ASSET PURCHASE AGREEMENT
------------------------
among
SKYLYNX COMMUNICATIONS, INC.
a Colorado corporation
and
CONTINET, LLC
an Oregon limited liability company
and
Xxxxxx XxXxxxxxx and Xxxx Xxxx
ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into and
made effective as of March 24, 1999 ("Effective Date"), by and among
SKYLYNX COMMUNICATIONS, INC., a Colorado corporation ("Purchaser"),
CONTINET, LLC, an Oregon limited liability company ("Seller"), and each of
those persons, jointly and severally, who are all of the members of Seller,
namely: Xxxxxx XxXxxxxxx and Xxxx Xxxx, which persons are hereinafter
collectively referred to as the "Members." Members and Seller are
hereinafter collectively referred to as the "Sellers." Certain other
capitalized terms used herein are defined in Article 11 and throughout this
Agreement.
RECITALS
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A. Seller is engaged in the business of internet service provision
(the "Business") with its headquarters located in Eugene, Oregon, and is
qualified to do business in the state of Oregon;
B. Seller has facilities and operations in the state of Oregon;
C. The Members hold all of the memberships of Seller, and Purchaser
is unwilling to enter into this Agreement without the covenants and
promises of the Members herein set forth; and
D. Purchaser desires to purchase and acquire certain assets,
properties, and contractual rights of Seller used in connection with the
Business, and Seller desires to sell such assets, properties, and
contractual rights to Purchaser, all on the terms and subject to the
conditions hereinafter set forth.
TERMS OF AGREEMENT
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In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Description of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, Seller does hereby grant, convey,
sell, transfer and assign to Purchaser the following assets, properties,
and contractual rights of Seller (collectively, the "Assets"), wherever
located, subject to the exclusions hereinafter set forth:
(a) all machinery, leasehold improvements, construction in
progress, furniture and fixtures, computer equipment and monitors, routers,
servers, computer software, and any other fixed assets owned by Seller and
used in the operations of the Business, including, without limitation, the
assets listed on Schedule 1.1(a) attached hereto and made a part hereof
(the "Equipment");
(b) all real property interests (whether owned or leased) used
or for use in the Business (the "Real Property"), as specifically described
on Schedule 1.1(b) attached hereto and made a part hereof, and all
improvements thereon;
(c) all of Seller's interests and rights and benefits under any
leases of machinery, vehicles, equipment, tools, furniture, fixtures or
other assets as specifically described on Schedule 1.1(c), attached hereto
and made a party hereof;
(d) all contractual rights of Seller with Seller's customers
(whether oral or in writing, and including without limitation all ISP
Service Agreements and Customer Agreements to which Seller is a party, and
all accounts receivable relating to services prior to the Closing (the
"Accounts Receivable"), relating to the conduct of the Business and all
other rights to provide services to customers of Seller (the "Customer
Accounts"), and all commitments, lists, leases, permits, licenses,
consents, approvals, franchises and other instruments relating to the
Customer Accounts (the "Related Documents"); a complete and accurate list
of the Customer Accounts and the Related Documents is set forth on Schedule
1.1(d), attached hereto and made a part hereof, and true and complete
copies of all Customer Accounts (or descriptions of unwritten arrangements)
and Related Documents shall be delivered to Purchaser simultaneously with
the execution and delivery of this Agreement;
(e) the contracts and other agreements to which Seller is a
party listed on Schedule 1.1(e) (the "Assumed Contracts");
(f) all of Seller's inventory of parts, supplies and accessories
of every kind, nature and description used or for use in connection with
the Business (the "Inventory");
(g) all proprietary rights of Seller, including, without
limitation, all right, title and interest of Seller in and to all trade
secrets, slogans, processes, rights, symbols, trademarks, service marks,
logos, domain names, and trade names used in the Business;
(h) all permits, licenses, franchises, consents and other
approvals and operating rights relating to the Business that are assignable
or transferable, which are more completely described and set forth on
Schedule 1.1(h), attached hereto and made a part hereof, true and complete
copies of which are also attached to Schedule 1.1(h);
(i) all communications equipment (together with any rights to
frequencies related thereto) used in connection with the Business, wherever
located;
(j) all right, title and interest of Seller in and to all
telephone and telecopier numbers used by Seller in the conduct of the
Business;
(k) all of Seller's right, title and interest in and to the name
"ContiNet," and any other names used in connection with the Business and
the rights to use such names (the "Business Names");
(l) all manual and automated routing and billing information and
components thereof, including, without limitation, all routing and billing
computer software and programs containing any customer information;
(m) all operating data and records of Seller, including, without
limitation, all of Seller's existing documents, files and other material
related to all current or past customers of the Business, financial,
accounting and credit records, correspondence, budgets and other similar
documents and records;
(n) all of the good will of the Business;
(o) all prepaid expenses and customer deposits; and
(p) all other tangible and intangible assets used in the
Business, including those set forth on Seller's balance sheet dated as of
February 28, 1999 (the "Current Balance Sheet"), a copy of which is
attached as Schedule 1.1(p) hereto.
All of the foregoing assets, properties and contractual rights described in
Section 1.1 are hereinafter sometimes collectively called the "Assets."
1.2 Excluded Assets. Excluded from this sale and purchase are
Seller's cash (excluding the customer deposits listed in Section 1.1(p))
and loans (notes receivable) to the Members, as shown on Schedule 1.2.
1.3 Non-Assignment of Certain Customer Accounts. Notwithstanding
anything to the contrary in this Agreement, to the extent that any Customer
Account shall require in a writing between customers of Seller and Seller
the consent of any third party, neither this Agreement nor any action taken
pursuant to its provisions shall constitute an assignment or an agreement
to assign if such assignment or attempted assignment would constitute a
breach thereof or result in the loss or diminution thereof; provided,
however that in each such case, Seller shall use its best efforts to obtain
the consent of such other party to such assignment to Purchaser. If such
consent is not obtained, Seller shall cooperate with Purchaser in any
reasonable arrangement designed to provide for Purchaser the benefits under
any such Customer Account, including, without limitation, an adjustment of
the Purchase Price set forth in Section 2.1 hereof and enforcement for the
account and benefit of Purchaser, of any and all rights of Seller against
any other person arising out of the breach or cancellation of any such
Customer Account by such other person, or otherwise. Attached hereto as
Schedule 1.3 is a list of all Customer Accounts requiring consent to their
assignment.
1.4 Accounts Receivable. As described in Section 1.1(d) above, the
Accounts Receivable are to be assigned to Purchaser at the Closing.
However, if Seller receives any payments after the Closing in connection
with the Accounts Receivable, then Seller shall forward such payments to
Purchaser on a regular basis (but at least monthly), together with an
itemized list of the sources thereof. Attached hereto as Schedule 1.4 is a
true and complete list of all Accounts Receivable of Seller as of February
28, 1999.
1.5 Proration of March 1999 Net Income. As of the date which is
forty-five (45) days after the Closing Date, Purchaser and Seller shall
meet to account for amounts paid in respect of Accounts Receivable relating
to services performed for customers in the month of March 1999, and the
amount of expenses incurred or paid in respect of March 1999 ("March 1999
Expenses"). To the extent that March 1999 Revenues exceed March 1999
Expenses (with the difference being "March 1999 Net Income"), Seller shall
be entitled to a portion thereof equal to March 1999 Net Income times a
fraction, the numerator of which, equals the number of days prior to the
Closing Date in March and the denominator of which is 31.
1.6 Change of Names. On the Closing Date, Seller shall cease doing
business under the Seller's current Business Names to a name not the same
as or similar to ContiNet or any other symbol, trademark, service xxxx,
logo, or trade name now used by Seller. Seller shall, on the Closing Date,
deliver to Purchaser, in form suitable for filing, such certificates,
consents and other documents as are necessary to effect the transfer of the
registration of the Business Names conveyed by Seller pursuant to this
Agreement in the State of Oregon and in any other relevant jurisdiction.
1.7 Dissolution of Seller. Seller has adopted a 12-month plan of
liquidation under IRC Section 337. After Closing, in accordance with its
plan of liquidation, Seller will distribute to Selling Members all of
Seller's right, title, and interest in and to this Agreement, the Note, and
the Excluded Assets, in exchange for the surrender by Selling Members of
their capital membership certificates of Seller for cancellation, and
thereafter Seller will liquidate completely and terminate its entity
existence. From and after the Closing Date, Seller will not engage in any
business or other activity, except (i) as required to fulfill its
obligations hereunder and (ii) as required to complete its liquidation and
dissolution. Nothing in this Agreement shall prevent Seller from
dissolving promptly on or after the Closing Date, with Seller's obligations
in connection herewith thereupon becoming the joint and several obligations
of the Members.
