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EXHIBIT 10.42
MUTUAL RELEASE AND SETTLEMENT AGREEMENT
This MUTUAL RELEASE AND SETTLEMENT AGREEMENT (hereinafter "Settlement
Agreement") is entered into by and between the following parties: Bikers Dream,
Inc., and its wholly owned subsidiary Ultra Acquisition Corporation,
(hereinafter sometimes referred to collectively as "Bikers") Xxxx Acres
Investments, Inc., (hereinafter "Xxxx"); Xxxxxxx X. Xxxxxxx, (hereinafter
"Xxxxxxx"); Xxxxxxx Xxxxx (hereinafter "Alden") and Xxxx Xxxxxxx "Vini" Xxxxxxxx
(hereinafter "Xxxxxxxx". This Settlement Agreement is made with reference to the
following recitals of fact:
RECITALS
A. On September 13, 1996, Bikers and Xxxx entered into a limited
liability company operating agreement, under which they each became members of a
limited liability company known as "Ultra Bikers LLC". Under the terms of this
agreement, Xxxx was to manufacture motorcycles and Ultra Bikers LLC was to
distribute them, including the distribution of motorcycles to retail stores
owned by Bikers. Pursuant to the terms of this agreement, Xxxx granted Bikers an
option to purchase the motorcycle assets of Xxxx, and Bikers granted Xxxx an
option to purchase 2,500,000 shares of Bikers' common stock.
B. At the time of the limited liability company operating agreement,
Xxxxxxx was the officer, director, and shareholder of Xxxx, and Xxxxxxxx was an
employee of Xxxx.
C. On January 30, 1997, Bikers and Xxxx entered into an Asset Purchase
Agreement, by which Bikers exercised its option to purchase the motorcycle
assets of Xxxx. Under the terms of this agreement, Xxxx received Bikers'
Promissory Note in the original principal amount of $2,700,000 in partial
payment for its motorcycle assets. Xxxxxxx also executed a Non-Competition and
Confidentiality Agreement dated January 30, 1997.
D. On January 30, 1997, Xxxxxxxx and Ultra Acquisition Corporation
("UAC") entered into an Employment Agreement, by which UAC employed Xxxxxxxx as
its production manager. Said employment agreement was subsequently modified in
June, 1997.
E. On June 27, 1997, Bikers and Xxxx entered into a Note Conversion
Agreement, by which Xxxx agreed to exercise 1,370,000 of its options to purchase
Bikers' common stock, in satisfaction of Bikers' obligation to pay Xxxx
$1,370,000 of principal under Bikers' Promissory Note. Xxxx also agreed to
accept 1,330,000 of Bikers' series B convertible preferred stock, in
satisfaction of the remaining principal balance due under the Bikers' Promissory
Note. As further consideration for Xxxx'x agreement to the Note Conversion
Agreement, Bikers issued 1,130,000 options to purchase Bikers' common stock at
an exercise price of $1.00 per share.
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X. Xxxx subsequently sold 250,000 shares of its Bikers' common stock,
with Bikers' consent, leaving Xxxx with 1,120,000 shares of Bikers' common
stock.
G. Differences have arisen between Bikers and Xxxx, and between Bikers
and Xxxxxxxx, regarding the terms of the agreements described above.
H. All parties to this Settlement Agreement now desire to terminate all
differences and disputes between them arising from the agreements described
above, and the various transactions to which those agreements pertain, and any
other differences and disputes; and to settle all past, present, and future
claims between them arising out of, relating to, or in any manner connected with
the agreements and the transactions, except to the extent addressed herein.
NOW, THEREFORE, in consideration of the waivers, releases, conditions,
warranties and covenants herein set forth, the parties to this Settlement
Agreement agree as follows:
AGREEMENT
1. Recitals Incorporated: The foregoing Recitals, Paragraphs A through
H hereinabove, are incorporated herein by this reference and made a part hereof.
2. No Admission of Liability: Notwithstanding the foregoing, nothing in
this Settlement Agreement shall be construed as an admission by any party hereto
of any liability to any other party with respect to any of the matters set forth
herein, except as specifically set forth herein.
