Operating one of the largest and oldest statewide tax preparation programs in the country, CEP has helped more than 270,000 families and returned nearly $400 million in refunds to Illinois communities. For more information, visit www.economicprogress.org.

Contact: Chris Comes
Clearwire
312-282-0539
__________________________________
Randy Shipley: Fair Use – Copyrights

Subject: Fair Use – Copyrights
Date: 2/3/2011 8:32:11 A.M. Central Standard Time
From: rshipley@billionairexchange.com
To: RONALDMAY@aol.com

Ron, as a journalist I would suggest you familiarize yourself with what is termed “fair use” for content that people may claim copyright for –

fairuse.stanford.edu/Copyright_and_Fair_Use_Overview/chapter9/index.html

Fair use is a copyright principle based on the belief that the public is entitled to freely use portions of copyrighted materials forpurposes of commentary and criticism. For example, if you wish to criticize a novelist, you should have the freedom to quote a portion of the novelist’s work without asking permission.

There is a lot of info at this link, and I am not an attorney so you need to make your own interpretations and come to your own conclusions on what you can and cannot use.

From this site – www.eff.org/issues/bloggers/legal/liability/IP

What is fair use?
There are no hard and fast rules for fair use (and anyone who tells you that a set number of words or percentage of a work is “fair” is talking about guidelines, not the law). The Copyright Act sets out four factors for courts to look at (17 U.S.C. § 107):
The purpose and character of the use. Transformative uses are favored over mere copying. Non-commercial uses are also more likely fair.
The nature of the copyrighted work. Is the original factual in nature or fiction? Published or unpublished? Creative and unpublished works get more protection under copyright, while using factual material is more often fair use.
The amount and substantiality of the portion used. Copying nearly all of a work, or copying its “heart” is less likely to be fair.
The effect on the market or potential market. This factor is often held to be the most important in the analysis, and it applies even if the original is given away for free. If you use the copied work in a way that substitutes for the original in the market, it’s unlikely to be a fair use; uses that serve a different audience or purpose are more likely fair. Linking to the original may also help to diminish the substitution effect. Note that criticism or parody that has the side effect of reducing a market may be fair because of its transformative character. In other words, if your criticism of a product is so powerful that people stop buying the product, that doesn’t count as having an “effect on the market for the work” under copyright law.
________________________________
Correspondence from Don Samuelson

Subject: Ron, I think this should work – with the help of Len Bland.
Date: 2/7/2011 10:46:25 P.M. Central Standard Time
From: DSSA310@aol.com
To: RONALDMAY@aol.com
CC: len.bland@gmail.com, melanie_adcock@msn.com

From: DSSA310@aol.com

To: RonaldMay@aol.com

Ron:

I thought you might want to know how business incubators and the systematic incubation of high-growth businesses was being promoted by the President’s Chief Technology Officer, along with the Secretaries of Commerce and Energy, the Director of the SBA, our mutual friend, the founder of early adopter/current luddites Steve Case of AOL, the head of the Kaufmann Enterprise Institute and Brad Feld of the Foundry Group in Boulder, Colorado. Seems like we may be poised for a major national effort.

This is a 30 minute video that is worth the time, although I’ve been unsuccessful in getting many to invest 30 minutes in watching the video. Odd. Perhaps poor salesmanship on my part. Alas, we need Ron May.

www.c-spanvideo.org/program/JobsPl

It seems to me the high tech/business incubator communities in Chicago would be interested in figuring out how their efforts could be assisted by this Start Up America program. Might be worth a group discussion.

There are two other web sites that complement this video.

The first is the Excelerate Labs web site which appears to be based in Chicago as part of the national network of local incubation systems promoted by Brad Feld and David Cohen of Boulder.

www.exceleratelabs.com/details/

Excelerate, in turn, appears to be associated with the Foundry Group, organized by Feld and Cohen in Boulder..

www.foundrygroup.com/portfolio/

So it appears to me that Chicago is already part of this mission to identify, incubate, nurture and grow the sort of high performance businesses being promoted by Start Up America. I suspect many creative juices might get flowing if folks were to watch and then think about the practical benefits of Start Up America.
Don
+++++++++++++++++++++++++++++

Subject: Fwd: Take the time
Date: 2/8/2011 11:24:35 P.M. Central Standard Time
From: DSSA310@aol.com
To: RONALDMAY@aol.com

Ron:

Did you get my recently revised email to you with the URL links?

You also might want to think about including this in one of your May Reports. It would be “news.” You might remind yourself how many people offered to help you think about commercializing your reporting interests. Lots of folks with good and generous ideas.

Don

——————————————————————————–
From: ndsamuelson@sbcglobal.net
To: vics003@sbcglobal.net, ifgoofy2@gmail.com, patml@comcast.net, jackmag1@comcast.net, dssa310@aol.com, maryann.holzl@comcast.net
Sent: 2/8/2011 10:41:42 P.M. Central Standard Time
Subj: Fwd: Take the time

Sent from my iPad

Begin forwarded message:

From: Diana Schaefer
Date: February 8, 2011 12:58:45 PM CST
To: Diana Schaefer
Subject: FW: Take the time

READ THIS VERY SLOWLY… IT’S PRETTY PROFOUND.

Too many people put off something that brings them joy just because they
haven’t thought about it, don’t have it on their schedule, didn’t know it
was coming or are too rigid to depart from their routine.