ARTICLE 2
PURCHASE PRICE AND RETENTION
2.1 Purchase Price. In consideration of the transfer of the Assets
and the restrictive covenants set forth herein, Purchaser shall pay to
Seller, at Closing, the Purchase Price of $475,000 as follows:
(a) The sum of Two Hundred Eighty Thousand Dollars ($280,000),
consisting of the application of the Five Thousand Dollars ($5,000) xxxxxxx
money deposit previously paid by Purchaser, and the amount of Two Hundred
Seventy-Five Thousand Dollars ($275,000), in certified funds at Closing;
and
(b) $50,000 pursuant to a promissory note payable in monthly
installments of $2,284.24 (including principal and 9% interest) until paid
in full (24 month amortization). The first payment under the note shall be
30 days after the first of the month following the Closing. There shall be
no prepayment penalty.
(c) The Purchase Price will be credited in the approximate
amount of $44,000 for revenue received for services not yet performed by
Seller as of the Closing Date. This amount, though not on the September
30, 1998 Balance Sheet as a liability, will be calculated prior to closing,
and approved by both parties (as a condition to Closing), and any variance
from $44,000 will adjust the Purchase Price by means of an adjustment in
the aggregate market value in Consideration Shares to be issued pursuant to
Section 2.1(d).
(d) The Purchaser shall issue to Seller or the Members, as
directed by Seller, shares of the Purchaser's common stock, $.001 par value
("Common Stock"), (the "Consideration Shares") having an aggregate market
value ("Market Value") equal to One Hundred One Thousand Dollars
($101,000). For purposes of this Agreement, Market Value shall mean the
average closing bid price of the Common Stock on the over-the-counter
market for the seven trading days immediately preceding the Closing Date.
The Consideration Shares shall be restricted securities under the
Securities Act of 1933, as amended, (the "Securities Act").
(e) At the Closing, for security purposes only, Purchaser shall
retain possession of a number of Consideration Shares having an aggregate
Market Value of Forty-Seven Thousand Five Hundred Dollars ($47,500)(the
"Hold Back Shares"). The Hold Back Shares shall be held by Purchaser for a
period of one (1) year after the Closing Date and shall be used as
collateral to secure any obligation of Seller and the Members under this
Agreement to indemnify Purchaser after the Closing Date. At the end of the
one year, the Hold Back Shares not previously foreclosed by Purchaser in
satisfaction of secured obligations of the Seller and the Members shall be
released from Purchaser's security delivered to Seller or the Members as
directed and shall be tradable by Seller or the Members to the extent
permitted by relevant securities laws prevailing at the time.
2.2 Adjustments to the Purchase Price. Notwithstanding anything to
the contrary stated in Section 2.1, the Purchase Price shall be adjusted at
Closing as follows:
(a) A part of the Purchase Price is based on the value of
accounts receivable, accounts payable, and deferred income, as stated on
the September 30, 1998 Balance Sheet. The Purchase Price(through
adjustment of the cash portion paid at Closing) will be adjusted on a
dollar for dollar basis to reflect any difference between the balances for
these items on the Balance Sheet for the month end prior to the Closing
(February 1999) and the September 30, 1998 Balance Sheet.
2.3 Shares. It is agreed and understood that the Consideration
Shares shall be restricted securities under the Securities Act of 1933, as
amended, which are unregistered shares that are not readily tradeable in
the public capital markets for a period of one (1) year after their
issuance to Seller or its Members on the Closing Date, pursuant to Section
2.1.
2.4 Liabilities. Except for accounts payable and deferred income,
and except in connection with obligations incurred after the Closing with
respect to contracts expressly assumed by Purchaser hereunder (in
particular, the Assumed Contracts), Purchaser is not assuming any
liabilities of Seller.
ARTICLE 3
CLOSING
3.1 Time and Place. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale of the Assets (the
"Closing") shall take place on or about March 24, 1999 or such other time
mutually agreed by both parties, at the offices of Xxxxxxx Xxxxxxx,
Attorney at Law, in Portland, Oregon. The date on which the Closing occurs
shall be referred to as the "Closing Date."
3.2 Obligations of Seller and Selling Members at Closing. At the
Closing, Seller and Members shall have delivered to Purchaser the following
executed documents:
(a) a General Conveyance, Assignment and Xxxx of Sale, in form
and substance satisfactory to Purchaser, and the Seller, conveying,
selling, transferring, and assigning to Purchaser all of the Assets (the
Xxxx of Sale");
(b) a receipt acknowledging payment by Purchaser of the Purchase
Price;
(c) fully executed consents to the assignment of the Customer
Accounts, if any, in form and substance satisfactory to Purchaser;
(d) the documents evidencing Seller's change of Business Names
as required by Section 1.1(k);
(e) a certified copy of the resolutions of the Members
authorizing the execution, delivery and performance of this Agreement, the
sale of the Assets to Purchaser, and the consummation of the transactions
contemplated herein, along with a certificate of good standing of Seller
from Oregon's Secretary of State;
(f) required consents for assignment of leases, if any;
(g) the assignment of the Permits described on Schedule 5.20, in
any;
(h) consents to the assignment of Assumed Contracts, if any; and
(i) a pledge agreement in form acceptable to Seller and
Purchaser, concerning the Hold Back Shares (the "Pledge Agreement") and for
security purposes only one or more stock certificates evidencing the Hold
Back Shares.
(j) such other documents or separate instruments of sale,
assignment or transfer reasonably required by Purchaser.
3.3 Obligations of Purchaser at Closing. At the Closing, and
coincidentally with the performance by Seller and Members of their
obligations described in Section 3.2, Purchaser shall deliver to Seller
(and, if so directed by Seller with respect to clause (c) below, the
Members) the following:
(a) The xxxxxxx money deposit of $5,000, plus a cashier's check
or a certified check, or wired funds as directed by Sellers, in the amount
of $275,000, as adjusted pursuant to Section 2.2.
(b) A $50,000 promissory note in form acceptable to Seller and
Seller's counsel, in accordance with Section 2.1(b).
(c) The Consideration Shares in accordance with Section 2.1(d)
and (e), as adjusted pursuant to Section 2.1(c).
(d) Such other certificates and documents as may be called for
by the provisions of this Agreement.
3.4 Issuance of Stock. Notwithstanding anything stated to the
contrary in Sections 3.2 and 3.3, the parties acknowledge that Purchaser
shall be entitled to issue to Seller or the Members (as directed by
Seller), the Consideration Shares as provided in Section 3.3 on or before
the fifth day after Closing. Moreover, the parties acknowledge Seller and
Members shall deliver to Purchaser the Pledge Agreement and their Hold Back
Shares as provided in Section 3.2(i) after Purchaser has issued its stock
to Seller or Seller's Members.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to the Sellers to enter into this Agreement
and to consummate the transactions contemplated hereby, Purchaser
represents and warrants to the Sellers that the statements contained in
this Article 4, except as set forth in any schedules to the subsections of
this Article 4 delivered by Purchaser to the Sellers on the date hereof
(such schedules hereinafter collectively referred to as the "Disclosure
Schedules" and, individually, as a "Disclosure Schedule"), if any, which
schedules may be required to be supplemented from time to time by Purchaser
after the date of this Agreement in order to make such representations and
warranties true as of the date such representation and warranties are
given: (i) are correct and complete as of the date of this Agreement; (ii)
will be correct as of the Effective Date and the Closing Date (as though
made then and as though the Effective Date and the Closing Date,
respectively, were substituted for the date of this Agreement throughout
this Article 4); and (iii) shall survive the Closing.
4.1 Corporate Status. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Colorado and has the requisite power and authority to own or lease its
properties and to carry on its business as now being conducted.
4.2 Corporate Power and Authority. Purchaser has the corporate power
and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. Purchaser has taken all action necessary to authorize the
execution and delivery of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated
hereby.
4.3 Enforceability. This Agreement has been duly executed and
delivered by Purchaser and constitutes a legal, valid, and binding
obligation of Purchaser, enforceable against Purchaser in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at
law or in equity.
4.4 No Violation. The execution and consummation of this Agreement
by Purchaser will not: (i) contravene any provision of the certificate of
incorporation or bylaws of Purchaser; (ii) violate or conflict with any
law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment, or order of any Governmental Authority or of any arbitration
award which is either applicable to, binding upon, or enforceable against
Purchaser; or (iii) require the consent, approval, authorization, or permit
of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person.
