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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of October 13,
2000, by and among THE ▇▇▇▇▇ COMPANIES, INC., a California corporation
("Buyer"), CROSBY, MEAD, ▇▇▇▇▇▇ & ASSOCIATES, a California corporation
("Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ MANSAKER, BRUNO CALLU, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇ (individually "Shareholder" and together
the "Shareholders").
R E C I T A L S
A. Company is engaged in the business of providing engineering, land
development design, infrastructure design and landscape architecture (the
"Business"). Shareholders own all of the issued and outstanding shares (the
"Shares") of capital stock of Company through their ownership of the common
stock, no par value ("Common Shares").
B. Company's facilities consist of executive and field offices as set
forth on Schedule 3.12(c) attached hereto (the "Facilities").
C. Buyer is engaged in the business of fully integrated
multidisciplined engineering and consulting services firm as more specifically
described in its periodic reports as filed with the Securities and Exchange
Commission. Buyer desires to purchase the Shares from Shareholders and
Shareholders desire to sell the Shares to Buyer, upon the terms and conditions
herein set forth.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
1. PURCHASE AND SALE OF SHARES.
Subject to the terms and conditions of this Agreement, on the Closing
Date (as hereinafter defined) Shareholders shall sell to Buyer and Buyer shall
purchase from Shareholders all the Shares.
2. PURCHASE PRICE - PAYMENT.
2.1 PURCHASE PRICE. The purchase price (the "Purchase Price") payable
for the Shares shall be:
(a) $1,216,000, cash payable on the Closing Date; and
(b) $1,000,000 in the form of shares of Buyer's unregistered
Common Stock ("Buyer Stock") payable as follows:
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(i) on the first anniversary of the Closing Date,
Buyer shall issue to Shareholder $500,000 of Buyer Stock. For
purposes of this Section 2.1(b)(i), each share of the Buyer
Stock shall be valued equal to the average of the closing ask
price of the Buyer's Common Stock on the NASDAQ National
Market System during the twenty consecutive trading days
ending on the tenth trading day after the Closing Date; and
(ii) on October 21, 2002, Buyer shall issue to
Shareholder $500,000 of Buyer Stock. For purposes of this
Section 2.1(b)(ii), each share of the Buyer Stock shall be
valued equal to the average of the last five closing ask
prices of Buyer's Common Stock on the NASDAQ National Market
System for the period ending on and including October 11,
2002. The Buyer Stock will have a $10 per share value. If, as
a result of the calculation set forth in this Section
2.1(b)(ii), the Buyer Stock has a value of less than $10 per
share, Buyer shall issue to the Shareholders such number of
shares of Buyer Stock such that the aggregate value of all
shares of Buyer Stock issued to Shareholders pursuant to this
Section 2.1(b)(ii) is equal to $500,000, and if the Buyer
Stock has a value of greater than $10 per share, Buyer shall
issue to the Shareholders such number of shares of Buyer Stock
such that the aggregate value of all shares of Buyer Stock
issued to Shareholders pursuant to this Section 2.1(b)(ii) is
equal to $500,000.
(c) The Purchase Price shall be adjusted as follows:
(i) The Purchase Price shall be adjusted by adding or
subtracting (as described below) the "Book Value Adjustment"
(defined below).
(ii) The "Book Value Adjustment" shall mean an
adjustment reducing or increasing the Purchase Price in an
amount equal to $1.00 multiplied by subsection (A) minus
subsection (B) below:
(A) on the one hand, the amount obtained by
taking (x) the total assets of the Company, excluding
intangible assets minus (y) the total liabilities of
the Company on the balance sheet of the Company dated
September 30, 2000 (the "Closing Balance Sheet"), all
as calculated in accordance with United States
Generally Accepted Accounting Principles ("GAAP"),
particularly with regard to revenue recognition, and
(B) on the other hand, $750,000;
If the calculation of the value of subsection (c)(ii)(A) minus
(c)(ii)(B) as described above results in a negative amount,
the Book Value Adjustment shall cause a reduction in the
payment of Buyer Stock (as described in Section 2.1(d) below)
and, if required, shall permit Buyer to recover from the
Shareholders, the Purchase Price previously paid, or such
other amounts which may be owing, to the Shareholders
hereunder. If the difference is a positive amount, the Book
Value Adjustment shall be paid in cash (as described in
Section 2.1(d) below) up to a maximum of $50,000 as the
maximum additional Purchase Price cash paid by
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Buyer, regardless of the amount of such positive difference in
excess of $50,000, provided, however, (i) accounts receivable,
and (ii) costs and estimated earnings in excess of ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ in excess of costs and estimated earnings,
adjustments beyond those to the September 30, 2000 financial
statements shall not be subject to such $50,000 limitation. In
the event that Buyer and Shareholders are unable to agree upon
the Closing Balance Sheet within 30 days of receipt of the
Closing Balance Sheet, then Buyer's independent accounting
firm shall select a firm of regionally recognized certified
public accountants to resolve any disputed items on the
Closing Balance Sheet which resolution shall be conclusive
upon all parties. Said firm shall be required to apply "GAAP"
as defined herein. Buyer and Shareholders shall each pay one
half of the expense of such firm of regionally recognized
certified public accountants. The calculation of the Book
Value Adjustment and delivery of the Closing Balance Sheet
shall be completed by Buyer within one hundred eighty (180)
days after the Closing Date.
(d) Any additional payment due from Buyer to Shareholders as a
result of the Book Value Adjustment having a positive value shall be
paid in cash within thirty (30) days of the Book Value Adjustment
calculation subject to the limitation on the amount of such positive
adjustment set forth in Section 2.1(c). Any amount due from
Shareholders as a result of the Book Value Adjustment having a negative
value shall cause a reduction of the aggregate Dollar value of Buyer
Stock to be issued (on an equal Dollar value basis) (i) first, as
payable to Shareholders on the first anniversary of the Closing Date
and, if required thereafter, (ii) as payable to Shareholders on October
21, 2002.
(e) In addition to the Book Value Adjustment, the Purchase
Price shall be subject to a right of set-off by Buyer as described in
Section 8.
2.2 PAYMENT. All cash payments under this Section 2 shall be made in
the form of Buyer's check payable to the order of the recipient. All payments of
the Purchase Price are to be made to the Shareholders for pro rata allocation
among the Shareholders in accordance with their respective holdings of Common
Shares. At Shareholders' election, the payment required by Section 2.1(a) shall
be made by wire transfer pursuant to instructions from Shareholders reasonably
in advance of the Closing Date (as hereinafter defined). Any payments in Buyer
Stock shall be rounded to the nearest whole share (0.5 share being rounded up).
3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.
Shareholders, jointly and severally, make the following representations
and warranties to Buyer, each of which is true and correct on the date hereof,
shall remain true and correct to and including the Closing Date, and shall
survive the Closing of the transactions provided for herein as set forth in
Section 8.5.
3.1 CORPORATE.
(a) ORGANIZATION. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California.
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(b) CORPORATE POWER. Company has all requisite corporate power
and authority to own, operate and lease its properties and to carry on
its business as and where such is now being conducted.
(c) QUALIFICATION. Company is duly licensed or qualified to do
business as a foreign corporation, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased by
it, or the nature of its business, makes such licensing or
qualification necessary. The states in which Company is licensed or
qualified to do business are listed in Schedule 3.1(c).
(d) SUBSIDIARIES. Company does not own any interest in any
corporation, partnership or other entity.
(e) CORPORATE DOCUMENTS, ETC. The certified copies of the
Articles of Incorporation and Bylaws of the Company, including any
amendments thereto, have been delivered by Shareholders to Buyer, and
are true, correct and complete copies of such instruments as presently
in effect. The corporate minute book and stock records of the Company
have been furnished to Buyer for inspection, and are true, correct and
complete and accurately reflect all material corporate action taken by
the Company. The directors and officers of the Company are listed in
Schedule 3.1(e).
(f) CAPITALIZATION OF THE COMPANY. The Company is authorized
to issue 200,000 shares of common stock, consisting of 100,000 shares
of voting common stock, no par value and 100,000 shares of nonvoting
common stock, no par value. No shares of such capital stock are issued
or outstanding except for shares of common stock of the Company which
are owned of record and beneficially by shareholders in the respective
numbers set forth in Schedule 3.1(f). All such shares of capital stock
of the Company are validly issued, fully paid and nonassessable. Except
as set forth on Schedule 3.1(f), there are no (a) securities
convertible into or exchangeable for any of the Company's capital stock
or other securities, (b) options, warrants or other rights to purchase
or subscribe to capital stock or other securities of the Company or
securities which are convertible into or exchangeable for capital stock
or other securities of the Company, or (c) contracts, commitments,
agreements, understandings or arrangements of any kind relating to the
issuance, sale or transfer of any capital stock or other equity
securities of the Company, any such convertible or exchangeable
securities or any such options, warrants or other rights.
3.2 SHAREHOLDERS.
(a) POWER. Each Shareholder has full power, legal right and
authority to enter into, execute and deliver this Agreement and the
other agreements, instruments and documents contemplated hereby (such
other documents sometimes referred to herein as "Ancillary
Instruments"), and to carry out the transactions contemplated hereby.
(b) VALIDITY. This Agreement has been duly and validly
executed and delivered by each Shareholder and is, and when executed
and delivered each Ancillary Instrument will be, the legal, valid and
binding obligation of such Shareholder,
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enforceable in accordance with its terms, except as such may be limited
by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
(c) TITLE. Each Shareholder has, and at Closing Buyer will
receive, good and marketable title to the Shares to be sold by such
Shareholder hereunder, free and clear of all liens, security interests,
pledges, assessments, levies, restrictions, options, voting trusts or
agreements, proxies, encumbrances, marital or community property
interests or other claims or charges of any nature whatsoever.
3.3 NO VIOLATION. Except as set forth on Schedule 3.3, neither the
execution and delivery of this Agreement or the Ancillary Instruments nor the
consummation by Company and Shareholders of the transactions contemplated hereby
and thereby (a) will violate any statute or law or any rule, regulation, order,
writ, injunction or decree of any court or governmental authority, (b) will
require any authorization, consent, approval, exemption or other action by or
notice to any court, administrative or governmental agency, instrumentality,
commission, authority, board or body (including, without limitation, under any
"plant-closing" or similar law), or (c) subject to obtaining the consents
referred to in Schedule 3.3, will violate or conflict with, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or accelerate
the performance required by, or result in the creation of any Lien (as defined
in Section 3.12) upon any of the assets of Company (or the Shares) under, any
term or provision of the Articles of Incorporation or Bylaws of Company or of
any contract, commitment, understanding, arrangement, agreement or restriction
of any kind or character to which Company or any Shareholder is a party or by
which Company or any Shareholder or any of its or their assets or properties may
be bound or affected.
