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EXHIBIT 10.1
CONSOLIDATED RECONVEYANCE COMPANY,
LENDERS POSTING AND PUBLISHING COMPANY
AND CONSOLIDATED RECONVEYANCE CORPORATION
ASSET AND STOCK PURCHASE AND SALE
AND ASSUMPTION OF LIABILITIES AGREEMENT
This Asset and Stock Purchase and Sale and Assumption of Liabilities
Agreement (the "Agreement"), dated as of December 15, 1996, is entered into by
and between Consolidated Reconveyance Company ("CRC"), a California limited
partnership, Lenders Posting and Publishing Company ("LPPC"), a California
limited partnership, and PacificAmerica Money Center, Inc. ("PAMM"), a Delaware
corporation (sometimes collectively referred to herein as "Sellers"), on the
one hand, and Consolidated Reconveyance Company, LLC ("New CRC"), a California
limited liability company, and Lenders Posting and Publishing Company, LLC
("New LPPC"), a California limited liability company, and Consolidated
Reconveyance Corporation ("CRCWA"), a Washington corporation (sometimes
collectively referred to herein with New CRC and New LPPC as "Purchasers"), on
the other hand, with reference to the following facts:
RECITALS
A. CRC is engaged in the business of providing trust deed foreclosure
and reconveyance services to mortgage lenders on loans secured by real property
located primarily in California (the "CRC Business"). LPPC is engaged in the
business of providing posting and publishing services to trust deed foreclosure
services companies and lenders (the "LPPC Business"). PAMM owns all of the
outstanding shares of common stock of CRCWA, which is engaged in the business
of providing trust deed foreclosure and reconveyance services to mortgage
lenders on loans secured by real property located primarily in Washington (the
"CRCWA Business").
B. CRC desires to sell, and New CRC desires to purchase the
assets of CRC, assume the liabilities of CRC (except the liabilities
specifically excluded herein) and continue the CRC Business. LPPC desires to
sell, and New LPPC desires to purchase the assets of LPPC, assume the
liabilities of LPPC and continue the LPPC Business. PAMM desires to sell, and
New CRC desires to purchase, all of the outstanding shares of stock of CRCWA
and continue the CRCWA Business. The assets of CRC and LPPC and the Common
Stock of CRCWA are sometimes collectively referred to herein as the
"Acquisition Assets."
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
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ARTICLE 1.
PURCHASE AND SALE OF CRC ASSETS
AND ASSUMPTION OF CRC LIABILITIES
BY NEW CRC
1.1. Transfer of Assets. Upon the terms and subject to the
conditions contained herein, on the Closing Date (as hereinafter defined), CRC
agrees to sell, convey, transfer, assign and deliver to New CRC, and New CRC
agrees to accept and purchase from CRC, the following assets, properties and
rights of CRC (collectively, the "CRC Assets"), subject to the exclusions set
forth in Section 1.2 hereof:
1.1.1. Balance Sheet Assets. All of the assets reflected on
the balance sheet of CRC at December 31, 1996, prepared in a manner consistent
with CRC's past financial statements. All of the tangible assets included in
the CRC Assets are being sold on an "as is" basis, with no warranties as to
condition from CRC to New CRC;
1.1.2. Business Names. All of CRC's rights to conduct
business under the name Consolidated Reconveyance Company and all trade names
and trademarks associated with such name, including logos and designs
pertaining thereto and derivatives thereof and all goodwill associated
therewith;
1.1.3. Customer Lists. All of CRC's right, title and
interest in and to that portion of CRC's customer list that is maintained and
used by CRC in the Business;
1.1.4. Contracts. All of CRC's right, title and interest in
and to each contract, agreement or commitment, written or oral, relating to
the Business to which CRC is a party as of the Closing Date, including all
rights of CRC as trustee under deeds of trust which name CRC as trustee
(collectively, the "Assigned Contracts"); and
1.1.5. Business and Records. The Business, together with
all books, records and accounts, correspondence, employment records, marketing
information and any confidential information which has been reduced to writing
relating to or arising out of the Business or customers or suppliers of CRC,
subject to CRC's reasonable rights of access as set forth in Section 11.1
hereof;
1.2. Excluded Assets. Notwithstanding anything contained in
Section 1.1 hereof to the contrary, CRC is not selling, and New CRC is not
purchasing, pursuant to this Agreement, any of the following, all of which
shall be retained by CRC (collectively, the "Excluded Assets"):
1.2.1. Real Property. Any real property, leaseholds or
leasehold improvements owned by CRC as of the Closing Date; and
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1.2.2. Partnership Documents. CRC's tax returns and other
partnership documents;
1.3. Assumption of Balance Sheet, Executory and Other Liabilities.
1.3.1. Balance Sheet Liabilities Except as provided in
Sections 1.3.3 and 1.3.4 hereof, as of the Closing Date, New CRC shall assume
and agree to thereafter pay when due and discharge and indemnify CRC and hold
CRC harmless with respect to all liabilities reflected on the balance sheet of
CRC as of December 31, 1996.
1.3.2. Executory Liabilities Assumed by New CRC. Except as
provided in Sections 1.3.3 and 1.3.4 hereof, as of the Closing Date, New CRC
shall assume and agree to thereafter pay when due and discharge and indemnify
CRC and hold CRC harmless with respect to the executory liabilities and
obligations of CRC under each Assigned Contract in effect on the Closing Date
and assigned to New CRC pursuant to Section 1.1.5 hereof.
1.3.3. Limited Liability in Connection with Consumer Action
and Xxxxx Actions. New CRC has agreed that it shall have the following
obligations in connection with the pending legal actions entitled Consumer
Action et al. v. Agency Sales, et al. (Contra Costa Superior Court Case No.
C95-02299) (the "Consumer Action") and Xxxxx v. TICOR Title Insurance Co. et
al. (Los Angeles Superior Court Case No. BC148433) ( the "Xxxxx Action");
1.3.3.1. Liability in Connection with Consumer
Action. In the event that a judgment is rendered against CRC in the Consumer
Action or CRC agrees to a settlement of the Consumer Action involving the
payment of damages or penalties by CRC, New CRC will reimburse CRC for 25% of
the total damages and/or penalties paid by CRC (not including any attorneys'
fees paid by CRC) in excess of $400,000, provided that New CRC's total
liability will not exceed $50,000;
1.3.3.2. Liability in Connection with the Xxxxx
Action. In the event that a judgment is rendered against CRC in the Xxxxx
Action or CRC agrees to a settlement of the Xxxxx Action involving the payment
of damages or penalties by CRC, New CRC will reimburse CRC for 25% of the total
damages and/or penalties paid by CRC (not including any attorneys' fees paid by
CRC) in excess of $25,000, provided that New CRC's total liability will not
exceed $25,000;
1.3.4. Liabilities Not Assumed by New CRC. New CRC shall
not be deemed by anything contained in this Agreement to have assumed and CRC
hereby agrees to indemnify New CRC and hold it harmless with respect to:
1.3.4.1. Agreement Breaches. Any liability of CRC to
any person or entity the existence of which constitutes a breach of any
covenant, agreement, representation, or warranty of Sellers contained in this
Agreement;
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1.3.4.2. Taxes. Any liability of CRC for any federal,
state, local or foreign income or franchise taxes, state or local property
taxes or other taxes of any kind or description except New CRC's pro rata
portion of any personal property taxes with respect to its ownership of any of
the CRC Assets after the Closing Date;
1.3.4.3. Employee Obligations. Any employment
contracts or obligations of CRC to its employees, including all expenses in
connection with the termination of any of such employees terminated prior to
the Closing Date;
1.3.4.4. Employee Benefit Plans. Any accrued or other
liability for contribution or payments to be made in respect of service during
periods through the Closing Date under any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ["ERISA"]) or other employee benefit plan maintained for the
employees of CRC who are participants therein up to the Closing Date;
1.3.4.5. Partnership and Securities Liabilities. Any
liabilities of CRC to the partners of CRC under the terms of its Agreement of
Limited Partnership, as amended and currently in effect, and any liabilities of
CRC for any federal or state securities law violations by either of them; and
1.3.4.6. Litigation Claims. Any liabilities of CRC
arising in the ordinary course of its business for actions taken by CRC prior
to the Closing Date, except for liabilities arising as a result of any
fraudulent action or wilful misconduct of CRC prior to the Closing Date and
except as provided in Section 1.3 hereof.