4.5 Purchaser's Acceptance. Purchaser represents and acknowledges
that it has entered into this Agreement on the basis of its own
examination, personal knowledge, and opinion of the value of the Business.
Purchaser has not relied on any representations made by Seller other than
those specified in this Agreement, except in connection with Seller's
indicating that documents examined in the course of the due diligence
process are genuine and that, to the best of Seller's knowledge, the
statements and information contend therein are true in all material
respects. Purchaser further acknowledges that Seller has made no agreement
or promise regarding the Assets being sold to Purchaser under this
Agreement, other than those specified in this Agreement, and that Purchaser
takes all such Assets in the condition existing on the date of this
Agreement, except as otherwise provided in this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As a material inducement to Purchaser to enter into this Agreement and
to consummate the transactions contemplated hereby, the Sellers, jointly
and severally, represent and warrant to Purchaser that the statements
contained in this Article 5, except as set forth in the Disclosure
Schedules to the subsections of this Article 5 delivered by the Sellers to
Purchaser on the date hereof, if any, which schedules may be required to be
supplemented from time to time by the Sellers after the date of this
Agreement in order to make such representations and warranties true as of
the date such representations and warranties are given: (i) are correct and
complete as of the date of this Agreement; (ii) will be correct as of the
Effective Date and the Closing Date (as though made then and as though the
Effective Date and the Closing Date, respectively, were substituted for the
date of this Agreement throughout this Article 5); and (iii) shall survive
the Closing. Nothing in the Disclosure Schedules shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless
the Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in detail. In addition, nothing in the
Disclosure Schedules shall be deemed to limit the indemnification
provisions set forth in Article 10 hereof. Without limiting the generality
of the foregoing, the mere listing (or inclusion of a copy) of a document
or other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or
warranty has to do with the existence of a document or other item itself).
Nothing in this paragraph shall require the disclosure of an exception on
more than one (1) Disclosure Schedule made a part of this Agreement;
provided, however, that in all such instances, the Disclosure Schedule on
which the requested information is located must be cross-referenced on the
appropriate Disclosure Schedule.
5.1 Corporate Status. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Oregon and is in good standing and is qualified to conduct
business under all applicable laws, regulations, ordinances, and orders of
Governmental Authorities to carry on its business, including but not
limited to, the laws of the State of Oregon and has the requisite power and
authority to own or lease its properties and to carry on the Business as
now being conducted. Seller is duly authorized and qualified, under all
applicable laws, regulations, ordinances, and orders of Governmental
Authorities, to carry on the Business in the places and in the manner as
now conducted except where the failure to be so authorized or qualified
would not have a Material Adverse Effect on the Business or on the
operations, properties, assets or conditions (financial or otherwise), of
Seller.
5.2 Power and Authority. Each of the Sellers has taken all action
necessary to authorize the execution and delivery of this Agreement, the
performance of his, her, or its obligations hereunder and the consummation
of the transactions contemplated hereby. Each Seller has the requisite
competence and authority to execute and deliver this Agreement, to perform
his, her, or its respective obligations hereunder and to consummate the
transactions contemplated hereby.
5.3 Enforceability. This Agreement has been duly executed and
delivered by each Seller, and constitutes the legal, valid and binding
obligation of each Seller, enforceable against each Seller in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at
law or in equity.
5.4 Y2K. Sellers are unaware of any potential material Y2K impact on
the Business.
5.5 Subsidiaries. Seller does not presently own of record or
beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock, or any other equity interest in
any corporation, association or business entity, nor is Seller, directly or
indirectly, a participant in any joint venture, partnership or other non-
corporate entity, except as provided in Schedule 5.5.
5.6 No Violation. The execution and consummation of this Agreement
will not: (i) contravene any provision of the Operating Agreement of the
Seller (the "Charter Documents"); (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award, which is
either applicable to, binding upon or enforceable against Seller, its
assets or securities, or any Seller; (iii) conflict with, result in any
breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default)
under, or give rise to a right to terminate, amend, modify, abandon or
accelerate, any Contract which is applicable to, binding upon or
enforceable against any Seller or the assets or securities of Seller; (iv)
result in or require the creation or imposition of any Lien upon or with
respect to any of the assets or securities of Seller; or (v) to the best of
each of the Shareholder's or Seller's knowledge, require the consent,
approval, authorization or permit of, or filing with or notification to,
any Governmental Authority, any court or tribunal or any other Person.
Seller acknowledges and agrees that the Purchaser has made no
representations to Seller regarding the tax consequences of any amounts
received by Seller pursuant to this Agreement. Seller agrees to pay all
federal and state taxes which are required by law to be paid with respect
to this Agreement.
5.7 No Commissions. Except for the Xxxxxx Group, Inc., none of the
Members or Seller has incurred any obligation for any finder's or broker's
or agent's fees or commissions or similar compensation in connection with
the transactions contemplated hereby.
5.8 Financial Statements. The Sellers have delivered to Purchaser
the financial statements of Seller for the years ending December 31, 1997,
and December 31, 1998, including the notes thereto and the balance sheet
dated as of February 28, 1999, (collectively, the "Financial Statements"),
copies of which are attached hereto as Schedule 5.8 and Schedule 1.1(p).
The balance sheet dated as of February 28, 1999, of Seller included in the
Financial Statements is referred to herein as the "Current Balance Sheet."
The Financial Statements fairly present the financial position of Seller
pertaining to the Assets at each of the balance sheet dates and the results
of operations for the periods covered thereby. The books and records of
Seller fully and fairly reflect all transactions, properties, assets, and
liabilities of Seller except for revenue collected for services not yet
performed, as stated in Section 2.1(c) above. There are no material
special or non-recurring items of income or expense during the periods
covered by the Financial Statements, and the Current Balance Sheet does not
reflect any write-up or revaluation increasing the book value of any
assets, except as specifically disclosed in the notes thereto. The
Financial Statements reflect all adjustments necessary for a fair
presentation of the financial information contained therein.
5.9 Changes Since the Current Balance Sheet. Except as provided in
Schedule 5.9, since the date of the Current Balance Sheet, Seller has not
out of the ordinary course of business: (i) sold, leased or transferred any
of its properties or assets; (ii) made or obligated itself to make capital
expenditures inconsistent with past practice; (iii) incurred any
obligations or liabilities (including any indebtedness) or entered into any
transaction or series of transactions, except for this Agreement and the
transactions contemplated hereby; (iv) waived, canceled, compromised or
released any rights; (v) made or adopted any change in its accounting
practice or policies; (vi) made any adjustment to its books and records;
(vii) entered into any transaction with any Affiliate; (viii) terminated,
amended, or modified any agreement; (ix) imposed any security interest or
other Lien on any of its assets; (x) entered into any other transaction or
was subject to any event which had or may have a Material Adverse Effect on
Seller or the Business; (xi) except as contemplated in this section,
engaged in any other transaction out of the ordinary course of the
Business; (xii) paid any dividends or made any distribution of cash or
property to the Members (except for payment of their regular salaries); or
(xiii) agreed to do or authorized any of the foregoing
5.10 Litigation. There is no action, suit, or other legal or
administrative proceeding or governmental investigation pending or to any
Seller's knowledge threatened against, by or affecting any Member, Seller,
the Business, or the assets of Seller, or which questions the validity or
enforceability of this Agreement or the transactions contemplated hereby,
and to any Seller's knowledge there is no basis for any of the foregoing.
There are no outstanding orders, decrees or stipulations issued by any
Governmental Authority in any proceeding to which the Members or Seller is
or was a party which have not been complied with in full or which continue
to impose any material obligations on the Assets.
5.11 Liabilities. Schedule 5.11 sets forth all liabilities or
obligations, whether accrued, absolute, contingent or otherwise, of Seller
not reflected on the Current Balance Sheet, including: (i) liabilities and
obligations existing on the date hereof, incurred in the ordinary course of
business consistent with past practice since the date of the Current
Balance Sheet; and (ii) liabilities incurred in the ordinary course of
Business prior to the date of the Current Balance Sheet which were not
required to be recorded thereon, including but not limited to liabilities
arising out of guarantees, repurchases of any of Seller's securities, and
indemnification agreements (the liabilities and obligations referenced in
(i) and (ii) above are referred to as the "Designated Liabilities"). None
of the Designated Liabilities relates to any breach of contract, breach of
warranty, tort infringement, or violation of law, and none arose out of any
action, suit, claim, governmental investigation, or arbitration proceeding.