3.4 FINANCIAL STATEMENTS. Included as Schedule 3.4 are true and
complete copies of (i) the financial statements of Company identified on
Schedule 3.4, (ii) a balance sheet of Company as of July 31, 2000, and the
related statements of income for the ten (10) months then ended (if applicable,
including the notes and schedules contained therein or annexed thereto if
applicable) (the "Recent GAAP Financial Statements"), and, (iii) a balance sheet
of Company as of September 30, 1999, and related statements of income for the
year then ended (if applicable, including the notes contained therein or annexed
thereto if applicable) (the "GAAP Financial Statements"). The Recent GAAP
Financial Statements have been prepared (or restated) in conformity with GAAP
(except for notes and schedules that might ordinarily be required by GAAP).
Except as set forth on Schedule 3.4, the Recent GAAP Financial Statements and
the GAAP Financial Statements have been prepared in accordance with the books
and records of Company, and fairly present, the assets, liabilities and
financial position, the results of operations and cash flows of the Company in
accordance with GAAP as of the date indicated and for the periods indicated. All
of such financial statements (if applicable, including all notes and schedules
contained therein or annexed thereto if applicable) are true, complete and
accurate. The Recent GAAP Financial Statements, and the GAAP Financial
Statements shall be prepared by Company on an accrual basis and shall
incorporate SFAS #109 (Accounting for Income Taxes) as if Company were an
accrual basis taxpayer, SOP 81-1 (Accounting for Performance of Construction
Type and Certain Production - Type Contracts) and all other appropriate
accounting pronouncements and standards (all such GAAP Financial Statements
shall have been produced at Company's expense).
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3.5 TAX MATTERS.
(a) PROVISION FOR TAXES. The provision made for taxes on the
Recent GAAP Financial Statements is sufficient for the current and
deferred payment of all federal, state, foreign, county, local and
other income, ad valorem, excise, profits, franchise, occupation,
property, payroll, sales, use, gross receipts and other taxes (and any
interest and penalties) and assessments, whether or not disputed, at
the date of the Recent GAAP Financial Statements and for all years and
periods prior thereto. Since the date of the Recent GAAP Financial
Statements, Company has not incurred any taxes other than taxes
incurred in the ordinary course of business consistent in type and
amount with past practices of Company.
(b) TAX RETURNS FILED. All federal, state, foreign, county,
local and other tax returns required to be filed by or on behalf of
Company have been timely filed and when filed were true and correct in
all material respects, and the taxes shown as due thereon were paid or
adequately accrued. True and complete copies of all tax returns or
reports filed by Company for each of its three (3) most recent fiscal
years have been delivered to Buyer. Company has duly withheld and paid
all taxes which it is required to withhold and pay relating to salaries
and other compensation heretofore paid to the employees of Company.
(c) TAX AUDITS. The federal and state income tax returns of
Company have been audited by the Internal Revenue Service and
appropriate state taxing authorities for the periods and to the extent
set forth in Schedule 3.5(c), and Company has not received from the
Internal Revenue Service or from the tax authorities of any state,
county, local or other jurisdiction any notice of underpayment of taxes
or other deficiency which has not been paid nor any objection to any
return or report filed by Company. There are outstanding no agreements
or waivers extending the statutory period of limitations applicable to
any tax return or report.
(d) CONSOLIDATED GROUP. Company is not and has never been a
member of an affiliated group of corporations that filed a consolidated
tax return.
(e) OTHER. Within the last five (5) years, Company has not (i)
filed any consent or agreement under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) applied for any tax
ruling, (iii) entered into a closing agreement with any taxing
authority, (iv) filed an election under Section 338(g) or Section
338(h)(10) of the Code (nor has a deemed election under Section 338(e)
of the Code occurred), (v) made any payments, or been a party to an
agreement (including this Agreement) that under any circumstances could
obligate it to make payments that will not be deductible because of
Section 28OG of the Code, or (vi) been a party to any tax allocation or
tax sharing agreement.
3.6 ACCOUNTS RECEIVABLE AND COSTS IN EXCESS OF ▇▇▇▇▇▇▇▇. Except as
disclosed in Schedule 3.6-1, all accounts receivable of Company reflected on the
Closing Balance Sheet ("Closing Receivables"), represent arm's length sales
actually made in the ordinary course of business; are collectible (net of the
reserve shown on the Closing Balance Sheet for doubtful
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accounts ("Closing Reserve")) in the ordinary course of business without the
necessity of commencing legal proceedings; are subject to no counterclaim or
set-off; and are not in dispute. Schedule 3.6-1 contains an aged schedule of
accounts receivable included in the Closing Balance Sheet. The entire amount
shown on the Closing Balance Sheet as "Costs in Excess of ▇▇▇▇▇▇▇▇" represents
costs incurred by the Company which is, or will become billable, and when
billed, will be collectible in the ordinary course of business without the
necessity of commencing legal proceedings; is subject to no counterclaim or
set-off; and is not in dispute. The amount of any Costs in Excess of ▇▇▇▇▇▇▇▇ as
of the Closing Date as set forth on Schedule 3.6-2 which remain uncollected as
of the first anniversary of the Closing Date shall be set-off against the
Purchase Price. The amount of Closing Receivables which exceed the Closing
Reserve, as of the first anniversary of the Closing Date, shall be conclusively
deemed to be uncollectible and shall provide Buyer a right of set-off in such
amount against the Purchase Price. The amount of Closing Reserve which exceeds
the Closing Receivables as of the first anniversary of the Closing Date, shall
be paid to the Shareholders in cash within thirty (30) days after the first
anniversary of the Closing Date.
3.7 WORK-IN-PROCESS. Except as disclosed in Schedule 3.7 or as set
forth in this Section 3.7, (i) all work-in-process and contracts underway
("Work-In-Process") constitute work performed pursuant to fully executed written
contracts or sales orders taken in the ordinary course of business, from regular
customers of Company with no recent history of credit problems with respect to
Company; (ii) neither Company nor any such customer is in material breach of the
terms of any obligation to the other, and no valid grounds exist for any set-off
of amounts billable to such customers on the completion of orders to which
Work-In-Process relates; (iii) all Work-In-Process is of a quality ordinarily
produced in accordance with the requirements of the orders to which such
Work-In-Process is identified, and will require no rework with respect to
services performed prior to Closing; (iv) all Work-In-Process is being conducted
pursuant to fully executed written contracts, orders and change orders issued
within the terms of the relationship pursuant to which such Work-In-Process is
being conducted; and (v) all Work-In-Process set forth on Schedule 3.7 (which as
of the date hereof reflects Work-In-Process as of the date of the Recent GAAP
Financials, shall be updated to include the schedules supporting the Closing
Balance Sheet) could be completed in compliance with the contracts to which each
such Work-In-Process relates if managed consistently with the past practices of
the Company (and in compliance with industry standards and good practices)
without adversely effecting, in the aggregate when complete, the profitability
of the Company. With respect to any oral agreements identified on Schedule 3.7
("Oral Agreements"): (i) all Work-In-Process pursuant to such Oral Agreements
constitute work performed pursuant thereto or oral sales orders taken in the
ordinary course of business, from regular customers of Company with no recent
history of credit problems with respect to Company; (ii) neither Company nor any
such customer is in material breach of the terms of any obligation to the other,
and no valid grounds exist for any set-off of amounts billable to such customers
on the completion of orders to which Work-In-Process relates; (iii) all
Work-In-Process is of a quality ordinarily produced in accordance with the
requirements of the orders to which such Work-In-Process is identified, and will
require no rework with respect to services performed prior to Closing; (iv) all
Work-In-Process is being conducted fully in accordance with and pursuant to such
Oral Agreements, oral or written orders and oral or written change orders issued
within the terms of the relationship pursuant to which such Work-In-Process is
being conducted; and (v) all Work-In-Process pursuant to Oral Agreements set
forth on Schedule 3.7 (which as of the date hereof reflects Work-In-Process as
of the
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date of the Recent GAAP Financials, shall be updated to include the schedules
supporting the Closing Balance Sheet) could be completed in compliance with the
Oral Agreements to which each such Work-In-Process relates if managed
consistently with the past practices of the Company (and in compliance with
industry standards and good practices) without adversely effecting, in the
aggregate when complete, the profitability of the Company.
3.8 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set forth
in Schedule 3.8, since the date of the Recent GAAP Financial Statements there
has not been:
(a) NO ADVERSE CHANGE. Any adverse change in the financial
condition, assets, liabilities, business, prospects or operations of
Company;
(b) NO DAMAGE. Any loss, damage or destruction, whether
covered by insurance or not, affecting Company's business or
properties;
(c) NO INCREASE IN COMPENSATION. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other employee
benefit granted, made or accrued;
(d) NO LABOR DISPUTES OR LOSS OF KEY EMPLOYEES. Any labor
dispute, disturbance or organizing activity, other than routine
individual grievances which are not material to the business, financial
condition or results of operations of Company or any loss of any
employee deemed "key" or "material" to the operation of the Company;
(e) NO COMMITMENTS. Any commitment or transaction by Company
(including, without limitation, any borrowing or capital expenditure)
other than in the ordinary course of business consistent with past
practice;
(f) NO DIVIDENDS. Any declaration, setting aside, or payment
of any dividend or any other distribution in respect of Company's
capital stock; any redemption, purchase or other acquisition by Company
of any capital stock of Company, or any security relating thereto; or
any other payment to any shareholder of Company as such a shareholder;
(g) NO DISPOSITION OF PROPERTY. Any sale, lease or other
transfer or disposition of any properties or assets of Company, except
for the sale of inventory items in the ordinary course of business;
(h) NO INDEBTEDNESS. Any indebtedness for borrowed money
incurred, assumed or guaranteed by Company;
(i) NO LIENS. Any mortgage, pledge, lien or encumbrance made
on any of the properties or assets of Company;
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(j) NO AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by Company of any contract, or any waiver of material
rights thereunder, other than in the ordinary course of business;
(k) LOANS AND ADVANCES. Any loan or advance (other than
advances to employees in the ordinary course of business for travel and
entertainment in accordance with past practice) to or from any person
including, but not limited to, any Affiliate (for purposes of this
Agreement, the term "Affiliate" shall mean and include all
Shareholders, directors and officers of Company; the spouse of any such
person; any person who would be the heir or descendant of any such
person if he or she were not living; and any entity in which any of the
foregoing has a direct or indirect interest, except through ownership
of less than 5% of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in
the national over-the-counter market);
(l) CREDIT. Any grant of credit to any customer or distributor
on terms or in amounts more favorable than those which have been
extended to such customer or distributor in the past, any other change
in the terms of any credit heretofore extended, or any other change of
Company's policies or practices with respect to the granting of credit;
or
(m) NO UNUSUAL EVENTS. Any other event or condition not in the
ordinary course of business of Company that is likely to have a
material adverse impact on the financial condition of the Company taken
as a whole.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
specifically disclosed in the Recent GAAP Financial Statements, or in Schedule
3.9, the Shareholders have no actual knowledge that the Company has any
liabilities, commitments or obligations (secured or unsecured, and whether
accrued, absolute, contingent, direct, indirect or otherwise), other than
commercial liabilities and obligations incurred since the date of the Recent
GAAP Financial Statements in the ordinary course of business and consistent with
past practice and none of which has or will have a material adverse effect on
the business, financial condition or results of operations of Company. Except as
and to the extent described in the Recent GAAP Financial Statements or in
Schedule 3.9, neither Company nor any Shareholder has actual knowledge of any
basis for the assertion against Company of any liability or of any
circumstances, conditions, happenings, events or arrangements, contractual or
otherwise, which may give rise to liabilities, except commercial liabilities and
obligations incurred in the ordinary course of Company's business and consistent
with past practice.
