DEBENTURE PURCHASE AGREEMENT
THIS DEBENTURE PURCHASE AGREEMENT (this "AGREEMENT") is made as of
December 15, 2005, by and between Chief Consolidated Mining Company, an
Arizona corporation ("COMPANY"), and Dimeling, Xxxxxxxxx & Park Reorganization
Fund II, L.P., a Pennsylvania limited partnership ("PURCHASER").
BACKGROUND
Purchaser desires to invest an aggregate of Two Million Five Hundred
Thousand Dollars ($2,500,000) in Company in exchange for a convertible debenture
as described in this Agreement and on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises
and covenants contained herein and for other good and valuable consideration,
and intending to be legally bound hereby, the parties hereby agree as follows.
ARTICLE I
PURCHASE OF DEBENTURE AND WARRANT
1.1 Sale and Purchase of the Debenture. Upon and subject to the
conditions of this Agreement, Company hereby agrees to sell and issue to
Purchaser and Purchaser hereby agrees to acquire from Company, at the Closing
(as defined below), a convertible debenture, in substantially the form attached
hereto as Exhibit A (the "DEBENTURE"), in the aggregate principal amount of Two
Million Five Hundred Thousand Dollars ($2,500,000) (the "PURCHASE PRICE").
1.2 Certain Terms of the Debenture
(a) The Debenture shall bear interest at the rate of eight
percent (8%) per annum, which shall accrue while the Debenture is outstanding
and shall be due and payable at the time of Conversion (as defined below) in
either cash or additional shares of Company's Common Stock, par value $0.50,
(the "COMMON STOCK"), at the sole discretion of Company.
(b) The Debenture shall be convertible into shares of Common
Stock at the rate of four thousand (4,000) shares for each One Thousand Dollars
($1,000) in principal amount of the Debenture (the "CONVERSION"). The Conversion
shall occur automatically upon the adoption of the Charter Amendment (defined
below) by the requisite percentage of shareholders of the Company.
1.3 Closing.
(a) Place and Time. The closing (the "CLOSING") in connection
with this Agreement shall take place in the offices of Xxxxxx Xxxxxxxx LLP,
Philadelphia PA, or at such other place as agreed upon by Company and Purchaser,
on December 15, 2005, or at such other date (the "CLOSING DATE") as mutually
agreed by the parties hereto in writing.
(b) Deliveries by Company. At the Closing, Company shall deliver
following to Purchaser:
(i) A fully executed copy of this Agreement;
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(ii) A fully executed copy of the Debenture;
(iii) A certificate confirming the good standing of Company
as of recent date prior to the Closing issued by the Secretary of State of the
State of Arizona; and
(iv) such other documents, instruments and writings as
Purchaser may reasonably require.
(c) Deliveries by Purchaser. At the Closing, Purchaser shall
deliver following to Company:
(i) A fully executed copy of this Agreement;
(ii) A wire transfer in the amount of Two Million Five
Hundred Thousand Dollars ($2,500,000); and
(iii) such other documents, instruments and writings as
Company may reasonably require.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Company. Company hereby
represents and warrants to Purchaser as follows:
(a) Organization and Good Standing. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona and has all requisite corporate power and corporate authority to carry
on its business as now conducted and as proposed to be conducted.
(b) Capitalization. The authorized capitalization of Company consists
of 50,000,000 shares of Common Stock. Except as disclosed in public filings
with the United States Securities and Exchange Commission (the "SEC") or as
contemplated hereby, there are no options, warrants, rights (including rights of
first refusal or any preemptive rights), proxy or stockholders agreements or
agreements of any kind in connection with the issuance of the Debenture or the
shares issuable upon conversion or exercise thereof (the "SHARES" and, together
with the Debenture, the "SECURITIES") or with respect to any future offer, sale
or issuance of securities by Company. Company is not a party or subject to any
agreement or understanding and, to Company's knowledge, there is no agreement or
understanding between any persons that affects or relates to the voting or
giving of written consents with respect to any security or the voting by a
director of the Company.