5.12 Indebtedness. Schedule 5.12 sets forth the outstanding principal
amount of and outstanding interest on (as of the date set forth in the
Schedule) all indebtedness for borrowed money and capitalized lease
obligations (including the outstanding principal amount and accrued but
unpaid interest and the name of the lender) owed to a bank or any other
Person by Seller and the name and telephone number of Seller's contact at
such bank or other Person.
5.13 Environmental Matters. To the best of each of the Sellers'
knowledge, the Seller has not received any notice (nor would there be any
basis for such a notice) from any local, state or federal agency having
jurisdiction over the Business, Seller's operations, properties, or assets
or responsibility for the enforcement of local, state, or federal
environmental, health, and safety laws (as defined in this Section) of any
violation of any environmental, health and safety laws by Seller or its
officers or employees, in connection with the assets.
5.14 Real Property, Leases and Significant Personal Property. Seller
does not own any real property. Schedule 5.14 sets forth:
(a) All personal property owned by Seller or used by the
Business as of the Current Balance Sheet date, included on the Current
Balance Sheet, all of which is included in the accounts reflected on the
Current Balance Sheet;
(b) All other personal property of Seller acquired since the
Current Balance Sheet date; and
(c) All leases for real and personal property to which Seller is
a party involving real or personal property, including in each case true,
complete and correct copies of all such leases and including an indication
as to which real and personal property is currently owned, or was formerly
owned, by any of the Members or Seller. All of the material machinery and
equipment and all other tangible assets of Seller are in good working order
and condition, ordinary wear and tear excepted, and have been maintained in
accordance with industry practice. All leases set forth in Schedule 5.14,
are in full force and effect and constitute valid and binding agreements of
Seller and constitute valid and binding agreements of the other parties
thereto in accordance with their respective terms, and all fixed assets
used by Seller are either owned by Seller or leased under a valid
agreement. There are no plans or projects involving the opening of new
operations or the acquisition of any real property or existing business,
with respect to which Seller has made any material expenditure in the one
year period prior to the date of the Agreement, or entered into a written
commitment therefor, which if pursued by Seller would require additional
expenditures of capital.
5.15 Good Title, Adequacy and Condition.
(a) Seller has, and at Closing will have, good and marketable
title to the Assets with full power to sell, transfer and assign the same,
free and clear of any Lien, and by virtue of the grant, conveyance, sale,
transfer, and assignment of Assets hereunder, Purchaser shall receive good
and marketable title to all of the Assets, free and clear of all Liens.
(b) The Assets constitute, in the aggregate, all of the assets
and properties necessary for the conduct of the Business in the manner in
which and to the extent to which such business is currently being conducted
and, except as provided in Schedule 5.15, include, without limitation, all
tangible and intangible assets owned by Seller including all vehicles,
equipment and inventory (more particularly described in Schedule 5.14), and
all Contracts, customer lists, intellectual property, cash and accounts
receivable, and licenses and permits of Seller.
5.16 Compliance with Laws. Except as provided in Schedule 5.16 and to
the best of Seller's and the Members' knowledge, Seller is in compliance
with all laws and regulations and is not in violation of any order of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction
over Seller and there are no claims, actions, suits or proceedings pending
or, to the knowledge of Seller or any of the Members. threatened, against
or affecting Seller or the Business, at law or in equity, before or by any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any of
them, and no notice of any such claim, action, suit or proceeding, whether
pending or threatened, has been received.
5.17 Absence of Certain Changes or Events. Since June 1, 1998, there
has not been: (i) any Material Adverse Change in the business, operations,
properties, condition (financial or other), or prospects of the Business,
taken as a whole, and no factor or condition exists and no event has
occurred that would be likely to result in any such change; or (ii) any
material loss, damage, or other casualty to the assets. Since June 1,
1998, the Seller has operated the Business in the ordinary course of
business consistent with past practice and has not: (i) incurred or failed
to pay or satisfy any material obligation or liability (whether accrued,
contingent or otherwise) relating to the operations of the Business; (ii)
incurred or failed to discharge or satisfy any Lien; (iii) sold or
transferred any of the assets of the Business or canceled any debts or
claims or waived any rights material to the Business relating to the
operations of the Business; (iv) defaulted on any material obligation
relating to the Business; (v) entered into any transaction material to the
Business, or materially amended or terminated any arrangement material to
the Business or relating to the Business; or (vi) entered into any
agreement or made any commitment to do any of the foregoing.
5.18 Intellectual Property. Schedule 5.18 hereto sets forth a true
and complete list of all of the Sellers' patents, patent applications,
licenses, copyrights, copyright registrations, copyright registration
applications, trade names, trademarks, trademark registrations, trademark
applications, servicemarks, serviceman registrations and serviceman
applications, domain names, EP addresses, trade secrets ad similar rights,
and any applications in respect thereto (the "Intellectual Property") used
by the Sellers in whole or in part for the conduct of the Business as now
conducted. All the Intellectual Property is owned by the Sellers free and
clear of any and all Liens, and no licenses for the use of any of such
rights have been granted by the Shareholders or Seller to any third
parties. All of such rights are valid and in good standing and are
adequate and appropriate for the Business as now conducted. Except as
listed on Schedule 5.18, all of such rights will be acquired by Purchaser
at the Closing, and the transfer of and use by Purchaser of such rights
will not require the consent of any other person. To the Shareholders' and
Seller's best knowledge, the operation of the Business does not infringe in
any way on or conflict with any registered or unregistered patent,
trademark, trade name, copyright, license or other right, of any person,
and the Sellers do not license any such right from others. The Sellers do
not know of any person who has wrongfully used, or threatened to use, any
of the Intellectual Property. No claim is pending or threatened or has
been made within the past five (5) years, to the effect that any such
infringement or conflict has occurred. The Intellectual Property is
adequate and appropriate for the Business as now conducted, and the
Sellers' rights in the same are valid and subsisting. The Sellers have the
full right to use their name in every jurisdiction where they do business.
5.19 Accounts Receivable. Except as provided in Schedule 5.19, all of
the Accounts Receivable of Seller are valid and legally binding, represent
bona fide transactions, and arose in the ordinary course of business of
Seller. To the best of Seller's and the Members' knowledge, all of such
Accounts Receivable posted on or after October 1, 1998, are good and
collectible receivables and will be collected in full in accordance with
the terms of such Accounts Receivable, without set-off or counterclaims.
5.20 Licenses and Permits. Except as provided in, Schedule 5.20 and
to the best of Seller's and Members' knowledge, Seller possesses all
licenses and required governmental or official approvals, permits or
authorizations (collectively, the "Permits") for its Business and
operations. All Permits are valid and in full force and effect, Seller is
in compliance in all material respects with their requirements, and no
proceeding is pending or to Seller's or any Member's knowledge threatened
to revoke or amend any of the Permits. None of the Permits is or will be
impaired or in any way affected by the execution and delivery of this
Agreement or the transactions contemplated hereby.
5.21 Contracts, Customer Lists and Employment Matters. Schedule 5.21
lists all customers and contracts of Seller that account for more than 1%
of Seller's annual gross revenue, all contracts of Seller requiring payment
or performance involving $10,000 or more, and all contracts and obligations
with a term longer than one (1) year (collectively, the "Material
Contracts"). All of the Material Contracts: (i) are valid and binding
obligations of the parties; (ii) are not in default and will not become in
default solely upon notice or the passage of time without curative action;
and (iii) will remain in full force and effect following the Closing,
without requiring the consent of the other parties thereto and without
causing a default, right to terminate or right to modify any terms under
any such Material Contracts, notwithstanding any provisions in any such
Material Contracts which may set forth a restriction or change in control
of Seller. Seller has delivered to Purchaser true, complete and correct
copies of all Material Contracts prior to Closing. None of the parties to
the Material Contracts (which include all of Seller's significant
Customers) has canceled or substantially reduced or, to the knowledge of
Seller or any of the Shareholders, is currently attempting or threatening
to cancel any Material Contract or substantially reduce utilization of the
services provided by Seller, and Seller has complied with all commitments
and obligations pertaining to any Material Contract, and is not in default
under any such Material Contract, and no notice of default has been
received.
5.22 Predecessor Status, Etc. There have been no predecessor limited
liability companies or corporations for the past five (5) years of Seller.
5.23 Spin-Off by Seller. Within the preceding two (2) years, there
has not been any sale, spin-off or split-up of material assets of Seller or
any other person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, Seller.
5.24 Records of Seller. All material corporate actions taken by
Seller have been duly authorized or ratified. All accounts, books, ledgers
and official and other records of Seller have been fully, properly and
accurately kept and completed in all material respects, and there are no
material inaccuracies or discrepancies of any kind contained therein.