I got to thinking one day about all those people on the Titanic who passed
up dessert at dinner that fateful night in an effort to cut back. From then
on, I’ve tried to be a little more flexible.

How many women out there will eat at home because their husband didn’t
suggest going out to dinner until after something had been thawed? Does the
word ‘refrigeration’ mean nothing to you?

How often have your kids dropped in to talk and sat in silence while you
watched ‘Jeopardy’ on television?

I cannot count the times I called my sister and said, ‘How about going to
lunch in a half hour?’ She would gas up and stammer, ‘I can’t. I have
clothes on the line. My hair is dirty. I wish I had known yesterday, I had
a late breakfast, It looks like rain’ And my personal favorite: ‘It’s
Monday.’ She died a few years ago. We never did have lunch together.

Because Americans cram so much into their lives, we tend to schedule our
headaches.. We live on a sparse diet of promises we make to ourselves when
all the conditions are perfect!

We’ll go back and visit the grandparents when we get Steve toilet-trained.
We’ll entertain when we replace the living-room carpet. We’ll go on a
second honeymoon when we get two more kids out of college.

Life has a way of accelerating as we get older. The days get shorter, and
the list of promises to ourselves gets longer. One morning, we awaken, and
all we have to show for our lives is a litany of ‘I’m going to,’ ‘I plan
on,’ and ‘Someday, when things are settled down a bit.’

When anyone calls my ‘seize the moment’ friend, she is open to adventure and
available for trips. She keeps an open mind on new ideas. Her enthusiasm
for life is contagious. You talk with her for five minutes, and you’re
ready to trade your bad feet for a pair of Rollerblades and skip an elevator
for a bungee cord.

My lips have not touched ice cream in 10 years. I love ice cream. It’s
just that I might as well apply it directly to my stomach with a spatula and
eliminate the digestive process. The other day, I stopped the car and
bought a triple-decker. If my car had hit an iceberg on the way home, I
would have died happy.

Now..go on and have a nice day. Do something you WANT to…not something on
your SHOULD DO list. If you were going to die soon and had only one phone
call you could make, who would you call and what would you say? ; And why
are you waiting?

Make sure you read this to the end; you will understand why I sent this to
you.

Have you ever watched kids playing on a merry go round or listened to the
rain lapping on the ground? Ever followed a butterfly’s erratic flight or
gazed at the sun into the fading night? Do you run through each day on the
fly? When you ask ‘How are you?’ Do you hear the reply?

When the day is done, do you lie in your bed with the next hundred chores
running through your head? Ever told your child, ‘We’ll do it tomorrow.’
And in your haste, not see his sorrow? Ever lost touch? Let a good
friendship die? Just call to say ‘Hi’?

When you worry and hurry through your day, it is like an unopened
gift….Thrown away… Life is not a race. Take it slower. Hear the music
before the song is over.

To those I have sent this to… I cherish our friendship and appreciate all
you do. We have some history together.

‘Life may not be the party we hoped for… but while we are here we might
as well dance!’

—— End of Forwarded Message
________________________________
Bill Price takes great notes: Midwest Business Brokers and Intermediaries 2011 Annual Conference

Subject: Re: Bill, pl.send those notes in the body of the email w/no attachments to this add
Date: 2/9/2011 8:39:47 A.M. Central Standard Time
From: wpriceiit@yahoo.com
To: RONALDMAY@aol.com

They follow — are probably too long to use all, but see what helps you.

William A. Price
Attorney at Law
www.growthlaw.com
ph/fax 800-630-4780

— On Wed, 2/9/11, RONALDMAY@aol.com wrote:

From: RONALDMAY@aol.com
Subject: Bill, pl.send those notes in the body of the email w/no attachments to this add
To: wpriceiit@yahoo.com
Cc: ronaldmay@aol.com
Date: Wednesday, February 9, 2011, 7:44 AM

Midwest Business Brokers and Intermediaries 2011 Annual Conference Notes

By: William A. Price, wprice@growthlaw.com

Introduction

These notes detail information provided during the January 27, 2011 event. Attendance was approximately 140 people. A list of speakers is available at www.mbbi.org/userfiles/files/MBBI%20Jan2011_Conf%20final.pdf. Panels are identified by time for start, and topic. Notes are the author’s, and any errors of recording are his.

9:00 Best Practices — Deferred Transaction Consideration

Sellers can obtain better security than buyer’s notes. This could include personal guarantees by the buyer, a UCC lien (properly recorded) to secure an interest in the sold assets that could be taken back if the note is not paid, or, for stock sales, a pledge of the buyer’s ownership interest in the newly formed or sold entity to be sure the seller is paid on the note.

Buyer’s lender usually wants a subordination agreement from sellers. This can interfere with note payment to sellers. The bank will demand that it have first priority in any security interests on the assets and real estate. Under subordination agreements, the bank can restrict payments which the buyer can make to the seller under the note to purchase the business until the bank is paid in full. The bank could also cut payments to interest only until the bank is paid. Sellers will want to see if they can negotiate a subordination agreement which allows them to be paid as long as the buyer is meeting its loan commitments.

Subordination agreements can also interfere with enforcement of seller’s rights if things go wrong. Some agreements allow banks to require sellers to take no action against buyers under the notes buyer gave seller to purchase the business, even if sellers are not being paid. An alternative to negotiate for (which can also be sought in court) is a stand-still, which allows the seller to give notice of default, with a time period for buyer to cure the default (180 days, in the speaker’s example), and seller enforcement actions or other remedies allowed after this notice (stand-still) period, if no cure is provided.