3. Purchase and Sale of Common Stock: Bikers covenants that it has
arranged to have certain investors purchase, and Xxxx hereby agrees to sell, the
1,120,000 shares of Bikers' common stock presently owned by Xxxx, in exchange
for $1,000,000 cash, not later than 5:00 p.m October 8, 1997. Xxxx agrees to
execute any documents reasonably requested by Bikers and or its attorneys in
connection with this transaction.
4. Options for Common Stock: Xxxx agrees to transfer to Bikers or its
nominee 1,080,000 of the options to purchase Bikers' common stock, in further
consideration for this agreement. Bikers agrees that either it or its assigns
shall consent to Xxxx'x transfer of 40,000 of its remaining 50,000 stock options
to Xxxxxxxx Ball ("Ball"), and the 10,000 balance of stock options to Xxxxx
Llama ("Llama"), upon the condition that Ball and Llama execute and deliver to
Bikers any documents reasonably requested by Bikers or its attorneys in
connection with this transfer. Said stock options shall continue to have the
registration rights, and be subject to the "lock-up" agreement, that they had
and were subject to as held by Xxxx.
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5. Preferred Stock: Bikers shall issue to Xxxx as soon as practicable
the 1,330,000 shares of its series B convertible preferred stock, as described
on the "Description of Series B Convertible Preferred Stock of Bikers Dream,
Inc." delivered to Xxxx in connection with the Note Conversion Agreement. Bikers
represents to Xxxx that it has received the authorization from the California
Secretary of State to issue said preferred stock to Xxxx. Said preferred stock
shall have the registration rights, and be subject to the "lock-up" agreement
and pledge agreement, as set forth below.
6. Registration Rights: Bikers' preferred stock held by Xxxx shall have
the following registration rights: The Registration Rights Certificate attached
as Exhibit B to the Note Conversion Agreement is hereby amended as follows: Add
to subparagraph (a) the following: "In addition to this "best efforts"
registration, the holder of the shares shall have piggyback registration rights
on any other registration (except S-8 and S-4 registrations), and demand
registration rights to be exercised in concert with the holders of at least 50%
of the issued and outstanding common stock."
7. Lock-Up: Bikers and Xxxx acknowledge that Biker's preferred stock
held by Xxxx is subject to the "lock-up" agreement set forth in paragraph (b) of
the Registration Rights Certificate described above.
8. Pledge Agreement to Secure Obligations: Bikers and Xxxx hereby agree
to delete Paragraph 1(d) of the Note Conversion Agreement, and to agree to the
following: Xxxx hereby agrees that Bikers may hold 730,000 shares of the Bikers'
series B convertible preferred stock owned by Xxxx pursuant to the terms of the
Pledge Agreement of even date herewith, the form of which is attached as Exhibit
A to this Agreement, to secure Xxxx'x performance under its indemnification
obligations to Bikers, as more fully set forth below; and to secure Xxxxxxxx'x
performance under his Employment Agreement, as more fully set forth below.
9. Xxxx'x Indemnification Obligations: Xxxx'x obligations to indemnify
Bikers, as set forth in the Asset Purchase Agreement, are modified as follows:
(a) Section 6.l(a) does not include any representation or warranty made
by Xxxx regarding the design of its products, as set forth in Section 3.24 of
the Asset Purchase Agreement, entitled "Product Liability and Warranty;
provided, however, that this shall not limit Xxxx'x obligation to indemnify
Bikers in any trademark or similar litigation brought by Harley Davidson, as
described below.
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(b) Delete the word "designed" from Section 6.0l(g); provided, however
that this shall not limit Xxxx'x obligation to indemnify Bikers in any trademark
or similar litigation brought by Harley Davidson, as described below.
(c) Add the following to Section 6.01(j): Provided, however, that
Xxxx'x obligation to indemnify Bikers is limited to any liability arising out of
any act or omission by Xxxx or its affiliates, including for illustration only
any use of any Harley Davidson "logos", and the design of any motorcycles.