(c) Authorization. All corporate action on the part of Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of the documents to be delivered by Company pursuant to
Section 1.3(b) hereof (the "TRANSACTION DOCUMENTS") and the transactions
contemplated thereby, the performance of all obligations of Company under the
Transaction Documents and the authorization, issuance and delivery of the
Securities has been taken. Each of the Transaction Documents constitutes the
valid and legally binding obligation of Company enforceable in accordance with
its terms.
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(d) Valid Issuance of the Shares. The Shares, when issued, sold
and delivered in accordance with the terms of the Debenture, will be: duly
authorized, validly issued, fully paid and nonassessable; free of any liens,
options, encumbrances, proxies, adverse claims or restrictions; and, assuming
the accuracy of Purchaser's representations in this Agreement at the time of
issuance, issued in compliance with all applicable federal and state securities
laws.
(e) Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local governmental authority (other than
filings required to be made under applicable federal and state securities laws)
on the part of Company is required in connection with the authorization,
execution, delivery of the Transaction Documents and performance of all
obligations of Company under the Transaction Documents, and the authorization,
issuance and delivery of the Securities.
(f) No Conflict with Other Instruments. Company is not in
violation or default of any provisions of Company's Articles of Incorporation,
Bylaws or other charter documents (collectively, the "CHARTER DOCUMENTS") or of
any instrument, judgment, order, writ, decree or contract to which Company is a
party or by which Company is bound or of any provision of any statute, rule or
regulation applicable to Company. The execution, delivery and performance of
this Agreement will not result in any violation of, be in conflict with, or
constitute a default under, with or without the passage of time or the giving of
notice: (i) any provision of the Charter Documents; (ii) any provision of any
judgment, decree or order to which Company is a party or by which Company is
bound; (iii) any material contract, obligation or commitment to which Company is
a party or by which Company is bound; or (iv) any statute, rule or regulation
applicable to Company.
(g) Absence of Claims. There are no actions, suits, claims,
investigations or legal or administrative proceedings pending or, to the best of
Company's knowledge and belief, threatened, against Company, and there are no
judgments, decrees or orders of any court, or government department, commission
or agency entered or existing against Company or any of its assets or
properties;
(h) Transfer Restrictions. There are no restrictions on the
transfer of capital stock of Company imposed by the Charter Documents, any
agreement to which Company is a party (other than those agreements expressly
contemplated by this Agreement), any order of any court or any governmental
agency to which Company is subject, or any statute other than those imposed by
relevant state and federal securities laws.
(i) No Undisclosed Liabilities. Company has no material
liabilities or obligations not disclosed to Purchaser, other than those
liabilities incurred (i) in the ordinary course of the Company's business since
December 31, 2004, or (ii) in connection with the negotiation and execution of
this Agreement.
(j) No Broker. No finder, broker, agent, financial advisor or
other intermediary has acted on behalf of Company in connection with the
offering or sale of the Shares or the negotiation or consummation of this
Agreement or any of the transactions contemplated hereby.
(k) Compliance with Securities Laws. Assuming the accuracy of
Purchaser's representations in this Agreement, the offer, grant, sale, and/or
issuance of the Debenture will not be in violation of the Securities Act of
1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), any state securities or "blue sky" law, or the
Charter Documents, when offered, sold and issued in accordance with this
Agreement. The Company is not current in its required reports under the Exchange
Act.
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2.2 Representations and Warranties of Purchaser. Purchaser, in order
to induce Company to issue and sell the Securities, hereby represents and
warrants to Company as follows:
(a) No Registration. Purchaser understands that: (i) none of the
Securities have been registered under the Securities Act or under the securities
laws of any state or other jurisdiction and are characterized as "restricted
securities" under the Securities Act and applicable regulations; (ii) no federal
or state authority has approved or disapproved the Securities or the offering
thereof, endorsed the merits of the offering of the Securities or made any
determination as to the fairness of the offering; and (iii) Company's sale of
the Securities to Purchaser hereunder is in reliance upon the exemption from the
registration provisions under the Securities Act contained in Section 4(2)
thereof and applicable state securities laws and the representations of
Purchaser herein.
(b) Accredited Investor. Purchaser is an "accredited investor" as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
(c) No Obligation to Register. Purchaser acknowledges that,
except as provided herein, Company has no obligation, and does not intend, to
register any the Securities under the Securities Act or to make available public
information (in the form of reports pursuant to Section 13 or Section 15 of the
Exchange Act, or otherwise) without which resale pursuant to SEC Rule 144
adopted under the Securities Act will not be possible. Accordingly, Purchaser
may be precluded from selling any of the Securities, or any interest therein,
for an indefinite period of time or at any particular time.