Buyers will want to ensure that notes they give sellers are not negotiable (transferable to third parties). Seller financing is not just a “gap filler” to make deals possible. Buyers prefer to have sellers who will have a vested interest in the success of the sold business after closing.

Lack of negotiability also has the advantage of providing a source of set-offs if sellers fail to perform their obligations under purchase agreements. Thus, if the accounting, or inventory counts, or collection of accounts receivable run behind expectations, the buyer can stop paying on the note until buyer claims are resolved. This would not be possible against a third party holder for value, whose right to payments would not, under the Uniform Commercial Code, be subject to contract defenses.

Note that there can be loan covenants in seller notes, as well as bank loans. Sellers can negotiate to have buyers required to provide them access to books and records and regular business reports, or other information. Other remedies can also benefit sellers. Thus, the note could provide that seller’s noncompete obligations terminate if they are not paid. A threat to compete may be enogh to get payments flowing again, even if sellers do not start a competing business. Banks may allow these remedies, even with subordination agreements, since they do not affect the bank’s first position security in transferred assets.

Seller financing was noted as an increasing trend. Part of the reason is that valuations are no longer supporting much goodwill, since sales are often flat or down. Seller financing amounts in Cornerstone deals have been about 17% of consideration, with some as low as 5%, some as high as 20%. Sellers prefer terms of about three years, with a balloon payment at the end of the term. Sellers should negotiate for an interest rate on notes they take back that is at least 1% over the rate for other financing in the deal, so buyers have an incentive to pay them first.

Cornerstone has prepared its sellers for note dealings and other financing terms by bringing in lenders before the deal is advertised. The lenders look at the deal, and make suggestions as to how they would structure a deal. You try to get a deal that could be fully financed by a lender, but if the lenders say no, then the client knows what can be done. You will need to get an experienced transactional attorney to put together the paperwork, who can answer lender’s questions about notes. The lawyer should also know the ways you can protect yourself against risk when you take back a note when selling a business.

In discussions with buyers, advance qualification of the deal through banks helps quantify the discussion of what financing may be needed to get a deal done. Reasonable financing terms can be set up, and the rest is then subject to negotiation. There are very few deals done which are all cash at closing.

Sellers should perform due diligence on buyers. Banks have tightened lending standards. The question for your due diligence is how creditworthy a buyer is. You also need to know if the buyer will be a good fit for the company, and for his or her role in same. The buyer (or buying group) will need to be able to come up with cash or other assets equal to at least 40% of the purchase price. Bank resources can cover most of the rest. Another buyer qualification would be enough collateral outside of the proposed purchase to support repayment of the loans taken to finance the deal. This is not always possible, but it helps guarantee payments to sellers who take back notes for part of the purchase price.

Negotiation of terms for seller’s notes can be done in discussions about the letter of intent. This allows any omissions that come up later to be caught and documented in final note and agreement terms, which would not be as easy at closing.

Seller evaluation of offer of financing: Sellers should significantly discount amounts offered in notes. The price offered in same is always based on an estimate of the present value of future payments, and there should be a further discount on same for the increased collections risk assumed by the seller in taking back a note. Payments which are contingent on future sales or other performance metrics should be particularly subject to significant discounts, when estimating their value.

Earn-outs depend on the purchased company making certain milestones. These are all post-closing, and can stretch over one to three years. They can be paid in a lump sum for the year or in a lump at the end of the earn-out period. Sellers should make these depend on gross sales, not on revenue or income, to avoid accounting disputes and manipulation by the new owners, particularly those who may have entity level overhead from the purchasing group that could significantly reduce net results for new subsidiaries.

One of the speakers asked what buyers or sellers should expect in earn-outs. Another noted that these are much more talked about than done. They can bridge the gap between the purchase price a buyer wants to pay and the one a seller wants to get. The seller may want a higher price, especially if sales are trending up. Buyers may not be willing to pay that price on current financials, but would agree to payments if things come in as expected.

Calculations are difficult in earn-outs, since sellers will want gross shares and buyers net, and there are overhead changes and other revisions that cause arguments. This is one reason why earn-outs are more talked about than done. Sellers always want calculations based on gross sales, buyers on EBITDA. Sellers, if they stick around, want a piece of the action. The main reason for earn-outs, as previously discussed, is to bridge the gap between seller and buyer’s perceptions of purchased entity value.

Cornerstone discussed three of their deals where an earn-out was present:

– In one, 2% of the purchase price was taken back, to be paid if sales remained stable or increased.
– In another, there was a 5% earn-out, dependent on sales in the first year after closing.
– In a third, 41% of the purchase price was an earn-out. The bad economy had hit sales, and the seller wanted a price based on old EBITDA percentages, saying the business was coming back. The buyer said they would pay if this proved to be true. The deal was set up with 20% of the purchase price paid at closing, 41% in the earn-out, and 20% with outside financing. The sellers were satisfied. They just wanted to take some of the cash they had invested in the deal off the table.

The seller in the last case was willing to do a large percentage as earn-out since he was sure what they buyer would be doing with the company after purchase. If a large percentage of value is taken as an earn-out, sellers should negotiate for a portion of EBITDA, with open books.

Cornerstone was asked about broker fees post-closing. The answer was that this is a case by case matter. They prefer to be out of the deal. They have arranged to be paid for 50% of the earn-out at closing, instead of trying to collect later fees.

