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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 Section1701/79 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.
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. Schrader________________
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
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Xxxxxx X. Xxxx, Xx.
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Xxxxxx X. Xxxx, XX
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Xxxxxx Xxxxxxxxxxxx
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G. Xxxxxx Xxxxxxxxxxx
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Xxxx Xxxxxx
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Xxxxx Xxxxxxx
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