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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (hereinafter "Agreement") is entered into
as of this 5th day of August, 1996, by and among 7-7, INC., an Ohio corporation
with its principal place of business being 000 Xxxxxxxxxxx Xxxx, Xxxxxxx, Xxxx
00000 (the "Target Corporation"), XXXXXX X. XXXX, XX., XXXXXX X. XXXX, XX,
XXXXXX XXXXXXXXXXXX, XXXX XXXXXX, XXXXX XXXXXXX, and G. XXXXXX XXXXXXXXXXX,
(together the "Shareholders" and individually a "shareholder"), EXSORBET
INDUSTRIES, INC., an Idaho corporation with its principal place of business
being 0000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxxx 00000 (and having
further offices at 0000 Xxxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxxx
72903) (hereinafter "Exsorbet") and 7-7 MERGER, INC., an Arkansas corporation
and a wholly owned subsidiary of Exsorbet (hereinafter the "Merger Sub").
RECITALS
A. The Target Corporation is engaged in the business of environmental
site remediation, hazardous waste transportation, removal and disposal and
liquiefication of coal tars (all of which, taken together, are hereinafter
referred to as the "Business").
B. Each of the directors of Target Corporation, Merger Sub, and Exsorbet
has determined that it is in the best interest of its respective shareholders
for Target Corporation to merge with and into Merger Sub upon the terms and
subject to the conditions of this Agreement (the "Merger").
C. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
D. Target Corporation, Merger Sub, Exsorbet, and Shareholders desire to
make certain representations, warranties, covenants and agreements in
connection with the Merger.
IT IS, THEREFORE, AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
1. BASIC TRANSACTION
(a) The Merger. Subject to the terms and conditions of this Agreement, at
the effective time, the Target Corporation will be merged with and into Merger
Sub in accordance with the provisions of Ark. Code Xxx. Section 4-26-1006 with
the effect provided in such section and in accordance with the provisions of
Section 1701/79 of the Ohio General Corporation Law, with the effect provided in
such section. The separate corporate existence of the Target Corporation shall
thereupon cease and Merger Sub shall be the surviving corporation of the Merger
(the "Surviving
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Corporation") and shall continue to be governed by the laws of the State of
Arkansas.
(b) Effective Date. The Merger shall become effective on the date and at
the time (the "Effective Time") that the Articles of Merger shall have been
accepted for filing by the Secretary of State of the State of Arkansas and the
Secretary of State of the State of Ohio (or such later date and time as may be
specified in the Articles of Merger), which shall be the Closing Date as
provided in this Agreement.
(c) Article of Incorporation. The Articles of Incorporation of Merger Sub
as in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and of the Arkansas Business Corporation Act.
(d) By-Laws. The By-Laws of Merger Sub as in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving Corporation, until
duly amended in accordance with the terms thereof, of the Surviving
Corporation's Articles of Incorporation of the Arkansas Business Corporation
Act.
(e) Directors. The Directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and By-Laws.
Provided, however, such directors of the Surviving Corporation shall act
promptly after the Effective Time to increase the number of directors of the
Surviving Corporation and to appoint one (1) new director. The individual
selected by Shareholders shall be nominated to serve on the Board for a minimum
period of five (5) years. Further, such individual shall also be nominated to
serve on the Board of Exsorbet.
(f) Officers. From and after the Effective Time, the following persons
shall be officers of the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's Articles
of Incorporation and By-Laws: (i) Xxxxxx X. Xxxx, XX -- president; (ii) Xxxxxx
Kurzenburger -- vice-president and chief financial officer; and (iii) G. Xxxxxx
Xxxxxxxxxxx -- secretary.
2. Conversion of Shares in the Merger; Purchase Price.
(a) Shareholders covenant and warrant that, upon execution of this
Agreement and continuing until the closing, they are the sole and exclusive
direct owners of all outstanding stock of all classes of Target Corporation and
that no other person, persons, or entities are entitled to claim any interest
whatsoever (whether direct, indirect, beneficially, by security interest, lien,
mortgage or otherwise) in any of the shares of stock of any class of the Target
Corporation. Each
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of the shareholders further covenants and warrants that no current or former
spouse of any Shareholders is entitled to claim any interest in any of the
shares of stock of the Target Corporation, by statute, property division,
through community property laws, or otherwise.
(b) The entire unauthorized capital stock of the Target Corporation
consists of five hundred (500) shares of common stock, of which Two Hundred
Thirty-Seven (237) shares are issued and outstanding. No treasury shares are
held. All the issued and outstanding shares of stock of all classes of the
Target Corporation have been duly authorized, are validly issued, fully paid,
and nonassessable and are held of record by the Shareholders.