1.4. Closing Costs; Transfer Taxes. New CRC shall be responsible
for any sales, use, excise, property or other taxes imposed by reason of the
transfer of the CRC Assets provided hereunder and any deficiency, interest or
penalty asserted with respect thereto.
ARTICLE 2.
PURCHASE AND SALE OF LPPC ASSETS
AND ASSUMPTION OF LPPC LIABILITIES
BY NEW LPPC
2.1. Transfer of Assets. Upon the terms and subject to the
conditions contained herein, on the Closing Date (as hereinafter defined), LPPC
agrees to sell, convey, transfer, assign and deliver to New LPPC, and New LPPC
agrees to accept and purchase from LPPC, the following assets, properties and
rights of LPPC (collectively, the "LPPC Assets"), subject to the exclusions set
forth in Section 2.2 hereof:
2.1.1. Balance Sheet Assets. All of the assets reflected on
the balance sheet of LPPC at December 31, 1996, prepared in a manner consistent
with LPPC's past
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financial statements. All of the tangible assets included in the LPPC Assets
are being sold on an "as is" basis, with no warranties as to condition from
LPPC to New LPPC;
2.1.2. Business Names. All of LPPC's rights to conduct
business under the name Lenders Posting and Publishing Company and all trade
names and trademarks associated with such name, including logos and designs
pertaining thereto and derivatives thereof and all goodwill associated
therewith;
2.1.3. Customer Lists. All of LPPC's right, title and
interest in and to that portion of LPPC's customer list that is maintained and
used by LPPC in the Business;
2.1.4. Contracts. All of LPPC's right, title and interest
in and to each contract, agreement or commitment, written or oral, relating to
the Business to which LPPC is a party as of the Closing Date (collectively, the
"Assigned Contracts"); and
2.1.5. Business and Records. The LPPC Business, together
with all books, records and accounts, correspondence, employment records,
marketing information and any confidential information which has been reduced
to writing relating to or arising out of the Business or customers or suppliers
of LPPC, subject to LPPC's reasonable rights of access as set forth in Section
11.1 hereof;
2.2. Excluded Assets. Notwithstanding anything contained in
Section 2.1 hereof to the contrary, LPPC is not selling, and New LPPC is not
purchasing, pursuant to this Agreement, any of the following, all of which
shall be retained by LPPC (collectively, the "Excluded Assets"):
2.2.1. Real Property. Any real property, leaseholds or
leasehold improvements owned by LPPC as of the Closing Date; and
2.2.2. Partnership Documents. LPPC's tax returns and other
partnership documents;
2.3. Assumption of Balance Sheet, Executory and Other Liabilities.
2.3.1. Balance Sheet Liabilities. As of the Closing Date,
New LPPC shall assume and agree to thereafter pay when due and discharge and
indemnify LPPC and hold LPPC harmless with respect to all liabilities reflected
on the balance sheet of LPPC as of December 31, 1996.
2.3.2. Executory Liabilities Assumed by New LPPC. As of the
Closing Date, New LPPC shall assume and agree to thereafter pay when due and
discharge and indemnify LPPC and hold LPPC harmless with respect to the
executory liabilities and obligations of LPPC under each Assigned Contract in
effect on the Closing Date and assigned to New LPPC pursuant to Section 2.1.4
hereof.
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2.3.3. Liabilities Not Assumed by New LPPC. New LPPC shall
not be deemed by anything contained in this Agreement to have assumed and LPPC
hereby agrees to indemnify New LPPC and hold it harmless with respect to:
2.3.3.1. Agreement Breaches. Any liability
of LPPC to any person or entity the existence of which constitutes a breach of
any covenant, agreement, representation, or warranty of LPPC contained in this
Agreement;
2.3.3.2. Taxes. Any liability of LPPC for
any federal, state, local or foreign income or franchise taxes, state or local
property taxes or other taxes of any kind or description, except New LPPC's pro
rata portion of any personal property taxes with respect to its ownership of
any of the LPPC Assets after the Closing Date;
2.3.3.3. Employee Obligations. Any
employment contracts or obligations of LPPC to its employees, including all
expenses in connection with the termination of any of such employees terminated
prior to the Closing Date;
2.3.3.4. Employee Benefit Plans. Any accrued
or other liability for contribution or payments to be made in respect of
service during periods through the Closing Date under any employee pension
benefit plan (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ["ERISA"]) or other employee benefit plan
maintained for the employees of LPPC who are participants therein up to the
Closing Date;
2.3.3.5. Partnership and Securities
Liabilities. Any liabilities of LPPC to the partners of LPPC under the terms
of its Agreement of Limited Partnership, as amended and currently in effect and
any liabilities of LPPC for any federal or state securities law violations by
either of them; and
2.3.3.6. Litigation Claims. Any liabilities of LPPC
arising in the ordinary course of its business for actions taken by LPPC prior
to the Closing Date, except for liabilities arising as a result of any
fraudulent action or wilful misconduct of LPPC prior to the Closing Date.
2.4. Closing Costs; Transfer Taxes. New LPPC shall be responsible
for any sales, use, excise, property or other taxes imposed by reason of the
transfer of the LPPC Assets provided hereunder and any deficiency, interest or
penalty asserted with respect thereto.
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ARTICLE 3.
PURCHASE AND SALE OF COMMON STOCK
OF CRCWA BY NEW CRC
3.1. Purchase and Sale of Common Stock. Upon the terms and subject
to the conditions contained herein, on the Closing Date (as hereinafter
defined), PAMM hereby sells, conveys, transfers, assigns and delivers to New
CRC, and New CRC hereby accepts and purchases from PAMM, all of the issued and
outstanding Common Stock of CRCWA. PAMM hereby agrees to indemnify and hold
harmless New CRC and New LPPC to the extent of the following liabilities, which
the parties agree shall be the primary responsibility of PAMM:
3.1.1. Taxes. Any liability of CRCWA for any
federal, state, local or foreign income or franchise taxes, state or local
property taxes or other taxes of any kind or description accrued through
December 31, 1996 except the pro rata portion of any personal property taxes
accrued after the Closing Date;
3.1.2. Employee Obligations. Any employment
contracts or obligations of CRCWA to its employees, including all expenses in
connection with the termination of any of such employees terminated prior to
the Closing Date;
3.1.3. Employee Benefit Plans. Any accrued or other
liability for contribution or payments to be made in respect of service during
periods through the Closing Date under any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ["ERISA"]) or other employee benefit plan maintained for the
employees of CRCWA who are participants therein up to the Closing Date;
3.1.4. Shareholder and Securities Liabilities. Any
liabilities of CRCWA to the shareholders of CRCWA and any liabilities of CRCWA
for any federal or state securities law violations by it; and
3.1.4.1. Litigation Claims. Any liabilities
of CRCWA arising in the ordinary course of its business for actions taken by
CRCWA prior to the Closing Date, except for liabilities arising as a result of
any fraudulent action or wilful misconduct of CRCWA prior to the Closing Date.
3.2. Tax Election. PAMM and New CRC agree that each of them shall
take such actions as are necessary to elect the tax treatment applicable under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended.
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ARTICLE 4.