(d) Investment Intent. Purchaser is acquiring the Securities
solely for its own account, for investment, and not with a view to, or for
resale in connection with, any distribution thereof. Purchaser's officers and
directors, together with its advisors, have such knowledge and experience in
financial and business matters that Purchaser is capable of evaluating the
merits and risks of purchasing the Securities.
(e) Transfer Restrictions. No transfer of any of the Securities
may be made unless Company is presented with an opinion of counsel, satisfactory
to it and its counsel, that such transfer may be effected without registration
under the Securities Act.
(f) Investment Risk. Purchaser is aware that a high degree of
risk is inherent in investing in Company; the purchase of the Securities is
highly speculative and there is a significant risk of loss of Purchaser's entire
investment; there is no market for the Securities nor can there be any assurance
that any such market will ever develop; and the Securities are subject to
substantial restrictions on transferability under state and federal securities
laws.
(g) Economic Risk. Purchaser is able, without impairing its
financial condition, to hold the Securities for an indefinite period of time and
to suffer a complete loss of Purchaser's investment.
(h) Consultation with Advisors. Purchaser has had an opportunity
to consult with counsel and such other advisors as it has considered appropriate
in connection with evaluation of the purchase of the Securities.
(i) Information Concerning Company. Purchaser and its advisors
have been given the opportunity to ask questions of and receive answers from
Company and its executive officers concerning its capital structure, initial
equity financing, business activities, financial condition and prospects and the
terms and conditions of the purchase of the Securities and to obtain any
additional information which Company possesses or can obtain without
unreasonable effort or expense. Purchaser
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has availed itself of such opportunity to the extent that Purchaser or
Purchaser's advisors considered appropriate in connection with the proposed
purchase of the Securities.
(j) No Broker. No finder, broker, agent, financial advisor or
other intermediary has acted on behalf of Purchaser in connection with the
offering of the Securities or the negotiation or consummation of this Agreement
or any of the transactions contemplated hereby.
ARTICLE III
COVENANTS
3.1 Amendment to Articles of Incorporation. Company shall solicit and
make best efforts to obtain the approval of the requisite percentage of its
shareholders to adopt an amendment to the Articles of Incorporation in
substantially the form attached hereto as Exhibit B (the "CHARTER AMENDMENT").
3.2 Filings. Company shall, within five (5) business days after the
adoption of the Charter Amendment by its shareholders, make all filings with the
state of Arizona necessary and appropriate to effectuate the Charter Amendment.
3.3 Issuance of Stock Certificates. Within five (5) business days
after the occurrence of the Conversion, Company shall issue to Purchaser, stock
certificates in the name of Purchaser (or such other person as Purchaser
designates) representing Ten Million (10,000,000) shares of Common Stock.
ARTICLE IV
REGISTRATION RIGHTS
4.1 Demand Registration Rights. Company agrees to promptly register
the Shares for resale with the Securities and Exchange Commission upon the
request of the Purchaser and to bear any and all costs, fees and expenses of so
doing.
ARTICLE V
ADDITIONAL PROVISIONS
5.1 Preemptive Rights. Company reaffirms the preemptive rights of
Purchaser pursuant to the Stock Purchase Agreement by and between Company and
Purchaser dated November 19, 1999. Nothing in this Agreement shall effect or
otherwise alter that agreement.
5.2 Legends. The Debenture and all certificates for Shares issued and
delivered to Purchaser under this Agreement, the Debenture, and all replacements
therefor issued to Purchaser or its assignees or transferees, shall bear, upon
their face or upon the reverse side thereof, the following legend(s) until, with
the consent of counsel to Company, the same may be removed in compliance with
all applicable securities laws, and each holder shall comply strictly with the
terms thereof:
(a) "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE
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SECURITIES LAWS OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
(b) Any legends required by the applicable securities or "blue
sky" laws of any state.