(c) All of the Target Corporation shares issued, outstanding and owned by
Shareholders immediately prior to the Effective Time, by virtue of the Merger
and without any action on the Shareholders' part, shall be exchanged for (i)
that number of shares of Exsorbet Common Stock that, valued at the Average
Closing Market Price for the time period between June 4, 1996 and ending ten
days prior to the date of execution of this Agreement, is equivalent to Three
Million Two Hundred Fifty Thousand Dollars ($3,250,000.00); (ii) cash in the
amount of Three Million Dollars ($3,000,000.00) to be paid by check, draft, or
negotiable instrument made payable to all Shareholders as indicated below; and
(iii) a subordinated note in the sum of Nine Hundred Thousand Dollars
($900,000.00) in the form as is attached hereto as Exhibit "A." Such Note
will be amortized over a five (5) year period and shall bear interest at a rate
of eight percent (8%) per annum. A copy of the amortization schedule for such
note is attached hereto as Exhibit "B." As used herein, the term "Purchase
Price" shall refer to the shares of stock of Exsorbet Industries, Inc., the
cash supplied to the Shareholders, and the subordinated note, all as identified
in the section.
(d) For the purposes of determining and paying the Merger consideration:
(i) "Average Closing Market Price" means the final sale or trading
price of Exsorbet Common Stock on the Nasdaq Stock Market, Inc. small
cap market at the close of such stock market on any given date. The
determination of the closing trade price by Bloomberg, L.P. shall be
conclusive.
(ii) "Stock" means the total number of shares of Exsorbet Common
Stock issued pursuant to Subparagraph 2(c).
(e) All shares of the Target Corporation to be exchanged for Exsorbet
Common Stock pursuant to this Section 2, shall cease to be outstanding, shall
be canceled and retired and shall cease to exist, and each holder of a stock
certificate representing any such Target Corporation Shares shall thereafter
cease to have any rights with respect to such Target Corporation Shares, except
the right to receive for each of the Target Corporation Shares, upon the
surrender of such stock certificate in Accordance with this Section, the number
of shares of Exsorbet Common Stock
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specified above, together with the cash portion of the Purchase Price.
(f) Each of the Shareholders, being all shareholders of 7-7, Inc., waives
any and all rights that a dissenter may possess pursuant to the laws of the
State of Ohio, or of any State, or of the United States to obtain any payment,
compensation, or other consideration by virtue of failing to consent to the
merger of 7-7, Inc. with 7-7 Merger, Inc.
3. Form of Consideration.
(a) At the Effective Time, each Shareholder shall surrender to the
Surviving Corporation all outstanding certificates representing Target
Corporation Shares together with stock powers duly endorsed in blank with
signatures appropriately guaranteed, and shall thereupon receive, in exchange
therefore, his pro rata share of the Purchase Price. Until such surrender,
each of the outstanding certificates representing Target Corporation Shares
shall, after the Effective Time, be deemed for all purposes to evidence only a
right to receive a pro rata portion of the Purchase Price as follows: Xxxxxx
X. Xxxx, Xx. -- 33.333%; Xxxxxx X. Xxxx, XX -- 36.287%; Xxxxxx Xxxxxxxxxxxx --
7.595%; G. Xxxxxx Xxxxxxxxxxx -- 7.595%; Xxxx Xxxxxx -- 7.595%; and Xxxxx
Xxxxxxx -- 7.595%.
(b) The Purchase Price shall be paid as follows:
(i) The cash consideration call for in Article 2(c) herein shall be
paid at Closing.
(ii) The stock consideration shall be exchanged and issued at Closing.
(iii) The delivery of the Promissory Note referred to in Article 2(c)
shall take place at closing. Said Promissory Note shall consist of
six (6) separate Promissory Notes payable to each of the six
individual shareholders, pro rata.
(c) No fractional share of Exsorbet Common Stock shall be issued in the
Merger. In lieu of any such fractional shares, each holder of Target
Corporation Shares who would otherwise have been entitled to a fraction of a
share of Exsorbet Common Stock upon surrender of stock certificates for
exchange pursuant to this Article 3 shall be entitled to receive an amount in
cash (without interest) equal to the last reported sale price of one share of
Exsorbet Common Stock on the NASDAQ Small Cap Market on the last business day
prior to the Closing Date, multiplied by such fraction.