Protection of sellers going forward was raised. The agreement should have times for buyers to present their calculations of what is owed, with time for sellers to respond. In practice, these matters depend on the relationship between sellers and buyers after closing.

Generally accepted accounting principles (GAAP) after 2009 mean that accountants have to guess what the earn-out will be, discount to present value, and thus calculate a balance sheet for the acquired company as of the time of closing. The effects are counter-intuitive: Earn-outs classified as liability, such as those payable in cash, are re-measured at fair value at every balance sheet date, with any changes in the fair value recognized in profit or loss. This accounting treatment results in volatility in post-acquisition income statements.
Subsequent changes to the contingent consideration also pose a challenge, because their impact on profit and loss is counter-intuitive. If an acquired business performs well and meets or exceeds performance objectives, the liability increases, resulting in additional expense. Conversely, if performance objectives are not met and no settlement occurs, the liability is reversed through profit or loss, which results in a gain.

You should clarify contingent purchase price amounts as far as possible. If the amounts or calculations are complex, there is an increased chance of lawsuits or post closing disputes, which none of the parties want. An example already mentioned: a large acquirer burdened a company they acquired with corporate overheads, leading to post-closing litigation as to what was fair. A calculation of post-closing results based on sales, not profits, is simpler to make.

Escrows are common in closings. These are dollar amounts set aside from payments otherwise to be made at closing, to take care of any set-offs needed for amounts otherwise expected (such as collections of accounts receivable after closing). The escrow usually runs for up to 120 days. Litigation costs and results, accounts receivable not realized, environmental cleanup costs, and other adjustments to working capital can be the subject of escrows. The true-up to actual working capital occurs at the end of the escrow period. In the panelist’s deals, for a $4 million transaction, $1-200,000 of escrows would be normal.

Sellers may calculate that escrows are likely to guarantee representations and warranties, to cover remaining due diligence uncertainties, or unusual matters, such as unreserved accounts receivable from the state of Illinois, which may never be realized. Buyers should seek enough escrows to assure historic EBITDA.

The amount of escrows depends on the situation. 10% would be fairly average. In about 20% of deals, there are no escrows. Troubled deals would be an example — the purchase price is discounted to account for the trouble, instead of a specific amount being set for uncertainties.

Half the time the escrow is not the exclusive remedy. There may be an offset available against payments due seller under a note. This means there is less risk to buyers from the matters for which the escrow was established.

The amount of the escrow could be set in the letter of intent, or made subject to due diligence. In five Cornerstone deals, the amount was 20% in two of the five deals. In another, there was a 5% escrow, another an 11%. The other was an all cash deal, with no escrows, and payment at closing. This last example deal involved the waste industry. The buyer was buying customer routes, and hence cash flow. The deal was set based on actual revenues over three or four months.

Equity rollovers happen in recapitalization transactions. Sellers don’t want to sell all of their business. Sellers may sell an 80% interest, and retain 20%. More often, they sell 100% of their business, then are required to reinvest some of their proceeds (in an equivalent example, 20%) in a successor entity. This is a tax efficient way to do such a deal. Another way is to sell all assets of the original entity to a new LLC, and to purchase 70% of the new entity, with a value estimated as equal to the assets sold, so there is no gain to seller.

Tax savings suggestions to sellers by buyers or new equity investors can endear them to sellers, even if sellers do not choose to take the tax audit risk.

Use of limited liability companies (LLC’s) in equity rollovers allows use of Section 754 elections, or allocations under Section 754 or 704(c).

(WAP notes:

704(c): Internal Revenue Code (IRC) Section 704(c) provides that a partnership must allocate items of income, gain, loss, and deduction attributable to contributed property to take into account any variation between the property’s adjusted tax basis and its fair market value at the time of contribution. The regulations allow the use of any reasonable allocation method that is consistent with the purposes of section 704(c), and describe three allocation methods that are generally considered “reasonable”: the traditional method, the traditional method with curative allocations, and the remedial method. An anti-abuse rule limits allocations that cut overall partnership taxable income.

754 allocations: IRC Section 754 allows filing of an election which results in allocation of transaction gain or loss to partners (per the rules in IRC Section 743, so the transfer either results in a:

“(1) increase the adjusted basis of the partnership property by the excess of the basis to the transferee partner of his interest in the partnership over his proportionate share of the adjusted basis of the partnership property, or
(2) decrease in the the adjusted basis of the partnership property by the excess of the transferee partner’s proportionate share of the adjusted basis of the partnership property over the basis of his interest in the partnership.

Under regulations prescribed by the Secretary, such increase or decrease shall constitute an adjustment to the basis of partnership property with respect to the transferee partner only.”)

Consulting agreements, personal goodwill, noncompetes, and other payments directly to individual sellers, and not to the sold entity, are ways of allocating gain to individuals, instead of to a Subchapter C entity, where entity level tax might be due on sale.

A question was asked on what multiple of EBITDA could be expected as a price. The answer was that it depends on the deal. As earn-out periods become later after closing, the seller’s contributions to profits are less likely to be significant. Earn-outs of over three years, and multiples of more than 3 times EBITDA are rare.

An example of a higher multiple was found where a seller note was offered by buyer, since seller had just landed a new and large client, and the bank would not finance based on the expected new revenues. This and other issues mean most deals are not based on simple EBITDA multiples.