PURCHASE PRICE
4.1. Purchase Price for Acquisition Assets. The aggregate purchase
price (the "Acquisition Price") for the Acquisition Assets shall be $1,822,000,
subject to increase or decrease in an amount equal to the increase or decrease
in the total combined partners' and shareholders' equity of CRC, LPPC and
CRCWA, as shown on the audited consolidating balance sheets of PAMM at December
31, 1996, from the total combined partners and shareholders' equity of CRC,
LPPC and CRCWA at November 30, 1996. The Acquisition Price shall be paid
$450,000 in cash on the Closing Date and $1,372,000, subject to adjustment as
described in the foregoing sentence, under the terms of a secured promissory
note of New CRC, New LPPC and CRCWA (the "Note") in the form attached hereto
as Exhibit A, secured by a Security Agreement (the "Security Agreement") in the
form attached hereto as Exhibit B.
4.2. Covenants of Purchasers Which Apply Until Note is
Paid in Full. Until the Note is paid in full, Purchasers hereby covenant that
neither they nor any of their affiliates (including any person or entity that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, any of the Purchasers) shall
engage in, or have any direct or indirect interest in, any business competitive
with the CRC Business, the LPPC Business or the CRCWA Business unless the
entity in which such business is conducted agrees to become jointly and
severally liable under the terms of the Note and Security Agreement, and the
gross revenues from any such business are included in the Gross Revenues (as
defined in the Note) for determining the amount owed by Purchasers to Sellers
under the terms of the Note.
4.3. Value of Assets. The parties agree that the fair
market value of the assets of each of CRC, LPPC and CRCWA is equal to the book
value of such assets as reflected in the balance sheets of those entities at
December 31, 1996, and that the value of the goodwill for the assets and stock
purchased hereby is $820,000.
ARTICLE 5.
CLOSING
5.1. Closing. The Closing of the transactions contemplated herein
(the "Closing") shall be held at the offices of Jeffer, Mangels, Xxxxxx &
Xxxxxxx, 2121 Avenue of the Stars, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, at
10:00 a.m. local time on December 31, 1996 (the "Closing Date"). The Closing
Date may not be extended unless Sellers and Purchasers mutually consent to a
later date.
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5.2. Documents to Be Delivered.
5.2.1. Deliveries at the Closing. Sellers and Purchasers
shall, on the Closing Date, deliver all instruments and documents required to
be delivered pursuant to Articles 6 and 7 hereof;
5.2.2. Form of Instruments and Documents. All of the
foregoing instruments and documents shall be in form and substance, and shall
be executed and delivered in a manner, reasonably satisfactory to Purchasers
and Sellers, as the case may be.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
OF SELLERS
6.1. Representations of CRC. CRC hereby represents and warrants to
Purchasers as follows:
6.1.1. Organization of CRC. CRC is duly organized, validly
existing and in good standing as a limited partnership under the laws of the
state of California, has full partnership power and authority to conduct its
business as it is presently being conducted and to own and lease its properties
and assets.
6.1.2. Authorization. CRC has all necessary partnership
power and authority and has taken all partnership action necessary to enter
into this Agreement, to consummate the transactions contemplated hereby, and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by CRC and is a legal, valid and binding obligation of it enforceable
against CRC in accordance with its terms.
6.2. Representations of LPPC. LPPC hereby represents and warrants
to Purchasers as follows:
6.2.1. Organization of LPPC. LPPC is duly organized,
validly existing and in good standing as a limited partnership under the laws
of the state of California, has full partnership power and authority to
conduct its business as it is presently being conducted and to own and lease
its properties and assets.
6.2.2. Authorization. LPPC has all necessary partnership
power and authority and has taken all partnership action necessary to enter
into this Agreement, to consummate the transactions contemplated hereby, and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by LPPC and is a legal, valid and binding obligation of it
enforceable against LPPC in accordance with its terms.
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6.3. Representations of CRCWA and PAMM. CRCWA and PAMM hereby
represent and warrant to Purchasers as follows:
6.3.1. Organization of CRCWA. CRCWA is duly organized,
validly existing and in good standing as a corporation under the laws of the
state of Washington, and has full corporate power and authority to conduct its
business as it is presently being conducted and to own and lease its properties
and assets.
6.3.2. Organization of PAMM. PAMM is duly organized,
validly existing and in good standing as a corporation under the laws of the
state of Delaware, and has full corporate power and authority to conduct its
business as it is presently being conducted and to own and lease its properties
and assets.
6.3.3. Authorization. PAMM has all necessary corporate
power and authority and has taken all corporate action necessary to enter into
this Agreement, to consummate the transactions contemplated hereby, and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by PAMM and is a legal, valid and binding obligation of it
enforceable against PAMM in accordance with its terms.
6.3.4. 6.4. No Conflict or Violation. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in (a) a violation of or a
conflict with any provision of the Certificate of Incorporation or Bylaws of
PAMM or CRCWA, or result in a breach of, or a default under, any term or
provision of any contract, agreement, indebtedness, lease, commitment, license,
franchise, permit, authorization or concession to which either of PAMM is a
party which breach or default would have a material adverse effect on the
ability of PAMM to consummate the transactions contemplated hereby or (c) a
violation by PAMM of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree or award, which violation would have a
material adverse effect on its ability to consummate the transactions
contemplated hereby.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
7.1. General Representations and Warranties. Purchasers hereby
represent and warrant to Sellers as follows:
7.1.1. Organization of New CRC and New LPPC. Each of New
CRC and New LPPC is duly organized, validly existing and in good standing as a
limited liability company under the laws of the State of California.
7.1.2. Authorization. Each of New CRC and New LPPC has all
necessary power and authority and has taken all action necessary to enter into
this Agreement,
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to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
New CRC and New LPPC and is a legal, valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms.
7.2. No Conflict or Violation. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in (a) a violation of or a conflict with any provision of the
Operating Agreement of either New CRC or New LPPC, (b) a breach of, or a
default under, any term or provision of any contract, agreement, indebtedness,
lease, commitment, license, franchise, permit, authorization or concession to
which either of New CRC or New LPPC is a party which breach or default would
have a material adverse effect on its business or financial condition or Seller
or its ability to consummate the transactions contemplated hereby or (c) a
violation by New CRC or New LPPC of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or award, which violation would
have a material adverse effect on its business or financial condition or its
ability to consummate the transactions contemplated hereby.
7.3. Additional Representations and Warranties. Purchasers
acknowledge that Xxxxxxx Xxxxxxx, the managing member of each of New CRC and
New LPPC, has been the chief executive officer of CRC, LPPC and CRCWA since
their respective organizations, and that certain other employees of CRC, LPPC
and CRCWA who will continue as employees of New CRC, New LPPC and CRCWA also
have knowledge of certain of the matters described herein, and that therefore,
Purchasers have knowledge of the business affairs of CRC, LPPC and CRCWA,
including litigation, assets and liabilities and obligations of each of them
under contractual arrangements. Purchasers therefore hereby represents and
warrants to Sellers as follows:
7.3.1. Consents and Approvals. No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any other person or entity, is required to be made
or obtained by any of Purchasers or Sellers in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
7.3.2. Litigation. Except with respect to the actions
disclosed in Section 1.3.3 hereof, to the best of Purchasers' knowledge, there
is no order, writ, injunction, judgment or decree outstanding or any action,
claim, suit, litigation, proceeding, labor dispute, arbitral action or
investigation (collectively, "Actions") pending or, to the knowledge of
Purchasers, threatened or anticipated against CRC, LPPC or CRCWA or any of the
transactions contemplated by this Agreement, which, if adversely determined,
would have a material adverse effect on Seller, or on the consummation of the
transactions contemplated by this Agreement. None of CRC, LPPC or CRCWA is in
default with respect to any judgment, order, writ, injunction or decree of any
court or governmental agency, and there are no unsatisfied judgments against
it.
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7.4. Assets. CRC, LPPC and CRCWA have no material assets except as
disclosed or accounted for on the respective balance sheets of CRC, LPPC and
CRCWA.
