EXHIBIT 10.17
DUCT UTILITY CONSTRUCTION AND TECHNOLOGIES, INC.
STOCK PURCHASE AGREEMENT
DUCT UTILITY CONSTRUCTION AND TECHNOLOGIES INC.,
A COLORADO CORPORATION
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of the 19th day of December, 2001, by and between DUCT UTILITY CONSTRUCTION AND
TECHNOLOGIES, INC., a Colorado corporation (the "Company"), and BUSINESS
INTELLIGENCE GROUP, an Ohio Corporation (" Subscriber"), with reference to the
following facts:
A. The Company is indebted to Subscriber pursuant to a series of
promissory notes (the "BIG Notes") in the aggregate amount of $50,000.00 (the
"BIG Debt").
B. Subscriber desires to convert the BIG Debt into common stock of the
Company ("Common Stock").
NOW, THEREFORE, for and in consideration of the mutual covenants,
representations and warranties contained herein, the parties hereto agree as
follows:
1. CONVERSION OF DEBT; PURCHASE AND SALE OF STOCK.
1.1 SALE OF SHARES. Subject to the terms and conditions of
this Agreement, Subscriber hereby agrees to convert the entire amount of the BIG
Debt into and purchase Common Stock at the rate of $0.20 per share for a total
of 250,000 shares (the "Shares").
1.2 PAYMENT OF THE PURCHASE PRICE. The Purchase Price for the
Shares shall be $100,000 and shall be paid by cancellation of the BIG Debt.
Subscriber hereby accepts the Shares in lieu of payment of the BIG Debt and in
full and complete satisfaction thereof.
1.3 THE CLOSING. The sale and issuance of the Shares and the
cancellation of the BIG Debt shall take place at the Company offices, 0000 Xxxxx
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxx 00000, on or before January 22,
2002, and shall be deemed effective as of December 19, 2001 (the "Closing"). On
or before the Closing, the parties shall take the following actions:
(a) STOCK PURCHASE AGREEMENT. Subscriber and the
Company shall each execute and deliver duplicate originals of this Agreement.
(b) CANCELLATION OF BIG DEBT NOTES. Subscriber
shall pay the Purchase Price by cancellation and delivery of the BIG Notes to
the Company. Each of the BIG Notes shall be marked "Cancelled," and initialed by
the President or Chief Executive Officer and the Secretary of Subscriber.
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(c) ISSUANCE OF STOCK CERTIFICATES. The Company
shall issue and deliver or cause to be issued and delivered to Subscriber and/or
its assigns set forth in Exhibit "A" a stock certificate(s) representing, in the
aggregate two-hundred fifty thousand (250,000) Shares within ten (10) business
days of the Closing.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company hereby represents, warrants and covenants to Subscriber as follows:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado.
2.2 CAPITALIZATION. The authorized capital of the Company
consists, or will consist immediately following the conversion of the BIG Debt
and issuance of the shares of:
(a) COMMON STOCK. One Hundred Five Million
(105,000,000) shares of no par value common stock, of which 12,593,846 shares
are issued or projected to be issued as of the Closing.
(b) PREFERRED STOCK. Five Million (5,000,000)
shares of $1.00 par value preferred stock, none of which no shares are issued
and outstanding as of the date of the Closing.
2.3 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Shares and the
performance of all obligations of the Company hereunder has been taken. This
Agreement constitutes the valid and legally binding obligation of the Company,
enforceable in accordance with its terms.
2.4 VALID ISSUANCE OF SHARES. The Shares being purchased
hereunder have been duly authorized, and when issued, sold and delivered in
accordance with the terms of this Agreement will be duly and validly issued,
fully paid and nonassessable, free of restrictions on transfer, other than
restrictions on transfer under this Agreement and/or under applicable state and
federal securities laws.
2.5 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, declaration or filing with,
any federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for filings required pursuant to applicable federal and
state securities laws and blue sky laws.
2.6 DISCLOSURE. The Company has fully provided Subscriber
with all the information that Subscriber has requested for deciding whether to
purchase the Shares. To its knowledge, neither this Agreement (including all the
exhibits and schedules hereto) nor any other statements or certificates made or
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delivered in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading in light of the circumstances under which they were
made.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SUBSCRIBER. Subscriber
hereby represents, warrants and covenants that:
3.1 AUTHORIZATION. Subscriber has full power and authority to
enter into this Agreement and such agreement constitutes Subscriber's valid and
legally binding obligation, enforceable in accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with Subscriber in reliance upon Subscriber's representation to the Company,
which by Subscriber's execution of this Agreement Subscriber hereby confirms,
that the Shares to be received by Subscriber will be acquired for investment for
Subscriber's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that Subscriber has no present
intention of selling, granting any participation in or otherwise distributing
the same. By executing this Agreement, Subscriber further represents that
Subscriber does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to any third person,
with respect to any of the Shares.