(d) Stock Registration. At the request of any Shareholder, the Merger Sub
shall begin the "process of registration" of all the shares of common (capital)
stock of Exsorbet Industries, Inc. provided to the Shareholders under this
Agreement. No Shareholder shall be obligated to allow
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his shares of stock to be registered. However, failure to participate in the
registration process will result in waiving of the right to register the shares
of stock at the expense of the Merger Sub. The obligations of the Merger Sub
in the process of registration shall be: (i) paying the costs and expenses
(including attorney's fees and filing fees with the United States Securities
and Exchange Commission) for filing a registration statement; (ii) providing
such information and cooperation as is reasonably requested by the Shareholders
or the attorneys filing the registration statement; (iii) execute such lawful
documentation as is necessary to effectuate registration; and (iv) take all
other action reasonably requested by the Shareholders or the attorneys
registering the shares of stock, to register the shares of stock. The
attorneys handling the registration process shall determine the type of
registration to be sought. No Shareholder may sell more than fifty percent
(50%) of his shares of stock obtained pursuant to this Agreement within one
year after the date of this Agreement, even if all shares are registered.
(e) Stock of the Target Corporation. At closing, the Shareholders will
deliver to the Merger Sub certificates representing all of the shares of stock
of any class of the Target Corporation, representing all shares of stock of any
class of the Target Corporation. At such time, the Shareholders shall execute
such certificates and take such action as is required to transfer such shares
of stock to Merger Sub. In the event that the Target Corporation utilizes the
service of an agent for transfer of shares of certificates of the Target
Corporation, the Shareholders shall designate the name, address, and telephone
number of such agent in a writing signed by Merger Sub and attached to this
Agreement.
(f) Other Documents. Contemporaneously with the execution of this
Agreement, Merger Sub shall deliver to the Shareholders all documents,
certificates, and exhibits as are specified herein. At the same time,
Shareholders shall deliver to the Merger Sub all documents, certificates, and
exhibits as are specified herein. Each party warrants and represents the
accuracy and truthfulness of all such documents.
4. Time of Closing. As used herein, the term "closing" refers to that
time when all parties to this Agreement exchange and provide the documentation,
exhibits, and consideration that is required under this Agreement. Closing
shall take place at the Effective Time, as defined above, at a mutually
agreeable location no later than August 31, 1996. At the option of the Merger
Sub, closing may occur upon five days written notice by the Merger Sub to the
Shareholders. In the event that a location for closing cannot be agreed upon,
closing shall occur at the facilities of 7-7, Inc.
5. Overseas Market. 7-7, Inc. shall be allowed reasonable flexibility in
pursuing overseas markets, provided the markets are commercially reasonable.
6. Nomination to Board of Directors. The board of directors of Exsorbet
Industries, Inc. will create a new position on its board of directors. An
individual selected by Shareholders shall be nominated to serve on the board
for a minimum period of five years.
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7. Confidentiality. Each of the parties, and their employees, agents,
officers, and directors shall keep confidential all information acquired
concerning the operation of 7-7, Inc. and Exsorbet Industries, Inc. prior to
merger unless such information is already publicly available, is subsequently
made publicly available without a breach of this Agreement, or is generally
known. The provisions of this paragraph shall not prohibit the release of such
information as is necessary to provide a press release concerning the proposed
merger of 7-7, Inc. with 7-7 Merger, Inc. Additionally, a copy of this
Agreement and any other agreements between the parties may be filed with Form
8-K, or any other filings, with the United States Securities and Exchange
Commission.
8. Representations and Warranties.
(a) Representations and Warranties of the Shareholders. Each of the
Shareholders jointly and severally represents and warrants to the Merger Sub
that the statements contained in this section are correct and complete as of
the date of this Agreement and will continue to be true at merger.
(i) Organization of Target Corporation. The Target Corporation is duly
organized, validly existing, and in good standing under the laws of the
State of Ohio. The Target Corporation is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where
such qualification is required, except where the lack of such qualification
would not have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Target Corporation. The Target Corporation has full corporate power and
authority to carry on the businesses in which it is engaged and to use the
properties used by it. A list of the officers and directors of the Target
Corporation is attached hereto as Exhibit "C."
(ii) Capitalization.
(a) The entire authorized capital stock of 7-7, Inc. consists of Five
Hundred (500) shares of common stock, of which Two Hundred Thirty
Seven (237) shares are issued and outstanding. No treasury shares are
held. All of the issued and outstanding shares of stock of all
classes of the Target Corporation has been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record
by the Shareholders. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
the Target Corporation to issue, sell, or otherwise cause to become
outstanding any of its stock of any class. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation,
or similar rights with respect to the Target
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Corporation. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of
the Target Corporation. The Shareholders directly own all of the
issued and outstanding stock of all classes of the Target Corporation,
free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws and as
otherwise stated in a Buy-Sell Agreement dated November, 1992, a copy
of which is attached hereto as Exhibit "D"), taxes, security
interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. The Shareholders are not a party to
any option, warrant, purchase right, or other contract or commitment
that could require the Shareholders to sell, transfer, or otherwise
dispose of any stock of the Target Corporation. The Shareholders are
not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any stock of the Target
Corporation. The Buy-Sell Agreement specified above shall terminate
as of the merger of the Target Corporation with the Merger Sub.