3.10 NO LITIGATION. Except as set forth in Schedule 3.10 there is no
action, suit, arbitration proceeding, investigation or inquiry pending or to the
best knowledge of Company, threatened against Company, its directors (in such
capacity), its business or any of its assets, nor is there any basis (past or
present) for any such proceedings, investigations or inquiries. Schedule 3.10
also identifies all such actions, suits, proceedings, investigations and
inquiries to which company or any of its directors have been parties within the
last three (3) years. Except as set forth in Schedule 3.10, neither Company nor
its business or assets is subject to any judgment, order, writ or injunction of
any court, arbitrator or federal, state, foreign, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
With respect
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to that action identified on Schedule 3.10 as ▇▇▇▇▇▇ Golf Improvement Center,
LLC ▇. ▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ and Associates, Case Number ▇▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇
Action"): (i) the ▇▇▇▇▇▇ Action has been fully and finally settled, and a
dismissal with prejudice of the entire action will be filed by October 21, 2000;
(ii) any and all monies to be paid pursuant to the settlement and/or the ▇▇▇▇▇▇
Action (including all attorneys' fees, costs and expenses) have and will be
funded entirely by the Company's insurer (except for the Company's insurance
deductible which has been paid in full as of the Closing Date) who had already
accepted defense and indemnity obligations with respect to the ▇▇▇▇▇▇ Action;
and (iii) there are no other actual or potential claims or liabilities which
have or shall accrue in connection with the ▇▇▇▇▇▇ Action, including its
settlement and/or the facts and circumstances which gave rise to the ▇▇▇▇▇▇
Action.
3.11 COMPLIANCE WITH LAWS.
(a) COMPLIANCE. Except as set forth on Schedule 3.11, the
Shareholders have no actual knowledge that the Company (including each
and all of its operations, practices, properties and assets) is not in
compliance with all applicable federal, state, local and foreign laws,
ordinances, orders, rules and regulations (collectively, "Laws"),
including without limitation, those applicable to discrimination in
employment, sexual harassment, occupational safety and health, trade
practices, competition and pricing, product warranties, zoning,
building and sanitation, employment, retirement and labor relations,
product advertising and laws relating to pollution or protection of the
environment, including Laws relating to emissions, discharges,
generation, storage, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes into the environment. Company has
not received notice of any violation or alleged violation of, and is
subject to no liability (whether accrued, absolute, contingent, direct
or indirect) for past or continuing violation of, any Laws. The
Shareholders have no actual knowledge of any reports and returns (i)
required to be filed by Company with any governmental authority not
having been filed, and (ii) being other than accurate and complete when
filed.
(b) LICENSES AND PERMITS. Company has all licenses, permits,
approvals, authorizations and consents of all governmental and
regulatory authorities and all certification organizations required for
the conduct of the business (as presently conducted and as proposed to
be conducted) and operation of the Facilities. All such licenses,
permits, approvals, authorizations and consents are described in
Schedule 3.11(b), are in full force and effect and will not be affected
or made subject to loss, limitation or any obligation to reapply as a
result of the transactions contemplated hereby. Except as set forth in
Schedule 3.11(b), Company (including its operations, properties and
assets) is and has been in compliance with all such permits and
licenses, approvals, authorizations and consents.
3.12 TITLE TO AND CONDITION OF PROPERTIES.
(a) MARKETABLE TITLE. Except as set forth on Schedule 3.12(a),
Company has good and marketable title to all of Company's assets,
business and properties necessary or useful in conducting the Business,
including, without limitation, all such properties (tangible and
intangible) reflected in the Recent GAAP Financial Statements and all
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assets which are fully depreciated or used under license, including but
not limited to, software, databases, reference materials and other
intellectual property, in all cases free and clear of all mortgages,
liens, (statutory or otherwise) security interests, claims, pledges,
licenses, equities, options, conditional sales contracts, assessments,
levies, easements, covenants, reservations, restrictions,
rights-of-way, exceptions, limitations, charges or encumbrances of any
nature whatsoever (collectively, "Liens") except those described in
Schedule 3.12(a). None of Company's assets, business or properties are
subject to any restrictions with respect to the transferability
thereof; and the Company's title thereto will not be affected in any
way by the transactions contemplated hereby.
(b) CONDITION. All property and assets owned or utilized by
Company are in good operating condition and repair, free from any
defects (except such minor defects and ordinary wear and tear as do not
interfere with the use thereof in the conduct of the normal operations
of Company), have been maintained consistent with the standards
generally followed in the industry and are sufficient to carry on the
business of Company as conducted during the preceding twelve (12)
months.
(c) REAL PROPERTY. Schedule 3.12(c) sets forth all real
property owned, used or occupied by Company (the "Real Property"),
including a description of all land, and all encumbrances, easements or
rights of way of record (or, if not of record, of which Company has
notice or knowledge) granted on or appurtenant to or otherwise
affecting such Real Property, the zoning classification thereof, and
all plants, buildings or other structures located thereon. Schedule
3.12(c) also sets forth, with respect to each parcel of Real Property
which is leased, the material terms of such lease. All buildings,
plants and other structures owned or otherwise utilized by Company are
in good condition and repair and have no structural defects or defects
affecting the plumbing, electrical, sewerage, or heating, ventilating
or air conditioning systems. There are now in full force and effect
duly issued certificates of occupancy permitting the Real Property and
improvements located thereon to be legally used and occupied as the
same are now constituted. Shareholders have no actual knowledge of any
fact or condition exists which would prohibit or adversely affect the
ordinary rights of use by the Company of the Real Property. Neither
Company nor any Shareholder has notice or knowledge of any (i) planned
or proposed increase in assessed valuations of any Real Property, (ii)
governmental agency or court order requiring repair, alteration, or
correction of any existing condition affecting any Real Property or the
systems or improvements thereat, (iii) condition or defect which could
give rise to an order of the sort referred to in "(ii)" above, (iv)
underground storage tanks, or any structural, mechanical, or other
defects of material significance affecting any Real Property or the
systems or improvements thereat (including, but not limited to,
inadequacy for normal use of mechanical systems or disposal or water
systems at or serving the Real Property), or (v) work that has been
done or labor or materials that has or have been furnished to any Real
Property during the period of six (6) months immediately preceding the
date of this Agreement for which liens could be filed against any of
the Real Property.
(d) NO CONDEMNATION OR EXPROPRIATION. Neither the whole nor
any portion of the property or any other assets of Company is subject
to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public
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authority with or without payment of compensation therefor, nor to the
best of Company's and Shareholders' knowledge has any such
condemnation, expropriation or taking been proposed.
3.13 INSURANCE. Set forth in Schedule 3.13 is a complete and accurate
list and description of all policies of fire, liability, errors and omissions,
workers compensation, health and other forms of insurance presently in effect
with respect to the business and properties of Company, true and correct copies
of which have heretofore been delivered to Buyer. Schedule 3.13 includes,
without limitation, the carrier, the description of coverage, the limits of
coverage, retention or deductible amounts, amount of annual premiums, date of
expiration and the date through which premiums have been paid with respect to
each such policy, and any pending claims in excess of $25,000. All such policies
are valid, outstanding and enforceable policies and provide insurance coverage
for the properties, assets and operations of Company, of the kinds, in the
amounts and against the risks customarily maintained by organizations similarly
situated; and no such policy (nor any previous policy) provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. Schedule 3.13
indicates each policy as to which (a) the coverage limit has been reached or (b)
the total incurred losses to date equal 50% or more of the coverage limit. No
notice of cancellation or termination has been received with respect to any such
policy, and neither Company nor any Shareholder has knowledge of any act or
omission of Company which could result in cancellation of any such policy prior
to its scheduled expiration date. Company has not been refused any insurance
with respect to any aspect of the operations of the business nor has its
coverage been limited by any insurance carrier (other than the initial policy
limit) to which it has applied for insurance or with which it has carried
insurance during the last three (3) years. Company has duly and timely made all
claims it has been entitled to make under each policy of insurance. At all times
during the last three (3) years, (a) all errors and omissions policies
maintained by or for the benefit of Company have been "claims made" policies and
not "occurrence" policies, and (b) all general liability policies maintained by
or for the benefit of the Company have been "occurrence" policies. There is no
claim by Company pending under any such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies, and neither
Company nor any of the Shareholders knows of any basis for denial of any claim
under any such policy. Company has not received any written notice from or on
behalf of any insurance carrier issuing any such policy that insurance rates
therefor will hereafter be substantially increased (except to the extent that
insurance rates may be increased for all similarly situated risks) or that there
will hereafter be a cancellation or an increase in a deductible (or an increase
in premiums in order to maintain an existing deductible) or nonrenewal of any
such policy. Such policies are sufficient in all material respects for
compliance by Company with all requirements of law and with the requirements of
all material contracts to which Company is a party.
3.14 CONTRACTS AND COMMITMENTS.
(a) REAL PROPERTY LEASES. Except as set forth in Schedule
3.12(c), Company has no leases of real property.
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(b) PERSONAL PROPERTY LEASES. Except as set forth in Schedule
3.14(b), Company has no leases of personal property involving
consideration or other expenditure in excess of $5,000 or involving
performance over a period of more than twelve (12) months.
(c) PURCHASE COMMITMENTS. Except as set forth in Schedule
3.14(c), Company has no purchase commitments for inventory, equipment
items or supplies that, together with amounts on hand, constitute in
excess of two (2) months normal usage.
(d) SALES COMMITMENTS. Except as set forth on Schedule
3.14(d), Company has no sales contracts or commitments to customers or
distributors which aggregate in excess of $25,000 to any one customer
or distributor (or group of affiliated customers or distributors).
Company has no sales contracts or commitments except those made in the
ordinary course of business, at arm's length, and no such contracts or
commitments are for a sales price which would result in a loss to the
Company.