5.25 Accuracy of Information Furnished by Seller and the Shareholders.
No statement or information contained in this Agreement and the various
Schedules and Annex attached hereto or in any certificate furnished to
Purchaser pursuant hereto, contains or shall contain any untrue statement
of a fact or omits or shall omit any fact necessary to make the information
contained therein not misleading. The Sellers have provided Purchaser with
true, accurate and complete copies of all documents listed or described in
the various Schedules attached hereto. If the Sellers become aware of any
fact or circumstance which would change a representation or warranty of
Seller in this Agreement, the party with such knowledge shall immediately
give notice of such fact or circumstance to Purchaser. However, such
notification shall not relieve the Sellers of their obligation under this
Agreement, and at the sole option of Purchaser, the truth and accuracy of
any and all warranties and representations of Seller at the date of this
Agreement shall be a precondition to the consummation of this transaction.
5.26 Investment Intent. The Sellers are acquiring the Consideration
Shares hereunder for their own account and not with a view to, or for the
sale in connection with, any distribution of any of the Consideration
Shares, except in compliance with applicable federal and state securities
laws. The Sellers have had the opportunity to discuss the transactions
contemplated hereby with Purchaser and have had the opportunity to obtain
such information pertaining to Purchaser as has been requested, including
but not limited to, filings made by Purchaser with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
5.27 Acknowledgment Regarding Disclosure of Certain Materials. The
Sellers hereby acknowledge and warrant that each of the Sellers has been
provided access to the following information: (i) all material books and
records of Purchaser, (ii) all material contracts and documents relating to
the transaction contemplated by this Agreement; (iii) all documents
required to be provided to the Shareholders pursuant to Rule 502 of the
Exchange Act; and (iv) the opportunity to question the appropriate
executive officers and partners.
5.28 Survival. Each of the representations and warranties set forth
in this Article 5 shall survive the Closing.
ARTICLE 6
CONDUCT OF BUSINESS PENDING THE CLOSING
6.1 Conduct of Business by Seller Pending the Closing. Except as
provided in Schedule 6.1, Seller and the Members, jointly and severally,
covenant and agree that, except as otherwise expressly required or
permitted by the terms of this Agreement, between the date of this
Agreement and the Closing, the business of Seller shall be conducted only
in, and Seller shall not take any action except in, the ordinary course of
business consistent with past practice. Seller and the Members shall use
its or their reasonable best efforts to preserve intact Seller's business
organizations, to keep available the services of its current officers,
employees and consultants, and to preserve its present relationships with
customers, suppliers and other Persons with which it has business
relations. By way of amplification and not limitation, Seller shall not,
except as expressly required or permitted by the terms of this Agreement
between the date of this Agreement and the Closing, directly or indirectly,
do or propose or agree to do any of the following without the prior written
consent of Purchaser:
(a) amend or otherwise change its Charter Documents;
(b) issue, sell, pledge, dispose of, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of any of its
assets, tangible or intangible; or any shares of its capital stock of any
class, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock or other securities;
(d) sell, lease or transfer any of its properties or assets
(other than in the ordinary course of business consistent with past
practice), or acquire (including, without limitation, for cash or shares of
stock, by merger, consolidation or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof or any assets; or make any investment either by purchase
of stock or securities, contributions of capital or property transfer, or
purchase any property or assets of any other Person; make or obligate
itself to make capital expenditures, incur any obligations or liabilities
including, without limitation, any indebtedness for borrowed money, issue
any debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any Person, or
make any loans or advances, modify, terminate, amend or enter into any
Contract other than as expressly required or permitted herein, or impose
any security interest or other Lien on any of its assets;
(e) pay any bonus to its officers or employees, or increase the
compensation payable or to become payable to its officers or employees or,
except as presently bound to do, grant any severance or termination pay to,
or enter into any employment or severance agreement with, any of its
directors, officers or employees, or establish, adopt, enter into or amend
or take any action to accelerate any rights or benefits which any
collective bargaining, bonus, profit sharing trust, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or
employees;
(f) take any action with respect to accounting policies or
procedures other than in the ordinary course of business and in a manner
consistent with past practices;
(g) pay, discharge or satisfy any existing claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of due and
payable liabilities reflected or reserved against in the Financial
Statements, as appropriate, or liabilities incurred after the date thereof
in the ordinary course of business and consistent with past practice or
delay paying any amount payable beyond forty-five (45) days following the
date on which it is due, except to the extent being contested in good
faith;
(h) enter into any transaction or agreement with any of the
Sellers or an Affiliate thereof except for such transactions or agreements
expressly permitted herein; or
(i) agree, in writing or otherwise, to take or authorize any of
the foregoing actions or any action which would make any representation or
warranty in Article 5 untrue or incorrect in any respect.
ARTICLE 7
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further
actions as may be necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement and the transactions
contemplated hereby and to satisfy the conditions set forth in Articles 8
and 9. The Sellers shall cause Seller to comply with all of the covenants
of Seller under this Agreement. The Sellers covenant and agree to deliver
to Purchaser at the Closing the certificates, opinions and other documents
required to be delivered to Purchaser pursuant to Article 8, and Purchaser
covenants and agrees to deliver to the Sellers the certificates and other
documents required to be delivered to the Sellers pursuant to Article 9.
7.2 Confidentiality, Publicity. Except as required by law, neither
party shall disclose the terms of this transaction to any third party nor
make any public announcement related to this Agreement or the transactions
contemplated hereby without the prior notification of the other party
hereto. The disclosing party shall provide the other party with a copy of
all public announcements proposed to be made by such party which relate to
this Agreement or the transactions contemplated hereby prior to the release
of such announcements to the public.
7.3 No Other Discussions. Until this Agreement is terminated as
herein provided, none of the Members, Seller, or their respective
Affiliates, employees, agents, and representatives will: (i) initiate,
encourage the initiation by others of discussions or negotiations with
third parties or respond to solicitations by third persons relating to any
merger, sale, or other disposition of any substantial part of the assets,
the Business or the properties of Seller (whether by merger, consolidation,
sale of stock, sale of assets, or otherwise); or (ii) enter into any
agreement or commitment (whether or not binding) with respect to any of the
foregoing transactions. The Sellers will immediately notify Purchaser if
any third party attempts to initiate any solicitation, discussion, or
negotiation with respect to any of the foregoing transactions.
7.4 Due Diligence Investigation. Purchaser shall be entitled to
conduct, prior to Closing, a due diligence investigation of Seller, its
assets and the Business. Seller shall provide Purchaser and its designated
agents and consultants with reasonable access during normal business hours
to Seller's business and the assets and all books, records, documents,
correspondence and other materials ("Proprietary Documents") related
thereto which Purchaser, its agents and consultants reasonably require to
conduct such due diligence review; provided, however, that without the
prior consent of Seller, Purchaser shall not contact, interview, meet,
solicit or otherwise discuss the transactions contemplated by this
Agreement with any customers, employees, or suppliers of Seller. Purchaser
agrees to keep strictly confidential and not to disclose to third parties
all or any portion of Proprietary Documents. Upon termination of this
Agreement, Purchaser shall return all Proprietary Documents, copies,
extracts, and summaries thereof, in any form or medium, in its possession,
to Seller.
7.5 Related Party Agreements. Set forth in Schedule 7.5 are all of
the existing agreements between Seller and the Members or their Affiliates
affecting the Assets, the Business, or the Sellers' ability to perform
their respective obligations hereunder, and unless otherwise stated, such
agreements shall continue to survive after the Closing.
7.6 Cooperation. Each of the parties agrees to cooperate with the
others in the preparation and filing of all forms, notifications, reports
and information, if any, required or reasonably deemed advisable pursuant
to any law, rule or regulation in connection with the transactions
contemplated by this Agreement and to use their respective best efforts to
agree jointly on a method to overcome any objections by any Governmental
Authority to any such transactions.
7.7 Other Actions. Prior to the Closing, each of the parties hereto
shall take all appropriate actions, and do, or cause to be done, all things
necessary, proper or advisable under any applicable laws, regulations, and
contracts to consummate and make effective the transactions contemplated
herein, including, without limitation, obtaining all licenses, permits,
consents, approvals, authorizations, qualifications, and orders of any
Governmental Authority and parties to Contracts with Seller as are
necessary for the consummation of the transactions contemplated hereby.
Each of the parties shall make on a prompt and timely basis all
governmental or regulatory notifications and filings required to be made by
it for the consummation of the transactions contemplated hereby. The
parties also agree to use best efforts to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby and to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby.