(b) There are in existence certain stock option agreements existing by
and between the individual Shareholders. These stock options will be
exercised prior to merger. All proceeds received from the exercise of
such options will be paid to the Target Corporation. The exercise of
such stock options will not change any terms of this Agreement, will
not increase the number of shareholders of the Target Corporation, and
will not add a new shareholder or shareholders of the Target
Corporation.
(iii) Authorization of Transaction. The Shareholders have full power and
authority to execute and deliver this Agreement and to perform their
obligations hereunder. This Agreement constitutes valid and legally binding
obligations of the Shareholders, enforceable in accordance with its terms
and conditions. The Shareholders need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iv) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Shareholder or the
Target Corporation is subject; or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
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in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which either Shareholder or the Target
Corporation is a party or by which either Shareholder or the Target
Corporation is bound or to which any of the assets of either Shareholder or
the Target Corporation is subject. Notwithstanding the provisions of this
subsection, the Shareholders will provide the Merger Sub with copies of all
of the Target Corporation's material lease, promissory notes, and other
obligations prior to merger for which prior notice or consent of a creditor
may be required to effectuate the signing of this Agreement.
(v) Brokers' Fees. The Shareholders have no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Merger Sub could
become liable or obligated.
(vi) Investment. The Shareholders (A) understand that, at the time of
issuance, the restricted common stock of Exsorbet Industries, Inc.,
provided as a portion of the consideration for this Agreement, has not been
registered under the Securities Act, or under any state securities laws,
and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering; (B) are
acquiring the restricted common stock solely for their own account for
investment purposes, and not with a view to the immediate distribution
thereof; (C) are sophisticated investors with knowledge and experience in
business and financial matters; (D) have received certain information
concerning the Merger Sub and have had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks
inherent in holding the restricted common stock; and (E) are able to bear
the economic risk and lack of liquidity inherent in holding the restricted
common stock.
(vii) Assets of the Target Corporation. The Target Corporation has good
and marketable title to the properties and assets used by it, located on
its premises, or shown on the most recent balance sheet or acquired after
the date thereof, free and clear of all security interests, except for
properties and assets disposed of in the ordinary course of business since
the date of the most recent balance sheet. Shareholders warrant that no
other person or entity is entitled to claim a mortgage interest, security
interest, or otherwise claim a right to possession of the real or personal
property utilized by the Target Corporation, except as is disclosed in
Exhibit "E," attached hereto.
(viii) Pending Litigation Concerning Property. There are no pending or,
to the knowledge of any of the Shareholders and the directors and officers
of the Target Corporation, threatened condemnation proceedings, lawsuits,
or administrative
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actions relating to the real and personal property utilized by the Target
Corporation. All real property improvements utilized by the Target
Corporation have received all required approvals of governmental
authorities (including material licenses and permits) required in
connection with the ownership or operation thereof, and have been operated
and maintained in accordance with applicable laws, rules, and regulations
in all material respects.
(ix) Agreement to Merge. Merger of the Target Corporation and Merger Sub
will take place as is specified above. Each of the parties to this
Agreement consents to such merger. The merger shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended.
(x) Financial Statements. Attached hereto as Exhibit "F" are the following
financial statements (collectively the "financial statements"): (i) audited
consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
November 30, 1993, 1994, and 1995, and unaudited financial statements for
the six months ended May 30, 1996, which are maintained in accordance with
generally accepted accounting procedures, for the Target Corporation. The
financial statements (including the notes thereto) have been prepared in
accordance with generally accepted accounting principles in effect in the
United States applied on a consistent basis throughout the periods covered
thereby and present fairly the financial condition of the Target
Corporation as of such dates and the results of operations of the Target
Corporation for such periods.