(e) CONTRACTS WITH AFFILIATES AND CERTAIN OTHERS. Except as
set forth in Schedule 3.14(e), Company has no agreement, understanding,
contract or commitment (written or oral) with any Affiliate or any
employee, agent, consultant, distributor, dealer or franchisee that is
not cancelable by Company on notice of not longer than thirty (30) days
without liability, penalty or premium of any nature or kind whatsoever.
(f) POWERS OF ATTORNEY. The Company has not given a power of
attorney, which is currently in effect, to any person, firm or
corporation for any purpose whatsoever.
(g) COLLECTIVE BARGAINING AGREEMENTS. Company is not a party
to or in negotiations concerning any collective bargaining agreements
with any unions, guilds, shop committees or other collective bargaining
groups.
(h) LOAN AGREEMENTS. Except as set forth in Schedule 3.14(h),
Company is not obligated under any loan agreement, promissory note,
letter of credit, or other evidence of indebtedness as a signatory,
guarantor or otherwise.
(i) GUARANTEES. Except as disclosed on Schedule 3.14(i),
Company has not guaranteed the payment or performance of any person,
firm or corporation, agreed to indemnify any person or act as a surety,
or otherwise agreed to be contingently or secondarily liable for the
obligations of any person.
(j) CONTRACTS SUBJECT TO RENEGOTIATION. Company is not a party
to any contract with any governmental body which is subject to
renegotiation.
(k) BURDENSOME OR RESTRICTIVE AGREEMENTS. Company is not a
party to nor is it bound by any agreement, deed, lease or other
instrument which is so burdensome as to materially affect or impair the
operation of Company or result in a material loss to the Company.
Without limiting the generality of the foregoing, Company is not a
party to nor is it bound by any agreement requiring Company to assign
any interest in any trade secret or proprietary information, or
prohibiting or restricting Company from competing
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in any business or geographical area or soliciting customers or
otherwise restricting it from carrying on its business anywhere in the
world.
(l) OTHER MATERIAL CONTRACTS. Company has no lease, contract
or commitment of any nature involving consideration or other
expenditure in excess of $25,000, or involving performance over a
period of more than twelve (12) months, or which is otherwise
individually material to the operations of Company, except as
explicitly described in Schedule 3.14(1) or in any other Schedule.
(m) NO DEFAULT. Company is not in default under any lease,
contract or commitment, nor has any event or omission occurred which
through the passage of time or the giving of notice, or both, would
constitute a default thereunder or cause the acceleration of any of
Company's obligations or result in the creation of any Lien on any of
the assets owned, used or occupied by Company. No third party is in
default under any lease, contract or commitment to which Company is a
party, nor has any event or omission occurred which, through the
passage of time or the giving of notice, or both, would constitute a
default thereunder or give rise to an automatic termination, or the
right of discretionary termination, thereof.
3.15 LABOR MATTERS. Within the last five (5) years Company has not
experienced any labor disputes, union organization attempts or any work stoppage
due to labor disagreements in connection with its business. Except to the extent
set forth in Schedule 3.15, (a) Company is in compliance with all applicable
laws respecting employment and employment practices, sexual harassment, terms
and conditions of employment and wages and hours, and is not engaged in any
unfair labor practice; (b) there is no unfair labor practice charge or complaint
against Company pending or threatened; (c) there is no labor strike, dispute,
request for representation, slowdown or stoppage actually pending or threatened
against or affecting Company nor any secondary boycott with respect to products
of Company; (d) no question concerning representation has been raised or is
threatened respecting the employees of Company; (e) no grievance which might
have a material adverse effect on Company, nor any arbitration proceeding
arising out of or under collective bargaining agreements, is pending and no such
claim therefor exists; and (f) there are no administrative charges or court
complaints against Company concerning alleged employment discrimination or other
employment related matters pending or threatened before the U.S. Equal
Employment Opportunity commission or any state or federal court or agency.
3.16 EMPLOYEE BENEFIT PLANS.
(a) DISCLOSURE. Schedule 3.16(a) sets forth all pension,
thrift, savings, profit sharing, retirement, incentive bonus or other
bonus, medical, dental, life, accident insurance, benefit, employee
welfare, disability, group insurance, stock purchase, stock option,
stock appreciation, stock bonus, executive or deferred compensation,
hospitalization and other similar fringe or employee benefit plans,
programs and arrangements, and any employment or consulting contracts,
"golden parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs,
arrangements and policies, including, without limitation, all "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee
manuals, and all written or binding
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oral statements of policies, practices or understandings relating to
employment, which are provided to, for the benefit of, or relate to,
any persons ("Company Employees") employed by Company. The items
described in the foregoing sentence are hereinafter sometimes referred
to collectively as "Employee Plans/Agreements," and each individually
as an "Employee Plan/Agreement." True and correct copies of all the
Employee Plans/Agreements, including all amendments thereto, have
heretofore been provided to Buyer. Each of the Employee
Plans/Agreements is identified on Schedule 3.16(a), to the extent
applicable, as one or more of the following: an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), a "defined benefit
plan" (as defined in Section 414 of the Code), an "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and/or as a plan
intended to be qualified under Section 401 of the Code. No Employee
Plan/Agreement is a "multiemployer plan" (as defined in Section 4001 of
ERISA), and Company has never contributed nor been obligated to
contribute to any such multiemployer plan.
(b) TERMINATIONS, PROCEEDINGS, PENALTIES, ETC. With respect to
each employee benefit plan (including, without limitation, the Employee
Plans/Agreements) that is subject to the provisions of Title IV of
ERISA and with respect to which the Company or any of its assets may,
directly or indirectly, be subject to any liability, contingent or
otherwise, or the imposition of any lien (whether by reason of the
complete or partial termination of any such plan, the funded status of
any such plan, any "complete withdrawal" (as defined in Section 4203 of
ERISA) or "partial withdrawal" (as defined in Section 4205 of ERISA) by
any person from any such plan, or otherwise):
(i) no such plan has been terminated so as to
subject, directly or indirectly, any assets of Company to any
liability, contingent or otherwise, or the imposition of any
lien under Title IV of ERISA;
(ii) no proceeding has been initiated or threatened
by any person (including the Pension Benefit Guaranty
Corporation ("PBGC") to terminate any such plan;
(iii) no condition or event currently exists or
currently is expected to occur that could subject, directly or
indirectly, any assets of Company to any liability, contingent
or otherwise, or the imposition of any lien under Title IV of
ERISA, whether to the PBGC or to any other person or otherwise
on account of the termination of any such plan;
(iv) if any such plan were to be terminated as of or
prior to the Closing Date, no assets of Company would be
subject, directly or indirectly, to any liability, contingent
or otherwise, or the imposition of any lien under Title IV of
ERISA;
(v) no "reportable event" (as defined in Section 4043
of ERISA) has occurred with respect to any such plan;
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(vi) no such plan which is subject to Section 302 of
ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code, respectively), whether or not waived;
and
(vii) no such plan is a multiemployer plan or a plan
described in Section 4064 of ERISA.
(c) PROHIBITED TRANSACTIONS, ETC. There have been no
"prohibited transactions" within the meaning of Section 406 or 407 of
ERISA or Section 4975 of the Code for which a statutory or
administrative exemption does not exist with respect to any Employee
Plan/Agreement, and no event or omission has occurred in connection
with which the Company or any of its assets or any Employee
Plan/Agreement, directly or indirectly, could be subject to any
liability under ERISA, the Code or any other law, regulation or
governmental order applicable to any Employee Plan/Agreement, or under
any agreement, instrument, statute, rule of law or regulation pursuant
to or under which Company has agreed to indemnify or is required to
indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirements of, any such statute,
regulation or order.
(d) FULL FUNDING. The funds available under each Employee
Plan/Agreement which is intended to be a funded plan exceed the amounts
required to be paid, or which would be required to be paid if such
Employee Plan/Agreement were terminated, on account of rights vested or
accrued as of the Closing Date (using the actuarial methods and
assumptions then used by Company's actuaries in connection with the
funding of such Employee Plan/Agreement).
(e) CONTROLLED GROUP; AFFILIATED SERVICE GROUP; LEASED
EMPLOYEES. Company is not and never has been a member of a controlled
group of corporations as defined in Section 414(b) of the Code or in
common control with any unincorporated trade or business as determined
under Section 414(c) of the Code. Company is not and never has been a
member of an "affiliated service group" within the meaning of Section
414(m) of the Code. There are not and never have been any leased
employees within the meaning of Section 414(n) of the Code who perform
services for Company, and no individuals are expected to become leased
employees with the passage of time.
(f) PAYMENTS AND COMPLIANCE. With respect to each Employee
Plan/Agreement, (i) all payments due from Company to date have been
made and all amounts properly accrued to date as liabilities of Company
which have not been paid have been properly recorded on the books of
Company and are reflected in the Recent GAAP Financial Statements; (ii)
Company has complied with, and each such Employee Plan/Agreement
conforms in form and operation to, all applicable laws and regulations,
including but not limited to ERISA and the Code, in all respects and
all reports and information relating to such Employee Plan/Agreement
required to be filed with any governmental entity have been timely
filed; (iii) all reports and information relating to each such Employee
Plan/Agreement required to be disclosed or provided to participants or
their beneficiaries have been timely disclosed or provided; (iv) each
such Employee
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Plan/Agreement which is intended to qualify under Section 401 of the
Code has received a favorable determination letter from the Internal
Revenue Service with respect to such qualification, its related trust
has been determined to be exempt from taxation under Section 501(a) of
the Code, and nothing has occurred since the date of such letter that
has or is likely to adversely affect such qualification or exemption;
(iv) there are no actions, suits or claims pending (other than routine
claims for benefits) or threatened with respect to such Employee
Plan/Agreement or against the assets of such Employee Plan/Agreement;
and (v) no Employee Plan/Agreement is a plan which is established and
maintained outside the United States primarily for the benefit of
individuals substantially all of whom are nonresident aliens.
(g) POST-RETIREMENT BENEFITS. No Employee Plan/Agreement
provides benefits, including, without limitation, death or medical
benefits (whether or not insured) with respect to current or former
Company employees beyond their retirement or other termination of
service other than (i) coverage mandated by applicable law, (ii) death
or retirement benefits under any Employee Plan/Agreement that is an
employee pension benefit plan, (iii) deferred compensation benefits
accrued as liabilities on the books of Company (including the Recent
GAAP Financial Statements), (iv) disability benefits under any Employee
Plan/ Agreement that is an employee welfare benefit plan and which have
been fully provided for by insurance or otherwise or (v) benefits in
the nature of severance pay.
(h) NO TRIGGERING OF OBLIGATIONS. The consummation of the
transactions contemplated by this Agreement will not (i) entitle any
current or former employee of Company to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due to any such employee or former employee
or (iii) result in any prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code for which an exemption is not
available.