Cornerstone noted that in five of their recent deals, 78% of the purchase prices paid were cash at close, 22% earn outs, seller notes, etc…

9:55 Business Valuation Trends, Small and Middle Market Transactions

Ed Morris, of Clifton Gunderson, spoke. He said copies of his PowerPoint are available on request.
He works on valuations and on transfer pricing issues. Clifton Gunderson is part of HLB International.

Valuations have been significantly reduced by economic developments since September 2009.

The value drivers are different for companies larger than or smaller than $10 million in annual sales.

The group was polled on whether they thought things in the economy were going well, or badly. Most thought they were going badly.

He noted that the recession was officially over in June of 2009, but people still think things are bad. Sentiment on this question, which is tracked monthly, was up only as of a January 2011 poll. The perception that things are not going well affects people’s estimates of the probability of future income streams from a deal, and hence deal valuations.

Unemployment trends support some pessimism. U-6, a measure of those who have given up seeking work plus those unemployed was 16.7% in December 2010, as against 17.3% in December 2009 (which had been the case since June of 2008.) Until that time, since 2003, there had never been a period of more than three months when U-6 was more than 10%.

Many now have a depression mentality. Accountants and attorneys were laid off in this recession. They have been struggling to try to gain income. As unemployment benefit periods have been extended, unemployment rates have stayed high. Some persons may not get serious about seeking work until their unemployment benefits disappear. Larry Sumners held this theory until he joined the Obama administration.

Bank failures are at a record high, with seven having failed so far in 2011, according to the FDIC website. Only three failed in all of 2007. 700 banks are on the FDIC watchlist. 150 could fail this year.
Failures have been high in Illinois, Georgia, Florida, and California. Illinois may be on that list because of the state’s economics, or exposures to construction loans.

Many companies have been struggling because the state of Illinois won’t pay on a timely basis. In one example, a company he valued had $3 million due from the state out of $6 million in accounts receivable, and the bank would no longer finance the $3 million as a probable account receivable.

In valuation, the capital asset pricing model (CAPM) assumes markets are rational, without bubbles. People, however, control markets, and they are not rational. They react based on what they and their friends have experienced. Thus, though the Dow is at 12,000, he is not impressed, since his 401(k) has barely broken even with pre-recession levels. When experienced people have been on unemployment for more than two years, depending on the industry they are in, their qualifications, and what is going on in the economy, they affect other’s perceptions. Your perception of value is what you look at when evaluating risks to future business cash flows. If you are a pessimist, there is plenty to look at. If you want to be an optimist, it is harder to find good things.

70% of the economy consists of consumer goods and services, and consumer sentiment has only risen this month. Perception is as important as a 3-6 times EBITDA calculation in determining value. In purchase transactions now, as many do not get done as are closed.

For small and medium sized businesses, there are two key drivers for value. Deal value is determined by perceived risks and future cash flow. What is selling is an income history over the last 12 months, and not any pro forma estimate of future cash flow increases. Valuation, by the way, is always about the future. You can have the future estimate based on the past, or can discount same or add to same based on differences you expect in the future. Now, only the recent past counts.

Availability of credit also determines what deals are possible, and what valuations can be obtained. Banks often want buyers to bring in 50-60% of the equity for a deal to happen. They may ignore seller notes or equity given to sellers in doing this calculation of amount of new cash required. They will want 50-60% of the mortgage amount.

Valuations and volume of deals are likely to stay flat in 2011 from 2010.

Unless there is strong growth from the recession, there will be no increase in multiples. Multiples will be available only in notes to seller or earn-outs.

Strategic buyer deals are increasing only if these companies have cash sitting there to make deals, and their deals are not dependent on availability of financing from a bank. Most bigger (more than $10 million) deals are strategic.

There are few or no leveraged buyouts unless private equity comes in to help finance the deal. Private equity may put cash in so that they can take the equity out again if things improve.

He used to say that a non-controlling interest in a private company had no value. Now, there is at least one person in California making a market in such interests. So never say never.

Positive factors: Boomers are retiring at 10,000 per day, so they will need to sell their companies.

In accounting firms, there are many succession issues. The founders often have noone on staff that can step in to the rainmaker and management role.

In revenue amounts, buyers will forget a bad 2009 if the company recovered in 2010.

The average multiple is down, and most companies have had low performance. Good businesses, with high and increasing revenues through all recent periods, could get a 5 or 6x multiple of EBITDA.

Industry prospects overall can limit upsides and exits available to owners.

Some sellers just want buyers to take over liabilities.

The Wells Fargo lender commented that he is very busy. If your company has cash flow, and good management, he can do the deal, up to $5 million. An example was a company with no real estate. You could put in 20% (10% from the buyer, 10% from seller taking back a note), he could do 80%.

11:20 Strategies For Buying Distressed Companies

One of the panelists commented that every deal is distressed nowadays.

The panelists included:

Versa Capital, from Philadelphia, which manages $950 million, and works on deals they can control and work with for three to five years. They fix them in the first year, turn matters around in the second, and sell in the third year. Polar Tec, Central Parking, Republic Storage, and an online retailer are current portfolio companies.

AVI: They work with healthy companies with talents, in the $20-100 million in annual sales range. They are agnostic on industry or geography. Companies they have include an aerospace deal, a business service operation, a flexible packaging operation, and a distribution operation. They can buy in an Article 9 sale or negotiate a deal.