7.5. Liabilities. To the best knowledge of Purchasers, based upon
the knowledge of Xxxxxxx X. Xxxxxxx and certain other employees who will
continue as employees of New CRC, New LPPC and CRCWA regarding the business
affairs of CRC, LPPC and CRCWA, none of them has any material liabilities or
obligations (absolute, accrued, contingent or otherwise), including, without
limitation, any liability for taxes and interest, penalties, and other charges
with respect thereto, except (i) current liabilities and long-term debt as
reflected on the Balance Sheet, and (ii) liabilities arising under contracts,
leases, letters of credit, purchase orders, permits, purchase agreements and
other agreements entered into by CRC, LPPC and CRCWA in the ordinary course of
their respective businesses.
7.6. Material Misstatements or Omissions. No representations or
warranties by Purchasers in this Agreement, nor any document, exhibit,
statement, certificate or schedule furnished to Seller pursuant hereto,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements of facts
contained therein not misleading.
ARTICLE 8.
COVENANTS OF SELLERS AND PURCHASERS
Sellers and Purchasers covenant with each other as follows:
8.1. Maintenance of Business Prior to Closing. Sellers shall use
their best efforts to continue to carry on the CRC Business, the LPPC Business
and the CRCWA Business in the ordinary course and substantially in accordance
with past practice and will not take any action inconsistent therewith or with
the consummation of the closing of this Agreement.
8.2. Maintenance of Cash Account. Sellers will use their best
efforts, and will cause all of their officers to use their best efforts, to
maintain a minimum aggregate of $500,000 in the cash account(s) of CRC, LPPC
and CRCWA as of the Closing Date.
8.3. Certain Prohibited Transactions. Prior to the Closing Date,
CRC, CRCWA and LPPC shall not, without the prior written consent of Xxxxxxx X.
Xxxxxxx on behalf of Purchasers and of Xxxx X. Xxxxxxx on behalf of Sellers:
8.3.1. enter any material transaction not in the ordinary
course of business and consistent with past practice;
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8.3.2. mortgage, pledge or otherwise encumber any of the
Acquisition Assets or sell, transfer or otherwise dispose of any of the
Acquisition Assets, except in the ordinary course of business and consistent
with past practice;
8.3.3. make any investment of a capital nature either by
purchase of stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other
individual, partnership, firm or corporation, except in the ordinary course of
business and consistent with past practice, or sell or otherwise dispose of, or
agree to sell or otherwise dispose of, any such investment;
8.3.4. enter into or terminate any material contract or
agreement, or make any material change in any of its contracts, other than in
the ordinary course of business and consistent with past practice, and other
than personnel changes as deemed appropriate by Xxxxxxx X. Xxxxxxx;
8.3.5. make any increase in, or any commitment to increase
the compensation payable to any employee of CRC, LPPC or CRCWA other than
routine increases made in the ordinary course of business and consistent with
past practice;
8.3.6. materially alter the manner of keeping its books; or
8.3.7. do any other act which would cause any representation
or warranty of Sellers or Purchasers in this Agreement to be or become untrue
in any material respect.
8.4. Notification of Certain Matters. Sellers shall give prompt
notice to Purchasers, and Purchasers shall give prompt notice to Sellers of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect any time from the
date hereof to the Closing Date and (ii) any material failure of Sellers or
Purchasers, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by them hereunder.
Each party shall use all reasonable efforts to remedy any material failure on
its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
8.5. No Mergers, Consolidations, Sale of Stock, Etc. Sellers will
not, directly or indirectly, solicit any inquiries or proposals or enter into
or continue any discussions, negotiations or agreements relating to the sale or
exchange of capital stock or partnership interests or the merger of CRC, LPPC
or CRCWA with, or any direct or indirect disposition of a significant amount of
the assets or business of CRC, LPPC or CRCWA to, any person other than
Purchasers or provide any assistance or any information to or otherwise
cooperate with any person in connection with any such inquiry, proposal or
transaction.
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8.6. Continuation of Business Relationship. For a period of seven
years following the Closing Date, provided that Purchasers provide reasonably
acceptable services at competitive rates, PAMM and its subsidiaries shall
engage New CRC or CRCWA, as appropriate, to act as trustee and provide all
trust deed foreclosure services on substantially all trust deeds securing loans
made by PAMM or any of its affiliates; provided that this agreement to engage
New CRC or CRCWA shall not include loans originated for sale if the intended
purchaser of such loans requires PAMM or its subsidiaries to use a different
trustee specified by such purchaser. Except in the event of fraud of New CRC
or CRCWA or misconduct which results in a material loss on a loan held by PAMM
or one of its subsidiaries, PAMM shall be required to deliver written notice to
New CRC and/or CRCWA informing them of the reasons for dissatisfaction with
their services, and New CRC and/or CRCWA shall have a period of 15 days to
provide evidence to PAMM of a correction of the reasons for PAMM's
dissatisfaction. If such evidence is reasonably satisfactory to PAMM, it shall
not terminate the engagement of New CRC or CRCWA. If New CRC or CRCWA do not
provide evidence of correction or such evidence that is provided is not
reasonably satisfactory to PAMM, then PAMM and its subsidiaries may terminate
the engagement of New CRC or CRCWA as trustee of record on deeds of trust
originated by PAMM or its subsidiaries. New CRC and CRCWA agree that they will
give PAMM and its subsidiaries access to the borrower lists of New CRC and
CRCWA for the purpose of allowing PAMM and its subsidiaries to solicit such
borrowers to refinance their loans, except to the extent prohibited by law.
ARTICLE 9.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for
hereby are subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions:
9.1. Representations, Warranties, and Covenants. All
representations and warranties of Purchasers contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date, and
Purchasers shall have performed all agreements and covenants required hereby to
be performed by it prior to or at the Closing Date.
9.2. Cash Deposit. Purchasers shall have delivered by December 31,
1996 to Sellers' legal counsel, to hold in trust for Purchasers until the
Closing Date, a cashier's or certified check in the amount of $450,000.
9.3. Security Agreement. Sellers and Purchasers shall execute and
deliver a Security Agreement in the form attached hereto as Exhibit B.
9.4. Certificates. Purchasers will furnish Sellers with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 9 as may be reasonably requested by
Seller.
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9.5. Corporate Documents. Sellers shall have received from
Purchasers resolutions duly adopted by the members or board of directors, as
appropriate, of Purchasers approving this Agreement and the transactions
contemplated hereby, certified by Xxxxxxx as managing member of New CRC and New
LPPC.
9.6. Assumption of Liabilities. Purchasers shall have executed and
delivered to Sellers such instruments, in form and substance satisfactory to
Sellers, as Sellers shall deem necessary in order for Purchasers to assume the
executory obligations of Sellers under each Assigned Contract to be assumed by
Purchasers pursuant hereto.
ARTICLE 10.
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchasers to consummate the transactions provided
for hereby are subject, in the discretion of Purchasers, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions:
10.1. Representations, Warranties, and Covenants. All
representations and warranties of Sellers contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date, and
Sellers shall have performed all agreements and covenants required hereby to be
performed by them prior to or at the Closing Date.
10.2. Certificates. Sellers will furnish Purchasers with such
certificates of Sellers to evidence compliance with the conditions set forth in
this Article 10 as may be reasonably requested by Purchasers.
10.3. Corporate Documents. Purchasers shall have received from
Sellers resolutions duly adopted by the board of directors PAMM and the board
of directors of Presidential Services Corporation, general partner of
Presidential Management Company, general partner of CRC and LPPC, approving
this Agreement and the transactions contemplated hereby, certified by the
corporate secretaries of each of PAMM and Presidential Services Corporation, as
appropriate.
10.4. Bills of Sale. Sellers shall have executed and delivered to
Purchasers deeds and bills of sale and other instruments of assignment in form
and substance satisfactory to Purchasers and its counsel, effectively
transferring title to the Acquisition Assets to Purchasers, as applicable.
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ARTICLE 11.