5.3 Survival; Termination. All representations and warranties
contained herein, as well as all statements contained in a certificate or other
instrument executed and delivered by Company or Company's duly authorized
officers pursuant to this Agreement or in connection with the transactions
contemplated hereby, shall survive the execution and delivery of this Agreement
for a period of one (1) year.
5.4 Expenses. Company and Purchaser shall each bear their own expenses
incurred with respect to the transaction contemplated hereby.
5.5 Amendment, Modification and Termination. This Agreement may be
amended, modified or terminated, or any provision or requirement hereof waived,
at any time only by an agreement in writing between Company and Purchaser.
5.6 Governing Law and Jurisdiction. This Agreement shall be governed
by and interpreted under the laws of the State of Pennsylvania, without giving
effect to the principles of conflicts of law of any jurisdiction. In the event
that a party to this Agreement perceives the existence of a dispute with the
other party concerning any right or duty provided for herein, the parties will,
as soon as practicable, confer in an attempt to resolve the dispute. If the
parties are unable to resolve such dispute amicably, then the parties hereby
submit to the exclusive jurisdiction of and venue in the state and federal
courts located in the State of Pennsylvania with respect to any and all disputes
concerning the subject, or arising out, of this Agreement.
5.7 Notices. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when hand delivered, one (1)
day after mailing when mailed by overnight courier (e.g., Federal Express or
Express Mail) or three (3) days after mailing by registered or certified mail,
as follows (provided that notice of change of address shall be deemed given only
when received):
If to Company, to:
Chief Consolidated Mining Company
00000 Xxxxxx Xxxx Xxxx, X.X. Xxx 00
Xxxxxx, Xxxx 00000
Attention: Chief Executive Officer
With a copy (which shall not constitute notice), to:
Xxxxxx Xxxxxxxx LLP
Xxxxxxxx Square
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
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If to Purchaser, to:
Dimeling, Xxxxxxxxx & Park Reorganization Fund II, L.P.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
or to such other names or addresses as Company or Purchaser, as the case may be,
shall designate by notice to each other person entitled to receive notices in
the manner specified in this Section 5.7.
5.8 No Waiver. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.
5.9 Binding Nature of Agreement and No Assignment. All of the terms
and provisions of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the respective successors and assigns of the parties
hereto. This Agreement may not be changed, modified, extended or terminated
except by a written amendment executed by an authorized representative of each
party.
5.10 Counterparts, Headings and Exhibits. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. The
headings used in this Agreement are for convenience only and are not to be
considered in construing or interpreting any term or provision of this
Agreement. All Exhibits hereto are hereby incorporated in this Agreement and
made a part hereof.
5.11 Integration. This Agreement and the other Transaction Documents
supersede all prior agreements and set forth the entire understanding among the
parties hereto and thereto with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings relating to the subject
matter hereof and thereof.
5.12 Severability. If any provision of this Agreement shall be held to
be illegal, invalid or unenforceable, then such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
5.13 Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided that if the final day of any time period falls on a Saturday,
Sunday or holiday on which federal banks are or may elect to be closed, then the
final day shall be deemed to be the next day which is not a Saturday, Sunday or
such holiday.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
CHIEF CONSOLIDATED MINING COMPANY
By:
------------------------------------
Name:
Title:
DIMELING, XXXXXXXXX & PARK
REORGANIZATION FUND II, L.P.
By:
------------------------------------
Name:
Title:
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EXHIBIT A
FORM OF DEBENTURE
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THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE SECURITIES LAWS. THIS DEBENTURE MAY NOT BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OF THE DEBENTURE UNDER SUCH ACT
AND UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR UPON SATISFACTION BY THE
ISSUER HEREOF THAT SUCH REGISTRATION IS NOT REQUIRED AS TO SUCH SALE OR OFFER.
THIS INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE THAT OF A
GENERAL UNSECURED INDEBTEDNESS OF THE COMPANY.
8% CONVERTIBLE DEBENTURE
$2,500,000.00
December ______, 2005
FOR VALUE RECEIVED, the undersigned, CHIEF CONSOLIDATED MINING COMPANY, an
Arizona corporation (the "Company"), promises to pay to the order of DIMELING,
XXXXXXXXX & PARK REORGANIZATION FUND II, L.P., a Pennsylvania limited
partnership (the "Holder") the principal sum of Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00) (the "Principal Amount"), together
with interest thereon as set forth below, at its offices or such other place as
the Holder may designated in writing.