7.8 Notification of Certain Matters. The Sellers shall give prompt
notice to Purchaser of the occurrence or non-occurrence of any event which
would likely cause any representation or warranty contained herein to be
untrue or inaccurate, or any covenant, condition, or agreement contained
herein not to be complied with or satisfied.
7.9 Payoff and Estoppel Letters. Prior to the Closing, the Sellers
shall request and deliver to Purchaser, with respect to any Indebtedness
affecting the Assets, the Business, or the Sellers' ability to perform
their respective obligations hereunder, payoff and estoppel letters from
such holders of any Indebtedness, which letters shall contain payoff
amounts, per diem interest, wire transfer instructions and an agreement to
deliver to Purchaser, upon full payment of any such Indebtedness, UCC-3
termination statements, satisfactions of mortgage or other appropriate
releases and any original promissory notes or other evidences of
indebtedness marked canceled. This Section is not intended to cover the
equipment leases identified in Schedule 1.1(e).
7.10 Transition Services. Purchaser shall hire Members to provide
transition services to the Purchaser for 30 days following the Closing, to
be performed during normal business hours at their then current salary
rate. During this transition period the Members will also be entitled to
their normal benefits (such as health insurance) that they were receiving
prior to the Closing.
7.11 Accounting Treatment. Sellers and Purchaser agree to follow tax
accounting treatment and allocations in respect of the sale of the Assets
consistent with the treatment and allocations described in Schedule 7.11.
7.12 Covenant Not to Compete. In order to ensure that Purchaser will
realize the benefits of the transactions contemplated hereby, Sellers agree
with Purchaser that Sellers will not, directly or indirectly, alone or as a
partner, joint venturer, officer, director, employee, consultant, agent,
independent contractor, trustee, custodian, fiduciary, lender, or security
holder of any company, business, or entity, or otherwise:
(a) for a period of three (3) years following the Closing Date,
engage in, or finance or provide financial assistance with respect to, any
business activity currently conducted by Seller or Purchaser, or conducted
by either of them in the preceding three (3) years, including, without
limitation, the Business, in the Restricted Territory except on behalf of
Purchaser; provided, however, that, the beneficial ownership of less than
five percent (5%) of the shares of stock of any corporation having a class
of equity securities actively traded on a national securities exchange or
over-the-counter market shall not be deemed, in and of itself, to violate
the prohibitions of this section;
(b) for a period of three (3) years following the Closing Date,
directly or indirectly: (i) induce any Person which is a customer of
Purchaser, its subsidiaries and their respective Affiliates, successors, or
assigns (collectively, the "Purchaser Companies") to patronize any business
directly or indirectly in competition with the Business conducted by the
Purchaser Companies in the Restricted Territory; (ii) canvass, solicit, or
accept from any Person which is a customer of the Purchaser Companies in
the Restricted Territory, any such competitive business; or (iii) request
or advise any Person which has a business relationship with the Purchaser
Companies in the Restricted Territory to withdraw, curtail, or cancel any
such Person's business with such entity;
(c) for a period of three (3) years following the Closing Date,
directly or indirectly employ, or solicit the employment of, any person who
was employed by Seller or the Purchaser Companies at or within the prior
six (6) months, or in any manner seek to induce any such person to leave
his or her employment; and
(d) at any time following the Closing Date, directly or
indirectly, in any way utilize, disclose, copy, reproduce, or retain in its
or their possession Seller's proprietary rights or records, including, but
not limited to, any of its customer lists. Notwithstanding the foregoing,
Seller may retain copies of all of its financial statements for tax
reporting purposes.
Each of the Sellers agrees and acknowledges that the restrictions
contained in this section are reasonable in scope and duration and are
necessary to protect the Purchaser Companies after the Closing. The
parties agree and acknowledge that any breach of this section will cause
irreparable damage to the Purchaser Companies and upon breach of any
provision of this section, the Purchaser Companies shall be entitled to
injunctive relief, specific performance, or other equitable relief;
provided, however, that, this shall in no way limit any other remedies
which the Purchaser Companies may have (including, without limitation, the
right to seek monetary damages). Purchaser and each of the Sellers hereby
agrees that Purchaser may assign, without limitation, the foregoing
restrictive covenants to any successor to Purchaser's business.
7.13 Employees. Purchaser agrees to hire the employees of the Seller
following the Closing, with the exception of Xxxx Xxxx. They will work for
Purchaser on an "at will" basis, terminable at any time except that
Purchaser agrees that if any of them is terminated within ninety (90) days
of the closing, such person shall receive a severance payment equal to
ninety (90) days pay. The Seller has represented that it will be
terminating their employment as of the Closing Date, and that it will
remain responsible for all salary, benefit, and tax matters pertaining to
their employment with the Seller. This Section 7.3 and Section 7.10 are
not additive with respect to Xxxxxx XxXxxxxxx.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions, any or all of which may be waived in whole or
in part by Purchaser;
8.1 Accuracy of Representations and Warranties; Compliance with
Obligations. The representations and warranties of the Sellers and Seller
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date with the same force and effect as
though made at and as of that time except: (i) for changes specifically
permitted by or disclosed pursuant to this Agreement; and (ii) that those
representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. The Members
and Seller shall have performed and complied with all of their obligations
required by this Agreement to be performed or complied with at or prior to
the Closing Date, including those obligations set forth in Article 7
herein. The Members and Seller shall have delivered to Purchaser a
certificate, dated as of the Closing Date, duly signed, certifying that all
such obligations have been performed and complied with.
8.2 No Material Adverse Change or Destruction of Property. Between
June 1, 1998, and the Closing Date: (i) there shall have been no Material
Adverse Change in Seller or the Business; (ii) there shall have been no
adverse federal, state, or local legislative or regulatory change affecting
in any material respect the service or products of Seller or the Business;
and (iii) no material portion of the Assets shall have been damaged by
fire, flood, casualty, riot, or other cause (regardless of insurance
coverage for such damage), and there shall have been delivered to Purchaser
a certificate to that effect, dated as of the Closing Date and signed by
the Sellers.
8.3 Member Certificate. Seller shall have delivered to Purchaser
copies of resolutions adopted by its Members authorizing the transactions
contemplated by this Agreement, certified as of the Closing Date by the
Secretary of Seller as being true, correct, and complete.
8.4 Consent. Seller and the Members shall have received consents to
the transactions contemplated hereby and waivers of rights to terminate or
modify any material rights or obligations of Seller and the Members from
any person from whom such consent or waiver is required under any contract
to which the Members, Seller, or the Assets are bound, or who, as a result
of the transactions contemplated hereby, would have such rights to
terminate or modify such contracts, either by the terms thereof or as a
matter of law. Without limiting the foregoing, the Sellers shall have
received all necessary consents to the transactions contemplated by this
Agreement including, without limitation, the transfer and assignment of all
operating permits necessary for the operation of the Business, and shall
have provided all proper notifications to and obtained all necessary
consents from such local, municipal, state or governmental authorities as
may be necessary in order to consummate the transactions contemplated
hereunder.
8.5 No Adverse Litigation. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body
which shall seek to restrain, prohibit, invalidate or collect damages
arising out of the transactions contemplated hereby, and which, in the
judgment of Purchaser, makes it inadvisable to proceed with the
transactions contemplated hereby.
8.6 Opinion Letter. Purchaser shall have received an opinion dated
as of the Closing Date from counsel for Seller and the Members, in
substantially the form attached hereto as Annex I.
8.7 General. All actions taken by the Sellers and Purchaser in
connection with the consummation of the transaction contemplated hereby and
all certificates, opinions and other documents required to effect the
transactions contemplated hereby, will be reasonably
satisfactory in form and substance to Purchaser.
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions, any or all of which may be waived in whole or
in part by the Sellers:
9.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Purchaser contained in
this Agreement shall be true and correct in all material respects at and as
of the Closing Date with the same force and effect as though made at and as
of that time except: (i) for changes specifically permitted by or disclosed
pursuant to this Agreement; and (ii) that those representations and
warranties which address matters only as of a particular date shall remain
true and correct as of such date. Purchaser shall have performed and
complied in all material respects with all of its obligations required by
this Agreement to be performed or complied with at or prior to the Closing
Date. Purchaser shall have delivered to the Sellers a certificate, dated
as of the Closing Date, and signed by an executive officer thereof,
certifying that such representations and warranties are true and correct,
and that all such obligations have been performed and complied with, in all
material respects.
9.2 Other Conditions. At the Closing, Purchaser shall have performed
its obligations as set forth in Section 3.3.