PAF buys into distressed companies with $1-20 million in sales. They get secured or mezzanine position. They have a “loan to own” strategy. Theirs is a “survivor” round.

An example was given by the moderator, involving comics stores.

The loan to own buyer would probably buy the company’s debt and sell off the assets, since none of the stores were performing. An Article 9 sale would be used, to have clear title.

The AVI man said they would look at which titles were producing an return on investment, and would look at cash flow, to see if any were profitable. They would probably look for a friendly takeover, without BK. Cash flow can be impeded by same.

The PAF man said they would need to look at lease terms and see if there was any ROI to do other than asset liquidation. There would be a question on return on time needed to deal with more than assets.

The Philadelphia man would look at loan to own. Lenders do almost anything to avoid realizing losses on loans. An example of what happens: the lender’s favorite takes over nonperforming companies, the bank just rolls over the loan, and does what it takes, including reducing interest rates to 1%, to avoid nonperformance.

The PAF man said his very small Chicago fund had done six transactions so far this year. His is a volume business. He makes only one offer, at a small percentage of a loan amount. Banks hide the real value of their loans as they try to fix deals.

The Philadelphia man would need a deal with more than $10 million in EBITDA once fixed to get involved. They look at data, and would see why a company was in distress. They would see if this was operational, cyclical, or resulted from big competitors. The product mix could be a problem. Cost structure elements affecting EBITDA could be an issue. They can make decisions quickly, in one case in as little as two weeks.

The fund works with intermediaries, since these can get sellers to be realistic, and provide accurate financials and other data.

The PAF buyer doesn’t want to depend on unrealistic owners. Purchase of the debt from a bank allows large amounts of pressure to bring sellers to realistic terms. He does take advantage of personal guarantees, which banks are reluctant to do. He has taken houses, as needed. This is leverage, and is part of the lower middle market in business deals.

Options for purchase include:

– An Article 9 sale. There could also be a levy on a pledge of stock. (WAP note: see www.law.cornell.edu/ucc/9/overview.html –this is a UCC proceeding, to realize results from a security interest in an asset.)
– The bank could choose to do a private sale in bankruptcy. The PAF buyer does not prefer these, since there are third party creditor claim risks. There is, however, no chance of losing the deal, and the bank is friendly, so this fits the AVI buyer better.
– An assignment for the benefit of creditors (ABC) is another option. The PAF man has had little luck on 363 or ABC deals. The ABC is similar to “assignment” transactions used in some states. ABC’s are used in Chicago, since there is a set of firms there that is reliable, and structures same, so they can buy for cents on the dollar. They are not acceptable south of Kankakee. The ABC could be better for a going concern business. The bank could require same unless it was to force an Article 9 sale, with enforcement of the personal guarantee, to assure owner cooperation. An ABC can operate with a receiver in place. (WAP: See generally www.answers.com/topic/assignment-for-benefit-of-creditors.)

The PAF fund finds an Article 9 with a cooperative owner easiest. About half of their deals go through Article 9 sales, and half do not. People understand foreclosures, and an Article 9 looks like a foreclosure, with a process ending up in public sale. Assignments have a perception that shenanigans are going on. Article 9 or UCC security interests are in every state, so suppliers can understand.
He is not involved to deal with people, he needs to make problems go away. Article 9 sales do this.

Bankruptcy proceedings, it was noted, eliminate successor liabilities, but can cost $1 million to litigate. The estate ends up paying for all the professionals for the estate, the bank, etc… Private equity sponsors getting into deals have to pay the litigation costs as a cost of admission. The new funder/owner gets a list of assets free and clear of all liens. Contracts for intellectual property rights, for supply, for commodity requirements, and other issues can be accepted or rejected, depending on whether they are still at market. Leases can be renegotiated, accepted, or left behind. A bankruptcy also allows all interested persons a central place to meet, instead of litigation on many claims all over the country. Local laws on going out of business sales can also be avoided. Bankruptcy courts can approve sale procedures. Bankruptcy is powerful medicine if the company’s problems need the trustee’s powers to resolve. It is not a solution for all failing businesses.

The risk in an Article 9 sale is that people may show up and buy the company, so the p/e fund or other that set up arrangements gets their entry fee back, but not the profit they hoped from a takeover of assets.

Chapter 128 sales are another option: this is a state law which produces results like court approved Article 9 sales. A court supervisor is involved at the end of the process. Many Wisconsin transactions have used this. An ABC is not as transparent. Section 128 is an ABC by another name. (WAP note: see legis.wisconsin.gov/statutes/Stat0128.pdf.)

The key in choosing options is that the deal must work. You look at deal structure, price, constituencies, their secured and nonsecured positions, and then decide what procedure will be used.

1:15: Economic Update: Adolfo Laurenti, Deputy Chief Economist, Mesirow Financial

The US has a two speed economy. There are dividing lines on outlook, depending on where you stand in the economy.

The rest of the world recovered faster than the US, which has produced upward pressure on commodity and food prices. Our recovery hit a soft patch in summer of 2010, with worries about European debt. The Fed’s quantitative easing pushed the 10 year treasury bond rate down to 2.4 or 2.5%. Housing starts in 2010 were lower than expected, at 0.59 million new units, below 0.6 million in 2009.
Government action did deep damage to business confidence.