1. Escrow. Prior to receipt of creditor acceptances, aggregating 50%
of outstanding amount owed, funds will be held in escrow by Company
counsel, except for funds disbursed to pay legal, accounting, regulatory,
and transfer agent fees as per the Escrow Agreement, attached hereto.
2. Interest Payments. Debentures will accrue interest while
outstanding at an annual rate of 8%, payable at the time of conversion in
either additional shares of the Company's class of Common Stock, $0.50 par
value (the "Common Stock") or cash, at the Company's discretion
3. Automatic Conversion Terms. Automatically converts into shares of
Common Stock at the rate of 4,000 shares for each $1,000 principal amount
of Debentures upon the approval by the Company shareholders of amendments
to the Company's Articles of Incorporation under Arizona state law to
reduce the per share par value amount, among other matters.
3.1. Conversion price. Conversion price shall be $0.25 per share,
subject to adjustment in the event of a stock split, recapitalization,
consolidation or other similar event affecting the Common Stock.
3.2. The Company shall use its best efforts to obtain the
requisite vote of shareholders for the approval of the amendment. In the
event that the required
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shareholder vote is not obtained, the debentures will be immediately due
and payable.
4. Subordination. The indebtedness represented by this Debenture
represents general unsecured debt and is subordinate to the Senior Debt of
the Company.
5. The Company reaffirms the preemptive rights held by Investor
pursuant to the Stock Purchase Agreement between the parties dated November
19, 1999. Nothing in this document shall affect or otherwise alter that
agreement.
6. Assignment. This Debenture and the obligations hereunder may not be
assigned by the Company without the prior written consent of Holder. Holder
may freely assign all or any portion of its right, title and interest in
and to the Debenture.
7. Waivers. The Company hereby waives presentment, demand, protest or
further notice of any kind to the extent permitted by applicable law.
8. Controlling Law. This Debenture and all matters related hereto
shall be governed, construed and interpreted strictly in accordance with
the laws of the State of Pennsylvania, without regard to its principles of
conflicts of laws.
9. Purpose of Investment. The Company represents and warrants that
this Debenture evidences an investment made in the Company made for the
purpose of restoring SEC reporting status, including the preparation and
audit of 2005 year-end financial statements and stockholder solicitation to
revise and restate articles of incorporation; repayment on a negotiated
basis of trade creditors, including professional fees of registered
independent accounting firm and counsel; retain mining operations general
manager; conduct preliminary site assessment of mining and mill assets; and
for general working capital needs.
10. No Usury. This Debenture is subject to the express condition that
at no time shall the Company be obligated or required to pay interest
hereunder at a rate that could subject the Holder to either civil or
criminal liability as a result of being in excess of the maximum rate that
the Company is permitted by law to contract or agree to pay. If, by the
terms of this Debenture, the Company is at any time required or obligated
to pay interest at a rate in excess of such maximum rate, the rate of
interest under this Debenture shall be deemed to be immediately reduced to
such maximum rate and interest payable hereunder shall be computed at such
maximum rate and the portion of all prior interest payments in excess of
such maximum rate shall be applied and shall be deemed to have been
payments in reduction of the principal balance of this Debenture.
11. Waiver of Trial by Jury. The Company agrees that any suit, action
or proceeding, whether claim or counterclaim, brought or instituted by the
Holder on or with respect to this Debenture, shall be tried only by a court
and not by a jury. THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL
BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING.
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12. Severability. In the event any one or more of the provisions
contained in this Debenture or any other Investment Document shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Debenture or such other Investment Documents, but this
Debenture and such other Investment Documents shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein
or therein.
IN WITNESS WHEREOF, the undersigned has caused this Debenture to be
executed on the day and year first written above.
WITNESS/ATTEST: COMPANY:
CHIEF CONSOLIDATED MINING COMPANY, an
Arizona corporation
By:
------------------------------------- ------------------------------------
Name: Name: Xxxxxxx Xxxxxxxxx
Title: President
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EXHIBIT B
AMENDMENT TO ARTICLES OF INCORPORATION
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