(xi) Events Subsequent to Most Recent Fiscal Year End. Since May 31, 1996,
there has not been any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the
Target Corporation taken as a whole. (As used in this paragraph, the term
"material" shall mean a change in an amount equal to more than ten percent
of the total consideration provided under this Agreement to the
Shareholders.) Without limiting the generality of the foregoing, since
that date:
(a) the Target Corporation has not sold, leased, transferred, or
assigned any material assets, tangible or intangible, outside the
ordinary course of business;
(b) the Target Corporation has not entered into any material
agreement, contract, lease, or license outside the ordinary course of
business;
(c) no party (including the Target Corporation) has accelerated,
terminated, made material modifications to, or canceled any material
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agreement, contract, lease, or license to which the Target Corporation
is a party or by which any of them is bound;
(d) the Target Corporation has not imposed any security interest upon
any of its assets, tangible or intangible, outside the ordinary course
of business;
(e) the Target Corporation has not made any material capital
expenditures outside the ordinary course of business;
(f) the Target Corporation has not made any material capital
investment in, or any material loan to, any other person or entity
outside the ordinary course of business;
(g) the Target Corporation has not created, incurred, assumed, or
guaranteed any debt outside the ordinary course of business;
(h) the Target Corporation has not granted any license or sublicense
of any material rights under or with respect to any "intellectual
property," as defined below;
(i) there has been no change made or authorized in the charter or
by-laws of the Target Corporation;
(j) the Target Corporation has not issued, sold, or otherwise disposed
of any of its capital stock, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock, except that options
to acquire 5.75 shares of capital stock of the Target Corporation have
been granted to individual Shareholders Xxxx Xxxxxx and Xxxxx Xxxxxxx,
which will be exercised prior to merger, as indicated above [the
percentage ownership of the shares of stock of the Target Corporation
computed above have considered that such options have already been
exercised];
(k) the Target Corporation has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(l) the Target Corporation has not experienced any material, damage,
destruction, or loss (whether or not covered by insurance) to its
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property;
(m) the Target Corporation has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and
employees outside the ordinary course of business;
(n) the Target Corporation has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement, except
as is disclosed in Exhibit "G," attached hereto;
(o) the Target Corporation has not granted any increase in the base
compensation of any of its directors, officers, and employees outside
the ordinary course of business;
(p) the Target Corporation has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other employee benefit plan);
(q) the Target Corporation has not made any other material change in
employment terms for any of its directors, officers, and employees
outside the ordinary course of business; and
(r) the Target Corporation has not obligated or promised to take any
of the actions specified in the subparagraphs above.
(xii) Undisclosed Liabilities. The Target Corporation has not incurred
any material liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes), except for (i) liabilities set forth on
the face of the most recent balance sheet (rather than in any notes
thereto) and (ii) liabilities which have arisen after the most recent
fiscal month end in the ordinary course of business. However,
contingencies attached hereto as Exhibit "H" are known contingencies that
existed prior to Merger for which no indemnification will be provided by
Shareholders. Any unrecorded liabilities prior to Merger which were not
the result of the contingencies identified on the exhibited specified in
this subsection are liabilities for which indemnity to the Merger Sub and
Exsorbet will be provided, as specified below, for a period of two years
following Merger.
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(xiii) Legal Compliance. The Target Corporation has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies thereof), and no
facts have occurred which would form the basis for any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand on,
against, or involving the Target Corporation.
(xiv) Tax Matters.
(a) The Target Corporation has filed all Income Tax Returns that it
was required to file. All such Income Tax Returns were correct and
complete in all material respects. All Income Taxes owed by the Target
Corporation (whether or not shown on any Income Tax Return) have been
paid. The Target Corporation is not the beneficiary of any extension
of time within which to file any Income Tax Return.
(b) There is no material dispute or claim concerning any Income Tax
liability of the Target Corporation either (A) claimed or raised by
any authority in writing or (B) as to which any of the Shareholders
and the directors and officers of the Target Corporation has Knowledge
based upon personal contact with any agent of such authority.
(c) Attached hereto as Exhibit "I" is a disclosure listing all
federal, state, local, and foreign Income Tax Returns filed with
respect to the Target Corporation for which an audit has been
conducted or the Target Corporation have been notified that an audit
will be conducted. The Shareholders have delivered to the Merger Sub,
or allowed the Merger Sub to inspect, correct and complete copies of
all federal Income Tax Returns, examination reports, and statements of
deficiencies assessed against, or agreed to by the Target Corporation
for the time periods through and including November 30, 1995. The
Target Corporation has not waived any statute of limitations in
respect of Income Taxes or agreed to any extension of time with
respect to an Income Tax assessment or deficiency.
(d) The Target Corporation has not filed a consent under Internal
Revenue Code Section 341(f) concerning collapsible corporations. The
Target Corporation has not made any material payments, is obligated to
make any material payments, or is a party to any agreement that under
certain circumstances could obligate it to make any material
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payments that will not be deductible under Internal Revenue Code
Section 280G. The Target Corporation has not been a United States
real property holding corporation within the meaning of Internal
Revenue Code Section 897(c)(2) during the applicable period specified
in Internal Revenue Code Section 897(c)(1)(A)(ii). The Target
Corporation is not a party to any tax allocation or sharing agreement.