ACTIONS BY SELLER AND PURCHASERS
AFTER THE CLOSING
11.1. Books and Records. Each party agrees that he or it will
cooperate with and make available to the other parties, during normal business
hours, all books and records, information and employees (without substantial
disruption of employment) retained and remaining in existence after the Closing
Date which are necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such books and records, information or employees for any
reasonable business purpose. The party requesting any such books and records,
information or employees shall bear all out-of-pocket costs and expenses paid
to third parties (including without limitation, attorneys' fees) reasonably
incurred in connection with providing such books and records, information or
employees. Sellers may require certain financial information relating to
Sellers for periods prior to the Closing Date for the purpose of filing
federal, state, local and foreign tax returns and other governmental reports,
and Purchasers agree to furnish such information to Sellers at their reasonable
request.
11.2. Indemnification.
11.2.1. By Sellers. Sellers shall indemnify, save and hold
harmless Purchasers and their officers, directors, employees and agents, from
and against any and all costs, losses (including, without limitation,
diminution in value), liabilities, damages, lawsuits, deficiencies, claims and
expenses (whether or not arising out of third-party claims), including, without
limitation, interest, penalties, reasonable attorneys' fees and all amounts
paid in investigation, defense or settlement of any of the foregoing (herein,
"Damages"), incurred in connection with or arising out of or resulting from (i)
any material breach of any covenant or warranty, or the material inaccuracy of
any representation, made by Sellers in or pursuant to this Agreement;(ii) any
and all liabilities and obligations of Sellers which arose prior to the Closing
Date which have not been assumed by Purchasers hereunder; and (iii) any and all
liabilities arising as a result of any federal or state securities law
violations due to the actions of CRC, LPPC, CRCWA or PAMM. The term "Damages"
as used in this Section 11.2 is not limited to matters asserted by third
parties against Purchasers, but includes Damages incurred or sustained by
Purchasers in the absence of third party claims.
11.2.2. By Purchasers. Purchasers shall indemnify and save
and hold harmless Sellers and their officers, directors, employees and agents,
from and against any and all Damages incurred in connection with or arising out
of or resulting from (i) any material breach of any covenant or warranty, or the
material inaccuracy of any representation, made by Purchasers in or pursuant to
this Agreement; (ii) any liability, obligation or commitment of Purchasers
relating to the Acquisition Assets or the operation of the Business after the
Closing Date; (iii) as of or after the Closing Date, any other claim, liability,
obligation or commitment
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of any nature which is expressly assumed by Purchasers pursuant to this
Agreement; and (iii) any and all liabilities arising as a result of any federal
or state securities law violations due to the actions of New CRC, New LPPC or
Xxxxxxx.
11.2.3. Defense of Claims. If a claim for Damages is to be
made by a party entitled to indemnification hereunder against the indemnifying
party, the party entitled to such indemnification shall give written notice to
the indemnifying party as soon as practicable after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section
11.2.3 Such notice shall set forth, with reasonable specificity, the facts,
conditions, or events which may give rise to Damages for which indemnification
may be sought under this Section 11.2.3 If any lawsuit or enforcement action
is filed against any party entitled to the benefit of indemnity hereunder,
written notice thereof shall be given to the indemnifying party as promptly as
practicable (and in any event within fifteen (15) days after the service of the
citation or summons); provided, that the failure of any indemnified party to
give timely notice shall not affect rights to indemnification hereunder except
to the extent that the indemnifying party demonstrates actual damage caused by
such failure. After such notice, if the indemnifying party shall acknowledge
in writing to the indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit or action, then the indemnifying party shall be entitled, if it so
elects, to take control of the defense and investigation of such lawsuit or
action and to employ and engage attorneys of its own choice to handle and
defend the same, at the indemnifying party's cost, risk and expense provided
that the indemnifying party and its counsel shall proceed with diligence and in
good faith with respect thereto. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its
own cost, participate in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom.
11.3. Further Assurances. After the Closing Date, each party will
cooperate in good faith with the other and will take all appropriate action and
execute any documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder. From time to time after the Closing Date, Sellers will
execute and deliver to Purchasers such instruments of sale, transfer,
conveyance, assignment and delivery, consents, assurances, powers of attorney
and other instruments as may be reasonably requested by counsel for Purchasers
in order to vest in Purchasers all right, title and interest of Sellers in and
to the Acquisition Assets and otherwise in order to carry out the purpose and
intent of this Agreement.
11.4. Personal Property Tax Adjustments After the Closing Date.
Personal property taxes with respect to the Acquisition Assets to be conveyed
to Purchasers pursuant hereto shall be prorated through the Closing Date and
shall be paid by Purchasers as and when due or reimbursed to Sellers to the
extent prepaid by them prior to the Closing Date.
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11.5. Right to Sublease of Premises by Purchasers. Purchasers shall
have the right to sublease from PAMM the premises currently occupied by
Sellers, on a month-to-month basis for up to 12 months, with the right to
terminate on 30 days' prior written notice to PAMM, at a monthly rental rate
equal to 85% of the monthly rental expense paid by Sellers on Suite 520 and
upon substantially the same additional terms as apply to Sellers under the
terms of the lease pursuant to which Sellers occupy the premises as of the
Closing Date.
ARTICLE 12.
MISCELLANEOUS
12.1. Notices. Any and all notices required or desired to be given
pursuant to this Agreement to any of the parties hereto shall be personally
delivered, or deposited in the United States mail, by registered or certified
mail, return receipt requested, postage fully prepaid, or transmitted by
facsimile transmission, addressed to each of the parties at the addresses set
forth below. Any and all notices given pursuant to this Section 12.1 shall be
deemed delivered to the other party when delivered by hand to the other party,
transmitted by facsimile transmission with confirmation of transmission, or on
the date mailed as set forth above. Any party may change its address for
notices by giving notice thereof in the same manner provided herein for
notices.
If to Sellers, addressed to:
Consolidated Reconveyance Company
Lenders Posting and Publishing Company
PacificAmerica Money Center, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
If to Purchasers, addressed to:
Consolidated Reconveyance Company, LLC
Lenders Posting and Publishing Company, LLC
00000 Xxxxxxxxxx Xxx, Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
or to such other place and with such other copies as any party may designate as
to himself or itself by written notice to the others.
12.2. Choice of Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of California.
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12.3. Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. No supplement, modification or
waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
12.4. Multiple Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.5. Expenses. Each party hereto shall pay its own legal,
accounting, out-of-pocket and other expenses incident to this Agreement and to
any action taken by such party in preparation for carrying this Agreement into
effect, and Purchasers shall not assume any liabilities of Sellers for such
expenses.
12.6. Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
12.7. Titles. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
12.8. Further Actions. Each of the parties hereto agrees that it
will sign such additional documents and take such additional actions as any
other party reasonably requests in order to carry out the purpose and of this
Agreement.
12.9. Attorneys' Fees. Should any party hereto institute any action
or proceeding at law or in equity, or in connection with an arbitration, to
enforce any provision of this Agreement, including an action for declaratory
relief, or for damages by reason of an alleged breach of any provision of this
Agreement, or otherwise in connection with this Agreement, or any provision
thereof, the prevailing party shall be entitled to recover from the losing
party or parties reasonable attorney's fees and costs for services rendered to
the prevailing party in such action or proceeding.
12.10. Arbitration. In the event of any dispute between one or more
parties arising under this Agreement, the parties agree that such dispute shall
be submitted to binding arbitration before a retired judge of the Superior
Court of the State of California under the auspices of Judicial Arbitration and
Mediation Services, Inc. ("JAMS"). The parties may
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agree on a retired judge from the JAMS panel. If they are unable promptly to
agree, JAMS will provide a list of three available judges and each party may
strike one. The remaining judge (of, if there are two, the one selected by
JAMS) will serve as the arbitrator. The arbitration shall be conducted in Los
Angeles, California. In rendering its decision, the arbitrator shall determine
the rights and obligations of the parties according to the substantive and
procedural laws of California. The decision must be based on, and accompanied
by, a written statement of decision explaining the factual and legal basis for
the decision as to each of the principal controverted issues. The decision
shall be conclusive and binding, and it may thereafter be confirmed as a
judgment by the Superior Court of the State of California, subject only to
challenge for errors of law or fact appearing on the face of the written
statement of decision.