9.3 Corporate Certificate. Purchaser shall have delivered to Seller
copies of resolutions adopted by its Board of Directors authorizing the
transactions contemplated by this Agreement certified as of the Closing
Date by the Secretary of Purchaser as being true, correct, and complete.
9.4 No Adverse Litigation. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body
which shall seek to restrain, prohibit, invalidate, or collect damages
arising out of the transactions contemplated hereby, and which, in the
judgment of the Sellers, makes it inadvisable to proceed with the
transactions contemplated hereby.
ARTICLE 10
NON-ASSUMPTION OF LIABILITIES; INDEMNIFICATION
10.1 Non-Assumption of Liabilities; Indemnification.
(a) The Sellers agree, jointly and severally, to indemnify and
hold Purchaser and its Affiliates harmless from and against the aggregate
of all expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and
expenses) incurred or suffered by Purchaser (collectively, "Indemnifiable
Damages") resulting from or arising out of: (i) any breach of a
representation or warranty made by the Sellers in or pursuant to this
Agreement; (ii) any breach of the covenants or agreements made by the
Sellers in this Agreement; (iii) any inaccuracy in any certificate
delivered by the Sellers pursuant to this Agreement; (iv) any
misrepresentation in or omission from any Schedule to this Agreement; (v)
any liability of the Sellers to creditors of the Sellers which is imposed
on Purchaser whether as a result of bankruptcy proceedings or otherwise and
whether as an account payable by the Sellers or as a claim of alleged
fraudulent conveyance or preferential payments within the meaning of the
United States Bankruptcy Code or otherwise; (vi) the existence of creditors
of the Sellers which are not disclosed to Purchaser; or (vii) any violation
by the Sellers of the requirements of any governmental authority relating
to the reporting and payment of federal, state, local or other income,
sales, use, franchise, excise, payroll, property or other tax liabilities
of the Sellers which occurs or exists prior to the Closing Date. The
indemnity obligation contained in this Section 10.1(a) shall continue for a
period of three (3) years from and after the Closing Date; provided,
however, that the indemnity obligations hereunder shall continue
indefinitely with respect to any claim arising from or relating to matters
for which Purchaser shall have provided notice to the Sellers of
Purchaser's intent to seek indemnification for such claims prior to the
expiration of such three (3) year period.
(b) The Sellers agree, jointly and severally, to indemnify and
hold Purchaser and its Affiliates harmless from and against the aggregate
of all Indemnifiable Damages resulting from or arising out of any
occurrence or circumstance (whether known or unknown) which occurs or
exists on or prior to the Closing Date and which constitutes, or which by
the lapse of time or giving notice (or both) would constitute, a breach or
default by the Sellers under any lease, Contract or other instrument or
agreement whether written or oral. The indemnity obligation contained in
this Section 10.1(b) shall continue for a period of two (2) years from and
after the Closing Date. Notwithstanding the foregoing time limitation, the
obligation of the Sellers to indemnify Purchaser hereunder shall continue
indefinitely with respect to any claim arising from or relating to matters
for which Purchaser shall have received a formal demand or allegation from
a third party and provided notice thereof to the Sellers and of Purchaser's
intent to seek indemnification for such claims hereunder within two (2)
years of the Closing Date.
(c) Sellers' indemnity obligations under this Section shall be
subject to the following:
(i) If any claim is asserted against Purchaser that would
give rise to a claim by Purchaser against Sellers for indemnification under
the provisions of this Section, then Purchaser shall promptly given written
notice to Selling Members concerning such claim and Selling Members shall,
at no expense to Purchaser, defend the claim, except that if the claim is
material to the ongoing conduct of the Business, Purchaser shall control
and Sellers shall fund such defense.
(d) Purchaser agrees to defend, indemnify and hold Seller and
Members from and against:
(i) Any and all claims, liabilities, and obligations of
every kind and description arising out of or related to the operation of
the Business following Closing or arising out of Purchaser's failure to
perform obligations of Sellers expressly assumed by Purchaser pursuant to
this Agreement.
(ii) Any and all damage or deficiency resulting from any
material misrepresentation, breach of warranty or covenant, or
nonfulfillment of any agreement on the part of Purchaser under this
Agreement.
10.2 Assumption of Specific Liabilities. Purchaser agrees to perform
all of the Sellers' contractual obligations related to the Assets and the
Business to the extent, and only to the extent, such obligations have been
expressly assumed by Purchaser hereunder and that they first mature and are
required to be performed by Purchaser after the close of business on the
Closing Date. Purchaser agrees to indemnify and hold Sellers harmless from
all expenses, losses, costs, deficiencies, liabilities and damages arising
solely from events occurring after the Closing related to Purchaser's
ownership of the Assets and Purchaser's conduct of the Business.
10.3 Survival of Representations and Warranties. Each of the
representations and warranties made by Seller and the Members in this
Agreement or pursuant hereto shall survive for a period of three (3) years
following the Closing Date. Notwithstanding any knowledge of facts
determined or determinable by any party by investigation, each party shall
have the right to fully rely on the representations, warranties, covenants,
and agreements of the other parties contained in this Agreement or in any
other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties contained
in this Agreement is independent of each other representation, warranty,
covenant and agreement.
10.4 Matters Involving Third Parties.
(a) If any third party shall notify Purchaser or any of the
Sellers with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against the other party under this
Article 10, then the party receiving such Third Party Claim shall promptly
notify the other party in writing; provided, however, that no delay on the
part of the notifying party in notifying the other party shall relieve such
party from any obligation hereunder unless (and then solely to the extent)
the indemnifying party is thereby prejudiced.
(b) Purchaser will have the right to defend against all Third
Party Claims with counsel of its choice reasonably satisfactory to Sellers.
If any of the Sellers is the notifying party, such party may retain
separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim. Neither party will consent to the entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving to the notifying party by the third
party of a release of all liability in respect of such Third Party Claim or
which seeks an injunction, specific performance, or a declaration of rights
or other equitable relief that, in the good faith judgment of notifying
party, will likely have a material adverse effect on the notifying party's
operations without the prior written consent of the notifying party (which
shall not to be withheld unreasonably).
ARTICLE 11
SECURITIES LAW MATTERS
11.1 Disposition of Shares. The Sellers represent and warrant that
the Consideration Shares being acquired by the Sellers hereunder are being
acquired and will be acquired for its own account, and will not be sold or
otherwise disposed of, except pursuant to (a) an exemption from the
registration requirements under the Securities Act, which does not require
the filing by Purchaser with the SEC of any registration statement,
offering circular or other documents, in which case, the Sellers shall
first supply to Purchaser an opinion of counsel (which counsel and opinions
shall be satisfactory to Purchaser) that such exception is available, or
(b) an effective registration statement filed by Purchaser with the SEC
under the Securities Act.
11.2 Legend. The certificates representing the Consideration Shares
shall bear the following legend:
THE SALE OF THE SECURITIES REPRESENTED BY THIS
INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). NO SALE,
HYPOTHECATION, PLEDGE OR OTHER DISPOSITION OF THESE
SECURITIES MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATING THERETO UNLESS THE SALE
OR OTHER DISPOSITION IS MADE IN ACCORDANCE WITH RULE
144 UNDER THE ACT OR THE HOLDER OF SUCH SECURITIES
PROVIDES AN OPINION OF COUNSEL SATISFACTORY TO SKYLYNX
COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT.
11.3 Contractual Restrict Legend. The Hold Back Shares shall bear the
following legend:
THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED
HEREBY HAS BEEN CONTRACTUALLY RESTRICTED. THE HOLDER
AGREES THAT SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF
SKYLYNX COMMUNICATIONS, INC. UNTIL THE EXPIRATION OF
SUCH RESTRICTION ON , 2000.
------------
11.4 Delivery of the Hold Back Shares. At the end of the Hold Back
Period, the Contractual Restriction Legend found in Section 11.3 shall be
removed from the Hold Back Shares to reflect the expiration of the Hold
Back Period. Purchaser shall cause shares to be delivered to the Sellers,
subject to adjustments that may be required to the Hold Back Shares,
including but not limited to, stock splits, dividends, redemptions, and any
foreclosure of the Hold Back Shares, pursuant to the pledge agreement
specified in Section 3.2(i), or any portion thereof.
11.5 No Bar. If the Hold Back Shares are insufficient to set off any
claim for any Indemnifiable Damages hereunder (or have been delivered in
whole or in part to the Sellers prior to the making or resolution of such
claim), then Purchaser may take any action or exercise any remedy available
to it by appropriate legal proceeding to collect the Indemnifiable Damages.