The Target Corporation (A) has not been a member of an affiliated
group filing a consolidated federal Income Tax Return (other than a
group the common parent of which was the Target Corporation) and (B)
has no liability for the taxes of any Person (other than the Target
Corporation) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(e) The Target Corporation is a subchapter S corporation, and neither
the Target Corporation nor any of the Shareholders has taken any
action which has, or could result in, revocation of such status prior
to execution of this Agreement. The Target Corporation has not, and
will not, take any action on or after July 1, 1996 which would
materially affect its financial statements or the financial status of
the Target Corporation.
(xv) Intellectual Property.
(a) The term "intellectual property" as used herein refers to: (i)
all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (ii) all trademarks, service
marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith,
(iii) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all mask
works and all applications, registrations, and renewals in connection
therewith, (v) all trade secrets and confidential business information
(including ideas, research and development, know- how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and
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business and marketing plans and proposals), (vi) all computer
software (including data and related documentation), (vii) all other
proprietary rights, and (viii) all copies and tangible embodiments
thereof (in whatever form or medium);
(b) The Target Corporation has not interfered with, infringed upon,
misappropriated, or violated any material "Intellectual Property"
rights of third parties in any material respect, and none of the
Shareholders and the directors and officers of the Target Corporation
has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Target Corporation must
license or refrain from using any "Intellectual Property" rights of
any third party). To the knowledge of any of the Shareholders and the
directors and officers of the Target Corporation, no third party has
interfered with, infringed upon, misappropriated, or violated any
material "Intellectual Property" rights of the Target Corporation in
any material respect.
(c) No patent or registration has been issued to Target Corporation
with respect to any of its "Intellectual Property," except for patent
numbers 4,788,115, 4,579,563, and 4,758,246 issued by the United
States Patent Office ("the patents"). The patents are, and shall
remain, the property of the Target Corporation, subject only to a
settlement agreement which has been provided to the Merger Sub. No
further applications for patents have been made for any additional
Intellectual Property. No third party has been granted any right,
license, or agreement to use any of the "Intellectual Property" of the
Target Corporation, except as stated in the confidential settlement
agreement. The Target Corporation possesses all right, title, and
interest to all "Intellectual Property" used by it, without
restriction by any contract, court order, or governmental authority.
(xvi) Inventory. The Target Corporation has no major inventory, except for
feedstock and processed tar products.
(xvii) Contracts. Attached hereto as Exhibit "J" is a list of all
contracts and agreements to which the Target Corporation is a party. Such
list may exclude any non-material contract creating an obligation on the
Target Corporation in an amount less than Two Thousand Five Hundred Dollars
($2,500.00). Such list shall specifically include: all partnership and
joint venture agreements; contracts of indemnity; confidentiality
agreements; any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material
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plan or arrangement for the benefit of its current or former directors,
officers, and employees; any collective bargaining agreement; any agreement
for the employment of any individual on a full-time, part-time, consulting,
or other basis providing annual compensation in excess of Two Thousand Five
Hundred Dollars ($2,500.00) or providing material severance benefits; any
agreement under which either Target Corporation has advanced or loaned any
amount to any of its directors, officers, and employees outside the
ordinary course of business; or any agreement under which the consequences
of a default or termination could have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Target Corporation.
(xviii) Notes and Accounts Receivable. Except as disclosed in Exhibit "K,"
all notes and accounts receivable of the Target Corporation are reflected
properly on their books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth on the face of the most recent
balance sheet (rather than in any notes thereto) as adjusted for operations
and transactions through the merger date in accordance with the past custom
and practice of the Target Corporation.
(xix) Powers of Attorney. To the knowledge of any of the Shareholders and
the directors and officers of the Target Corporation, there are no material
outstanding powers of attorney executed on behalf of the Target
Corporation.
(xx) Insurance. Exhibit "L" attached hereto is a list of each material
insurance policy (including policies providing property, casualty,
liability, and workers' compensation coverage and bond and surety
arrangements) with respect to which the Target Corporation is a party, a
named insured, or otherwise the beneficiary of coverage.
(xxi) Litigation. Exhibit "M," attached hereto is a list of each instance
in which the Target Corporation (a) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (b) is a party
or, to the knowledge of any of the Shareholders and the directors and
officers of the Target Corporation, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator.
(xxii) Employees. To the knowledge of any of the Shareholders and the
directors and officers of the Target Corporation, no executive, key
employee, or significant group of employees plans to terminate employment
with the Target Corporation during the next 12 months. The Target
Corporation is a party to and bound by a
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collective bargaining agreement, has not experienced any strike or material
grievance, claim of unfair labor practices, or other collective bargaining
dispute within the past three years. The Target Corporation has not
committed any material unfair labor practice. None of the Shareholders and
the directors and officers of the Target Corporation has any knowledge of
any organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Target
Corporation.