(i) DELIVERY OF DOCUMENTS. There has been delivered to Buyer,
with respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required under
ERISA, with respect to each such Employee Plan/Agreement for
the last two (2) years;
(ii) a copy of the summary plan description, together
with each summary of material modifications, required under
ERISA with respect to such Employee Plan/Agreement, all
material employee communications relating to such Employee
Plan/Agreement, and, unless the Employee Plan/Agreement is
embodied entirely in an insurance policy to which Company is a
party, a true and complete copy of such Employee
Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded
through a trust or any third party funding vehicle (other than
an insurance policy), a copy of the trust or other funding
agreement and the latest financial statements thereof; and
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(iv) the most recent determination letter received
from the Internal Revenue Service with respect to each
Employee Plan/Agreement that is intended to be a "qualified
plan" under Section 401 of the Code.
(v) With respect to each Employee Plan/Agreement for
which an annual report has been filed and delivered to Buyer
pursuant to clause (i) of this Section 3.16(i), no material
adverse change has occurred with respect to the matters
covered by the latest such annual report since the date
thereof.
(j) FUTURE COMMITMENTS. Company has no announced plan or
legally binding commitment to create any additional Employee
Plans/Agreements or to amend or modify any existing Employee
Plan/Agreement.
3.17 EMPLOYMENT COMPENSATION. Schedule 3.17 contains a true and correct
list of all employees to whom Company is paying compensation and the
compensation paid thereto during the twelve month period ending as of the date
of the Recent GAAP Financial Statements, including bonuses and incentives (such
as auto allowances, company supplied autos, life insurance and other benefits),
and listing the current annual rate of compensation for each employee.
3.18 TRADE RIGHTS. Schedule 3.18 lists all Trade Rights (as defined
below) in which Company now has any interest, specifying whether such Trade
Rights are owned, controlled, used or held (under license or otherwise) by
Company, and also indicating which of such Trade Rights are registered. All
Trade Rights shown as registered in Schedule 3.18 have been properly registered,
all pending registrations and applications have been properly made and filed and
all maintenance, renewal and other fees relating to registrations or
applications are current. In order to conduct the business of Company, as such
is currently being conducted or proposed to be conducted, Company does not
require any Trade Rights that it does not already have. Company is not
infringing and has not infringed any Trade Rights of another in the operation of
the business of Company, nor is any other person infringing the Trade Rights of
Company. Company has not granted any license or made any assignment of any Trade
Right listed on Schedule 3.18, nor does Company pay any royalties or other
consideration for the right to use any Trade Rights of others. There are no
inquiries, investigations or claims or litigation challenging or threatening to
challenge Company's right, title and interest with respect to its continued use
and right to preclude others from using any Trade Rights of Company. All Trade
Rights of Company are valid, enforceable and in good standing, and there are no
equitable defenses to enforcement based on any act or omission of Company. The
consummation of the transactions contemplated hereby will not alter or impair
any Trade Rights owned or used by Company. As used herein, the term "Trade
Rights" shall mean and include: i) all trademark rights, business identifiers,
trade dress, service marks, trade names and brand names, all registrations
thereof and applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of authorship; (iii) all patents and patent applications, and
all international proprietary rights associated therewith; (iv) all contracts or
agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all inventions, mask works
and mask work registrations, know-how, discoveries, improvements, designs, trade
secrets, shop and royalty rights, employee covenants
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and agreements respecting intellectual property and non-competition and all
other types of intellectual property; and (vi) all claims for infringement or
breach of any of the foregoing.
3.19 MAJOR CUSTOMERS AND SUPPLIERS.
(a) MAJOR CUSTOMERS. Schedule 3.19(a) contains a list of the
10 largest customers of Company for each of the two (2) most recent
fiscal years (determined on the basis of the total dollar amount of net
sales) showing the total dollar amount of net sales to each such
customer during each such year. Neither Company nor any Shareholder has
any knowledge or information of any facts indicating, nor any other
reason to believe, (i) that the Company's relationship with any of the
customers listed on Schedule 3.19(a) is other than that which is likely
to give rise to a positive recommendation by such customer of the
Company to others, or (ii) that to the extent any Customer listed on
Schedule 3.19(a) would have recurring projects, that such Customer
would be other than likely to retain the Company to perform such
project.
(b) MAJOR SUPPLIERS. Schedule 3.19(b) contains a list of the
10 largest suppliers of services and goods (including major
subcontractors) to Company for each of the two (2) most recent fiscal
years (determined on the basis of the total dollar amount of purchases)
showing the total dollar amount of purchases from each such supplier
during each such year. Neither Company nor any Shareholder has any
knowledge or information of any facts indicating, nor any other reason
to believe, that any of the suppliers listed on Schedule 3.19(b) will
not continue to be suppliers to the business of Company after the
Closing and will not continue to supply the business with substantially
the same quantity and quality of goods at competitive prices. There are
no agreements between the Company and any subcontractor or supplier
requiring Company to use the services or goods of such subcontractor or
supplier with respect to any further Company business.
3.20 WARRANTY AND PRODUCT LIABILITY. Schedule 3.20 contains a true,
correct and complete copy of Company's standard warranty or warranties and,
except as stated therein, there are no warranties, commitments or obligations
with respect to the Company's services. Schedule 3.20 sets forth the estimated
aggregate annual cost to Company of performing warranty obligations for
customers for each of the five (5) preceding fiscal years and the current fiscal
year to the date of the Recent GAAP Financial Statements. Schedule 3.20 contains
a description of all malpractice claims, product liability claims and/or errors
and omission claims and similar claims, actions, litigation and other
proceedings relating to services rendered, which are presently pending or which
to Company's or any Shareholder's knowledge are threatened, or which have been
asserted or commenced against Company within the last five (5) years, in which a
party thereto either requests injunctive relief or alleges damages (whether or
not covered by insurance).
3.21 BANK ACCOUNTS. Schedule 3.21 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which the company maintains a safe deposit box, lock box or
checking, savings, custodial or other account of any nature, the type and number
of each such account and the signatories therefore, a
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description of any compensating balance arrangements, and the names of all
persons authorized to draw thereon, make withdrawals therefrom or have access
thereto.
3.22 AFFILIATES, RELATIONSHIPS TO COMPANY.
(a) CONTRACTS WITH AFFILIATES. All leases, contracts,
agreements or other arrangements between Company and any Affiliate are
described on Schedule 3.22(a).
(b) NO ADVERSE INTERESTS. No Affiliate has any direct or
indirect interest in (i) any entity which does business with Company or
is competitive with Company's business, or (ii) any property, asset or
right which is used by Company in the conduct of its business.
(c) OBLIGATIONS. All obligations of any Affiliate to Company,
and all obligations of Company to any Affiliate, are listed on Schedule
3.22(c).
3.23 NO BROKERS OR FINDERS. Except as set forth in Schedule 3.24,
neither Company nor any of its directors, officers, employees, Shareholders or
agents have retained, employed or used any broker or finder in connection with
the transaction provided for herein or in connection with the negotiation
thereof.
3.24 DISCLOSURE. No representation or warranty by the Shareholders in
this Agreement, nor any statement, certificate, schedule, document or exhibit
hereto furnished or to be furnished by or on behalf of Shareholders pursuant to
this Agreement or in connection with transactions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained therein not misleading.
3.25 INVESTMENT REPRESENTATION. The representations and warranties
contained in the Investment Representation Certificate (the "Investor
Certificate"), in the form attached hereto as Exhibit 3.25, are true and correct
and shall be true and correct on the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer makes the following representations and warranties to the
Shareholders, each of which is true and correct on the date hereof, shall remain
true and correct to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by Shareholders or any notice to
Shareholders, and shall survive the Closing of the transactions provided for
herein.
4.1 CORPORATE.
(a) ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California.
(b) CORPORATE POWER. Buyer has all requisite corporate power
to enter into this Agreement and the other documents and instruments to
be executed and delivered by Buyer and to carry out the transactions
contemplated hereby and thereby.
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4.2 AUTHORITY. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Buyer pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors of Buyer. No other corporate
act or proceeding on the part of Buyer or its shareholders is necessary to
authorize this Agreement or the other documents and instruments to be executed
and delivered by Buyer pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
4.3 NO BROKERS OR FINDERS. Except as set forth on Schedule 4.3, neither
Buyer nor any of its directors, officers, employees or agents have retained,
employed or used any broker or finder in connection with the transaction
provided for herein or in connection with the negotiation thereof.
4.4 DISCLOSURE. No representation or warranty by Buyer in this
Agreement, nor any statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of Buyer pursuant to this Agreement
or in connection with transactions contemplated hereby, contains or shall
contain any untrue statement of material fact or omits or shall omit a material
fact necessary to make the statements contained therein not misleading.
4.5 INVESTMENT INTENT. The Shares are being acquired by Buyer for
investment only and not with the view to resale or other distribution.
4.6 SEC FILINGS AND FINANCIAL STATEMENTS. Buyer has timely made all
required filings with the Securities and Exchange Commission ("SEC") and such
filings do not contain any untrue statements by Buyer of a material fact
concerning Buyer or omit any material fact concerning Buyer necessary to make
the statements in such filings not misleading. Each of the financial statements
concerning Buyer contained within such SEC filings by Buyer were prepared in
accordance with GAAP and fairly present the financial position of Buyer as of
the respective date of such financial statements. True and correct copies of all
of Buyer's SEC filings since August 26, 1999, have been delivered to
Shareholders or made available to Shareholders (such filings are available
online at the SEC website for review). There has been no material adverse change
in Buyer's financial condition, assets, liabilities, business, prospects or
operations since the date of the most recent financial statement made available
to Shareholders (June 30, 2000). Buyer is not aware of any event, other than the
transaction contemplated hereby, which would require Buyer to file a report of
Form 8-K with the SEC.
5. COVENANTS.
5.1 REFERRAL OF CLIENTS. Buyer and the Company shall use commercially
reasonable efforts to refer potential clients and projects to the other to the
extent that such clients or projects require services that are within the scope
of each of their respective core expertise.
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5.2 EMPLOYEE OPTIONS. Buyer shall reserve up to fifty thousand (50,000)
options to purchase its common stock for grant to current and future employees
of the Company. The recipients of such options shall be subject to the approval
of Buyer.
5.3 NONCOMPETITION. Subject to the Closing, and as an inducement to
Buyer to execute this Agreement and complete the transactions contemplated
hereby, and in order to preserve the goodwill associated with the business of
Company being acquired pursuant to this Agreement, each Shareholder shall, on or
before the Closing Date and in accordance with the requirements of Exhibit
5.3-1, enter into either that certain (i) Noncompetition Agreement (Primary)
substantially in the form of Exhibit 5.3-2 attached hereto, or (ii)
Noncompetition Agreement (Other) substantially in the form of Exhibit 5.3-3
attached hereto.