(d) Delete the clause "including any such actions relating to the
operations of Ultra Bikers", from Section 6.01(k), and add the following: "Xxxx
further agrees to indemnify Bikers in any lawsuit in which the allegations
against Bikers are based upon its dealings with Xxxx or its Affiliates, and Xxxx
is a defendant in the lawsuit. By way of illustration only, Xxxx is obligated to
indemnify Bikers in the Xxxxx Xxxxx lawsuit now pending in the Orange County
Superior Court, from the effective date of this Settlement Agreement, because
Xxxx is a defendant in that lawsuit, and the allegations against Bikers are
based upon its alleged dealings with Xxxx."
(e) Section 6.6(a) of the Asset Purchase Agreement is hereby modified,
to delete the phrase "and at Buyer's option, in the form of an offset against
the note", and to insert the phrase "and in the event of a default by Xxxx under
its indemnification obligations for Xxxx or its Affiliates, by proceeding
against Xxxx'x stock held by Bikers pursuant to the Pledge Agreement of even
date herewith, a copy of which is attached as Exhibit A hereto."
(f) Section 6.6(b) is hereby deleted.
(g) Anything to the contrary notwithstanding, the maximum liability
owed to Bikers by Xxxx and all of its affiliates under any of the
indemnification obligations shall not exceed the actual consideration actually
received by Xxxx from its sale of its motorcycle assets to Bikers, which for the
purposes of this Settlement Agreement is fixed at $2,370,000 in cash and
1,330,000 shares of Bikers Series B Convertible Preferred Stock; provided,
however, that this limitation upon the liability of Xxxx and its affiliates
shall not apply to any claims for indemnification based upon actual fraud.
10. Bikers' Indemnification Obligations: Bikers and Xxxx agree that
Section 6.2 of the Asset Purchase Agreement, Indemnification by Buyer, shall be
modified by the addition of a new subsection (d): "The pending lawsuit filed by
H-D Michigan, Inc., et al., in the United States District Court, Central
District of California, Case No. CV-SACV97-29LHM(ANX), or any related or similar
action, including any action based on similar facts and circumstances (the
"Harley-Davidson Lawsuit"), and arising out of any act or omission by Bikers,
including for illustration only any use of any Harley Davidson "logos", and its
design of any motorcycles. Xxxx acknowledges that Bikers is presently subject to
a consent decree entered in a related "Harley Davidson" lawsuit, and that
Biker's obligation to indemnify Xxxx in connection with that lawsuit will arise
only out of an alleged violation of that consent decree."
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11. Modification of Xxxxxxxx'x Employment Agreement: Xxxxxxxx and
Bikers agree that Xxxxxxxx'x Employment Agreement is modified as follows:
(a) Xxxxxxxx shall resign, effective upon the effective date of this
Settlement Agreement.
(b) Bikers Dream, Inc., and Ultra Acquisition Corporation shall be
relieved of any further obligations under said Employment Agreement, including
without limitation the payment of any compensation and additional benefits.
(c) Section 7 of Xxxxxxxx'x Employment Agreement, entitled
Non-Competition; Confidentiality, is modified as follows:
(i) The term is reduced, so that the Covenant expires six
months after the effective date of this Settlement Agreement;
(ii) Subsection (a) is hereby modified, to insert the
following: "Anything to the contrary contained herein notwithstanding,
it shall not be a breach of this Non-Competition Covenant for Xxxxxxxx
to manufacture, distribute or sell up to six custom motorcycles during
the term of this Covenant.
(iii) Subsection (e) is hereby modified, to insert the
following: "Provided, however, that Xxxxxxxx shall be in breach of this
Covenant not to Disparage only if Xxxxxxxx'x remarks cause a present or
prospective business relationship, such as a vendor or employee, to
either refuse to do business with Bikers, or to grant Bikers less
desirable credit or other terms than would have been granted but for
Xxxxxxxx'x remarks. Provided, further, that Bikers may establish a
breach of this Covenant not to Disparage only with a written statement
signed under penalty of perjury, or oral testimony in a deposition or
other proceeding under penalty of perjury, by the present or
prospective business relationship or other witness(es) with personal
knowledge, setting forth facts which constitute a breach of this
Covenant as set forth herein."