(xxiii) Employee Benefits. Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form and in
operation in all material respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(xxiv) Guaranties. The Target Corporation is not a guarantor or otherwise
is responsible for any liability or obligation (including indebtedness) of
any other person or entity.
(xxv) Environment, Health, and Safety.
(a) As used in this section, the term "Environmental, Health, and
Safety Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, and the Occupational Safety and Health Act of
1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee
health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes.
(b) Except as disclosed in Exhibit "H," the Target Corporation (A) has
complied with the Environmental, Health, and Safety Laws in all
material respects (and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any such failure to
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comply), (B) has obtained and been in substantial compliance with all
of the terms and conditions of all material permits, licenses, and
other authorizations which are required under the Environmental,
Health, and Safety Laws, and (C) has complied in all material respects
with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables
which are contained in the Environmental, Health, and Safety Laws.
(c) The Target Corporation will not have any known material
liabilities pursuant to any Environmental, Health, and Safety Laws at
the time of merger. It is understood that the Target Corporation is
in the business of handling and arranging for disposal of various
substances. The Target Corporation represents that the prior handling
and disposal services performed were performed in compliance with
Environmental, Health and Safety Laws in effect at the time such
services were performed.
(d) It is understood that the Target Corporation is in the business of
transporting, handling, and processing hazardous materials and
hazardous wastes, and that the properties and equipment utilized by it
may contain or temporarily store such materials as is required to
perform these services. The Shareholders are not aware of any
information that would indicate that the Target Corporation is
presently exposed to any liability whatsoever arising as a result of
transporting, handling, or processing such hazardous materials and
hazardous wastes.
(b) Representations and Warranties of the Merger Sub and Exsorbet. The
Merger Sub and Exsorbet represent and warrant to the Shareholders that the
statements contained in this section are correct and complete as of the date of
this Agreement and will continue to be true at merger.
(i) Organization of the Merger Sub and Exsorbet. Exsorbet Industries, Inc.
is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Idaho. 7-7 Merger, Inc. is a wholly owned
subsidiary of Exsorbet Industries, Inc. and is duly organized, validly
existing, and in good standing under the laws of the State of Arkansas.
(ii) Authorization of Transaction. The Merger Sub has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Merger Sub, enforceable in accordance with its terms and conditions. The
Merger Sub need not give any notice to, make any filing
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with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated
by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Merger Sub or
Exsorbet is subject or any provision of its charter or bylaws.
(iv) Brokers Fees. The Merger Sub and Exsorbet have no liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
any Shareholder could become liable or obligated.
(v) Investment. The Merger Sub is not obtaining the Target Corporation
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of any securities laws.
9. Post-Merger Covenants. The parties agree as follows with respect to the
period after execution of this Agreement.
(a) General. In case at any time after the execution of this Agreement,
any further action is necessary to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party unless such action was specifically required under the terms of this
Agreement. The Shareholders acknowledge and agree that from and after the
Merger the Merger Sub will be entitled to possession of all documents, books,
records (including tax records), agreements, and financial data of any sort
relating to the Target Corporation.
(b) Litigation Support. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the merger date
involving the Target Corporation, each of the other parties will cooperate with
him or it and his or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending party.
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(c) Transition. Neither of the Shareholders will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Target Corporation from
maintaining the same business relationships with the Target Corporation after
the merger as it maintained with the Target Corporation prior to the merger.
(d) Removal of Personal Guarantees. The Merger Sub and Exsorbet will use
their best efforts to effectuate the removal of any personal guarantees by the
Shareholders for debts of the Target Corporation guaranteed individually by the
Shareholders. Such attempts will take place within 180 days after merger.
10. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the representations
and warranties of the Merger Subs and Shareholders contained herein shall
survive the merger hereunder (even if the aggrieved party knew or had reason to
know of any misrepresentation or breach of warranty at the time of merger) and
continue in full force and effect for a period of two years thereafter.
(b) Indemnification Provisions for the Benefit of the Merger Sub and
Exsorbet. In the event any of the Shareholders breaches any of their
representations, warranties, or covenants contained herein, then each of the
Shareholders agrees to indemnify the Merger Sub and Exsorbet from and against
the entirety of any damages the Merger Sub and Exsorbet may suffer as a result
of such breach except as follows:
(i) if available, the Merger Sub will either maintain the Target
Corporation's existing liability insurance or purchase new insurance with
the same coverage, which names the individual Shareholders as additional
insureds thereof, to provide coverage for any claims subject to this
provision during the term of indemnification; and
(ii) Each Shareholder's maximum personal liability for indemnification
shall not exceed sixty-five percent (65%) of the shareholder's pro rata
portion of cash consideration received under this Agreement. The
provisions of this paragraph shall not, however, relieve any third party
(including in insurance company, bonding company, or other third party
providing indemnity) from the same liability to the extent that such third
party would be liable under another agreement.