3.3 DISCLOSURE OF INFORMATION. Subscriber acknowledges and
agrees that it is an existing shareholder of the Company and that its President,
Xxxxx Xxxxxxxx, is actively involved in and thoroughly familiar with the day to
day business and affairs and financial condition of the Company. Further,
Subscriber acknowledges it has received all financial and other information
concerning the Company and its officers and directors and the Shares as it
considers necessary or appropriate for deciding whether to purchase the Shares.
Subscriber represents that it has carefully reviewed such information, and that
it has had an opportunity to ask questions and receive answers from the Company
regarding the Shares, and the business, properties, prospects and financial
condition of the Company, and that Subscriber is satisfied with the information
and responses Subscriber has received, and Subscriber does not desire or require
any additional information prior to entering into this Agreement.
3.4 SUBSCRIBER EXPERIENCE. Subscriber is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of an investment in the Shares. If
other than an individual, Subscriber also represents it has not been organized
for the purpose of acquiring the Shares.
3.5 RISK FACTORS. Subscriber recognizes that the purchase of
Shares is inherently speculative and involves a high degree of risk, and is
suitable only for persons of adequate financial means who have no need for
liquidity in this investment and that (i) it may not be possible to liquidate
Subscriber's investment in the event of an emergency; (ii) transferability of
the Shares is extremely limited; and (iii) it is possible that Subscriber's
entire investment may be lost. In this regard, Subscriber specifically
acknowledges and agrees it has read and understands the following Risk Factors.
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A PURCHASE OF SHARES OF STOCK IN THE COMPANY INVOLVES A HIGH
DEGREE OF FINANCIAL RISK. SUBSCRIBER SHOULD CAREFULLY
CONSIDER ALL OF THE RISK FACTORS DESCRIBED BELOW. THIS
OFFERING IS INTENDED ONLY FOR PERSONS WHO CAN AFFORD TO LOSE
ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT IN THE SHARES.
THE FOLLOWING RISK FACTORS SHOULD NOT BE CONSIDERED AS AN
EXHAUSTIVE LIST OF ALL RISK FACTORS INHERENT IN AND AFFECTING
THE BUSINESS OF THE COMPANY AND THE SHARES, BUT RATHER A
PARTIAL LIST OF SOME OF THE RISKS ASSOCIATED WITH THE SHARES.
3.5.1 LIMITED OPERATING HISTORY; EARLY STAGE OF DEVELOPMENT.
The Company has no significant operating history upon which an evaluation of the
Company's business and prospects can be based. The Company faces all of the
risks inherent in new, speculative businesses, and there is no assurance that
the Company will be successful or profitable. The likelihood of the success of
the Company must be considered in light of expenses, difficulties, complications
and delays frequently encountered with the formation of a new business, the
development of new technology, and the competitive and regulatory environment in
which the Company will operate. Such risks include, without limitation, the
highly competitive nature of the Company's industry, the rapid technological
changes associated with the fiber optic and cable utility industry and the
ability of the Company to develop, protect, market and sell its services. The
business, marketing, legal and regulatory changes that may occur could have a
significant impact on the business prospects of the Company. Management cannot
predict the effects such changes may have on the Company or its proposed
business.
3.5.2 AVAILABILITY OF CAPITAL. The success of the Company
will be dependent on the successful conclusion of one or more additional private
placements and/or public offerings of its Common Stock. The share price and
other terms and conditions of such offerings will be determined by the Company's
interim success and market conditions at that time. Subscriber acknowledges and
agrees it has been advised and understands that the Company has no firm
commitments for the placement or subscription of any private equity financing at
this time. Further, should the need arise, there can be no assurance that
sufficient capital can be raised in any subsequent Company offering to sustain
operations or that future sales will meet the Company's growth expectations.
Should either of these events fail to occur, the Company may elect to reduce
expansion or pursue other financing alternatives. Failure of the Company to
successfully complete any private or public offering may adversely affect the
Company's operations in ways that cannot be foreseen or predicted.
3.5.3 COMPETITION. The business of the Company will be
subject to competition from a variety of sources, some or all of which may
possess particular competitive advantages. There are already significant
competing companies in the fiber optic and cable utility construction market in
which the Company will compete.
3.5.4 RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE: DEPENDENCE
ON TELECOMMUNICATIONS PROVIDERS. The Company is dependent on Telecommunications,
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Internet, CATV and general utilities networks and providers. This dependence
raises significant risks. In particular, the market for Telecommunications, CATV
and, Internet services and devices is extremely volatile and characterized by
rapidly changing technology, evolving industry standards, changes in customer
needs and frequent new service and product introductions. The Company's future
success will depend, in large part, on its ability to forge successful long term
relationships with these Providers and, in turn, on the success of these
Providers as well.