12.11. Binding on Successors, Etc. This Agreement shall be binding
upon and be for the benefit of the parties and each of their successors and
assigns. In addition, all obligations of CRC and LPPC as provided for herein
shall be joint and several obligations of PAMM.
12.12. Disaster Plan. In the event of an earthquake or other natural
disaster, if as a result of such event New CRC, New LPPC or CRCWA are unable to
conduct business from their established business location, if any location of
PAMM has not been damaged as result of such event and to the extent that desk
space and computer needs of PAMM and its subsidiaries permit, then PAMM shall
allow New CRC, New LPPC and CRCWA to use the computer equipment and three desks
at any undamaged location PAMM for a period of up to 30 days from the date of
the event in order to continue their business.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
"Purchasers"
CONSOLIDATED RECONVEYANCE COMPANY, LLC
By: /s/ XXXXXXX X. XXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
LENDERS POSTING AND PUBLISHING COMPANY, LLC
By: /s/ XXXXXXX X. XXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
CONSOLIDATED RECONVEYANCE CORPORATION,
a Washington corporation
By: /s/ XXXXXXX X. XXXXXXX
------------------------------------
Xxxxxxx X. Xxxxxxx, President
"Sellers"
CONSOLIDATED RECONVEYANCE COMPANY,
a California limited partnership
By: /s/ XXXX X. XXXXXXX
------------------------------------
Xxxx X. Xxxxxxx, President
Presidential Services Corporation,
general partner, Presidential Management
Company, general partner
LENDERS POSTING AND PUBLISHING COMPANY,
a California limited partnership
By: /s/ XXXX X. XXXXXXX
-----------------------------------
Xxxx X. Xxxxxxx, President
Presidential Services Corporation,
general partner, Presidential Management
Company, general partner
PACIFICAMERICA MONEY CENTER, INC.,
a Delaware corporation
By: /s/ XXXX X. XXXXXXX
-----------------------------------
Xxxx X. Xxxxxxx, President
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SECURED PROMISSORY NOTE
December 31, 1996 $1,372,000 Los Angeles, California
FOR VALUE RECEIVED, each of the undersigned (collectively, "Debtors"),
jointly and severally, promises to pay to the order of PACIFICAMERICA MONEY
CENTER, INC. ("PAMM"), as designee of Consolidated Reconveyance Company (CRC")
and Lenders Posting and Publishing Company ("LPPC") under that certain Asset and
Stock Purchase and Sale and Assumption of Liabilities Agreement dated as of
December 31, 1996, at 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx,
Xxxxxxxxxx 00000, or at such other address as the holders of this Note shall
from time to time designate in writing to Debtors, the principal sum of One
Million Three Hundred Seventy Two Thousand and no/100 Dollars ($1,372,000),
together with interest on the balance owed thereon from the date hereof until
paid in full at the rate of seven percent (7%) per annum.
The principal amount of this Note is subject to increase or decrease in
amount equal to the increase or decrease in the total combined partners' and
shareholders' equity of CRC, LPPC and Consolidated Reconveyance Corporation
("CRCWA"), as shown on the audited consolidating balance sheets of PAMM at
December 31, 1996, from the total combined partners and shareholders' equity of
CRC, LPPC and CRCWA at November 30, 1996.
Each of the Debtors, jointly and severally, further agrees to pay
interest on any amount of principal which is not paid when due (either as a
regular payment or as a mandatory prepayment, as described below), from the date
on which such amount is due until such amount of principal is paid in full, at a
rate per annum (in lieu of the seven percent interest rate) equal to 10% per
annum.
All unpaid principal and interest owed under this Note shall be due and
payable in full on March 1, 2012.
Payments of regular principal installments and accrued interest shall
be made on or before the 1st day of each calendar month commencing April 1, 1997
in an amount equal to $25,000 per month until March 1, 1999; from April 1, 1999
until March 1, 2012, payments of regular principal installments and accrued
interest shall equal $9,328.93 per month. In addition, Debtors shall make
mandatory prepayments on this Note on or before the 15th day of each April,
July, October and January, beginning on July 15, 1997, in an amount equal to the
following percentages of the combined gross revenues of Debtors for new orders
booked on an accrual basis ("Gross Revenues"), during the next to last quarter
preceding the date on which a prepayment is due:
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10% of Gross Revenues in excess of $660,000 and under $750,000; and
33% of Gross Revenues in excess of $750,000.
Until all amounts owed under this Note are repaid in full, Debtors
shall provide to PAMM quarterly statements of revenues. In addition, Debtors
shall provide to PAMM such other financial statements of Debtors as PAMM shall
reasonably request, provided that such information shall not be requested more
frequently than semi-annually unless an Event of Default has occurred under the
terms of this Note or the Security Agreement, Debtors request any consent or
waiver under the Security Agreement or Secured Party has a special need to
receive current information from Debtors.
It is the intent of Debtors and PAMM that the holders of this Note
shall never be entitled to receive, collect or apply, as interest of any kind
required hereunder, any amount in excess of the maximum rate of interest
permitted to be charged by applicable law; and in the event the holders of this
Note ever receive, collect or apply as interest of any kind any such excess,
such amount which would be excess interest shall be deemed a partial prepayment
of principal and treated hereunder as such; and if the principal is paid in
full, any remaining excess fund shall forthwith be paid to Debtors.
Each payment made by Debtors under this Note shall be credited first to
interest, if any, then due, and the remainder to principal. Principal and
interest shall be payable in lawful money of the United States of America.
Debtors shall have the right to prepay all or any portion of the
principal sum hereof at any time without penalty.
This Note is secured by a Security Agreement of even date herewith (the
"Security Agreement") between Debtors and PAMM. Upon the occurrence of an Event
of Default as defined in the Security Agreement, then, in addition to all of the
holders' other rights and remedies under the Security Agreement or otherwise
under applicable law, the entire principal sum, all principal and accrued
interest shall become immediately due and payable at the option of the holders
hereof, without demand or notice, and all future amounts of contingent interest
shall become due and payable, without demand or notice, immediately as such
amounts become determinable.
Each of the Debtors, jointly and severally, agrees to pay all costs and
expenses (including without limitation actual attorneys' fees) incurred by any
holder of this Note in connection with or related to this Note or the
enforcement thereof, whether or not suit be brought. In any litigation arising
out of or relating to this Note, in which any holder of this Note is an adverse
party, each of the Debtors hereby waives trial by jury. Each of the Debtors
hereby further waives presentment, demand for payment, notice of dishonor,
notice of nonpayment, protest, notice of protest, and any and all other notices
and demands in connection with the delivery, acceptance, performance, default,
or enforcement of this Note.
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To the fullest extent permitted by law, each of the Debtors waives the statute
of limitations in any action brought by the holders in connection with this
Note.
No failure to exercise, and no delay in exercising, any right, power or
remedy hereunder or under any document delivered to the holders hereof shall
impair any right, power or remedy which the holders may have. The rights and
remedies of the holders hereof are cumulative and not exclusive of any rights or
remedies which the holders would otherwise have.
No waiver or modification of any of the terms or provisions of this
Note shall be valid or binding unless set forth in a writing signed by the
holders of this Note and each of the Debtors, and then only to the extent
therein specifically set forth.
This Note and all transactions hereunder and/or evidenced hereby shall
be governed by, construed under and enforced in accordance with the laws of the
State of California. Each of the Debtors hereby agrees that all actions or
proceedings relating directly or indirectly hereto may, at the option of the
holders, be litigated in courts located within the State of California, and each
of the Debtors hereby expressly consents to the jurisdiction of any such court
and consents to the service of process in any such action or proceeding by
personal delivery or by certified or registered mail directed to each of the
Debtors at their respective addresses last known to holders.
This Note and the Security Agreement securing this Note may be pledged,
assigned or transferred at any time by the holder hereof.