(d) Section 8 of Xxxxxxxx'x Employment Agreement, entitled
Non-Solicitation of Customers, is modified as follows:
(i) The term is reduced, so that the Covenant expires six
months after the effective date of this Settlement Agreement;
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(ii) Section 8 is further modified, to insert the following:
"Provided, however, that Bikers may establish a breach of this
Non-Solicitation of Customers Covenant only with a written statement
signed under penalty of perjury, or oral testimony in a deposition or
other proceeding under penalty of perjury, by the customer or other
witness(es) with personal knowledge, setting forth facts which
constitute a breach of this Covenant as set forth herein."
(e) Section 9 of Xxxxxxxx'x Employment Agreement, entitled
Non-Interference with Employees, is modified as follows:
(i) The term is reduced, so that the Covenant expires six
months after the effective date of this Settlement Agreement;
(ii) The following is added to Section 9: "Employee further
agrees that he will not interfere with Bikers' employees, or disrupt
their work for Bikers at Bikers' places of business, by coming onto
Bikers' places of business and making remarks to them which disparage
Bikers, or cause the employees to stop their work, or otherwise
interrupting the work performed by Bikers employees."
(iii) Section 9 is further modified, to insert the following:
"Provided, however, that Bikers may establish a breach of this
Non-Interference with Employees Covenant only with a written statement
signed under penalty of perjury, or oral testimony in a deposition or
other proceeding under penalty of perjury, by the Bikers' employee or
other witness(es) with personal knowledge, setting forth facts which
constitute a breach of this Covenant as set forth herein."
12. Modification of Agreement not to Compete: Bikers and Xxxx agree to
delete the word "fifth" Section 5.1 Agreement not to Compete, of the Asset
Purchase Agreement, and to insert the word "second". Bikers and Xxxx further
agree that Section 1.1 of the separate "Non-Competition and Confidentiality
Agreement" signed by Xxxxxxx Xxxxxxx pursuant to this Section 5.1, and dated
January 30, 1997, is similarly modified, to provide that it expires on the
second anniversary of the Closing Date of the Asset Purchase Agreement.
13. Deletion of Stock Options Assigned to Xxxxx Xxxxxxxx: Bikers and
Xxxx agree to modify Section 5.4 of the Asset Purchase Agreement, to delete any
reference to the transfer to Xxxxx Xxxxxxxx of any of Xxxx'x options to purchase
Bikers' common stock. Bikers agrees to use its best efforts to obtain Xx.
Xxxxxxxx'x consent to this modification and his release of Xxxx from any claim
to said stock options.
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14. Dissolution of Ultra Bikers, LLC: Bikers shall diligently pursue
the dissolution of Ultra Bikers, LLC, as provided in Section 5.4 of the Asset
Purchase Agreement. Bikers shall assume any remaining liabilities of Ultra
Bikers, LLC, and shall indemnify Xxxx against any claims or losses arising out
of Ultra Bikers, LLC, except for any claim or loss due to any act or omission by
Xxxx or its Affiliates; provided, however, that this shall not affect the
obligations of the parties regarding the Harley-Davidson lawsuit, which are set
forth separately herein. Section 13.4 of the Limited Liability Company Operating
Agreement is hereby modified to delete subsection (d), which requires Xxxx to
return the stock options to Bikers upon dissolution of the Limited Liability
Company, and subsection (e), regarding the retention of rights by Xxxx upon
dissolution.
15. Limited Liability Company Operating Agreement: Bikers and Xxxx
agree there are no provisions of this agreement which presently pertain to the
dealings between the parties, except insofar as Section 11.1 defines the stock
options originally granted to Xxxx, and except insofar as the Asset Purchase
Agreement requires Bikers to dissolve the Limited Liability Company.
16. Stock Option Agreement dated September 13, 1996: Xxxx and Bikers
agree that there are no provisions of this agreement which presently pertain to
the dealings between the parties, except insofar as Section 3 defines the
registration rights and lock-up agreement pertaining to the stock options
originally granted to Xxxx.