3.5.5 DEPENDENCE UPON INDIVIDUAL EFFORTS OF MANAGEMENT AND
KEY STAFF. The Company's success is substantially dependent upon the efforts of
its Management and key staff. As revenue increases, the Company intends to
retain dedicated, competent and highly motivated individuals to fill additional
management and staff positions. This will be essential to the success of the
Company.
3.5.6 FOUNDERS, DIRECTORS, AND EXECUTIVE OFFICERS. The
Company's founders, directors, and executive officers, in the aggregate, own the
majority of the Company's outstanding Shares. These stockholders, acting
together, would be able to significantly influence all matters requiring
approval by the stockholders of the Company, including the election of directors
and the approval of mergers or other business combination transactions. All
decisions with respect to the management of the Company will be made exclusively
by the board of directors and officers of the Company. Although most of these
individuals have substantial business experience, they do not have significant
telecommunications, CATV, Internet and/or construction utilities industry
experience, and there are no assurances that the Company will ultimately be
successful
3.5.7 LACK OF PUBLIC MARKET. While a portion of the Company's
Common Stock is publicly traded, the market for the company's Common Stock is
extremely volatile, and there can be no assurance that there will ever be a
sustainable public market for such stock. In any event, the Shares being
purchased hereby are not being registered under Federal or state securities law.
As such, the Shares may not be resold or otherwise transferred unless they are
subsequently registered or an exemption from registration requirements is
available. Consequently, Subscriber may not be able to liquidate its investments
in the Shares.
3.5.8 DILUTION. It is presently anticipated that the Company
will issue additional Shares of common or preferred stock, which could result in
significant dilution of Subscriber Shares.
3.5.9 LACK OF DIVIDENDS. In order to increase sales and
long-term profitability and value, Management of the Company may elect to retain
earnings for use in connection with the business of the Company. Further,
borrowing arrangements, which the Company may have with banks or financial
institutions in the future may limit or otherwise restrict the ability of the
Company to pay dividends to holders of its Common Stock or other classes of
securities. Therefore, there can be no guarantee or assurance that dividends
will ever be paid.
3.5.10 PLEDGE OF COMPANY ASSETS TO LENDERS AND OTHER PARTIES.
The Company may enter into borrowing arrangements from time to time, which
require that certain assets of the Company be pledged to secure repayment of
such borrowing. To the extent the Company defaults on any obligation, the levy
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or foreclosure by a creditor upon substantial equipment or tangible assets of
the Company could have a materially adverse and significant impact upon the
Company's ability to conduct its business and operations.
3.5.11 LACK OF SEPARATE LEGAL REPRESENTATION/INTEREST OF
COUNSEL. Subscribers are advised that counsel for the Company has not acted on
behalf of subscribers or prospective subscribers or conducted a review or
investigation on their behalf in respect to the Shares being issued pursuant to
this Agreement. Subscribers are therefore urged to review this Agreement
carefully and consult such professionals as subscriber or prospective investor
deems necessary for a full and complete understanding of this Agreement, the
economic and financial potential of the proposed undertaking and its
consequences for the subscriber or prospective investor. Counsel for the Company
expresses no opinion whatsoever on behalf of subscribers or prospective
subscribers as to the merit of investing in this Offering.
3.6 FORWARD LOOKING STATEMENTS. Subscriber acknowledges and
agrees it has been advised and understands that information provided to
Subscriber in connection with its investment hereunder contains forward-looking
statements, which are based on the Company's management's predictions as to
future events including the potential market for the Company's products and
services and the costs of doing business, which in turn are based upon
information currently available to such management. Subscriber recognizes and
agrees that some of the information and/or assumptions relied upon by the
Company's management may not occur or be incorrect and unanticipated events and
circumstances inevitably will occur, and accordingly, all forecasts and
projections are estimates only and may not be construed as a guaranty or
indicator of actual future performance. Subscriber acknowledges and agrees that
such forecasts and assumptions are subject to numerous uncertainties and risks
including, without limitation (i) the Company's ability to attract and retain
qualified management personnel, (ii) the Company's ability to xxxxxx strategic
alliances with key Telecommunications, CATV, Internet and Utility providers,
(iii) the Company's ability to enter into favorable relationships with other
service providers, (iv) the emergence of competition, (v) the Company's success
in raising enough additional capital to fully exploit its business plan, and
(vi) the Company's ability to satisfy future unanticipated capital needs on
terms acceptable to the Company. Subscriber acknowledges and agrees that to the
extent the Company is unable to meet its capital needs and/or any of
management's assumptions or predictions turn out to be wrong, the actual
performance of the Company will almost certainly be materially adversely
affected.