5.4 CONFIDENTIALITY. As an inducement to Buyer to execute this
Agreement and complete the transactions contemplated hereby, and in order to
preserve the goodwill associated with the business of the Company, each
Shareholder hereby covenants and agrees as follows:
(a) COVENANT OF CONFIDENTIALITY. No Shareholder shall at any
time subsequent to the Closing, except as explicitly requested by
Buyer, (i) use for any purpose, (ii) disclose to any person, or (iii)
keep or make copies of documents, tapes, discs or programs containing,
any confidential information concerning Company. For purposes hereof,
"confidential information" shall mean and include, without limitation,
all Trade Rights in which Company has an interest, all customer lists
and customer information, and all other information concerning
Company's processes, apparatus, equipment, packaging, products,
marketing and distribution methods, not previously disclosed to the
public directly by Company.
(b) EQUITABLE RELIEF FOR VIOLATIONS. Each Shareholder agrees
that the provisions and restrictions contained in Section 5.3 and this
Section 5.4 are necessary to protect the legitimate continuing
interests of Buyer in acquiring the Shares, and that any violation or
breach of these provisions will result in irreparable injury to Buyer
for which a remedy at law would be inadequate and that, in addition to
any relief at law which may be available to Buyer for such violation or
breach and regardless of any other provision contained in this
Agreement, Buyer shall be entitled to injunctive and other equitable
relief as a court may grant after considering the intent of Section 5.3
and this Section 5.4.
5.5 GENERAL RELEASES. At the Closing, each Shareholder shall deliver,
general releases to Buyer, in form and substance satisfactory to Buyer and its
counsel, releasing Company and the directors, officers, agents and employees of
Company from all claims to the Closing Date, except (i) as may be described in
written contracts disclosed in the Disclosure Schedule and expressly described
and excepted from such releases, and (ii) in the case of persons who are
employees of the Company, compensation for current periods expressly described
and excepted from such releases.
5.6 BOOKS AND RECORDS REQUEST. The Company, at its own expense, shall
cause its books and records to conform to GAAP for the engineering/construction
industry prior to the review by Buyer described in Section 5.7.
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5.7 ACCESS TO INFORMATION AND RECORDS. Subject to the existing March
31, 2000, Confidentiality Agreement between Buyer and Company, during the period
prior to the Closing, Shareholders shall cause Company to give Buyer, its
counsel, accountants and other representatives (i) access during normal business
hours to all of the properties, books, records, contracts and documents of
Company for the purpose of such inspection, investigation and testing as Buyer
deems appropriate (and Company shall furnish or cause to be furnished to Buyer
and its representatives all information with respect to the business and affairs
of Company as Buyer may request); (ii) upon Company's consent (not unreasonably
withheld), access to employees, agents and representatives for the purposes of
such meetings and communications as Buyer reasonably desires; and (iii) with the
prior consent of Company in each instance (which consent shall not be
unreasonably withheld), access to vendors, customers, manufacturers of its
machinery and equipment, and others having business dealings with Company.
5.8 CONDUCT OF BUSINESS PENDING THE CLOSING. From the date hereof until
the Closing, except as otherwise approved in writing by the Buyer, Company
covenants as follows, and Shareholders shall cause each of the following to
occur:
(a) NO CHANGES. Company will carry on its business diligently
and in the same manner as heretofore and will not make or institute any
changes in its methods of purchase, sale, management, accounting or
operation.
(b) MAINTAIN ORGANIZATION. Company will take such action as
may be necessary to maintain, preserve, renew and keep in favor and
effect the existence, rights and franchises of Company and will use its
best efforts to preserve the business organization of Company intact,
to keep available to Company the present officers and employees, and to
preserve for Company its present relationships with suppliers and
customers and others having business relationships with Company.
(c) NO BREACH. Company and Shareholders will not do or omit
any act, or permit any omission to act, which may cause a breach of any
material contract, commitment or obligation, or any breach of any
representation, warranty, covenant or agreement made by the
Shareholders herein, or which would have required disclosure on
Schedule 3.8 had it occurred after the date of the Recent GAAP
Financial Statements and prior to the date of this Agreement.
(d) NO MATERIAL CONTRACTS. Without the prior written consent
of Buyer, no contract or commitment will be entered into, and no
purchase of supplies, equipment and no sale of goods or services (real,
personal, or mixed, tangible or intangible) will be made, by or on
behalf of Company, except contracts, commitments, purchases or sales
which are in the ordinary course of business and consistent with past
practice, are not material to the Company (individually or in the
aggregate) and would not have been required to be disclosed in the
Disclosure Schedule had they been in existence on the date of this
Agreement.
(e) NO CORPORATE CHANGES. Company shall not amend its Articles
of Incorporation or Bylaws or make any changes in authorized or issued
capital stock.
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(f) MAINTENANCE OF INSURANCE. Company shall maintain all of
the insurance in effect as of the date hereof and shall procure such
additional insurance as shall be reasonably requested by Buyer.
(g) MAINTENANCE OF PROPERTY. Company shall use, operate,
maintain and repair all property of Company in a normal business
manner.
(h) INTERIM FINANCIALS. Company will provide Buyer with
interim monthly financial statements (as of calendar month-end) and
other management reports as and when they are available.
(i) NO NEGOTIATIONS. Neither Company nor any Shareholder will
directly or indirectly (through a representative or otherwise) solicit
or furnish any information to any prospective buyer, commence, or
conduct presently ongoing, negotiations with any other party or enter
into any agreement with any other party concerning the sale of Company,
Company's assets or business or any part thereof or any equity
securities of Company (an "acquisition proposal"), and Company and
Shareholders shall immediately advise Buyer of the receipt of any
acquisition proposal.
(j) NO TRANSFER OF SHARES. No Shareholder shall transfer or
attempt to transfer any of the Shares except to Buyer pursuant hereto;
and Company shall refuse to accept any certificates for Shares to be
transferred or otherwise to allow such transfers to occur upon its
books.
5.9 CONSENTS. Company and Shareholders will use their best efforts
prior to Closing to obtain all consents necessary for the consummation of the
transactions contemplated hereby.
5.10 OTHER ACTION. Company and Shareholders shall use their best
efforts to cause the fulfillment at the earliest practicable date of all of the
conditions to the parties' obligations to consummate the transactions
contemplated in this Agreement.
5.11 DISCLOSURE SCHEDULE. Shareholders and Company shall have a
continuing obligation to promptly notify Buyer in writing with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in the
Disclosure Schedule, but no such disclosure shall cure any breach of any
representation or warranty which is inaccurate.
5.12 NO SOLICITATION. In the event that the Closing does not occur,
neither Buyer, Shareholders nor the Company shall actively solicit any existing
employees of the Company or the Buyer for a one year period, commencing the date
of this Agreement. This does not preclude either party for having discussions
with and hiring employees of the Company or the Buyer, if those employees
initiate the process. If Buyer, Shareholders or the Company does initiate the
solicitation of the other party's employees, that party shall be liable to pay
the other for liquidated damages therefore, an amount equal to the annual salary
of the employee with whom such party initiated discussions.
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6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF THE CLOSING DATE. Each of
the representations and warranties made by Shareholders in this Agreement, and
the statements contained in the Disclosure Schedule or in any instrument, list,
certificate or writing delivered by Shareholders or Company pursuant to this
Agreement, shall be true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the Closing Date
as though such representations and warranties were made or given on and as of
the Closing Date, except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer.
6.2 COMPLIANCE WITH AGREEMENT. Shareholders and Company shall have in
all material respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date, including the delivery of the closing
documents specified in Section 9.1.
6.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Buyer, Company or any of the affiliates, officers or
directors of any of them, with respect to the transactions contemplated hereby.
6.4 CONSENTS AND APPROVALS. All approvals, consents and waivers that
are required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to Buyer
not less than two (2) business days prior to the Closing.
6.5 THIRD PARTY CONSENTS. Company shall have delivered to Buyer on or
prior to the Closing Date, consents from landlords under each lease of Real
Property to the transactions contemplated by this Agreement. Buyer shall have
obtained all approvals, consents and waivers from its banks and other third
parties from whom such consents, approvals or waivers are required.
6.6 SECTION 1445 AFFIDAVIT. Company shall have delivered to Buyer an
affidavit, in form satisfactory to Buyer, to the effect that Company is not a
"foreign person," "foreign corporation," "foreign partnership," "foreign trust,"
or "foreign estate" under Section 1445 of the Code, and containing all such
other information as is required to comply with the requirements of such
section.
6.7 TERMINATION OF QUALIFIED PLANS. The Board of Directors of the
Company shall have executed a unanimous written consent substantially in the
form of Exhibit 6.9-1 hereto terminating its 401(k) plan sufficiently prior to
the Closing to cause, to the reasonable satisfaction of Buyer and its counsel,
Buyer's qualified plans not to be deemed to be successor plans, and the Company
shall amend its 401(k) plan by adopting the amendment substantially in the form
of Exhibit 6.9-2 hereto.
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6.8 SATISFACTORY DUE DILIGENCE AND DISCLOSURE. Buyer shall have been
provided with all reasonably requested due diligence materials and the schedules
attached hereto and shall have completed, to its satisfaction, a "due diligence"
review of the assets, liabilities, operations, financial condition, and
proprietary rights of the Company.
6.9 SATISFACTORY EVIDENCE OF AUTHORITY TO EXECUTE. Shareholders shall
have provided such documents or instruments as are necessary, in the reasonable
judgment of buyer's counsel, to establish the authority of the person or persons
executing this Agreement on behalf of the Shareholders.
6.10 BANK LIEN. Company's credit line and lien in favor of ▇▇▇▇▇ Fargo
Bank shall have been terminated.
6.11 INVESTOR CERTIFICATE. Each of the Shareholders shall have executed
and delivered to the Buyer the Investor Certificate.
6.12 INSURANCE. Company shall have obtained a policy of multi-year
"run-off" insurance in form and content satisfactory to Buyer, naming Buyer as
an additional insured, a description of which is contained in a copy of the
insurance binder attached hereto as Exhibit 6.12.
7. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS.
Each and every obligation of Shareholders to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the Closing of
the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. Each of
the representations and warranties made by Buyer in this Agreement shall be true
and correct in all material respects when made and shall be true and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date.
7.2 COMPLIANCE WITH AGREEMENT. Buyer shall have in all material
respects performed and complied with all of Buyer's agreements and obligations
under this Agreement which are to be performed or complied with by Buyer prior
to or on the Closing Date, including the delivery of the closing documents
specified in Section 9.2.
7.3 ABSENCE OF SUIT. No action, suit or proceeding before any court or
any governmental authority shall have been commenced or threatened, and no
investigation by any governmental or regulating authority shall have been
commenced, against Buyer, Company or any of the affiliates, officers or
directors of any of them, with respect to the transactions contemplated hereby.