There have been three big changes in the world that have affected the US economy:

Structural changes:

New Workers: India, with 1 billion people, Vietnam, Thailand, the Middle East to the Persian Gulf, and Eastern European skilled workers are competing with US workers in a globalized economy, with their wages at $12-16,000 per year or less, versus ours at $50,000 or more.

IT applied to manufacturing and to other industries has also eliminated the need for many US jobs.

Transportation costs have become irrelevant to the extension of markets, since information products cost nothing to transport, and information has become the No. 1 input for business.

The implications of these structural changes are that there are imbalances in the trade and credit markets. There is also a transformation of manufacturing, services, credit, and government.

He expects GDP to grow at 2-4%, most of the time at the high end of that range, over 20111-2012. The high end will see growth at 3-3.5%, with some quarters near 4%.

There will be volatility on exports, with big changes in exchange rates and inventories.

Real GDP should be up 3.2% for 2011. Consumption should be up 3.4%, with signs showing already of pent up demand. Industrial production should be up 3.9%.

The personal savings rate is likely to be reduced. It will rebuild, but not as fast as last year.

Industrial production will be up, with large orders for machinery and equipment.

Housing starts will be close to flat, at only 0.67 million new units.

Rates for the T-bond are expected to be 3.4%, changing only at the end of 2011.

The divide in the economy is present for consumers and businesses.

For consumers, there is a significant divide by income levels, by education levels, and by asset levels. Big earners face very different prospects than lower earnings groups. A college education means things will turn out well, a lack of same does not.

There are few jobs, especially in the Midwest, available for those without degrees, that pay $50-70,000 per year. This used to be the case, but the story cannot continue. Millions in the rest of the world are taking those jobs. High skilled people there will take $10,000 or so per year, instead of demanding $50,000.
For those with high income and assets, their net worth is not in their homes, and homes have depreciated steadily in value over the last several years.

In business, very large businesses have access to capital. The markets issue bonds, and their balance sheets are in good shape. Small to medium size businesses can only access capital markets through banks. There are headwinds. Banks are reluctant to extend credit.

Markets are good if you are exporting and selling machinery abroad, such as industrial cranes, or are selling things to companies that are selling things abroad. In the US market, companies, especially
retailers, that sell to consumers, are feeling the pinch of the economy.

The unemployment rate is 9.4%, but many other workers are unhappy in their jobs. Many workers are part time, marginal in the workforce. The U-6 unemployment rate is 16 or 17%.

In 1981, 1990, and 2001, we had recessions. There was a payroll hit between four to six quarters after the peak, but two years after, job creation kicked in. Now, there is no recovery.

In 2001, it took 16 quarters to get to the same level of payrolls as at the peak of the expansion. This time, some say we will recover quickly. Mesirow does not forecast this. We estimate that it will take a long time to get out of this hole, with unemployment still at 9.5% by the end of 2011. It could be down to 8.5% by the end of 2012.

Remember that some of this unemployment is not just cyclical, but structural. There is a mismatch of skills in the job market. Openings may be up, but jobs are not being filled. There is a disconnect in the labor market.

Many are unemployed for longer and longer periods. The extension of unemployment benefits lets some search longer for a better match. The laid off Lehman brokers took awhile to take MacDonalds jobs…

The government has apparently raised the floor on what is acceptable structural unemployment. When people can’t sell their houses, it is harder for them to move to new jobs. When they are laid off, none expect to be rehired by the same company, or in the same industry or sector.

In the economy, retail and transportation have been losing sectors. Education and health have been the best for job gains. Utilities had the highest combination of earnings and job gains. Financial services, profesional services, mining, and wholesale all lost some jobs. Leisure, retail stores, and similar jobs are paying only $12-14 per hour. Manufacturing jobs with high pay are gone.

The high end is the source of more consumption. The savings rate was up to 7% last year. It is now 6%. People were scared. In 2011, there may be some additional disposable income for the higher quartiles of income. Bonuses are back for Wall Street, big company employees, and exporters, but not for everyone.

Stock holdings represent 57% of net worth for the top 10% of income earners, 39% for everyone else (mostly in IRA’s). The home represents 19% of net worth for the top 10%, 47% for the middle. Home price drops pinch if your income is at a low level. Stock market indexes have produced no “wealth effect” as they have gone up.

Housing was helped by the tax credit for new homebuyers, but there was no momentum created by this after it lapsed. The question for same has not been low mortgage rates. The question has been qualification for a 20% down payment. The new normal for qualification is the old normal. You need 20% down to qualify, and it takes a long time to get this if you have no savings. Home prices are down for the year. There is no appetite to build new homes. There is an “L” shaped non-recovery for housing. The US should build 1.4 to 1.5 million units per year for equilibrium, but there is no sign of this in expected housing starts. A 20-50% increase in this market would still be depressed from pre-recession levels.

Corporations had an export recovery, which is back to the peak, for export sales and for corporate profits. These companies have access to credit. Bonds are back, but there are few signs of recovery in commercial loans. It will take some time for the flow of credit to pick up. Banks are unwilling to lend because they can either lend or rebuild their capital. They can’t do both at the same time. They have had an overexposure to commercial real estate.

The Fed studies show manufacturing capacity utilization still low, unemployment high, few price increases except for energy and food. The core components of inflation are not up. The core index is down, so rates are close to zero, and this is a good time to buy assets. The Fed could be behind the time in increasing interest rates, and still be rational. Wages and salaries are not up, and there is no wage pressure on inflation.

He predicts that interest rates will go up, unemployment will stay high, and there will be tax hikes.