17. Monstercycle Truck: Bikers agrees to pay Alden $16,000 for the
Monster truck and trailer. Alden agrees to transfer the truck and trailer to
Bikers, upon payment of the $16,000, free and clear from the present lien on the
truck.
18. Starters: Xxxx agrees to release Bikers from any claim arising out
of the $15,000 advanced by Xxxx for the starters delivered to Bikers, in further
consideration for this Settlement Agreement.
19. Flooring Account: Bikers and Xxxx agree that this Settlement
Agreement does not pertain to any of the dealings between Bikers, Ultra Custom
Cycles, Inc., a Nevada corporation, ("UKC Nevada") and any partnership or
individual who has loaned money to UKC Nevada, in connection with the financing
of motorcycles.
20. Indemnification and Release of Xxxxxxx: Bikers agrees to indemnify
Xxxxxxx against any claim arising out of his service as an officer of Ultra
Acquisition Corporation, and to release Xxxxxxx from any claim arising out of
his service as an officer of Ultra Acquisition Corporation, to the fullest
extent permitted by law.
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21. Premises Leases: Bikers and Xxxx agree to use their best efforts to
obtain the consent of the landlords to the assignment of the premises leases, as
described in Section 1.1(g) of the Asset Purchase Agreement, from Xxxx to
Bikers. In the event that the landlords refuse to consent to the release of Xxxx
and Xxxxxxx under said premises leases, then said assignments shall provide that
Bikers shall indemnify Xxxx and Xxxxxxx against all liability arising under said
premises leases. Said assignments shall also provide that, in the event of any
default by Bikers under the leases, which remains uncured for the maximum period
permitted under said premises leases, then Xxxx shall have the right to retake
possession of the premises and to cure said defaults.
22. Materials: Xxxx agrees to release Bikers from any claims for
reimbursement or payment for the materials it has contributed to Bikers, in
further consideration of this Settlement Agreement.
23. Xxxxxxxxxx Litigation: Bikers and Xxxx agree to equally split the
costs of defending Bikers against this claim. By way of illustration only, in
the event that Xxxxxxxxxx agrees to accept a new motorcycle in settlement of his
claims against Bikers, and any claim he might assert against Xxxx, Bikers will
provide a new motorcycle; Xxxxxxxxxx'x present motorcycle will be repaired by
Bikers, and resold. The difference between the net cost of the settlement (cost
of new motorcycle + costs of flooring current motorcycle + costs of repairing
current motorcycle - sales proceeds from current motorcycle) will be paid
equally by Xxxx and Bikers.
24. Release of Bikers: In consideration for this Settlement Agreement,
and subject to the performances required of the parties under this Settlement
Agreement, Mull, Silvers, Alden, and Xxxxxxxx release and forever discharge
Bikers, and its employees, agents, officers, directors, shareholders, attorneys,
beneficiaries and assigns, from any and all claims, attorney's fees, expenses,
and causes of action in existence as of the execution of this Settlement
Agreement, whether or not well founded, arising out of any of the claims
referred to herein, including without limitation any claims arising out of the
sale of Xxxx'x motorcycle assets to Bikers. This release is binding upon Mull,
Silvers, Alden and Xxxxxxxx, for themselves and their past and present agents,
attorneys, employees, partners, successors, spouses, beneficiaries and assigns,
and for the benefit of Bikers and its past and present agents, attorneys,
employees, partners, successors, spouses, beneficiaries and assigns. This
release shall not include any claims arising out of any breach of this
Settlement Agreement.
25. Release of Xxxx: In consideration for this Settlement Agreement,
and subject to the performances required of the parties under this Settlement
Agreement, Bikers releases and forever discharges Mull, Silvers, Alden and
Xxxxxxxx, and their employees, agents, officers, directors, shareholders,
attorneys, beneficiaries and assigns, from any and all claims, attorney's fees,
expenses, and causes of action in existence as of the execution of this
Settlement Agreement, whether or not well founded, arising out of any of the
claims referred to herein, including without limitation any claims arising out
of its purchase of Xxxx'x motorcycle assets described above. This release is
binding upon Bikers, for itself and its past and present agents, attorneys,
employees, partners, successors, spouses, beneficiaries and assigns, and for the
benefit of Mull, Silvers, Alden and Xxxxxxxx, and their past and present agents,
attorneys, employees, partners, successors, spouses, beneficiaries and assigns.