7.4 SHARE PRICE. The closing ask price of the Buyer's common stock on
the NASDAQ National Market shall have been $3.00 or greater during the period
commencing on the date of this Agreement and ending on the date immediately
preceding the Closing Date.
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8. INDEMNIFICATION.
8.1 BY SHAREHOLDERS. Subject to the terms and conditions of this
Section 8, each Shareholder, jointly and severally, hereby agrees to indemnify,
defend and hold harmless Buyer, its directors, officers, employees and
controlled and controlling persons (hereinafter "Buyer's Affiliates") and the
Company from and against all Claims asserted against, resulting to, imposed
upon, or incurred by Buyer, Buyer's Affiliates or the Company, directly or
indirectly, by reason of, arising out of, resulting from or not otherwise
disclosed as a result of (a) the inaccuracy or breach of any representation or
warranty of any Shareholder or Company contained in or made pursuant to this
Agreement (regardless of whether such breach is deemed "material" for purpose of
Section 6.1), or (b) the breach of any covenant of any Shareholder or the
Company contained in this Agreement; provided, however, Shareholders shall have
no liability under this Section 8.1 until the total liability under this Section
8.1 for all Claims considered together exceeds $20,000 (and then only to the
excess) (such $20,000 threshold amount referred to herein as the "Liability
Basket"). Notwithstanding the foregoing, any Claims pursuant to Section 3.1,
Section 3.2, Section 3.4, Section 3.5, Section 3.6, Section 3.7 and Section
3.12, shall have no Liability Basket threshold and shall give rise to a right of
indemnity commencing with the "first Dollar" of Claims. In addition Shareholders
shall have no liability under this Section 8.1 in excess of the Purchase Price,
provided, however, that the Shareholders shall have liability in excess of the
Purchase Price for breaches concerning Section 3.1, Section 3.2, Section 3.5,
Section 3.10, Section 3.11(a), Section 3.16 and Section 3.20. As used in this
Section 8, the term "Claim" shall include (i) all debts, liabilities and
obligations; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, settlements, costs and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and attorneys fees and expenses); and
(iii) all demands, claims, suits, actions, costs of investigation, causes of
action, proceedings and assessments, whether or not ultimately determined to be
valid. Buyer may, at its sole and absolute discretion, elect to set-off the
amount or value or any such Claim against any payments otherwise due to
Shareholders hereunder, whether in cash, Buyer Stock, or otherwise as described
in Section 8.4.
8.2 BY BUYER. Subject to the terms and conditions of this Section 8,
Buyer hereby agrees to indemnify, defend and hold harmless each Shareholder from
and against all Claims asserted against, resulting to, imposed upon or incurred
by any such person, directly or indirectly, by reason of or resulting from (a)
the inaccuracy or breach of any representation or warranty of Buyer contained in
or made pursuant to this Agreement (regardless of whether such breach is deemed
"material" for purposes of Section 7.1), or (b) the breach of any covenant of
Buyer contained in this Agreement, including any claim accruing after the
Closing Date and for which the Shareholders are not otherwise liable hereunder.
8.3 INDEMNIFICATION OF THIRD-PARTY CLAIMS. The obligations and
liabilities of any party to indemnify any other under this Section 8 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
(a) NOTICE AND DEFENSE. The party or parties to be indemnified
(whether one or more, the "Indemnified Party") will give the party from
whom indemnification is sought (the "Indemnifying Party") prompt
written notice of any such Claim, and the Indemnifying Party will
undertake the defense thereof by representatives chosen by it.
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Failure to give such notice shall not affect the Indemnifying Party's
duty or obligations under this Section 8, except to the extent the
Indemnifying Party is prejudiced thereby. So long as the Indemnifying
Party is defending any such Claim actively and in good faith, the
Indemnified Party shall not settle such Claim. The Indemnified Party
shall make available to the Indemnifying Party or its representatives
all records and other materials required by them and in the possession
or under the control of the Indemnified Party, for the use of the
Indemnifying Party and its representatives in defending any such Claim,
and shall in other respects give reasonable cooperation in such
defense.
(b) FAILURE TO DEFEND. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party (upon further
notice) has the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of the
Indemnifying Party, and the Indemnifying Party shall thereafter have no
right to challenge the Indemnified Party's defense, compromise,
settlement or consent to judgment therein.
(c) INDEMNIFIED PARTY'S RIGHTS. Anything in this Section 8.3
to the contrary notwithstanding, (i) if there is a reasonable
probability that a Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other
money payments, the Indemnified Party shall have the right to defend,
compromise or settle such Claim, and (ii) the Indemnifying Party shall
not, without the written consent of the Indemnified Party, settle or
compromise any Claim or consent to the entry of any judgment which does
not include as an unconditional term thereof the giving by the claimant
or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Claim.
8.4 PAYMENT. The Indemnifying Party shall promptly pay the Indemnified
Party any amount due under this Section 8, which payment may be accomplished in
whole or in part, at the option of the Indemnified Party, by the Indemnified
Party setting off any amount owed to the Indemnifying Party by the Indemnified
Party. To the extent set-off is made by an Indemnified Party in satisfaction or
partial satisfaction of an indemnity obligation under this Section 8 that is
disputed by the Indemnifying Party, upon a subsequent determination by final
judgment not subject to appeal (or, where required hereby, binding and final
decision by arbitration pursuant to the requirements of Section 11.5) that all
or a portion of such indemnity obligation was not owed to the Indemnified Party,
the Indemnified Party shall pay the Indemnifying Party the amount which was set
off and not owed. Upon judgment, determination, settlement or compromise of any
third party Claim, the Indemnifying Party shall pay promptly on behalf of the
Indemnified Party, and/or to the Indemnified Party in reimbursement of any
amount theretofore required to be paid by it, the amount so determined by
judgment, determination, settlement or compromise and all other Claims of the
Indemnified Party with respect thereto, unless in the case of a judgment an
appeal is made from the judgment. If the Indemnifying Party desires to appeal
from an adverse judgment, then the Indemnifying Party shall post and pay the
cost of the security or bond to stay execution of the judgment pending appeal.
Upon the payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed to the rights of such Indemnified Party, to the
extent not waived in settlement, against the third party who made such third
party Claim.
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8.5 LIMITATIONS ON INDEMNIFICATION. Except for any willful or knowing
breach or misrepresentation, as to which claims may be brought without
limitation as to time or amount and except as provided below, no claim or action
shall be brought under this Section 8 for breach of a representation or warranty
after the lapse of three (3) years following the Closing:
(a) There shall be no time limitation on claims on actions
brought for breach of any representation or warranty made by
Shareholders in or pursuant to Sections 3.1 and 3.2, and Shareholders
hereby waive all applicable statutory limitation periods with respect
thereto. The representations and warranties contained in Section 3.10
and Section 3.16 shall survive for a period of five (5) years following
the Closing.
(b) Any claim or action brought for breach of any
representation or warranty made by Shareholders in or pursuant to
Section 3.5 may be brought at any time until the underlying tax
obligation is barred by the applicable period of limitation under
federal and state laws relating thereto (as such period may be extended
by waiver).
(c) Any claim or action brought for breach of any
representation or warranty made by Shareholders in or pursuant to
Section 3.11 may be brought at any time until the underlying claim is
barred by the applicable period of limitation under federal and state
laws relating thereto (as such period may be extended by waiver).
(d) Any claim made by a party hereunder by filing a suit or
action in a court of competent jurisdiction or a court reasonably
believed to be of competent jurisdiction for breach of a representation
or warranty prior to the termination of the survival period for such
claim shall be preserved despite the subsequent termination of such
survival period.
(e) If any act, omission, disclosure or failure to disclosure
shall form the basis for a claim for breach of more than one
representation or warranty, and such claims have different periods of
survival hereunder, the termination of the survival period of one claim
shall not affect a party's right to make a claim based on the breach of
representation or warranty still surviving.
8.6 NO WAIVER. The Closing of the transactions contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of condition
constituting the basis of the Claim at or before the Closing, and regardless of
whether such breach, violation or failure is deemed to be "material" for
purposes of Section 10.2.
9. CLOSING.
The closing of this transaction (the "Closing") shall take place at the
offices of ▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 3:00 P.M. on October 13, 2000, or at such other time and
place as the parties hereto shall agree upon. Such date is referred to in this
Agreement as the "Closing Date."
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9.1 DOCUMENTS TO BE DELIVERED BY COMPANY AND SHAREHOLDERS. At the
Closing, Company and Shareholders shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
(a) STOCK CERTIFICATE(S). A stock certificate or certificates
representing the Shares, duly endorsed for transfer or with duly
executed stock powers attached.
(b) COMPLIANCE CERTIFICATE. A certificate signed by each
Shareholder that each of the representations and warranties made by
Shareholders in this Agreement is true and correct in all material
respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on and as of
the Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer), and that Company and
Shareholders have performed and complied with all of Company's and
Shareholders' obligations under this Agreement which are to be
performed or complied with on or prior to the Closing Date.
(c) CERTIFIED RESOLUTIONS. Certified copies of the resolutions
of the Board of Directors and the Shareholders of Company, authorizing
and approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
(d) ARTICLES OF INCORPORATION: BYLAWS. A copy of the Bylaws of
Company certified by the secretary of Company, and a copy of the
Articles of Incorporation of Company certified by the Secretary of
State of the state of incorporation of Company.
(e) INCUMBENCY CERTIFICATE. Incumbency certificates relating
to each person executing (as a corporate officer or otherwise on behalf
of another person) any document executed and delivered to Buyer
pursuant to the terms hereof.
(f) GENERAL RELEASES. The General Releases referred to in
Section 5.5, duly executed by the persons referred to in such section.
(g) RESIGNATIONS. The resignations of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as officers and directors of the Company,
effective as of the Closing Date and in form satisfactory to Buyer's
counsel.
(h) NONCOMPETITION AGREEMENT. The Noncompetition Agreement in
the form of Exhibit 5.3 attached hereto executed by each of the
Shareholders.
(i) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Buyer may reasonably request.
9.2 DOCUMENTS TO BE DELIVERED BY BUYER. At the Closing, Buyer shall
deliver to Shareholders the following documents, in each case duly executed or
otherwise in proper form:
(a) CASH. To Shareholders, Buyer's check (or confirmation of
wire transfer) as required by Section 2.1(a) hereof.
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(b) COMPLIANCE CERTIFICATE. A certificate signed by the chief
financial officer of Buyer that the representations and warranties made
by Buyer in this Agreement are true and correct on and as of the
Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date (except
for any changes permitted by the terms of this Agreement or consented
to in writing by Shareholders), and that Buyer has performed and
complied with all of Buyer's obligations under this Agreement which are
to be performed or complied with on or prior to the Closing Date.