The role of government in the economy is still controversial. On the fiscal side, spending and expenses need to be in balance. We won’t climb out of our current mess without higher taxes. We will have to pay our debts. Social Security financing is a major remaining question.

He doubts we’ll have a “lost decade”, like Japan. Instead, there will be boom and bust, with below trend growth instead of a flat low. We should have 5% growth on average, not 6-7%, which happened after our last recessions.

On deficits, he found both the bipartisan group and the blue ribbon commission’s proposals timid. There is no appetite in Congress for serious entitlements reform or budget changes. Much could be done to reform the tax code and to cut expenditures — little will be done.

On health care, the “reform” did nothing to cut the rate of increase in spending.

The European budgets suffer from unaffordable social welfare systems, and there will be a structural adjustment, since their economies are not very large or increasing. The Euro will survive, but get weaker than its current 1.36 or 1.33 per dollar. People are now borrowing in the US at low rates, and investing same in the Euro, to profit from the spread.

On oil, OPEC production is up, while production from the US, Norway, and the UK is down. The price could go up further if the recovery in Europe is better than 1.7%. If it goes to 2.2%, oil could be back to $120-130/barrel. The effect on US consumers is to limit demand, not to increase prices overall.
Local and state government fundamentals are better than current ratings suggest. These governments do a bad job of predicting increases in revenue when the economy goes up. Property taxes are not likely to increase, and other favorable developments will eliminate tensions in this market.

Gold prices are a bubble, Euro prices are high, with much volatility. We print enough dollars that the money has to go somewhere. Bubbles are expensive to clean up.

2:15 Financing Your Deal

Tom Meyer from Wells Fargo chaired the panel. He said they are the #1 SBA lender in the US, with $1.65 billion in loans last year. The others on the panel were Craig Brzezinski, of Wintrust Commercial Lending, was the second. Wintrust is a middle market lender that paid off their TARP loan, and have substantial funds available for loans. Steve Hein, of Marquette Capital, said they get involved in mezzanine financing and equity deals. They have closed a fund raised in 2004, and are in the first year of investments from a new fund.

Brzezinski said they do conventional loans for companies with revenues from $10-200 million. Things are better than they were a year ago. We have moved from surviving a crisis to thinking longer term. Companies are starting to make capital investments. They underwrite good management. They
like to see a 10% excess available in cash to finance a revolving like of credit. They can finance 85% of accounts receivable, 65% of inventory values, and 85% on invoice advances. They finance 80% loan to value ratios for owner occupied real estate. Their loan pricing is the 30 day LIBOR plus 200-300 basis points. Swaps are financed for fixed rates at amounts over $1 million. They make multi-year commitments for revolving loans. Cash flow strips are being done for up to 10% of a company’s capital structure, with 3 year terms and cash flow recapture to fund the strips.

A couple of recent deals:

– $35 million manufacturing company, $9.35 million in loan, a “revolver” at 85%, company turns inventory 15 times per year, with a great balance sheet, debt:equity ratio is 1:1, and no personal guarantee was required.

– A $22 million/yr. mfg. coy, 30 years in its niche, obtained a $5 million line of credit at 85% of receivables, with cash flow 3.5 times debt service.

– An acquisition with help from a private equity group. The LOI was for $35 million in sales, with $6 million in EBITA. They had a loan for a purchase price of $24 million, with senior debt of $10 million. There was also a revolving line of credit, $6 million in equipment loans, two years of a cash flow strip. Estimated debt to EBITDA after sale was about 2:1.

The Marquette speaker noted stretch tranches like the “cash flow strip” have come in before mezzanine debt in some recent deals. Manufacturing deals were asset based. In the service economy, there are no more assets, so mezzanine debt comes in early in the capital structure. The investment is based largely on the management team, and their position in their industry.

The SBA lender suggested you pre-qualify, as seller or buyer. Buyer qualification is based on character, management ability, and not, generally, collateral. You need realistic buyers and sellers. You need to get the numbers to the bank, and get an attorney, a CPA, and a business broker who are all credible. He loans under the 7(a) program, for size standards like the 504 loan program now, not the earlier ones that used to apply to 7(a) loans. Loans go to entities with $2.5 million or less in sales and up to to $9 million (WAP note: SBA site says $7 million, but this may be up) maximum net worth, depending on the industry. This limit is for pre-loan size. (WAP note: for SBA detail, see www.sba.gov/content/cdc504-loan-program.) Moneys are loaned out for ten years. (WAP note: some SBA lenders provide longer amortization for real estate.) All loans require personal guarantees, and borrowers need to show they need the loan to do the deal — they don’t qualify for a $2 million SBA loan if they have $2 million in cash on hand. The biggest question on qualification is one of liquidity, and of character. SBA fees will be about 2.5% of the transaction amount. There is no prepayment penalty if the loan is for less than 15 years. For real estate loans, there is a prepayment penalty of 5% if paid in the first year, 3% if paid in the second, and none after three years.

Wells Fargo lends in most of the US.

Marquette does deals in the US, since for their SBIC qualifications, deals can’t have more than 50% of the company employees abroad. US citizens or permanent resident aliens have to be the buyer, for all SBA programs. On their rates, he said that for unsponsored (no p/e) deals, rates are in the low 20s. Sponsored deals get rates in the high teens for their mezzanine debt. These depend on the market rate. They will do unsponsored deals.
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END OF REPORT

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