"Debtors"
CONSOLIDATED RECONVEYANCE COMPANY, LLC
By: s/XXXXXXX X. XXXXXXX
------------------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
LENDERS POSTING AND PUBLISHING COMPANY, LLC
By: s/XXXXXXX X. XXXXXXX
------------------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
CONSOLIDATED RECONVEYANCE CORPORATION
By: s/XXXXXXX X. XXXXXXX
------------------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated December 31, 1996,
is made by and between Consolidated Reconveyance Company, LLC ("New CRC"), a
California limited liability company, and Lenders Posting and Publishing
Company, LLC ("New LPPC"), a California limited liability company
(collectively, "Purchasers"), and Consolidated Reconveyance Corporation
("CRCWA"), a Washington corporation, on the one hand (sometimes collectively
referred to herein with Purchasers as "Debtors") and PacificAmerica Money
Center, Inc., on the other hand ("Secured Party"), with reference to the
following facts:
RECITALS:
A. Pursuant to the Consolidated Reconveyance Company, Lenders
Posting Agreement and Consolidated Reconveyance Corporation Asset and Stock
Purchase and Sale and Assumption of Liabilities Agreement (the "Purchase
Agreement") between Purchasers, Consolidated Reconveyance Company ("CRC"), a
California limited partnership, Lenders Posting and Publishing Company
("LPPC"), a California limited partnership, and PacificAmerica Money Center,
Inc. ("PAMM"), a Delaware corporation (sometimes collectively referred to
herein as "Sellers"), Purchasers have agreed to purchase and Sellers have
agreed to sell all of the assets and transfer all of the liabilities of CRC and
LPPC and PAMM has agreed to sell all of the stock of CRCWA in accordance with
the terms of the Purchase Agreement. A portion of the Acquisition Price (as
defined in the Purchase Agreement) is payable by Purchasers after the closing
date of the Purchase Agreement in accordance with the terms of a promissory
note of Debtors (the "Note") in the form attached as Exhibit A to the Purchase
Agreement.
B. In order to secure the balance of the Note, Debtors have
agreed to grant a security interest to Secured Party in all of the accounts
receivable of New CRC, CRCWA and New LPPC upon the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
1. Pledge and Security Interest. Debtors hereby pledge
to Secured Party, and grant to Secured Party a security interest in, the
following, whether now owned or hereafter acquired (the "Collateral"): all of
Debtors' rights, title and interest in and to all accounts receivable of any of
them, whether arising before, on or after the date of this Agreement, and all
proceeds thereof, including cash, securities, instruments, accounts and general
intangibles.
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2. Security for Obligations. This Agreement secures the payment
of all amounts owed by Debtors under the Note in accordance with its terms (all
such obligations being referred to herein as the "Obligations").
3. Representations and Warranties. Debtors represent and
warrant, now and until the indefeasible payment in full of all Obligations, as
follows:
a. Debtors are (or, with respect to after-acquired
property, will be when acquired) the legal and beneficial owners of the
Collateral free and clear of any lien, security interest, charge or encumbrance
except for the security interest created by this Agreement and a security
interest created by Debtors in favor of a third party lender (the "Third Party
Lender") concurrently with this Agreement not to exceed $400,000. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except such as may
have been filed in favor of Secured Party relating to this Agreement and in
favor of the Third Party Lender.
b. The pledge and grant of a security interest in the
Collateral pursuant to this Agreement, create or, with respect to
after-acquired property, will create when Debtors have rights in such property,
a valid and perfected first priority security interest in the Collateral,
securing the payment of the Obligations.
c. This Agreement has been duly and validly authorized,
executed and delivered and constitutes the binding obligation of Debtors,
enforceable against each of them in accordance with its terms.
4. Covenants of Debtors. Until the indefeasible payment of the
Obligations, each of Debtors agrees that:
a. It will not (i) transfer, sell, assign, convey,
pledge or encumber any of the Collateral or any interest therein, except that
it may use proceeds of accounts receivable to pay its obligations in the
ordinary course of its business; (ii) create any lien, security interest or
other charge or encumbrance upon or with respect to any of the Collateral,
except for the security interest created by this Agreement, a security interest
in favor of the Third Party Lender to secure a loan not to exceed $400,000, and
except as provided in Section 5 hereof; (iii) allow to exist any lien, security
interest or other charge or encumbrance on the Collateral imposed by a third
party without the consent of Debtors for a period of 60 days; (iv) change its
address without notice to Secured Party or the filing of amendments to each
financing statement required to be filed hereunder to reflect such change; or
(v) fail to comply with any of the covenants contained in the Purchase
Agreement.
b. At any time and from time to time, at the expense of
Debtors, each Debtor will promptly execute and deliver all further instruments
and documents, and take all further action that may be necessary or that
Secured Party may reasonably request, in order to perfect and protect any
security interest granted or to be granted hereby or to enable
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Secured Party to exercise and enforce their rights and remedies hereunder with
respect to the Collateral.
c. Secured Party is hereby authorized to file one or
more financing or continuation statements, or amendments thereto, relative to
all or any part of the Collateral, without the signature of Debtors when
permitted by law. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement when permitted by law.
d. Debtors will furnish to Secured Party from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral and information as
Secured Party may reasonably request, all in reasonable detail. Unless an
Event of Default has occurred under the terms of this Agreement, Debtors
request any consent or waiver under this Agreement or Secured Party has a
special need to receive current information from Debtors, Secured Party shall
not request information from Debtors more frequently than every six months.
Secured Party agrees to keep all such information confidential, except to the
extent necessary to make limited disclosure thereof to its accountants,
attorneys or regulators.
e. Debtors will not increase the principal amount owing
to the Third Party Lender to an amount in excess of $400,000 without the
written consent of Secured Party, which will not be unreasonably withheld, and
shall be granted if the conditions of Section 5 hereof are met.
f. Neither Debtors nor any of their affiliates
(including any person or entity that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, any of the Debtors) shall engage in, or have any direct or indirect
interest in, any business competitive with the business of any of Debtors
unless the entity under which such business is conducted agrees to become a
joint debtor with Debtors under the terms of the Note and this Security
Agreement and the gross revenues from any such business are included in the
Gross Revenues (as defined in the Note) for determining the amount owed by
Debtors to Secured Party under the terms of the Note.
5. Agreement to Subordinate. Notwithstanding anything to the
contrary contained in this Agreement, Secured Party agrees that it will, upon
the reasonable request of Debtors and the provision of such information by
Debtors to Secured Party as it shall reasonably request, agree to subordinate
its interest in the Collateral in favor of a security interest granted to the
provider of financing for any of Debtors, provided that the total combined
accounts receivable of New CRC, CRCWA and New LPPC is equal to at least 200% of
the aggregate of the remaining Obligations owed by Debtors to Secured Party and
any other debts or obligations owed by Debtors which are secured by the
Collateral or any part thereof.
6. Events of Default. An Event of Default, as used herein, shall
be deemed to occur in the event: (a) any material warranty, representation,
statement, report, or
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certificate made or delivered to Secured Party by any Debtor, or any of their
employees or agents, is incorrect, false, untrue, or misleading when given in
any material respect whatever; or (b) Debtors shall fail to pay or perform when
due all or any part of the Obligations or any material covenant or obligation
required of Debtors under the Purchase Agreement; or (c) there occurs in
Secured Party' judgment a material impairment of the prospect of payment or
performance of any or all of the Obligations; or (d) any event shall occur
which may or does result in the acceleration of the maturity of any
indebtedness of any Debtor to others (regardless of any requirement of notice,
opportunity to cure or other condition prior to the exercise of any right of
acceleration); or (e) there shall be made or exist any levy, assessment,
attachment, seizure, lien, or encumbrance for any cause or reason whatsoever
upon all or any material part of the assets of any Debtor (unless discharged by
payment, release or bond not more than sixty days after such event has
occurred); or (f) there shall occur the dissolution, termination of existence,
or business failure of New CRC, CRCWA or New LPPC; or (g) any of New CRC, CRCWA
or New LPPC file a petition for reorganization, arrangement, composition, or
similar relief under any federal or state insolvency law or seek, consent to or
acquiesce in the appointment of a receiver, trustee or custodian for any New
CRC, CRCWA or New LPPC or all or any part of its property; or (h) or any
involuntary petition under any federal or state insolvency law or involuntary
appointment of a receiver, trustee or custodian of New CRC, CRCWA or New LPPC
is not dismissed, vacated or stayed within sixty days after such petition or
appointment; or (i) the assignment for the benefit of creditors by New CRC,
CRCWA or New LPPC; or (j) any Debtor shall enter into any agreement (whether
written or oral), or offer to enter into any such agreement, with all or a
significant number of its creditors regarding any moratorium or other
indulgence with respect to its debts.