(c) CERTIFIED RESOLUTIONS. A certified copy of the resolutions
of the Board of Directors of Buyer authorizing and approving this
Agreement and the consummation of the transactions contemplated by this
Agreement.
(d) INCUMBENCY CERTIFICATE. Incumbency certificates relating
to each person executing any document executed and delivered to Company
or Shareholders by Buyer pursuant to the terms hereof.
(e) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to Company at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Company may reasonably request.
10. TERMINATION.
10.1 RIGHT OF TERMINATION WITHOUT BREACH. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
(a) by mutual written agreement of Buyer and Shareholders'
Agent;
(b) by Shareholders if the Closing shall not have occurred on
or before October 31, 2000 as a result of Buyer's breach of a
representation, warranty or covenant contained herein; or
(c) by either Buyer or Shareholders if the Closing shall not
have occurred on or before November 30, 2000, provided the terminating
party has not, through breach of a representation, warranty or
covenant, prevented the Closing from occurring on or before such date.
10.2 TERMINATION FOR BREACH.
(a) TERMINATION BY BUYER. If (i) there has been a material
violation or breach by any Shareholder or Company of any of the
agreements, representations or warranties contained in this Agreement
which has not been waived in writing by Buyer, or (ii) there has been a
failure of satisfaction of a condition to the obligations of Buyer
which has not been so waived, or (iii) Company, Shareholders' Agent or
any Shareholder shall have attempted to terminate this Agreement under
this Section 10 or otherwise without grounds to do so, then Buyer may,
by written notice to Shareholders' Agent at any time prior to the
Closing that such violation, breach, failure or wrongful termination
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attempt is continuing, terminate this Agreement with the effect set
forth in Section 10.2(c) hereof.
(b) TERMINATION BY SHAREHOLDERS. If (i) there has been a
material violation or breach by Buyer of any of the agreements,
representations or warranties contained in this Agreement which has not
been waived in writing by Shareholders, or (ii) there has been a
failure of satisfaction of a condition to the obligations of
Shareholders which has not been so waived, or (iii) Buyer shall have
attempted to terminate this Agreement under this Section 10 or
otherwise without grounds to do so, then Shareholders may, by written
notice to Buyer at any time prior to the Closing that such violation,
breach, failure or wrongful termination attempt is continuing,
terminate this Agreement with the effect set forth in Section 10.2(c)
hereof.
(c) EFFECT OF TERMINATION. Termination of this Agreement
pursuant to this Section 10.2 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other
party which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements, conditions or other
provisions of this Agreement prior to termination hereof. In addition
to the right of any party under common law to redress for any such
breach or violation, each party whose breach or violation has occurred
prior to termination shall jointly and severally indemnify each other
party for whose benefit such representation, warranty, covenant,
agreement or other provision was made ("indemnified party") from and
against all losses, damages (including, without limitation,
consequential damages), costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated
matter), penalties, court costs, and attorneys fees and expenses)
asserted against, resulting to, imposed upon, or incurred by the
indemnified party, directly or indirectly, by reason of, arising out of
or resulting from such breach or violation. Subject to the foregoing,
the parties' obligations under Section 11.8(a) of this Agreement shall
survive termination.
11. MISCELLANEOUS.
11.1 DISCLOSURE SCHEDULE. The Schedules have been compiled in a bound
volume (the "Disclosure Schedule"), executed by Shareholders and dated and
delivered to Buyer on the date of this Agreement. Information set forth in the
Disclosure Schedule specifically refers to the article and section of this
Agreement to which such information is responsive and such information shall not
be deemed to have been disclosed with respect to any other article or section of
this Agreement or for any other purpose. The Disclosure Schedule shall not vary,
change or alter the language of the representations and warranties contained in
this Agreement and, to the extent the language in the Disclosure Schedule does
not conform in every respect to the language of such representations and
warranties, such language in the Disclosure Schedule shall be disregarded and be
of no force or effect.
11.2 FURTHER ASSURANCE. From time to time, at Buyer's request and
without further consideration, Company and Shareholders will execute and deliver
to Buyer such documents and take such other action as Buyer may reasonably
request in order to consummate more effectively the transactions contemplated
hereby.
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11.3 DISCLOSURES AND ANNOUNCEMENTS. Announcements concerning the
transactions provided for in this Agreement by Buyer, Company or Shareholders
shall be subject to the approval of the other parties in all essential respects,
except that approval of the Shareholders or Company shall not be required as to
any statements and other information which Buyer may submit to the Securities
and Exchange Commission or Buyer's stockholders or be required to make pursuant
to any rule or regulation of the Securities and Exchange commission, the
National Association of Securities Dealers, Inc. or the Nasdaq Stock Market,
Inc. or otherwise required by law.
11.4 ASSIGNMENT; PARTIES IN INTEREST.
(a) ASSIGNMENT. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the
other parties. Notwithstanding the foregoing, Buyer may, without
consent of any other party, cause one or more subsidiaries or
affiliates of Buyer to carry out all or part of the transactions
contemplated hereby; provided, however, that Buyer shall, nevertheless,
remain liable for all of its obligations, and those of any such
subsidiary, to Shareholders hereunder.
(b) PARTIES IN INTEREST. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person any
right or remedy under or by reason of this Agreement.
11.5 LAW GOVERNING AGREEMENT; VENUE. This Agreement may not be modified
or terminated orally, and shall be construed and interpreted according to the
internal laws of the State of California, excluding any choice of law rules that
may direct the application of the laws of another jurisdiction. All claims,
disputes and other matters in controversy (collectively, "Dispute") arising,
directly or indirectly out of or related to this Agreement, or the breach
thereof, whether contractual or noncontractual, and whether during the term or
after the termination of this Agreement, shall be resolved exclusively according
to the procedures set forth in this Section 11.5. Any Dispute shall be resolved
by arbitration before a single arbitrator appointed by the American Arbitration
Association or its successor in Orange County, California. The determination of
the arbitrator shall be final and absolute. The arbitrator shall be governed by
the duly promulgated rules and regulations of the American Arbitration
Association or its successor then in effect, and the pertinent provisions of the
laws of the State of California relating to arbitration. The decision of the
arbitrator may be entered as a final judgment in any court of the State of
California or elsewhere. The prevailing party in any such arbitration shall also
be entitled to recover reasonable attorneys', accountants' and experts' fees and
costs of suit in addition to any other relief awarded such prevailing party.
11.6 AMENDMENT AND MODIFICATION. Buyer and Shareholders may amend,
modify and supplement this Agreement in such manner as may be agreed upon in
writing between Buyer and Shareholders.
11.7 NOTICE. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile
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transmission or other electronic means of transmitting written documents if
followed by certified mail; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, demands or requests are as
follows:
If to Buyer, to: The ▇▇▇▇▇ Companies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as Buyer shall furnish to Shareholders in
writing.
If to Shareholders, to: c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other person or address as Shareholders shall designate in accordance
with this Agreement. In addition, any notice to Shareholders shall also be
deemed to be notice to the Company.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission; if sent by overnight courier pursuant to this paragraph, such
communication shall be deemed delivered upon receipt; and if sent by U.S. mail
pursuant to this paragraph, such communication shall be deemed delivered as of
the date of delivery indicated on the receipt issued by the relevant postal
service, or, if the addressee fails or refuses to accept delivery, as of the
date of such failure or refusal. Delivery to either Shareholder shall constitute
delivery to all Shareholders. Any party to this Agreement may change its address
for the purposes of this Agreement by giving notice thereof in accordance with
this section.
11.8 EXPENSES. Regardless of whether or not the transactions
contemplated hereby are consummated:
(a) EXPENSES TO BE PAID BY SHAREHOLDERS. Shareholders shall
pay, and shall indemnify, defend and hold Buyer and Company harmless
from and against, each of the following:
(i) TRANSFER TAXES. Any sales, use, excise, transfer
or other similar tax imposed with respect to the transactions
provided for in this Agreement, and any interest or penalties
related thereto.
(ii) PROFESSIONAL FEES. All fees and expenses of
their own and Company's legal, accounting, tax, investment
banking and other professional counsel in connection with the
transactions contemplated hereby; provided,
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however, that Buyer shall pay fifty percent (50%) of Company's
fees owing to its accountants, up to a maximum of $7,500
payable by Buyer, with respect to such accountants' services
rendered in the preparation of the schedules to this
Agreement.
(iii) BROKER'S AND FINDER'S FEES. All fees and
expenses of their own and Company's brokers and finders in
connection with the transactions contemplated hereby.
(b) OTHER. Except as otherwise provided herein, each of the
parties shall bear its own expenses and the expenses of its counsel and
other agents in connection with the transactions contemplated hereby.
(c) COSTS OF LITIGATION. The parties agree that the prevailing
party in any action brought with respect to or to enforce or interpret
any right or remedy under this Agreement shall be entitled to recover
from the other party or parties all reasonable costs and expenses of
any nature whatsoever incurred by the prevailing party in connection
with such action, including without limitation attorneys' fees and
prejudgment interest.
11.9 ENTIRE AGREEMENT. This instrument embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.
11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.11 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
11.12 PRIVATE OFFERING. The Shares of Buyer Stock to be issued by Buyer
in connection with this Agreement have not, and as of the Closing will not, be
registered under the Securities Act of 1933, as amended (the "Securities Act").
Such Buyer Stock will be issued pursuant to an exemption from registration under
the Securities Act in reliance on, among other things, the Shareholders'
responses in their respective Investor Certificates. Consequently, the Buyer
Stock issued in connection with this Agreement may not be sold or otherwise
transferred unless a registration statement under the Securities Act is in
effect with respect to such securities, or in the alternative, an exemption from
registration under the Securities Act is found to be available to the reasonable
satisfaction of Buyer.
11.13 FORM 8-K AND SECURITIES LAW FILINGS. The Shareholders shall
cooperate with and assist the Buyer to the extent reasonably requested by the
Buyer, in providing information for the preparation of the Report on Form 8-K
which may be filed by Buyer in connection with this transaction.
11.14 LEGEND. The Buyer Stock issued in connection with this Agreement
shall bear substantially the following legend:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT, OR UNLESS THE
CORPORATION HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE
CORPORATION, THAT SUCH REGISTRATION IS NOT REQUIRED."
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
BUYER: THE ▇▇▇▇▇ COMPANIES, INC.,
a California corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Printed Name: ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Title: CEO
--------------------------------------
COMPANY: ▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ & ASSOCIATES,
a California corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: CEO
--------------------------------------
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SHAREHOLDERS: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ Mansaker
----------------------------------------------
▇▇▇▇▇▇▇ MANSAKER
/s/ Bruno Callu
----------------------------------------------
BRUNO CALLU
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
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