This release does not include any claims arising out of a breach of this
Settlement Agreement.
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26. Section 1542 Waiver: The parties agree that there is a risk that,
subsequent to the execution of this Settlement Agreement, they will incur or
suffer loss, damages or injuries which are in some way caused by or related to
the matters referred to above, but which are unknown and unanticipated at the
time this Settlement Agreement is signed. The parties assume such risk, and
agree that this Settlement Agreement shall apply to all such unknown or
unanticipated results, as well as those known and anticipated. The parties
expressly waive and relinquish any and all rights and benefits afforded by
Section 1542 of the California Civil Code which provides as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the Release, which if known by him must have
materially affected his, settlement with the debtor."
27. Attorneys Fees: In the event that it becomes necessary for any
party to this Settlement Agreement to bring an action to interpret or enforce
any provision of this Settlement Agreement, or arising out of a
misrepresentation contained in this Settlement Agreement, then the prevailing
party shall be entitled to recover its actual attorney's fees incurred in
connection with such action.
28. No Oral Modifications: This Settlement Agreement shall not be
modified by any party hereto by oral representation before or after the
execution of this Settlement Agreement, and any and all modifications must be in
writing and signed by all of the parties hereto.
29. Entire Agreement: This Settlement Agreement contains the entire
understanding and agreement between the parties with respect to the matters
referred to herein. No other representations, covenants, undertakings, or prior
or contemporaneous agreements, oral or written, regarding such matters which are
not specifically contained and/or incorporated herein by reference, shall be
deemed, in any way, to exist or bind any of the parties hereto, except as
specifically set forth herein. The parties hereto acknowledge that each said
party has not been induced to enter into this Settlement Agreement and has not
executed this Settlement Agreement in reliance upon any promises,
representations, warranties or statements not provided within or incorporated by
reference into this Settlement Agreement.
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30. Miscellaneous. No delay or failure by any party in the exercise of
any right or remedy shall constitute a waiver thereof. This Settlement Agreement
shall be construed and governed by the laws of the State of California. The
parties agree that they will execute any other documents as may become necessary
to implement this Settlement Agreement. The headings used in this Settlement
Agreement are used for convenience only and should not be considered in
construing this Settlement Agreement. The parties agree that this Settlement
Agreement was drafted jointly by each of them, and therefore the rule of
interpretation which requires documents to be strictly construed against their
drafters does not apply to this Settlement Agreement. In the event that any of
the provisions contained in this Settlement Agreement is held to be invalid,
illegal or unenforceable, that shall not affect the validity, legality or
enforceability of the other provisions. This Settlement Agreement may be
executed in counterparts, each of which is deemed to be an original, but such
counterparts together shall constitute one and the same instrument. All parties
hereto acknowledge receipt of a copy of this Settlement Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Settlement
Agreement, and when fully executed, it shall be effective as of the last date
set forth below.
Dated: October 7, 1997 /s/ X. Xxxxxxxx
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Bikers Dream, Inc.
by: X. Xxxxxxxx
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its: Pres. and CEO
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Dated: October 7, 1997 /s/ X. Xxxxxxxx
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Ultra Acquisition Corporation
by: X. Xxxxxxxx
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its: Pres. and CEO
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Dated: October 7, 1997 /s/ Xxxxxxx X. Xxxxxxx
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Xxxx Acres Investments, Inc.
by Xxxxxxx X. Xxxxxxx, President
Dated: October 7, 1997 /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Dated: October 7, 1997 /s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
Dated: October 7, 1997 /s/ Xxxx Xxxxxxx Xxxx Xxxxxxxx
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Xxxx Xxxxxxx "Vini" Xxxxxxxx
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