(c) Indemnification Provisions for Benefit of the Shareholders. In the
event the Merger Sub or Exsorbet breaches any of its representations,
warranties, and covenants contained herein, then the Merger Sub and Exsorbet
agree to indemnify the Shareholders from and against the entirety of any
damages the Shareholders, or any of them, may suffer as a result of such
breach.
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(d) Matters Concerning Indemnity. In the event that either party becomes
aware of any claim or threatened claim being made against such party for which
any other party could ultimately be held liability, either directly or by
virtue of the indemnity requirements of this Agreement, the party becoming
aware of such claim or threatened claim shall immediately cause written notice
of the claim or threatened claim to be given to all other parties. Any party
which could ultimately be held liable, by virtue of the indemnity provisions of
this paragraph, shall have the right to participate in, and control, the legal
defense of the party against whom a claim or threatened claim has been made.
No claim for indemnity shall be made which results from a settlement or consent
judgment without the consent of the indemnifying party, which consent shall not
be unreasonably withheld. The foregoing indemnification provisions are in
addition to, and not in derogation of, any statutory, equitable, or common law
remedy any Party may have for breach of representation, warranty, or covenant.
11. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
12. Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements, or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
13. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective
successors, heirs, administrators, personal representatives, and permitted
assigns. No party may assign either this Agreement or any of his or its rights,
interests, or obligations hereunder without the prior written approval of the
Merger Sub and the Shareholders. Provided however, this provision shall not be
construed as prohibiting a transfer of the cash consideration that Shareholders
are to receive under this Agreement nor as providing any greater restriction on
transferability of the restricted common stock of Exsorbet Industries, Inc.
than is otherwise stated herein.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Furthermore, a facsimile
signature contained on this document or a facsimile copy of this document shall
be as valid and binding as the original.
15. Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth
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below:
If to the Shareholders: Xxxxxx X. Xxxx, Xx., 0000 X. Xxxxxxxx Xxxxx, Xxxx
Xxxx, XX 00000.
Xxxxxx X. Xxxx, XX, 0000 XXX Xxxx, #000,
Xxxxxxxxxxx, XX 00000.
Xxxxxx Xxxxxxxxxxxx, 000 Xxxxxxxx Xxxxx, Xxxxxxx,
XX 00000.
G. Xxxxxx Xxxxxxxxxxx, Carriage Hill Apartments,
0000 Xxxxxxxx Xxxx, X.X., Xxxxxxxxx #00, Xxxxxx,
XX 00000.
Xxxx Xxxxxx, 0000 Xxxxxxxx Xxxx, Xxxxxxxxxxx, XX
00000.
Xxxxx Xxxxxxx, 00000 X. Xxxxx Xxxx, Xxxxx, XX
00000.
If to the Merger Sub: Xxxxxxx X. Xxxxx, Xx., 0000 Xxxxx Xxxxxxx Xxxx,
Xxxxx 000, Xxxx Xxxxx, XX 00000 [or such other
address as the Shareholders are hereafter
directed in writing].
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth.
17. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Merger Sub and the Shareholders, or any individual Shareholder if such
amendment or waiver concerns only one Shareholder. No waiver by any party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
18. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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19. Expenses. Each of the parties and the Target Corporation will bear
their own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Shareholders agree that the Target Corporation has not borne and will not bear
any of the Shareholders costs and expenses (including any of their legal fees
and expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
20. Construction. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
21. Incorporation of Exhibits, Annexes, and Schedules. The Exhibits
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
7-7 MERGER, INC.,
an Arkansas corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------
Officer
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------
Officer
7-7, INC.,
an Ohio corporation
By: /s/ Xxxxxx X. Xxxx, XX
-----------------------
Officer
/s/ XXXXXX X. XXXX, XX.
------------------------------------
Xxxxxx X. Xxxx, Xx.
/s/ XXXXXX X. XXXX, XX
------------------------------------
Xxxxxx X. Xxxx, XX
/s/ XXXXXX XXXXXXXXXXXX
------------------------------------
Xxxxxx Xxxxxxxxxxxx
/s/ G. XXXXXX XXXXXXXXXXX
------------------------------------
G. Xxxxxx Xxxxxxxxxxx
/s/ XXXX XXXXXX
------------------------------------
Xxxx Xxxxxx
/s/ XXXXX XXXXXXX
------------------------------------
Xxxxx Xxxxxxx
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