ARTICLE 12
DEFINITIONS
12.1 Defined Terms. As used herein, the following terms shall have
the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Securities and Exchange Act of
1934, as in effect on the date hereof.
"Business Activity" as used in Section 7.12, as well as the phrases
"business activity currently conducted", "in competition with the business"
and "such competitive business", and all similar phrases used in that
section with respect to activities covered by the covenant not to compete
shall mean the areas of dial-up internet subscription services, dedicated
access internet subscription services, and website design/site hosting
subscription services, as stated in the parties' binding letter of intent,
Section 8.
"Common Stock" shall mean shares of common stock of the Purchaser,
$0.001 par value.
"Consideration Shares" shall have the meaning set forth in Section 2.
1 (d) above.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust, commitment,
obligation, or other contract, agreement, or instrument, whether written or
oral.
"Governmental Authority" means any nation or government, any state,
regional, local, or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government.
"Knowledge" or "to the best knowledge" or similar terms as used in
this Agreement, unless otherwise specifically defined herein, shall mean
the actual or constructive knowledge, after due inquiry and investigation,
of each of the Members of Seller, and its key employees in managerial
roles.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien, or charge of any kind (including, but not limited to, any conditional
sale or other title retention agreement, any lease in the nature thereof,
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code or comparable law or any jurisdiction in connection
with such mortgage, pledge, security interest, encumbrance, lien, or
charge).
"Market Value" means the average closing price of a share of the
Common Stock on the over-the-counter market for the seven trading days
immediately preceding the Closing Date.
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities,
rights, obligations, operations, business or prospects which change (or
effect) individually or in the aggregate, is materially adverse to such
condition, properties, assets, liabilities, rights, obligations,
operations, business or prospects.
"Person" means an individual, partnership, corporation, business
trust, joint stock corporation, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever nature.
"Restricted Territory" means the state of Oregon.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible,
withholding, social security, and unemployment taxes imposed by any
federal, state, local, or foreign governmental agency, and any interest or
penalties related thereto.
ARTICLE 13
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of all of the parties hereto at
any time prior to Closing; or
(b) by Purchaser in the event of a material breach by the
Sellers of any provision of this Agreement; or
(c) by either party if the Closing shall not have occurred by
April 30, 1999, notwithstanding the diligent efforts of all parties, and
the parties hereto have not agreed to extend the date to close.
13.2 Effect of Termination. Except as expressly stated herein, in the
event of termination of this Agreement pursuant to Section 13.1, this
Agreement shall forthwith become void; provided, however, that nothing
herein shall relieve any party from liability for the willful breach of any
of its representations, warranties, covenants or agreements set forth in
this Agreement. Purchaser shall immediately return to the Sellers any and
all documents pursuant to Section 7.4.
ARTICLE 14
GENERAL PROVISIONS
14.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered (and
shall be deemed delivered) by certified or registered mail (first class
postage pre-paid), guaranteed overnight delivery, or facsimile transmission
if such transmission is confirmed by delivery by certified or registered
mail (first class postage pre-paid) or guaranteed overnight delivery, to
the following addresses and telecopy numbers (or to such other addresses or
telecopy numbers which such party shall designate in writing to the other
party):
(a) If to Purchaser or, following the Closing:
SkyLynx Communications, Inc.
000 Xxxxx Xxxxxx Xxxxxx, Xxxx 000
Xxxxxx, XX 00000
Attention: Chairman
Fax: (000) 000-0000
With a copy to:
XxXxxxxxx, Will & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
Fax: (000) 000-0000
(b) If to the Sellers prior to the Closing:
ContiNet, LLC
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx XxXxxxxxx and Xxxx Xxxx
With a copy to:
X. Xxxxx XxXxxxxx
Xxxxx, Gartland, Nelson, XxXxxxxx & Xxxx, P.C.
X.X. Xxx 00000
Xxxxxx, XX 00000-0000
If to the Sellers after the Closing:
Next Step Communications, LLC
c/o Xxxx Xxxx
000 Xxx Xxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
14.2 Entire Agreement. This Agreement (including the Schedules and
Annex attached hereto) and other documents delivered at the Closing
pursuant hereto, contains the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings (oral or written) between or among the parties with respect
to such subject matter. The Schedules and Annex constitute a part hereof
as though set forth in full above.
14.3 Expenses. Except for the closing fees (estimated to be
approximately Fifteen Hundred Dollars ($1,500) which are to be shared
equally between the parties, and as otherwise provided herein, the parties
shall pay their own fees and expenses, including their own accounting and
counsel fees, incurred in connection with the negotiation and preparation
of this Agreement or any transaction contemplated hereby. Sellers shall be
liable for all sales, application, or transfer taxes or other such fees and
costs incurred in connection with this Agreement or any transaction
contemplated hereby.
14.4 Amendment; Binding Effect; Assignment. This Agreement may not be
modified, amended, supplemented, canceled or discharged, except by written
instrument executed by all parties. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Except as expressly provided herein,
the rights and obligations of this Agreement may not be assigned by the
Sellers without the prior written consent of Purchaser.
14.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
14.6 Governing Law: Interpretation. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State
of Oregon applicable to contracts executed and to be wholly performed
within such State.
14.7 Access to Records. After the Closing Date, the Sellers shall
have reasonable access during regular business hours to the books and
records of Seller that are necessary to permit the Sellers to exercise
their rights hereunder and to obtain any information necessary for their
personal and corporate tax matters.
14.8 Attorneys' Fees. If either party to this Agreement shall bring
any action for any relief against the other, declaratory or otherwise,
arising out of or in connection with this Agreement or the breach or
interpretation hereof, the losing party shall pay to the prevailing party a
reasonable sum for attorney fees incurred in bringing such suit and/or
enforcing any judgment granted therein, all of which shall be deemed to
have accrued upon the commencement of such action and shall be paid whether
or not such action is prosecuted to judgment. Any judgment or order
entered in such action shall contain a specific provision providing for the
recovery of attorney fees and costs incurred in enforcing such judgment.
For the purposes of this section, attorney fees shall include, without
limitation, fees incurred in the following: (1) postjudgment motions; (2)
contempt proceedings; (3) garnishment, levy, and debtor and third party
examination; and (4) discovery.
14.9 Mediation, Arbitration and Bench Trial.
(a) If any dispute arises between the parties, either party may
request mediation, utilizing United States Arbitration & Mediation
Services, of Portland, Oregon ("USA&M"). The parties shall attempt to
settle on a mediator, but if they fail to do so, shall accept a mediator
chosen by USA&M. The mediation shall take place as soon as reasonably
possible in Eugene, Oregon, at the offices agreeable to the parties. Costs
shall be split equally between the parties.
(b) If the mediation is unsuccessful, either party may request
arbitration and appoint an arbitrator selector. The other party shall also
choose an arbitrator selector, and the two arbitrator selectors shall
choose an arbitrator. If the choice of the arbitrator is not made within
10 days of the choosing of the first arbitrator selector, then either party
may apply to the presiding judge of the judicial district where the
Premises are located to appoint the required arbitrator.
(c) The arbitrator chosen as provided by Section 14.9(b) shall
proceed according to United States Arbitration and Mediation Rules
governing arbitration, and the award of the arbitrators shall have the
effect therein provided. The arbitration shall take place in Lane County,
Oregon.
(d) Each party shall have the right to opt out of binding
arbitration as provided above, and instead elect a bench trial. However,
the right to elect a bench trial must be exercised prior to a party either
initiating an arbitration or answering an arbitration complaint. If either
of those actions are taken with respect to an arbitration, the right to
elect a bench trial shall be deemed irrevocably waived.
(e) The parties further agree, in the event any dispute arises
between the parties that cannot be resolved by mediation, and which is not
resolved by the process of arbitration, not to elect a trial by jury of any
issue triable of right by jury, and to waive any right to trial by jury
fully to the extent that any such right shall now or hereafter exist with
regard to this Agreement, or any claim, counterclaim or action arising in
connection therewith. This waiver of right to trial by jury is given
knowingly and voluntarily by each party, and is intended to encompass
individually each instance and each issue as to which the right to a trial
by jury would otherwise accrue.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
SKYLYNX COMMUNICATIONS, INC.
a Colorado corporation
By:
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Name:
---------------------------------
Title:
--------------------------------
CONTINET, LLC
an Oregon limited liability company
By:
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Name:
---------------------------------
Title:
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XXXXXX XxXXXXXXX
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XXXX XXXX