3.7 ACCREDITED INVESTOR. Subscriber is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC") Rule
501 of Regulation D, as presently in effect, as more particularly set forth in
Exhibit "B".
3.8 RESTRICTED SECURITIES. Subscriber understands that the
Shares it is purchasing are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations, the Shares may be resold without registration under the
Act only in certain limited circumstances. In the absence of an effective
registration statement covering the Shares or an available exemption under the
Act, the Shares must be held indefinitely. In particular, Subscriber represents
that it is familiar with SEC Rule 144, as presently in effect, and understands
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the resale limitations imposed thereby and by the Act, including without
limitation the Rule 144 condition that current information about the Company be
available to the public. Such information is not now available and the Company
has no present plans to make such information available.
3.9 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, Subscriber further agrees not to
make any disposition of all or any portion of the Shares unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
all restrictions set forth and described in this Agreement and:
(a) There is then in effect a registration
statement under the Act covering such proposed disposition and such disposition
is made in accordance with such registration statement;
(b) Subscriber shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and if
requested by the Company, Subscriber shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such disposition
will not require registration of the Shares under the Act; or
(c) Notwithstanding the provisions of subsections
(a) and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Subscriber that is a partnership to a partner of
such partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or interstate succession of any partner to his or her
spouse or to the siblings, lineal descendants or ancestors of such partner or
his or her spouse, if the transferee agrees in writing to be subject to the
terms hereof to the same extent as if he or she were an original Subscriber
hereunder.
3.10 LEGENDS. It is understood that each certificate or other
document evidencing any of the Shares may bear one or all of the following
legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by the laws of the States
of California and/or Delaware.
3.11 SUBSCRIBER LEGAL COUNSEL. Subscriber acknowledges that
Subscriber has had the opportunity to review this Agreement, the exhibits and
the schedules attached hereto and the transactions contemplated by this
Agreement with Subscriber's own legal counsel. Subscriber is relying solely on
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Subscriber's legal counsel and not on any statements or representations of the
Company or any of the Company's agents, including Xxxxx & Xxxxxx LLP, for legal
advice with respect to this investment or the transactions contemplated by this
Agreement.
4. GENERAL PROVISIONS.
4.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any Shares). Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
4.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Colorado.
4.3 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.4 NOTICES. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day; (iii) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the address as set forth on the signature page hereof or at such other
address as such party may designate by ten days advance written notice to the
other parties hereto.
4.5 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
4.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the parties hereto.
4.7 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
4.8 ENTIRE AGREEMENT. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
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warranties, representations or covenants except as specifically set forth herein
or therein.
4.9 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DUCT UTILITY CONSTRUCTION AND
TECHNOLOGIES, INC.,
A COLORADO CORPORATION
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Xxxxxxx X. Xxxx, CEO
Address: 00000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Email: xxxxxxxxx@xxxxxxx.xxx
No. of Shares Subscribed For: 250,000 SUBSCRIBER:
BUSINESS INTELLIGENCE GROUP, INC.
AN OHIO CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx, President
Address: 00000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Email: xx_xxxx@xxxxxxx.xxx
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EXHIBIT B
ACCREDITED INVESTOR CRITERIA
Each Subscriber must qualify as an "Accredited Investor," as defined
herein. The following are general definitions of qualified Accredited Investors:
o A natural person who had an individual income (not combined with a
spouse's income) in excess of $200,000 in each of the last two years or
joint income with that person's spouse in excess of $300,000 in each of
the last two years and has a reasonable expectation of reaching the
same income level in the current year.
o A natural person whose individual net worth, or joint net worth with
his or her spouse, at the time of the purchase, exceeds $1,000,000.
o Any corporation, Massachusetts or similar business trust, or
partnership, with total assets in excess of $5,000,000.
o A trust, with total assets in excess of $5,000,000, if the investment
decision is made by a trustee who, either alone or with the trustee's
purchase representative(s), has such knowledge and experience in
financial and business matters that he or she is capable of protecting
the trust's interest and evaluating the merits and risks of the
investment.
o A 501(c)(3) non-profit organization with assets of in excess of
$5,000,000.
o A bank, savings and loan association or other institution as defined in
the Securities Act of 1933, insurance company, Investment Company,
business Development Company, small business Investment Company, or
private business Development Company, as defined in certain statutes.
o An employee benefit plan as defined in ERISA, if the investment
decision is made by a plan fiduciary which is a bank, savings and loan
association, insurance company or registered investment advisor, or if
it has total assets in excess of $5,000,000, or if a self-directed
plan, the investment decision is made by person(s) who meet one of the
tests in paragraph 1 or 2 above.
o An entity in which each of the equity owners meets one of the tests in
paragraph 1 or 2 above.
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