7. Secured Party Appointed Attorney-in-Fact. Upon the occurrence
of an Event of Default, each Debtor hereby irrevocably appoints Secured Party
as each Debtor's attorney-in-fact, with full authority in the place and stead
of such Debtor and in the name of Debtor, Secured Party or otherwise, from time
to time in Secured Party's discretion, without notice to any Debtor, to take
any commercially reasonably action and to execute any instrument which Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
a. To ask, demand, collect, xxx for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral; and
b. To file any claims or take any action or institute
any proceedings which Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Collateral.
8. Remedies. If any Event of Default shall have occurred and be
continuing:
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a. Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to them, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in the State of
California (whether or not the Uniform Commercial Code applies to the affected
Collateral) and also may, without notice or demand except as specified below,
sell the Collateral or any part thereof in a commercially reasonably manner in
one or more parcels at public or private sale, at Secured Party's offices or
elsewhere, at such time or times, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms, in each case as may be
commercially reasonable. Debtors agree that, to the extent notice of a private
sale shall be required by law, at least ten (10) days' notice to Debtors of the
time after which any private sale is to be made shall constitute reasonable
notification. Notice of any public sale shall be sufficient if it describes
the Collateral to be sold in general terms and is published at least once in
"The Los Angeles Times" or "The Wall Street Journal" not less than ten (10)
days prior to the sale. All requirements of commercially reasonable notice
shall be met if such notice is mailed by certified mail, postage prepaid, to
Debtors, at the addresses set forth herein or at such other address or
addresses as Debtors may have in writing provided to Secured Party, at least
ten (10) days before the time of such sale or disposition. At any sale of the
Collateral, if permitted by law, Secured Party may bid (which bid may be, in
whole or in part, in the form of cancellation of indebtedness) for and purchase
the Collateral or any portion thereof for the account of Secured Party.
Secured Party shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice to Debtors, be made at the
time and place to which it was so adjourned.
b. In accordance with California Commercial Code Section
9502 or otherwise permitted by law, Secured Party shall have the right to
notify the account debtors of the Collateral to make all payments otherwise
payable to Debtors, or any of them, directly to Secured Party. Secured Party
shall keep records of all notices sent to account debtors and all payments
received by Secured Party from such account debtors.
c. Effective immediately upon notice of default by
Secured Party, all payments received by Debtors in respect of the Collateral
shall be received in trust for the benefit of Secured Party, shall be
segregated from other funds of Debtors and shall be forthwith paid over to
Secured Party in the same form as so received (with any necessary indorsement).
9. Application of Proceeds. Any cash held by Secured Party as
Collateral after and during the continuance of an Event of Default, and all
cash proceeds received by Secured Party (all such cash being "Proceeds") in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral, shall be applied promptly from time to time by Secured
Party:
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First, to the payment of the costs and expenses of such sale,
collection or other realization, including reimbursement to Secured Party and
its agents and counsel for expenses, liabilities and advances made or incurred
by Secured Party in connection therewith;
Second, to the payment of the Obligations; and
Third, after payment in full of all Obligations, to Debtors or their
successors or assigns, or to whomsoever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds.
Each Debtor shall, jointly and severally, remain liable for any
deficiency due on the Obligations after application of the Proceeds.
10. Indemnity and Expenses.
a. Each of Debtors and Secured Party agree to indemnify
the other party from and against any and all claims, losses and liabilities of
the indemnified party as a result of any breach of this Agreement by the
indemnifying party.
b. Debtors will upon demand pay to Secured Party the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of counsel and of any experts and agents, which Secured Party may
incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale or substitution of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of Secured Party hereunder, or
(iv) the failure by Debtors to perform or observe any of the provisions hereof.
11. Waivers; Remedies. No waiver of any provision of this
Agreement, nor consent to any departure by Debtors therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
Secured Party, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of Secured Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
12. Notices. All notices and other communications provided for
hereunder shall be in writing (including telecopier) and mailed, telecopied or
delivered, if to Debtors, at their address at 00000 Xxxxxxxxxx Xxx, Xxxxxx
Xxxxx, Xxxxxxxxxx 00000; Telecopier No. (000) 000-0000, Attention: Xxxxxxx X.
Xxxxxxx; and if to Secured Party, 00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx
Xxxxx, Xxxxxxxxxx 00000, Telecopier No. (000) 000-0000, Attention: Xxxx X.
Xxxxxxx; or, as to any Debtor or Secured Party, at such other address as shall
be designated by it in a written notice to the others. All such notices and
communications shall be effective when personally delivered upon receipt, when
mailed, three days following deposit in the mails, and when telecopied upon
electronic confirmation of
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receipt, except that notices to Secured Party shall not be effective until
actually received by them.
13. Continuing Security Interest; Transfer of Obligations. This
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until indefeasible payment in full of
the Obligations, (b) be binding upon each Debtor, its representatives,
successors and assigns, and (c) inure, together with the rights and remedies of
Secured Party hereunder, to the benefit of Secured Party and each of its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), Secured Party may assign or otherwise transfer the
Obligations to any other person or entity, and such other person or entity
shall thereupon become vested with all the benefits in respect thereof granted
to Secured Party herein or otherwise.
14. Termination. Upon the indefeasible payment to Secured Party
of all Obligations due, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to Debtors. Upon any such
termination, Secured Party will, at Debtors' expense, execute and deliver to
Debtors such documents as Debtors shall reasonably request to evidence such
termination and reversion.
15. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the laws of the State of California except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interests hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of
a jurisdiction other than the State of California. Unless otherwise defined
herein, terms used in the Uniform Commercial Code in the State of California
are used herein as therein defined.
16. Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
17. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and unenforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired hereby.
18. Captions. The captions of the various sections herein are for
convenience only, and none of them is intended to be any part of the body or
text of this Agreement or is intended to be referred to in construing any of
the provisions hereof.
19. Interpretation. This Agreement has been prepared and
negotiations in connection therewith have been carried on by the joint efforts
of the parties and their respective counsel. This Agreement is to be construed
simply and fairly and not strictly for or against any of the parties hereto.
Whenever in this Agreement the context may require, the
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masculine gender shall be deemed to include the feminine and/or neuter, and the
singular to include the plural. The obligations hereunder of each person or
entity constituting a Debtor are joint and several.
20. Time is of the Essence. Time is of the essence in the
performance by Debtors of each and every obligation under this Agreement.
21. Entire Agreement. This Agreement and the Purchase Agreement
contain the entire agreement and understanding among the parties hereto and
supersede all prior oral and written agreements, promises, representations,
commitments or understandings relating to the subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
DEBTORS:
CONSOLIDATED RECONVEYANCE COMPANY,
a California limited liability company
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
LENDERS POSTING AND PUBLISHING COMPANY,
a California limited liability company
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
CONSOLIDATED RECONVEYANCE CORPORATION,
a Washington corporation
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx, President
SECURED PARTY:
PACIFICAMERICA MONEY
CENTER, INC.,
a Delaware corporation
By: /s/XXXX. X. XXXXXXX
--------------------------------
Xxxx X. Xxxxxxx, President
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